ICHIA — Interim / Quarterly Report 2016

Apr 8, 2016

ICHIA TECHNOLOGIES, INC.

A leading component player in the world.

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Investor Conference

Apr 8,2016

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Agenda

Times Content 14:00~14:30 Registration 14:30~15:30 1Q/2016 Operation 15:30~16:00 Q&A 16:00 Ending

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Consolidated Statements of Income1Q/2016(YoY comparisons) Unit: In NT$ thousands

In NT$ thosands
u	1Q/2016		3 1Q/2015 Amount % 1,881,422 100 (1,804,920) -96 76,502 4 (174,924) -9 (98,422) -5 12,444 1 (85,978) -4 6,093 - (79,885) -4 P.S. Figures shown above are consolidated and unaudited.
	Amount	%	Amount
Net Sales	1,337,923	100	1,881,422
Cost of Sales	**(1,279,005) **	-96	(1,804,920)
Gross Profit	58,918	4	76,502
Operating Exp.	**(108,390) **	-8	**(174,924) **
Gain From Operations	(49,472)	-4	(98,422)
Non-Operating Income & Exp.	**(30,684) **	-2	12,444
Earnings Before Income Tax	(80,156)	-6	(85,978)
Tax Expense	25,550	2	6,093
Net Income	(54,606)	-4	(79,885)

Consolidated Statements of

	Consolidated Statements of	Consolidated Statements of	Consolidated Statements of	Consolidated Statements of
Unit:	4 1Q/2016 4Q/2015 Amount % Amount % Net Sales 1,337,923 100 1,662,526 100 Cost of Sales (1,279,005) -96 (1,534,773) -92 Gross Profit 58,918 4 127,753 8 Operating Exp. (108,390) -8 (74,700) -5 Gain From Operations (49,472) -4 53,053 3 Non-Operating Income & Exp. (30,684) -2 (30,263) -2 Earnings Before Income Tax (80,156) -6 22,790 1 Tax Expense 25,550 2 (18,910) -1 Net Income (54,606) -4 3,880 - Income1Q/2016(QoQ comparisons) In NT$ thousands P.S. Figures shown above are consolidated and unaudited.
		Amount	%	Amount
	Net Sales	1,337,923	100	1,662,526
	Cost of Sales	**(1,279,005) **	-96	(1,534,773)
	Gross Profit	58,918	4	127,753
	Operating Exp.	**(108,390) **	-8	**(74,700) **
	Gain From Operations	(49,472)	-4	53,053
	Non-Operating Income & Exp.	**(30,684) **	-2	(30,263)
	Earnings Before Income Tax	(80,156)	-6	22,790
	Tax Expense	25,550	2	(18,910)
	Net Income	(54,606)	-4	3,880

Revenue Breakdown by BU

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Growth by Quarter

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Operation Ability

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Ichia Business analysis with Institute investor

Larry Sun 2016/04/08

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Agenda

 The tough year for Ichia - 2015

• The impact to Ichia Revenue

• What did Ichia gain from the downturns

 What is the scenario for 2016

 How will Ichia react?

• MVI become self-sufficient operation.

• FPC stand firm in " High Reliability" Market segmentation. ( Auto / OFC)

• PEDLIM has been recognized by all customers finally.

• Improve the profit to minimize the impact from RedColor Supply Chain.

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The tough year for Ichia - 2015 - The impact to Ichia Revenue

• Selling price dropped by 30% in Consumer applications.

• China Brand End customer ( Red color Brand) affected our customers to adopt the China local supplier ( Red color Suppliers).

• Or we need to compromise the price level to sustain the business.

• Wearables is struggling, only Fitbit in good shape.

• Fine pitch demand slipped cause the MP timing shifted to 2H16 or 2017.

• FPC business dropped dramatically from Jan. to April, Management team late response on downsize to low down the breakeven point, rest of months were struggling for balance the gap.

