CHROMA — Call Transcript 2019

Mar 11, 2019

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CHROMA ATE INC. 2018.4Q Earnings Conference Call

Paul Ying, CFO Leo Huang, Chairman & CEO

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21[st] February, 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 2,988 employees (as December, 2018)

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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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Sales Revenues Gross Margin R&D Expenses R&D Expenses in % of Sales Revenues

Consolidated Sales Consolidated

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Gross Margin R&D Expenses in % of Sales Revenues
Parent Only 8,018
7,547
16,931
7,233
14,901
5,135 56%
11,624 54% 52% 51%
52%
9,692
47% 47%
10,307 44% 44% 4,539
39%
17%
15%
13% 13% 15%
1,143
755 784 937 1,085
Chroma Employees ： 1,715  (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 2018 Condensed Consolidated Income Statement

		Condensed Consolidated P&L (In Million NTD, except for EPS in NTD)		2018 %		2017 % YoY %
		Net Sales		16,931 100%		14,901 100% 14%
		Consolidated Sales of Testing Equipment Business		9,725 57%		9,873 66% (1%)
		Consolidated Sales of MAS		4,862 29%		2,538 17% 92%
		Consolidated Sales of New Material		2,005 12%		2,054 14% (2%)
		Others		339 2%		436 3% (22%)
		Cost of Goods Sold		(9,473) (56%)		(7,832) (53%) 21%
		Gross Profit		7,458 44%		7,069 47% 6%
		Operating Expenses: General & Administration Research & Development		(3,164) (19%) (1,255) (7%)		(2,814) (19%) 12% (1,212) (8%) 4%
		Operating Income		3,039 18%		3,043 20% -
		Non-Operating Income (Expenses), net		269 2%		79 1% 240%
		Income (Loss) Before Tax Income Tax		3,308 20% (761) (5%)		3,122 21% 6% (573) (4%) 32%
		Net Income		2,547 15%		2,549 17% -
		Other Comprehensive Income (Losses)		4 -		(138) (1%) n/a
		Comprehensive Income		$ 2,551 15%		$ 2,411 16% 6%
		Net Income (Losses) Attributable To: Shareholders of the Parent Noncontrolling Interests		2,546 15% 1 -		2,558 17% - (9) - n/a
				$ 2,547 15%		$ 2,549 17% -
		EPS (Basic)		$ 6.22		$ 6.41 (3%)
		EPS (Diluted)		$ 6.08		$ 6.18 (2%)

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		2018. Dec 4,689 2,417 821 1,954 14,690	2018. Dec 4,689 2,417 821 1,954 14,690	2017. Dec + / - % 7,028 - 33% 2,431 - 1,688 - 51% 1,161 68% 13,463 9%
	Total Assets			23,202	22,018 5%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)			93 104 123 Net cash	101 87 116 Net cash
	ROE (%)			18%	21%
	ROA (%)			11%	13%
	Cash Position EBITDA Cash Flow from Operation	2018 3,655 1,266		2017 3,459 2,749	YoY 6% (54%)
	Free Cash Flow	(569)		2,911	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

2018.4Q Key Points

2,285

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• Sales Revenue: $ 1,697 million,

• down 13% QoQ, down 17% YoY

• Gross Margin: 52%

• Operating Margin: 17%

• Net Income: NT$ 479 million,

• down 22% QoQ, down 46% YoY

• 2018.4Q Highlights:

• The major sales contribution in

fourth quarter is mainly coming

from turnkey solutions, presented a growth of 60% QoQ.

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2,046
1,970 1,922 1,958
1,890
1,797
1,697
54%
53% 52% 53% 52% 51% 52%
47%
26%
23%
22% 21% 22%
20%
16% 16%
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2017.1Q 2017.2Q 2017.3Q 2017.4Q 2018.1Q 2018.2Q 2018.3Q 2018.4Q

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Year 2018.4Q Condensed Income Statement

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	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2018.4Q %		2018.3Q % QoQ %	2017.4Q % YoY %
	Net Sales		1,697 100%		1,958 100% (13%)	2,046 100% (17%)
	Cost of Goods Sold		(821) (48%)		(962) (49%) (15%)	(1,079) (53%) (24%)
	Gross Profit		876 52%		996 51% (12%)	967 47% (9%)
	Operating Expenses: General & Administration Research & Development		(305) (18%) (293) (17%)		(313) (16%) (3%) (291) (15%) -	(368) (18%) (17%) (281) (13%) 4%
	Operating Income		278 17%		392 20% (29%)	318 16% (13%)
	Non-Operating Income (Expenses), net		242 14%		295 15% (18%)	617 30% (61%)
	Income (Loss) Before Tax		520 31%		687 35% (24%)	935 46% (44%)
	Income Tax		(41) (2%)		(75) (4%) (45%)	(47) (3%) (13%)
	Net Income		$ 479 29%		$ 612 31% (22%)	$ 888 43% (46%)
	Other Comprehensive Income		(93) (6%)		(111) (6%) (16%)	30 2% n/a
	Comprehensive Income		$ 386 23%		$ 501 25% (23%)	$ 918 45% (58%)
	EPS (Basic)		$ 1.16		$ 1.49 (22%)	$ 2.18 (47%)
	EPS (Diluted)		$ 1.13		$ 1.46 (23%)	$ 2.11 (46%)

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100% owned subsidiaries’ income - New Material: 12m (QoQ ↑ 20%, YoY ↑ 140%), MAS: 148m (QoQ ↓ 38%, YoY ↓ 73%).

