KYEC — Investor Presentation 2018

Aug 31, 2018

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Benchmark of The Testing Industry

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King Yuan Electronic Corp., Ltd. 京元電子股份有限公司

[TWSE: 2449] August, 2018

• Wafer Test Service

• Pre-Assembly

• Burn-In Service

• IC Test Service

• Backend Support

• Turnkey Operation

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Safe Harbor Notice

� Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward - looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company most recent Annual Report on Taiwan Stock Exchange (Market Observation Post System).

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KYEC rou sna shot g p p

Overview

Manufacturing footprint in Taiwan & China

• Established In: May 1987

• Headquarters: Hsinchu, Taiwan

• TWSE Listed: 2449.TW

• Market Cap.[(1)] : NT$33,931.2 million

• Cash and Cash Equivalents[(1)] : NT$4,799.2 million

• Employees[(1)] : 7,489

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Headquarters Chu-Nan fab. Tung-Luo fab.

KLT & ZKT, Suzhou, China

Key milestones

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Began wafer sort
service for logic
Complete Complete Chu-
and memory
Chu-Nan fab I Nan fab III & IV
product
Began wafer
dicing service Began burn-in Complete Complete Complete Tong- Complete Tong-
services Hsinchu HQ Chu-Nan fab II Luo fab I Luo fab II
1987 1990 1993 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Establish US Inception of Establish S’pore Establish Japan
Inception of subsidiary KLT Suzhou subsidiary subsidiary
KYEC
Listed in Inception of ZKT
TWSE Market Suzhou
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Note: (1) As of June 30, 2018

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KYEC is the benchmark of semi testin industr g y

KYEC is uniquely positioned, locally and globally, as a pure-play testing house and aiming to take advantages of the ever-growing outsourced semi testing business.

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4000+ sets of installed test system, including both commercial and in-house developed testers, providing testing services for various end applications

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Optimal customer structure and balanced business exposure to maintain strong margin growth during the volatile semiconductor market environment

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In-house test system developing and manufacturing capability as a core competence differentiate KYEC from its OSAT peers

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Seasoned management team with broad and deep industry experiences

5

Healthy financial structure and strong EBITDA profit to support CapEx

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Corporate strategies dedicated to enhance shareholder’s interests

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Diversified roduct mix for stable lon -term rowth p , g g

• In general, test services contributed > 80% of company’s total revenue.

• Devices tested by KYEC have been widely used in various applications, including consumer, communication, automotive, data computing and industrial … etc.

• Revenue recorded in Others included sale of equipment and tooling, lease income, and miscellaneous items.

Revenue breakdown for Q218

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By Manufacturing Process
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Final Test
37.5%
Burn-In
2.7%
Assembly
13.8%
Wafer Sort Others
43.5% 2.6%
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By Application
Consumer
51.9%
Data
Processing
9.3%
Industrial
7.0%
Others
Commun- 0.8%
Automotive
ication
8.7%
22.4%
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KYEC services lobal to tier customers g p

� 60% of global top 50 semi companies use KYEC’s test services

� Top 10 customers contributed 56.6% of revenue in Q218.

(Million US$)

2017	Company	2016	2017	change
1	Samsung Electronics	40,104	59,875	49.30%
2	Intel	54,091	58,725	8.60%
3	SK Hynix	14,681	26,370	79.60%
4	Micron Technology	13,381	22,895	71.10%
5	Qualcomm	15,415	16,099	4.40%
6	Broadcom Ltd. (formerly Avago)	13,233	15,405	16.40%
7	Texas Instruments	11,899	13,506	13.50%
8	Toshiba	9,918	12,408	25.10%
9	Western Digital	4,170	**9,159 **	119.60%
10	NXP	9,314	8,750	-6.10%
11	ST Microelectronics	6,815	8,031	17.80%
12	Infineon Technologies	7,033	7,872	11.90%
13	Apple	7,157	7,862	9.90%
14	MediaTek	8,725	7,837	-10.20%
15	Renesas Electronics	5,707	6,914	21.10%
16	nVIDIA	4,576	6,537	42.90%
17	Sony	5,483	6,424	17.20%
18	Analog Devices	3,562	5,705	60.20%
19	ON Semiconductor	4,123	5,297	28.50%
20	AMD	4,038	5,085	25.90%
21	HiSilicon Technologies	3,730	4,480	20.10%
22	Microchip Technology	3,065	3,766	22.90%
23	Skyworks Solutions	2,890	3,319	14.80%
24	Rohm	2,531	2,857	12.90%
25	Xilinx	2,311	2,476	7.10%

