CHROMA — Call Transcript 2019

May 21, 2019

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CHROMA ATE INC.

2019.1Q Earnings Conference Call

Paul Ying, CFO

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30[th] April, 2019

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1

Disclaimer

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This presentation contains some forward-looking statements that are subject to substantial risks and uncertainties. Typically, these statements contain words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “plan”, “forecast”, “project”, “predict”, “potential”, “continue”, “may”, “should”, “will”, and “would” or similar words. You should consider these forward-looking statements carefully because such statements are only our expectations or projections about future events, and actual results may differ materially from those expressed or implied by such statements. The forward-looking statements in this presentation include, but are not limited to, growth rates for various markets estimated by third party sources, future products and technology development, widespread market acceptance of the hosted delivery model, future revenue growth and profitability. You should be cautioned that the forwardlooking statements are no guarantee of our future performance. The forward-looking statements contained in this presentation are made only as of the date of this presentation and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances, except as required by law. This presentation and the information contained herein are the property of Chroma Ate Inc.

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2

Agenda

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• Corporate Profile

• • Financial Review

• • Operation Highlights

• • Q&A

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3

CORPORATE PROFILE

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4

Corporate Profile

• Chroma Group founded in 1984, a world leading own brand turnkey test & automation solution provider, specialized in electronics test and measurement instruments and ATS (auto test system). Businesses cover test and measurement instruments and ATS for various industries, and a turnkey solution as an integration of Test and Measurement , Automation and MES (manufacturing execution system).

• Key success: Precision, Reliability, Innovation

• Chroma group encompass business unit of Chroma Ate Inc., Modular Assembly System

• (MAS) and Chroma New Material Corp (CNMC).

• 2018 Consolidated Sales : NT$ 16.9 billion

• 2018 Net Income: NT$2.5 billion

• Chroma Group total of 2,918 employees (as March, 2019)

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Consolidated Chroma Ate Sales Others
Consolidated CNMC Sales
Consolidated MAS Sales
16,931
14,901
29%
17%
11,624
10,307 3% 14%
9,692 12%
7% 20%
13%
29%
24%
60% 58% 74% 66% 57%
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2014

2015

2016 2017 2018

5

Financial Performance

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Consolidated Sales Consolidated
Gross Margin
16,931
14,901
11,624
9,692
47% 47%
10,307 44% 44%
39%
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Sales Revenues Gross Margin R&D Expenses R&D Expenses in % of Sales Revenues

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Parent Only 8,018
7,547
7,233
5,135 56%
54%
52% 51%
52%
4,539
17%
15%
13% 13% 15%
1,143
755 784 937 1,085
Chroma Employees ： 1,682  (R&D 40%)
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2016

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2014

2015

2017

2018

2014

2015

2016

2017 2018

6

Financial Performance

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ROE

Dividend

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Basic EPS Cash dividend
22% Payout ratio
18%
17% 6.41 6.22
14%
13%
4.53 4.50
4.20
3.51
3.28 3.30
2.60
2.40
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
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*** The dividend will be paid out after the resolutions of Annual General Shareholders meeting.**

7

Global Operation Sites

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43 93 EST. 1999 EST. 2017
Operation Distributors
Sites
Netherlands: Germany:
Ede Augsburg
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EST. 2008 EST. 2018 EST. 1993 EST. 2001 Japan: Korea: United States: United States: Shin-Yokohama/ Pangyo Irvine, CA Foothill Ranch, CA Nagoya/ Osaka Santa Clara, CA Marlborough, MA Chandler, AZ Mexico： Ciudad Juarez

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EST. 1998 EST. 1999 EST. 2000 EST. 2001
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EST. 2003 EST. 2009
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China/ Shenzhen China/ Beijing China/ Shanghai China/ Dongguan

Taiwan: Taoyuan (Headquarters)

Taiwan: Hsinchu Taiwan: Kaohsiung

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EST. 2006 EST. 2011 EST. 2011
China/ Suzhou China/ Xiamen China/ Chongqing
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EST. 2016
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Quantel：Singapore

Others:

India: New Delhi/ Mumbai/ Bangalore Thailand: Bangkok Vietnam: Hanoi/ Ho Chi Minh Malaysia: Kuala Lumpur/ Penang Philippines: Manila/ Cebu Indonesia: Jakartar

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Others: Qingdao/ Zhengzhou/ Xian/Hefei/ Chengdu/ Wuhan/ Hangzhou/ Guangzhou/ Hong Kong

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8

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FINANCIAL REVIEW

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9

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Year 2019.1Q Condensed Consolidated Income Statement