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13

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Year 2018 Condensed Income Statement

	Condensed P&L– Parent Only (In Million NTD, except for EPS in NTD)		2018 %	2017 % YoY %
	Net Sales		7,547 100%	8,018 100% (6%)
	Cost of Goods Sold		(3,630) (48%)	(3,901) (49%) (7%)
	Gross Profit		3,917 52%	4,117 51% (5%)
	Operating Expenses: Selling and General & Administration Research & Development		(1,259) (17%) (1,143) (15%)	(1,272) (16%) (1%) (1,085) (13%) 5%
	Operating Income		1,515 20%	1,760 22% (14%)
	Non-Operating Income (Expenses), net		1,414 19%	1,106 14% 28%
	Income (Loss) Before Tax		2,929 39%	2,866 36% 2%
	Income Tax		(382) (5%)	(308) (4%) 24%
	Net Income		$ 2,547 34%	$ 2,558 32% -
	Other Comprehensive Income		- -	(133) (2%) n/a
	Comprehensive Income		$ 2,547 34%	$ 2,425 30% 5%
	EPS (Basic)		$ 6.22	$ 6.41 (3%)
	EPS (Diluted)		$ 6.08	$ 6.18 (2%)

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Non-operating Income included 100% owned subsidiaries’ income - New Material: 45m (YoY ↑ 96%), MAS: 1008m (YoY ↑ 39%).

14

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		2018. Dec 1,867 1,897 630 1,800 14,410	2018. Dec 1,867 1,897 630 1,800 14,410	2017. Dec + / - % 2,878 - 35% 1,862 2% 1,500 - 58% 1,000 80% 13,230 9%
	Total Assets			19,327	18,560 4%
	Inventory Turnover (Day) AR Turnover (Day) AP Turnover (Day) Net Debt to Equity (%)			189 138 122 4%	155 123 120 Net cash
	ROE (%)			18%	22%
	ROA (%)			13%	15%
	Cash Position EBITDA Cash Flow from Operation	2018 3,128 1,815		2017 3,047 662	YoY 3% 174%
	Free Cash Flow	510		1,327	(62%)

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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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15

OPERATION HIGHLIGHT

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16

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2018.4Q Product Mix and Consolidated Sales Breakdown

(Unit: Million NTD)	(Unit: Million NTD)	2018. 4Q %	QoQ	YoY
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	Test Instruments & Automatic Testing System (ATS)	1,038 61%	(9%)	(9%)
	Semiconductor / Photonics Test Solutions	364 21% (35%)		9%
	Turnkey Solutions	202 12% 59% (57%)
	Service & Others	93 6% (26%) (10%)
	Total of Parent Company Sales	1,697 100% (13%) (17%)
	+ Sales from Overseas Affiliates	686 55% 17%
		2,383 61% - (9%)
MAS New Material Other Subsidiaries Consolidated Sales		951 24% 10% (51%) 512 13% (7%) (3%) 78 2% (20%) (34%)
		3,924 100% - (25%)

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17

2018 Product Mix and Consolidated Sales Breakdown

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(Unit: Million NTD)	(Unit: Million NTD)		2018 %	YoY		2017 %
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	Test Instruments & Automatic Testing System (ATS)	4,411 58%		4%	4,253 53%
	Semiconductor / Photonics Test Solutions	1,890 25% (23%)			2,460 31%
	Turnkey Solutions	778 11% (16%)			928 12%
	Service & Others	468 6% 24%			377 4%
	Total of Parent Company Sales	7,547 100% (6%)			8,018 100%
	+ Sales from Overseas Affiliates	2,178 17%			1,855
		9,725 57% (1%)			9,873 66%
MAS New Material Other Subsidiaries Consolidated Sales		4,862 29% 92% 2,005 12% (2%) 339 2% (22%)			2,538 17% 2,054 14% 436 3%
		16,931 100% 14%			14,901 100%

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18

Year 2019 Guidance

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Chroma consolidated sales revenues have grown consecutively for four years, presented a CAGR of 15%. The year 2018 consolidated sales presented another year of growth of 14% compared to 2017. The impressive results in 2018 was mainly contributed from MAS (the Automation business), presented a strong growth of 92% YoY, while the Chroma testing equipment business were flat compared to last year. The net income in 2018 was 2.5 billion NTD, also flat compared to 2017.

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2019 Business Outlook:

• First quarter low due to supply chain relocation and Chinese new year.

• Expects shipments to pick up from second quarter and earnings in 2019 will not

• lower than last two years.

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• Testing equipment business expects to grow in 2019. EV markets and OEM/ EMS relocation will continue to drive the growth of power electronics testing equipment and solutions sales. While semiconductor / photonics testing solution will be mainly contribute from VCSEL capacity build and pilot run of ToF.

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19

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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20

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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21

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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22

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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23

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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24

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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25

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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26

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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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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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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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Keep going beyond
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Thank You !

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Copyright © 2018 Chroma ATE Inc. All rights reserved.

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