2017	Company	2016	2017	change
26	Marvell Technology Group	2,408	2,394	-0.60%
27	Maxim Integrated	2,223	2,380	7.10%
28	Qorvo	2,270	2,267	-0.10%
29	Robert Bosch	2,059	2,256	9.60%
30	Cypress Semiconductor	1,828	2,243	22.70%
31	Osram	1,624	1,928	18.70%
32	Nanya Technology	1,293	1,808	39.80%
33	Mitsubishi	1,544	1,654	7.10%
34	Microsemi	1,562	1,642	5.10%
35	Unigroup Spreadtrum RDA	1,765	1,600	-9.30%
36	Synaptics	1,435	1,556	8.40%
37	Cirrus Logic	1,443	1,555	7.80%
38	Novatek	1,417	1,548	9.20%
39	Nichia	1,471	1,504	2.20%
40	Omnivision	1,255	1,431	14.00%
41	Vishay	1,236	1,374	11.20%
42	Realtek Semiconductor	1,171	1,369	16.90%
43	Dialog Semiconductor	1,187	1,346	13.40%
44	Sanken	1,169	1,276	9.20%
45	Nexperia	0	1,256	NM
46	Winbond Electronics	1,041	1,254	20.50%
47	Diodes	941	1,054	12.00%
48	Panasonic	1,054	1,051	-0.30%
49	Macronix International	671	1,048	56.20%
50	Denso	947	990	4.50%

Note: company’s names in blue are KYEC’s customers

Source: Gartner 2017

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KYEC retains flexible and cost effective test solutions

• Current semi testing service provider is demanding on flexibility, cost effective and various platform/capacity for servicing the small-volume business trend.

• KYEC is standing to take advantage of this market trend for its flexible in test platform choices, capacity and in-house capability.

� KYEC currently installed 4000+ test systems on its shop floor.

	Memory	Logic / Mixed-Signal	CIS/CCD	LCD Driver	RF / Wireless	SoC
Advantest	T5571P / T5581H / T5585 / T5588 T5371 / T5372 / T5377S T5382A / T5771 T5335 / T5365 / T5334 / T5335P	T6672 / T6673 T6575 / T6577 T6683		T6331 T6371 T6372 T6373	T2000-RF	T2000
Agilent (Verigy)	V1200 / V2000 V3000 / V4400	HP93K / HP94K / HP83K	HP93KIP / HP94KIP		HP93KPSRF	HP93KPS
LTX- Credence	Kalos / XW Kalos II / HEX Pkalos / Pkalos II	Duo/Quartet SCX12 / ITS9KEXA/CV ITS3KEXA ASL1K / ASL3K-MS Sapphire / D10			ASL3K-RF Fusion-CX Fusion-MX	Sapphire / D10 Fusion-MX DiamondX
Teradyne		Catalyst / J750 J750EX / iFlex Ultra Flex	IP750 IP750EMP		Flex-RF Catalyst-RF Ultra Flex-RF	J750EX / J750 iFlex / Ultra Flex Catalyst
Yokogawa				TS6700 ST6730
KYEC	M-series tester	E-series tester	I-series tester	D-series tester	E-series tester	E-series tester

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In-house test s stems widel use in mass roduction y y p

� In general, in-house test system provide a custom-tailored solution flexible in test configuration and programming for device used in various applications.