		Condensed Consolidated P&L (In Million NTD, except for EPS in NTD)		2019.1Q %		2018.1Q % YoY %
		Net Sales		2,742 100%		3,466 100% (21%)
		Consolidated Sales of Testing Equipment Business		2,023 74%		2,358 68% (14%)
		Consolidated Sales of MAS		274 10%		605 18% (55%)
		Consolidated Sales of New Material		395 14%		426 12% (7%)
		Others		50 2%		77 2% (35%)
		Cost of Goods Sold		(1,425) (52%)		(1,902) (55%) (25%)
		Gross Profit		1,317 48%		1,564 45% (16%)
		Operating Expenses: General & Administration Research & Development		(733) (26%) (295) (11%)		(702) (20%) 4% (302) (9%) (2%)
		Operating Income		289 11%		560 16% (48%)
		Non-Operating Income (Expenses), net		72 2%		17 1% 324%
		Income (Loss) Before Tax Income Tax		361 13% (64) (2%)		577 17% (37%) (155) (5%) (59%)
		Net Income		297 11%		422 12% (30%)
		Other Comprehensive Income (Losses)		67 -		23 1% 191%
		Comprehensive Income		$ 364 13%		$ 445 13% (18%)
		Net Income (Losses) Attributable To: Shareholders of the Parent Noncontrolling Interests		296 11% 1 -		431 12% (31%) (9) - n/a
				$ 297 11%		$ 422 12% (30%)
		EPS (Basic)		$ 0.72		$ 1.06 (32%)
		EPS (Diluted)		$ 0.71		$ 1.03 (31%)

10

Balance Sheet Highlights & Financial Ratio

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	Consolidated (In Million NTD) Balance Sheet Highlights Cash & Short Term Investments Inventory Short Term Debt Long Term Debt Shareholders Equity		2019. March 4,843 2,498 486 2,146 15,125	2019. March 4,843 2,498 486 2,146 15,125	2018. Dec + / - % 4,689 3% 2,417 3% 821 - 41% 1,954 10% 14,690 3%
	Total Assets			23,327	23,202 1%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)			155 177 209 Net cash	93 104 123 Net cash
	ROE (%)			8%	18%
	ROA (%)			5%	11%
	Cash Position EBITDA Cash Flow from Operation	2019.1Q 486 500		2018.1Q 661 20	YoY (26%) n/a
	Free Cash Flow	388		(777)	n/a

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All ROE + ROA has been annualized.

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Free Cash Flow = Net Cash Provided by Operating Activities + (Net Cash used by Investing Activities)

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11

Quarterly Highlights

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Sales Revenues Gross Margin Operating Margin

2019.1Q Key Points

• Sales Revenue: $ 1,541 million,

• down 9% QoQ, down 22% YoY

• Gross Margin: 55%

• Operating Margin: 19%

• Net Income: NT$ 296 million,

down 38% QoQ, down 31% YoY

• 2019.1Q Highlights:

• The first quarter sales has reflected

the influences from US-China Trade war and Chinese New Year, but gross margin reached the highest in

past 8 quarters.

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1,970 1,922 1,958
1,697
1,541
54% 55%
52% 51% 52%
21% 22%
20%
19%
16%
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2019.1Q

2018.1Q 2018.2Q 2018.3Q 2018.4Q

12

Year 2019.1Q Condensed Income Statement

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	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2019.1Q %		2018.4Q % QoQ %	2018.1Q % YoY %
	Net Sales		1,541 100%		1,697 100% (9%)	1,970 100% (22%)
	Cost of Goods Sold		(696) (45%)		(821) (48%) (15%)	(955) (48%) (27%)
	Gross Profit		845 55%		876 52% (4%)	1,015 52% (17%)
	Operating Expenses: General & Administration Research & Development		(291) (19%) (265) (17%)		(305) (18%) (5%) (293) (17%) (10%)	(319) (16%) (9%) (275) (14%) (4%)
	Operating Income		289 19%		278 17% 4%	421 22% (31%)
	Non-Operating Income (Expenses), net		53 3%		242 14% (78%)	128 6% (59%)
	Income (Loss) Before Tax		342 22%		520 31% (34%)	549 28% (38%)
	Income Tax		(46) (3%)		(41) (2%) 12%	(118) (6%) (61%)
	Net Income		$ 296 19%		$ 479 29% (38%)	$ 431 22% (31%)
	Other Comprehensive Income		66 4%		(93) (6%) n/a	24 1% 175%
	Comprehensive Income		$ 362 23%		$ 386 23% (6%)	$ 455 23% (20%)
	EPS (Basic)		$ 0.72		$ 1.16 (38%)	$ 1.06 (32%)
	EPS (Diluted)		$ 0.71		$ 1.13 (37%)	$ 1.03 (31%)

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100% owned subsidiaries’ income - New Material: 8m (QoQ ↓ 33%, YoY ↑ 100%), MAS: (5m).

