1、 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 awa
2、re 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.1 April 2019 Asia Pacific/Taiwan Equity Research Semiconductor Devices Asia Semiconductor Sector Researc
3、h Analysts Randy Abrams,CFA 886 2 2715 6366 randy.abramscredit- Jerry Su 886 2 2715 6361 jerry.sucredit- Pauline Chen 886 2 2715 6323 pauline.chencredit- Thompson Wu 886 2 2715 6386 thompson.wucredit- Achal Sultania 44 20 7883 6884 achal.sultaniacredit- Keon Han 82 2 3707 3740 keon.hancredit- Sang U
4、k Kim 82 2 3707 3795 sang.kimcredit- Kyna Wong 852 2101 6950 kyna.wongcredit- Haas Liu 886 2 2715 6365 haas.liucredit- THEME AIC 2019:Raising TSMC/Mediatek targets,chain slowly lifting off a deep bottom Figure 1:Hardware/Semiconductor companies attending AIC by sub-sector Source:Credit Suisse resear
5、ch Tech supply chain in attendance at AIC.The 22nd Credit Suisse AIC in Hong Kong featured 300 companies,2,000 investors and 90 keynote presentations.We published our takeaways from the relevant tech companies including the chip companies within our coverage including foundries TSMC,SMIC,and Hua Hon
6、g;back-end including ASE,Inari,and ASM Pacific and IC Design(Mediatek)and notable tech companies hardware(Samsung Electronics,Xiaomi and Lenovo),components(Q-Tech,Soulbrain,TPK),telecoms(China Mobile,China Unicom and China Telecom),wafers(Siltronic),equipment(ASML)and automation(Airtac).Still a mixe
7、d outlook for the tech chain.Supply chain feedback was still mixed at the AIC and Semicon China,with the tech supply chain maintaining a view for a deep seasonal bottom in 1Q19,some pick-up from a low base in 2Q19 and hopes for a more normal seasonal 2H19 ramp.Most companies acknowledge 2-3 quarters
8、 to clear excess component inventory(memory,logic semis,MLCCs)and product cycles stay in a lull during the late stage of 4G with unexciting spec upgrades beyond multi-cam,other end markets flat(PC/TVs)and auto gains dampened by cyclical slowdown in units.Hyperscale is at least still tracking mild gr
9、owth,IoT demand remains strong and early 5G infrastructure deployments continue.TSMC outlook solid beyond the 1H slowdown.We maintain Outperform on TSMC following AIC and lift our target price from NT$250 to NT$280,which would be 5%FCF yield,3.5-4.0%dividend yield at our target price and 17x cash ad
10、justed 2020 EPS of NT$15.We expect slowness to continue in 1H19,with 1Q19 at high-end of guidance down 25-26%but 2Q19 up only 5%QoQ before 2H19 rebounds strongly on sharp 7nm ramps supported by high-end share gains into AMD and Qualcomm,customer share gains by Huaweis chip division and seasonal ramp
11、 of iPhone with larger die size.Mediatek gradual margin improvement and non-mobile diversification continues.We maintain Outperform on Mediatek following AIC and lift our 2019-20 earnings from NT$12.88/NT$14.63 to NT$13.81/NT$16.22 on slightly higher sales and continued improvement in GMs,raising ou
12、r TP from NT$290 to NT$350 based on 15x cash adjusted 2020 P/E(21x straight P/E).Our revision comes from higher revenue with 1Q19 tracking to higher-end of guidance on better smartphone/non-mobile growth products and gradually improving GMs from improving mix and costs.TSMCSMICHua HongASMLASEMediate
13、kSiltronicsASM PacificInari AmertronSamsungLG ElectronicsLenovoXiaomiRazerHuamiDownstream componentsTPKQ-TechCatcherFITLG InnotekDisplayLG DisplayTelcosChina MobileChina TelecomChina UnicomAutomationAirtacSemiconductorDownstream hardware 1 April 2019 Asia Semiconductor Sector 2 Focus charts Figure 2
