ICHIA — Interim / Quarterly Report 2015

Oct 12, 2015

ICHIA TECHNOLOGIES, INC.

A leading component player in the world.

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Investor Conference

Oct 8,2015

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Agenda

Times Content 14:00~14:30 Registration 14:30~15:30 3Q/2015 Operation 15:30~16:00 Q&A 16:00 Ending

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Unit:	Consolidated Statements of Income1Q~3Q/2015(YoY comparisons)
	1Q~3Q/2015 1Q~3Q/2014 In NT$ thousands
		金額	%	金額	%
	Net Sales	5,720,699	100	8,714,981	100
	Cost of Sales	**(5,366,634) **	-94	(7,150,660)	-82
	Gross Profit	354,065	6	1,564,321	18
	Operating Exp.	**(461,731) **	-8	**(602,896) **	-7
	Gain From Operations	(107,666)	-2	961,425	11
	Non-Operating Income and Expenses	139,217	2	137,027	2
	Earnings Before Income Tax	31,551	-	1,098,452	13
	Tax Expense	17,762	-	(229,763)	-3
	Net Income	49,313	-	868,689	10

P.S. Figures shown above are consolidated and unaudited.

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Consolidated Statements of Income-3Q/2015 (QoQ comparisons)

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3Q/2015 3Q/2015
Unit: In NT$ thousands
金額 % 金額 %
Net Sales 1,898,473 100 1,940,804 100
Cost of Sales (1,793,517) -94 (1,768,197) -91
Gross Profit 104,956 6 172,607 9
Operating Exp. (154,542) -8 (132,265) -7
Gain From
(49,586) -2 40,342 2
Operations
Non-Operating
Income and 79,526 4 47,247 2
Expenses
Earnings Before
29,940 2 87,589 4
Income Tax
Tax Expense 45,714 2 (34,045) -1
Net Income 75,654 4 53,544 3
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P.S. Figures shown above are consolidated and unaudited.
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Revenue Breakdown by BU

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Growth by Quarter

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Ichia Business analysis with Institute investor

Larry Sun 2015/10/08

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Agenda

 MVI have turned around for profit generator for Ichia

 MVI application segmentation

• What has been done for MVI turning around?

• How about FPC ?

• Recall "what we have seen" :

• "What will the impact in 2015?"

• What's the challenges for FPC suppliers?

• Action has been done in Q3 and what's result will be expected

 PCCL / PEDLIM have been MP in Q3

• Vertical integration for Molding/Stiffner

• Restructure our operation to react to the market scenario changes

 Where is the "Beef " ? Is Ichia in there?

 Conclusion

 Q & A

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What has been done for MVI

• Get ZS focus on IP phone and Wearable

 Get SZ focus on Automobile business development

• Integrated with FPC for joint market development

MVI has been self sufficiently revenue and profit generator for Ichia

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MVI Product Application
MVI
Automotive Parts Consumer Product Wearable Device Waterproof
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MVI Product Aplication

YTD 2015 Sep. Product Application

單位:千元

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Automotive R&D Road Map

	2014 MVI Development 2015 2016 2013 Existing current: 1. Single/2-shot as molded plastic 2. Silicone Pad 3. Transparent Lighting lens 4. Painting/Laser etching decorated plastic 5. Mechanical sub-ass’y 6. FPC 1. Bigger size molding (OHC Housing) 2. Lens with optical surface treatment 1. FPC-Mechanical Sub Ass’y 2. Lens Sub module 3. High gloss parts 1. Module & Ass’y 2. Exterior parts 2014

**Based on inner facility, process and market Trends. Currently focus on interior e parts,develop function and exterior parts for the future.

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BASIS peak

Sony Smart watch 3

Copy from Sony website and BASIS website Sony Smartband 3

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Water Proof Casing

IP68

• Waterproof : Fully submersible to 2M for 1hr.