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13

Balance Sheet Highlights & Financial Ratio

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	Parent Only (In Million NTD) Balance Sheet Highlights Cash & Short Term Investment Inventory Short Term Debt Long Term Debt Shareholders Equity		2019. March 2,093 2,002 300 2,000 14,853	2019. March 2,093 2,002 300 2,000 14,853	2018. Dec + / - % 1,867 12% 1,897 6% 630 - 52% 1,800 11% 14,410 3%
	Total Assets			19,748	19,327 2%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)			252 146 136 1%	189 138 122 4%
	ROE (%)			8%	18%
	ROA (%)			6%	13%
	Cash Position EBITDA Cash Flow from Operation	2019.1Q 402 451		2018.1Q 596 230	YoY (33%) 96%
	Free Cash Flow	428		(856)	n/a

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All ROE + ROA has been annualized.

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Free Cash Flow = Net Cash Provided by Operating Activities + (Net Cash used by Investing Activities)

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14

OPERATION HIGHLIGHT

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15

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2019.1Q Product Mix and Consolidated Sales Breakdown

(Unit: Million NTD) Test Instruments & Automatic Testing System (ATS) Semiconductor / Photonics Test Solutions Turnkey Solutions Service & Others Total of Parent Company Sales + Sales from Overseas Affiliates Chroma Consolidated Testing Equipment Business MAS New Material Other Subsidiaries Consolidated Sales	(Unit: Million NTD) Test Instruments & Automatic Testing System (ATS) Semiconductor / Photonics Test Solutions Turnkey Solutions Service & Others Total of Parent Company Sales + Sales from Overseas Affiliates Chroma Consolidated Testing Equipment Business MAS New Material Other Subsidiaries Consolidated Sales	(Unit: Million NTD) Test Instruments & Automatic Testing System (ATS) Semiconductor / Photonics Test Solutions Turnkey Solutions Service & Others Total of Parent Company Sales + Sales from Overseas Affiliates Chroma Consolidated Testing Equipment Business MAS New Material Other Subsidiaries Consolidated Sales		2019.1Q %	QoQ	YoY		2018 %
	Test Instruments & Automatic Testing System (ATS) Semiconductor / Photonics Test Solutions Turnkey Solutions Service & Others Total of Parent Company Sales + Sales from Overseas Affiliates Chroma Consolidated Testing Equipment	Test Instruments & Automatic Testing System (ATS)		943 61%	(9%) (10%)		4,411 58%
		Semiconductor / Photonics Test Solutions		384 25%	5% (14%)		1,890 25%
		Turnkey Solutions		100 7% (50%) (71%)			778 11%
		Service & Others		115 7% 24% (10%)			468 6%
		Total of Parent Company Sales		1,542 100% (9%) (22%)			7,547 100%
		+ Sales from Overseas Affiliates		481 (30%) 24%			2,178
				2023 74% (15%) (14%)			9725 57%
				, 274 10% (71%) (55%) 395 14% (22%) (7%) 50 2% (36%) (35%)			, 4,862 29% 2,005 12% 339 2%
				2,742 100% (30%) (21%)			16,931 100%
							1

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16

Year 2019 Guidance

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Chroma first quarter consolidated sales revenues have reached 2.7 billion NTD, represented a decline of 30% QoQ and 21% YoY respectively. Consolidated gross margin reached record high of 48%.

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2019 Business Outlook:

• Testing equipment business sales will be picked up from second quarter

and move into peak season.

 The Testing equipment business expects to grow quarter over quarter. Overseas (US, Europe and Japan) markets will start to pick up from 2Q after a short term swings from US-China Trade War. Due to 5G market demand, IC System Level Testers shipments will be started to contribute in 2H, while photonics will continue to benefit from VCSEL and optical fiber demand increase. Turnkeys mostly will be mainly contributed in 2H.

• MAS (Automation) business will start to pick up in second half as well.

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17

Growth Opportunities

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Testing Solution Sales

Market Applications

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Turnkey Solutions
EV
Semiconductor/Photonics Test Solutions
3D Sensing
Test Instruments & ATS
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18

Test Instruments & ATS

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TECHNOLOGY

Power Testing		FullFour Quadrant/Regenerative 0-500VAC,100kVA		High Voltage :1800V High Power Density:18kW@3U		e-Scooter operation simulation mode Complying withTES regulation Up to 12kW
MARKET	’H2.18			EV Market, Green Energy		’19
		Regenerative Grid Simulator		Programmable DC Source		E-Scooter Charging Station ATS
		618XX		& Solar Array Simulator		8000
				62XXXH-S