14、:TSMC 1Q19-2Q19 and 2019-20 estimates CS vs street Source:Company data,Credit Suisse estimates,The BLOOMBERG PROFESSIONAL service Figure 3:Mediatek 1Q19-2Q19 and 2019-20 estimates CS vs street Source:Company data,Credit Suisse estimates,The BLOOMBERG PROFESSIONAL service Figure 4:A flat year require
15、s a 2H19 hockey stick for semiconductors(in mn,unless otherwise stated)Source:Company data,Credit Suisse estimates Figure 5:China smartphones may trough in 1H19 Figure 6:Smartphone replacements stretching Source:Credit Suisse estimates Source:Credit Suisse estimates 1Q192Q1920192020(NT$mn)CSCS(old)S
16、treetRevised guidanceCSCS(old)StreetGuidanceCSCS(old)StreetCSCS(old)StreetSales216,839215,779223,170US$7.0-7.1bn/NT$214.2-217.3bn228,189245,794234,415+US$400mn sales1,011,8531,041,0811,046,4451,120,9151,144,8641,142,299 Chg(%)-25.2-25.5-23.0-25.0%to-26.1%QoQ(NT$)5.213.95.0-1.90.91.510.810.09.2GM(%)4
17、2.342.143.741-43%45.045.945.4GM+1.5%46.746.447.049.348.248.7OpM(%)30.230.032.329-31%32.334.234.0OpM+2.1%35.435.335.937.937.037.4 Net Inc.62,107 61,408 65,992 NT$30.6:1 Guide 64,257 72,623 68,046 329,365 337,143 338,596 389,044 388,870 387,368 EPS(NT$)2.402.372.552.482.802.61+34c EPS12.7013.0013.2115
18、.0015.0015.11US GAAP EPS3.383.382.552.562.562.6112.7013.0013.2115.0015.0015.111Q192Q19201820192020(NT$mn)CSCS(old)StreetGuidance CSCS(old)StreetActualCSCS(old)StreetCSCS(old)StreetSales$52,666$51,659$51,939NT$48.7-53.6bn$60,343$59,486$60,377$238,057$247,651$243,876$244,095$264,877$261,481$263,065Chg
19、-13.5%-15.2%-14.7%Down 12-20%14.6%15.2%16.2%-0.1%4.0%2.4%2.2%7.0%7.2%10.2%GM%40.2%39.5%39.6%GM:38-41%40.3%39.8%39.7%38.5%40.4%40.0%39.8%40.6%40.1%40.4%OpM%5.7%4.5%4.9%OpM:1-8%8.3%7.4%8.0%6.8%9.1%8.5%8.4%10.2%9.2%9.9%Net Inc.3,207 2,599 3,457 FX:30.9 4,822 4,301 5,480 17,171 21,683 20,222 22,056 25,4
20、67 22,971 26,519 GAAP EPS$3.14$2.75$2.15$3.07$2.74$3.44$13.29$14.78$13.85$14.00$16.22$14.63$16.94Pro Forma EPS$2.04$1.66$2.15$3.07$2.74$3.44$10.96$13.81$12.88$14.10$16.22$14.63$17.09Asian Upstream sales1Q182Q183Q184Q181Q19E2Q19E3Q19E4Q19E2013201420152016201720182019Foundry$10,660$9,991$10,823$11,665
21、$9,318$9,681$11,315$12,190$26,913$32,192$33,779$38,255$41,524$43,139$42,505 QoQ-9.0%-6.3%8.3%7.8%-20.1%3.9%16.9%7.7%15.0%19.6%4.9%13.3%8.5%3.9%-1.5%Back-end$4,867$5,131$5,767$5,914$4,855$5,133$5,768$5,918$15,691$17,647$18,101$18,965$21,085$21,678$21,674 QoQ-17.2%5.4%12.4%2.5%-17.9%5.7%12.4%2.6%8.7%1
22、2.5%2.6%4.8%11.2%2.8%0.0%Upstream sales(US$)15,52715,12216,59017,57914,17414,81317,08318,108$42,604$49,839$51,881$57,220$62,610$64,817$64,178 QoQ-11.8%-2.6%9.7%6.0%-19.4%4.5%15.3%6.0%12.6%17.0%4.1%10.3%9.4%3.5%-1.0%Semi Customer sales1Q182Q183Q184Q181Q19E2Q19E3Q19E4Q19E2013201420152016201720182019Fa
23、bless/IDM Customers11,20312,54714,05313,35111,61511,84713,98013,281$40,969$43,155$42,366$44,939$48,197$51,154$50,723 QoQ-13.0%12.0%12.0%-5.0%-13.0%2.0%18.0%-5.0%4.6%5.3%-1.8%6.1%7.3%6.1%-0.8%Downstream units1Q182Q183Q184Q181Q19E2Q19E3Q19E4Q19E2013201420152016201720182019Smartphone units344.7353.9377
24、.5383.5325.9342.2370.6359.51,0191,3031,4381,5441,4621,4601,398 QoQ-12.3%2.7%6.7%1.6%-15.0%5.0%8.3%-3.0%40.5%27.9%10.3%7.3%-5.3%-0.2%-4.2%TV units68.269.670.369.666.868.170.271.6205225221230267278277 QoQ-6.8%2.0%1.0%-1.0%-4.0%2.0%3.0%2.0%0.7%10.1%-1.8%3.7%16.1%4.2%-0.4%Tablet units49.547.048.050.844.