Weight: ~25g Waterproof Design by O RING

• Bundle ACOUSTIC VENTS film for MIC and Speaker Bundle anti-reflection for Camera

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RECEIVER, CAMERA
CAMERA&SENSOR
MUTE COVER
POWER BUTTON
VOLUME BUTTON
WATERPROOF
DESIGN BY O RING
PROTECTING
SCREEN LENS
CORNING GLASS
EARPHONE COVER
MIC SPEAKER
CHARGER COVER
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Capabilities-FPC waterproof part
We can apply
conformal coating on
soldering
Waterproof Silicone structure of
switch waterproof
for inner of device.
IPX7
Connect to main
FPC
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Unique from Ichia -- Single contact window for all integration

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Ichia
FPCA MVI
ESI Service
ESI Service
Tooling shop in
Manufacturing in house
house
Manufacturing in
house
SMT in house
， ，
Integration FPC+MVI Simple contact (Decoration/assy)
，
Time saving Cost competitive
PEDLIM (Fine pitch Waterproof solution
25/25um)
NNN
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How about FPC BU?

Recall "what we have seen" :

• "What will the impact in 2015?"

- it has been expected on 2015-04-10

• What's the challenges for FPC suppliers? and impact on our business

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Recalled.

What will be happened from now on ?

 People expecting after Smart Phone become matured?

• Smart Phone as the platform for : --- Yes, But not mature

• Extension by Wearable creatives/ APPs? --

• IoT?

• Data milded in Cloud , Client computing on Handhold ?

• 4G Lte become the main stream and 5G on the road......

 Technology shuffling for the demand changes?

• Replace LCM + Touch by TDDI --- Not generally applied

• Bio metric solution is required on Mobile device --- Slow Moving

• Security by Finger print , Retina pattern, ...

• Health detector by Transducer, Sensor,...

• Force of pressure on Dome switch,...

• Water proof become standard feature. -- Not really

• House design by Metal CNC vs. Plastic injection. -- Yes,

 What will be the impact for FPC industry?

• Technology road map for fine pitch and smaller Pad size has been pushed earlier.

• Cost reduction pressure harder than expected.

• Product life cycle become shorter and shorter, even EOL before mature

• Pressure on "Time to market" is normally happened.

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2014 was the year to segment FPC Recalled. suppliers into different categories

 The current technologies -- Happened

( S/S, D/S, 50/50um, connection w/ passive Components, LED light bar,…)

• Going to be price war

• Major competitors from Existing TW based and China local supplier.

 Innovation of the current technology -- Postponed for maturity

( 40/40um, 3, 4 multilayer board, IC / connectors,

• Yield rate, shorter lead time, SMT/Assembly and sourcing capability,…will be the key differentiation to win

• Japan, Taiwan based supplier, Korean supplier, some leading vendor from China ,

• Play the major margin contribution

 Fine pitch solution to support top of line applications -- not yet booming ( 35/35 or 30/30um, 3-4 layer board, Via or Blind hole, thinner stack, …)

• The technology breakthrough and verification to justify the “ thinner Mobile/pad, Wearing device, new creative applications,…

• Japan and one or two Taiwan FPC (1/ 4 Oz FCCL, or 1/6 OZ FCCL , or half etching), Taiwan ( Ichia) ( Semi-additive solution)

• Compete on Yield rate, Reliability, MP capability,…

 High reliability market focus ( Automotive, Medical, Industrial,...) -- Ichia

• Most of Japanese vendor and Korean

• Taiwanese supplier ( Ichia)

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Recalled.

What will be the impact in 2015  Consumer market:

• Except Apple, most of Smart Phone need to have their name recognized by a good product strategy. -- Apple IPhone 6 and 6S make serious impact

• ASUS, Huawei, Lenovo ( Moto), Mi, Oppo, HTC,..

• Most of them will have their new phone launched in coming 1-2 months. == Q2

• 2 in 1 or TDDI solution will be an impact to Touch Panel vendors. The current Touch solution will be only considered as the solution on low cost devices.

• JDI, CPT, AUO,... == Q3 -- Delayed

• LCM for watch required -- Ichia got Mxxx, Pxxx, Fxxx, ...

• Innolux , AUO, JDI , Samsung,... == Q2 initiated, booming in Q3, Q4

• Wearable -- Slow moving

• More clear picture for what will be the main required in the market?