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SOLUTION

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19

Test Instruments & ATS

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TECHNOLOGY

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Max Output Voltage: 6kV
High Precision & Multi-current Range High Precision & Multi-current Range
Battery Testing Pulse Interval: 30ms~3000ms
6V, 30A 6V, 12A
8 Types of Judgments
Cylindrical Battery Application: Roll-to-roll Production Process App.
18650 、 20700 、 21700 3D Thickness measuring
Battery AOI
2D defect detection Measuring range ： 1~300μm
’H2.18 ’19
MARKET
Power/Green Battery
Battery Charge Battery Charge
Battery Cell Surge Tester
& Discharge Tester & Discharge Tester
19311/19311-10
17208M-6-30 17216M-6-12
Cylindrical Battery Cell AOI System Thin Film Automated Optical Metrology System
SOLUTION
7505-K006 7505-K007
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20

Semiconductor/Photonics Test Solutions

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TECHNOLOGY

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Flexible Configuration :
IC Testing Handler ATE/SLT/ATE+SLT
Max.144 Test Sites
Wafer Surface Profile
Optical Metrology Measurement & Analysis: 12”
System
1um – 0.1nm Inspection Range
’18.H2 ’19
MARKET CPU/MCU/GPU, ICs, MEMS, PMIC, FPGA, Sensors IC Wafer
FT & SLT Hybrid Test System
3200
Advanced Packaging Optical Metrology System
7505-K005
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SOLUTION

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21

Semiconductor/Photonics Test Solutions

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TECHNOLOGY

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VCSEL/EEL 6” Photonics Wafer Discrete Module Testing
Testing LIV & NF & FF Testing Parallel Test; Tiny Module Handling
OLED Burn-in
Mini LED/OLED High Speed Double Side Inspection Mini LED Probing
Testing 15ms per chip Multi-die Parallel Test Full Automation System,
>500 Channel Scalable Design
’H2.18 ’19
MARKET 3D Image Sensing, Autonomous Driving, OLED, Mini LED
Wafer Package Wafer/Cell
Photonics Wafer Wafer Chip VCSEL/EEL Module Mini LED OLED
Probing Test System Inspection System Characterization System Probing Burn-in System
58635 7940 58621 Test System
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SOLUTION

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22

Turnkey Solution

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TECHNOLOGY

OLED Module Automatic Burn-in System : TV Automatic Test Turnkey Test : OLED Module Temp. up to 85 ℃ , Class 1000 Throughput 15sec / Each TV Burn-in Automation Fine Pitch Contact to 100 um Optical Pattern Inspection Multi - MIPI / eDP Signaling & Power Monitoring Fully Function Testing with MES Management ’H2.18 ’19 MARKET Flat Panel Display

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OLED Module Automatic Burn-In System SOLUTION 5710

TV Test Line TV Automatic Test System

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23

Semiconductor/Photonics Test Solutions

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- In line Nanoparticle Monitoring System

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Sub
20nm
SuperSizer II SuperSizer V
Semi S2 in Certified Semi S2 in Process
Fore CMP Slurry Fore high purity wet chemicals
(solvent)
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24

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Strategic Investment & Alliance with Camtek Ltd.

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20.5% Stake of Camtek Ltd.

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Total Shares Transaction: 7,817,440 ordinary shares.

Total Capital: 74 million USD (approx. 2.3 billion NTD)

Technology: White Light Triangulation Technology (Patented)

Application: Mainly in Semiconductor Advanced Package Synergies:

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Strengthen Chroma’s AOI and 3D

metrology capabilities for serving of broad set of fast growing industries Development of low cost solution for 2D Optical Inspection.

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Two seats on Camtek’s Board of Directors

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25

About Camtek

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• Camtek is a leading manufacturer of metrology and inspection equipment and a provider of software solutions serving the mid end of the semiconductor industry.

• Camtek is organized in 8 subsidiaries around the world in US, Europe, Japan, China, Hong Kong, Taiwan, Korea and Singapore, with R&D and production mainly in Israel, and co-headquartered in Hong Kong.

• 2018 revenue of US$123.2 million, increase of 32% YoY. Gross profit of US$60.8m (49.4%), growth rate of 33% YoY and net income of US$18.7m (15.2%), 10 times compared to 2017. (* based on continued operations only)

• Employees: 295

• Market Cap of US$297 million as of 2018/2/13, cash US$54.9 million

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26

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Camtek: Product

Wafer Inspection

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Wafer 3D Metrology

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Camtek: Software Solution

Automatic Defect Classification

Fully automated inspection process Deep Learning based algorithms

Defect classification

• •

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Yield Analysis

Yield enhancement Process control Enhanced data visualization

Map Analysis Pattern

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Camtek: Customer Reference

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Fab & Assembly House

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www.chromaate.com

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----- Start of picture text -----

Keep going beyond
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Thank You !

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