25、743.845.247.4259274242228201195181 QoQ-20.0%-5.0%2.0%6.0%-12.0%-2.0%3.0%5.0%63.3%5.9%-11.6%-5.9%-11.9%-2.7%-7.2%PC units59.360.467.970.364.064.365.463.3316307281258255258257 QoQ-14.4%1.9%12.4%3.5%-9.0%0.5%1.8%-3.3%-10.9%-2.8%-8.4%-8.4%-1.0%1.1%-0.4%Total Demand Units(mn)521.7530.9563.6574.1501.4518.
26、5551.4541.81,7992,1102,1832,2592,1842,1902,113 QoQ-12.7%1.8%6.2%1.9%-12.7%3.4%6.3%-1.7%24.8%17.3%3.5%3.5%-3.3%0.3%-3.5%106129136151112113119117821041021038391103108-30%-20%-10%0%10%20%30%40%50%(120)(80)(40)-40 80 120 160 2001Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q194Q19China smartp
27、hone shipmentYoY(%)China smartphoneshipment(mn units)China smartphone YoY growth(%)0.01.02.03.04.05.06.07.003006009001,2001,5001,8002,10020082009201020112012201320142015201620172018Smartphone unitsReplacement rateSmartphone units(mn)Replacement rate(Years)1 April 2019 Asia Semiconductor Sector 3 AIC
28、 2019:Raising TSMC/Mediatek targets,chain slowly lifting off a deep bottom We published our takeaways from the tech companies attending our 22nd Asian Investment Conference which featured 300 companies and 2,000 investors including a number of large cap regional tech companies.We published our takea
29、ways from the relevant tech companies attending the AIC including the chip companies within our semiconductor coverage including foundries TSMC,SMIC,and Hua Hong;back-end including ASE,Inari,and ASM Pacific and IC Design(Mediatek)and notable tech companies spanning hardware(Samsung Electronics,Xiaom
30、i and Lenovo),components(Q-Tech,Soulbrain,TPK),telecoms(China Mobile,China Unicom and China Telecom),wafers(Siltronic),equipment(ASML)and automation(Airtac).The tech supply chain feedback was consistent with a view of a deep bottom in 1Q19 but only modest improvement in 2Q19 followed by some potenti
31、al for more normal 2H19.By subsector,smartphones are still tracking to a full year modest decline for both Apple and China smartphones but is seeing slightly better order trends.Component suppliers have seen a small rebound from depressed 1Q19 levels for iPhone components after emerging market retai
32、l price cuts and China smartphones are seeing a healthy pick-up in March on new model launches across the top 4 China brands as well as pre-emptive inventory building by Huawei to buy it time to negotiate any sudden technology import ban.The auto/industrial channel is still mixed,with selective high
33、-end/high voltage discretes still healthy on EV demand but broad MCUs/analog seeing only modest pick-up in 2Q19.Within compute,notebooks still have lingering CPU constraints in 1H19 although servers are continuing to see some recovery from the late-2018 slowdown,with US hyperscale orders rebounding
34、in 1Q19 and China customers expecting to pick-up by 2Q19.Full-year outlook for servers is still for around 10%growth with hyperscale up 15%and enterprise flat to down slightly.Overall though,the mixed demand environment is impacting the semiconductor production chain,with foundries flat to down on c
35、apex and memory makers trimming utilisation(Toshiba,WDC and Micron).The raw wafer makers are also seeing customers push back wafer production schedules and TSMC,SMIC and Hua Hong all noted intention to be renegotiating wafer pricing later this year and taking effect on 2020 pricing.In 2Q19,we expect
36、 the semiconductor supply chain to only see a modest improvement due to negative impact from ongoing inventory digestion and muted demand outlook.Although most of the companies still expect a meaningful recovery in 2H19 to keep full year business flat YoY,the high bar for HoH growth and macro uncert
37、ainty could put their guidance at risk.Stock-specific tone at the AIC For stocks,tone from the AIC is consistent with our more positive view on both TSMC and Mediatek among the large caps in our coverage.TSMC is set for gains on 5G with share gains into Qualcomm,AMD and Huawei and from higher silico