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The tough year for Ichia - 2015 - What did Ichia gain from the downturns

MVI

• MVI return to be self-sufficient operation

• Successfully positioned as the world #1 player of "IP phone Key pad .

• manufacturing."

• Extend the business to Automotive Product line by successfully won from Maxxxx, Visxxxxx,....

• Malaysian Operation in good shape and continue grow with profitable business.

• Molding process successfully recognized by "Auto" , Business for Auto molding will be focused.

• FPC  Successfully penetrating Fxxx and start the revenue from Q4  Successfully increased the Auto Business allocation from Txxx ( China), Ixxxx, Axxxx , ..and start new business from Jxxxx , Kxxxx and Sxxxx in 2016

  • Successfully open doors for Gxxxx, Axxxx...

  • Low down the BEP by restructure the organization and integration of the operation

Final  Balance the loss in Q1 and make the 2015 in "positive" . Result

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What's scenario for 2016?

 Positive side:

• Automobile business expansion with extended use of " Electronics" in/on Car for Informative, Driver Assistant, connection for Smart Devices,...

• Demand on High speed communication (OFC) increased dramatically (same form factor with 4x density required,...)

• Number of Mass production on PEDLIM is growing , even they are still in small quantity,...

• Negative side:

• Price in consumer could be further reduced by "Red-color" suppliers or Hungry players.

• MP of consumer postponed for ECN at the last minutes.

• Slow acceptance from market on New appliances ( Wearables,... Watch,..)

• No significant application to lead the market demand

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Ichia in 2016 AutoShow

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How will Ichia react?

• MVI become self-sufficient operation.

• MVI

• Fully leverage the automation to make the Keytone operation in very effective way reduce cost by manual operation effectively. make the .

• low ( negative) margin become profitable

• Adjust the modulized Co-molding process to collect small "MOQ" business win Wearable device flexibility , profitability.

• The volume for Automobile mass production pick up from Q4 last year significantly.

• Expand Molding/Tooling businese for Automobile.

MVI become self-sufficient operation comfortably.

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Automobile Product OBM Product Automation Equipment
Overhead Control TPMS
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How will Ichia react?

- FPC stand firm in " High Reliability" Market.

 Automobile share in  Optical Fiber Communication Revenue > 50% in Q1 2016. ( OFC) grow steadily

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Automobile share % of FPC
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# of Items for OFC

	4Q15	1Q16	2Q16	3Q16
Sample award	75	10	TBD	TBD
Sample Approved	-	10	65	10+
Mass production	-	10	35	45+

OFC quality demand even tougher than Automobile:

• Life time required : Auto 10 years / OFC 25 years.

• Quality demand : 1000Hr Thermal Shock demand : Auto sample / OFC every MP shipment

• Process Required: Auto Normal soldering process / OFC Gold Bound all the time.

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Why Automobile Segmentation is tough for normal FPC guys move in ?

 4 times level up to make Ichia be firm on the " specific " Automobile Electronic suppliers

1st level up 2nd level up 3rd Level up 4th Level up investment of Quality system Computerization Deeper in process machines enforcement of the process & fully leverage (2012-2013) ( 2013-2015) ( 2013-.....) the inform. systems

• Measurement - Liability test Chambers, Precise scale/meter/TDR/EDS/Rohs/Xrate,....

• Equipment - Drilling, Plating, Gold plating, SMT ( with in line AOI/SPI/Cleaner/....) .

• In-line IPQC, ABL, Daily evaluation of Quality, CS enforcement for Q in plants,....

• Reporting , storage of data, Sample/ Cross section storage,

• Clean room level up, 4M1E extended to suppliers,...

• Supplier Qualification process,....

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Why Automobile Segmentation is tough for normal FPC guys move in ?