 Automobile / Medical market: --Ichia recognized by LCM

• FPC for Automotive will grow faster as expected.

 Newly initiatives -- Slow moving

• Transactor module , Micro motor, NFC, Wireless Charger/ NFC Antena,.. .

• FPCA Co-Mold for Water proof,..

• High frequency application / narrow range of impedance,....

• Thinner structure circuit for the substitution of current "IC subtract level" circuit .

• Force touch/ Strain gage

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What's challenges for FPC suppliers

• Poor Business visibility -

• Automobile - less 2 months.

• Mobile Phone, Tablet, Wearable,... - about 1 month

• Cut throat price competition -

• On-hand consumer business margin dropped badly.

• Defensive reaction cause the penetration harder

• Leadtime become shorter and shorter

• Lead time forced to reduce to 3 weeks from 4-5 weeks

• Sample to MP cycle extended to 7- 9 Months from 3-6 Months.

That have impacted Ichia's revenue and and profit for Q1 and Q2. But balance it out from Q3

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Actions has been done in Q3 -1

 PCCL/PEDLIM MP in Q3, Q4

• 15 part numbers approved for MP

• But it took about 7-9 months for MP

• New Lines will be on MP from Oct. and fully integrated from Nov.

 About 10% utilization rate from Nov. and progressively increased to 30% for Q1/2016. Margin Improved by 2-3 % for FPC, and FPCA by 1-2% when Utilization rate by 50%

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Actions has been done in Q3 -2

 Vertical inte ration for Moldin /Stiffner g g

項目	07比例	08比例	比例	預估比例
自製
自製
外購
合計

項目 月份	月	月	月	月	月	月	月	月	月	月預估
雙面膠自製數量占比
雙面膠自製金額占比

The actions will be increase the FPC margin by 2-3% for and total FPCA margin by 1% around

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Action Has been done Q3-3

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AutoMobile share
increased to 39%
Mobile
Phone
Auto
Others
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Ichia has been recognized as Automobile Supplier in FPC industry

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Actions has been done in Q3 -4

• Re-Organization

• Merge SCM , Stiffner, - into Plant management

• QA merged into CS dept,

• Flatness by reducing one level of " Supervisor".

• Reduce manpower cost by 30%.

The action will improve margin by 1.5% net margin

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What will be expected for 2016

 Where is the "beef"?

 How to react to the situation?

 MVI  FPC

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Where is the " Beef "

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Megna, ALPS
JDI Continental , Bosh
AUO Visteon, Futuris
Innolux
Tinama
-Fxxx
BroadBand
Automobile
Vxxx
- Mxx Watch/
Gxx Glass
POS
- Fxx, Pxx
- Asus
-Axxx
Wearable
-Sony Gxx Axx Mobile phone
HP, Dell
- Asus, XiaoMi,
Pad Mobile Phone
Profit
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Quantity
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MVI Product Application %

	%
	28%
	25%
	16%
	14%
	5%
	5%
	3%
Waterproof camera	2%
	2%
	0%
Total	100%

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Conclusion:

• Year 2015 is a tough year for Ichia in FPC segmentation, we start the recovery actions from Q2, and Positive Result from Q3 and forward .

• MVI have been turned around for profitable operation all the time.

• PEDLIM/PCCL Have distinguished Ichia from competitor from now on. and will be a profit generator for 2016.

• Over 45% revenue ( FPC+ MVI) come from Automobile, and recognized as member of "Automobile Supplier " Chain

• 2015 will be the bottom of the valley, Upstream progressively from Q2 2015.

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Q & A

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歡迎聯繫

Larry Sun 孫永祥 Spokesman Tel : +886-3-3973345 ext. 11802 E-mail : ichia.ir@ichia.com

Patrick Tsai 蔡沛成 Investor Relations Tel : +886-3-3973345 ext. 11808 Mobil: +886-987-816-292 E-mail : Patrick.Tsai@ichia.com

- Company Website http://www.ichia.com.tw/ Financial details - http://mops.twse.com.tw/mops/web/index

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