38、n content in 5G phones,level 2/3 autonomous vehicles and IoT smart appliances.Mediatek has potential for mild upside from GMs rebounding to 40%+on better mobile mix/costs,higher growth from its higher margin growth products outside smartphones,and areas to grow into networking,automotive communicati
39、ons and with the start of the 5G device cycle from mid-2020.We see favourable outlook for several small-mid cap semiconductor stocks including:Inari(improving RF outlook with share gains in flagship smartphone and higher content in 5G),Kingpak(automotive CIS growth continuing)and Realtek(growth from
40、 IoT/networking/connectivity).Among the China foundries,Hua Hong should grow mildly as local China customers gain share in discretes and MCU although will enter a transition to lower profitability growth as it starts production and needs to fill its 12 fab from late-2019.We publish our takeaways fro
41、m the tech companies attending AIC which featuring 300 companies and 2,000 investors High inventory and a lull in product cycles has driven a deep 1Q19 bottom and slow and uneven recovery in 2Q19 TSMCs rebound on 7nm in 2H19 to lift sentiment after the disappointing slowdown and soft 1H19 1 April 20
42、19 Asia Semiconductor Sector 4 SMIC should see improving business outlook and progress on advanced nodes but profitability is still dampened by under-utilised 28nm and aggressive expansion in the past few years.AIC takeaways for the semiconductor universe Key topics and themes at AIC this year inclu
43、de:1.Business slowdown in 1H19 from high inventory levels and soft demand could risk full-year flat expectation.2.China smartphone brands starting to rebound in March into 2Q19 on new product launches and inventory restocking.3.Broader semi inventory correction may continue into 2Q19 due to soft dem
44、and from macro uncertainty.4.Bare silicon wafer pricing could be negatively impacted by the semiconductor slowdown across foundries and memory makers despite some protection from long term supply agreements.5.5G telco enthusiasm muted due to delay in technology progress and cautious investment from
45、telecom operators,though plans still moving ahead for 2020 commercial roll-outs in urban cores.We summarise in more depth the main semiconductor takeaways and also more detailed updates from our tech teams meetings in the hardware and semiconductor supply chain.Outlook for only gradual sales growth,
46、2H a high bar The demand outlook for the tech supply chain is at least stabilising at a lower level into 2Q19 following the downward revision for expectation in the past few quarters.Despite improving customer confidence and some short-term rush orders,most of the companies only expect a mild QoQ re
47、covery in 2Q19 before a more meaningful pick up in 2H19 as customers are unwilling to build inventory as tech end market demand is dragged by a lull in product cycles and concerns of macro softness continuing.Global smartphone units should still continue to decline mildly as limited spec upgrades to
48、ward the end of the 4G cycle stretches replacement cycles in developed countries and China to offset still some penetration growth in emerging markets.Figure 7:A flat year requires a 2H19 hockey stick for semiconductors(in mn,unless otherwise stated)Source:Company data,Credit Suisse estimates The so
49、ft demand for automotive and industrial applications and high distribution inventory is continuing to slow the pick-up from the low levels for IDM customers,with Renesas already lowering production and Infineon revising down guidance this week.Data center Asian Upstream sales1Q182Q183Q184Q181Q19E2Q1
50、9E3Q19E4Q19E2013201420152016201720182019Foundry$10,660$9,991$10,823$11,665$9,318$9,681$11,315$12,190$26,913$32,192$33,779$38,255$41,524$43,139$42,505 QoQ-9.0%-6.3%8.3%7.8%-20.1%3.9%16.9%7.7%15.0%19.6%4.9%13.3%8.5%3.9%-1.5%Back-end$4,867$5,131$5,767$5,914$4,855$5,133$5,768$5,918$15,691$17,647$18,101$