• 4 times level up to make Ichia be firm on the " specific " Automobile Electronic suppliers

1st level up 2nd level up 3rd Level up 4th Level up investment of Quality system Computerization Deeper in process machines enforcement of the process & fully leverage (2012-2013) ( 2013-2015) ( 2013-.....) the inform. systems

• •

• Process to fit MOQ for Auto Market, Paperless approach for in plant process Computerize all the data in the field ( Scan ( Pad for plant operation), all the parameter all the paper Document for filing) , Barset by Bar-code scan ( Drilling, Plating, code for panel,QR code for AOI, flying probe,.... SMT, ICT, ...) •

• pieces,....traceability PC to manage the production progress by

• PC to manage the production progress by on-site PC clerk with auto alert for management attention,

• No temperate material storage along with production line allowed,..

• Cross comparison from in-coming material with out-going comparison to prevent misuse of components,...

• Piece traceblity for " process machine" , "people", material/ components", " process parameter", ....

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Why Automobile Segmentation is tough for normal FPC guys move in ?  The challenge even tougher than RigidPCB fab for Automobile

• .

• Full operation from Bare FPC to FPCA and testing

• Not only consider the PCB traceability , we need to extended to component, full functional module reliability, tracebility to module level ( QR code on .

• piece level)

• Engineering efforts not only limited on Bare PCB works, but need to extended for function feature knowledge,...

• Project management is full scope as devices level instead of PCB board level.

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Why Automobile Segmentation is tough for normal FPC guys move in ?

 The challenge not only the investment on " hardware investment", it is subjected to "software / managerial" mindset migration. (the most difficulty throughout the " level-up" )

• Determined to adopt the crucial Quality system,

• Determined to develop a system ( MIS/CIM/..) to support the in-line quality and finished goods traceability.

• Determined to innovate process for prevent the " error" happened repeatedly.

  • Barcode to load the parameter to machine for process,

  • Remove all the Side-walk inventory back to central storage "daily basis" , allow the cross check by central data for misuse of material/ components.

• Determine to get the operator qualified with "on-board training/qualification"

• Promising Result to justify Ichia's previous Determination

• Penetrate into new customers by referrals.

• Award very crucial Quality demand Customer " OFC" segmentation. ( 25 years reliability required. )

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LCM module for Auto

Players from China : Tiema , BOE,

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How will Ichia react?

- PEDLIM recognized market firmly

* ** * Knocking the doors for business.

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Technology Roadmap

L/S=25/25um

L/S=20/20um L/S=15/15um

Drill/PAD 100/250um 75/200um 50/150um 30/130um 10/100um

Thickness(D/S):110um 80um 60um Impeadence: ±10% for 5G ±7%for 10G ±5%for 20G Multilayer: 4Layer(125um) 6layer 8Layer

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What the PEDLIM do behind the superiors in technology?

 Not just Fine pitch solution, what the technology mean to the customers:

• Environmental Friendly

• Cu waste is only 5% of the traditional Etching process.

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CU Waste form Etching
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With same pattern in each m [2]
PEDLIM Normal
1um * 50% of 22um * 50% of
CU etched CU etched
PEDLIM SAVE 95%!
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CU used in Pattern
With same pattern in each item
PEDLIM Normal
thickness thickness
12~15um 20~22um
PEDLIM SAVE 50%!
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• Electric power utilization (less than 4 processes from PI to pattern) .

• Less supporting materials required during the process

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What the PEDLIM do behind the superiors in technology?

 ON-Demand Cu thickness for 6um to 60um with no interfering the width of line space

PEDLIM success!

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TTranditional etching: Fail
50um
50um
30~70um
60um
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Conclusion

• Ichia wene through tough turn in 2015 and but quickly recover in 2016 by:

• Low down BEP. from 6.5E to 5E.

• > 50% revenue from "High Boundary Automobile " market to help Ichia minimize the impact from "Cut-throut Price War".

• Worked with the Leading OFC company to help Ichia open doors for "High speed Communication" market segmentation .

 PEDLIM has been well recieved by all the customers with pilot projects started to MP now. The efforts will help Ichia improve the profit to minimize the impact from Red-color suppliers.

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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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