� In addition, KYEC designs and manufactures test tooling and probe card in-house.

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Application of in-house tester
CIS Tester
Tester Work Station
Integration Image Illumina Illuminator Contro tor ller GPIB / RS232 R
Process & Optical DPSCardPECard1 PECard 2 PECard PECard n Capture Card (1)Capture Card (2) IP Rack PC#1IPPC#1PC#2IPPC#2 TCP/IP
…………….Capture Card (3)Capture Card (4)PC#3PC#4IPPC#8 HUB 8
Prober Analog module Logic Tester
MEMS G-sensor Tester
Integration of Motion & thermal
socket
SOC solution
MEMS Microphone Tester
Integration of Analog
Integration of module & RF module
Acoustic chamber
& kit design
High Power Solution
Strip Solution Integration of Hi-voltage
module & Hi-current module
………
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KYEC has lon histor on in-house tester manufacturin g y g

• KYEC has long history in test system and tooling development and manufacturing independently since 2002.

• KYEC retains 400+ of professional experts in its R&D team working on technology development for advanced semiconductor testing and relevant tooling manufacturing.

• Numerous test systems developed and introduced into mass production for key customer’s wafer and final testing on SoC, CIS, LCD driver, memory and MEMS products.

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Tester for analog/logic devices Tester for LCD drivers
Tester for memory Tester for MEMS E320 E320
tester/RF
tester/RF
Tester for RF devices option for TV option for
blue tooth
tuner
E320_P tester E320 E320 E320 tester/RF M-serial tester
E320 logic tester for power logic tester/512 logic tester/1024 option for GPS &
system management IC channels channels BDS for Memory
2002 2004 2006 2008 2010 2012 2014 2016 2018
E320 tester/ E320 tester/analog D-serial tester for D-serial tester for
analog option for baseband option for LCD driver/1536 TDDI/LCD Driver/2304
audio devices channels
channels
Tester for MEMS Tester for MEMS Tester for MEMS Tester for MEMS
accelerometer sensor Microphone sensor Pressure sensor Gyro sensor
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KYEC developed I-series testers for CMOS image sensor

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5M pixel
Motion sensor MIPI 1.0G MIPI 1.2G 16M pixel
I500 CIS I5000 CIS I9000 CIS I7000 CIS
tester I2000 CIS tester tester tester tester
2002 2004 2006 2008 2010 2012 2014 2016 2018
I300 CIS I1000 CIS I1000C CIS I6000 CIS I2000 CIS tester I1000HD CIS
tester tester tester tester tester
Optical mouse 3M pixel Automotive 8M pixel 23 M pixel MIPI 2.5G
MIPI 1.6G
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KYEC expects to grow revenue from in-house test system

• In general, 20 - 25% of KYEC’s revenue was generated by 1,100+ sets[(1) ] of in-house test systems and 280+ sets[(1)] of burn-in ovens installed on its shop floor.

• We expects to grow in-house tester revenue by lateral deploying the test solution to various end applications with our customers.

• Given its uniqueness in technical services and cost effective structure to customer, we plan to take advantages from this leading In-house capability against our peers at the market place

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50.0%
40.0%
30.0%
24.4% 24.5%
22.6% 22.2% 21.4% 23.4%
20.0%
22.0%
19.4% 21.1% 18.9% 20.6% 19.6%
10.0%
0.0%
1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18
% in company's total sales % in company's testing revenue
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Note: (1) As of March 31, 2018

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KYEC rovides turnke WLCSP services as well p y

KYEC’s WLCSP process flow

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Wafer incoming
inspection
Wafer Test
Wafer grinding
Laser mark
Die saw
(Laser grooving)
AOI
T & R
Waffle pack
Ship
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• In addition to wafer testing, KYEC provides wafer grinding, die sawing/laser grooving, AOI and packing services for Wafer Level Chip Scale Package (WLCSP) as well.

• WLCSP is primarily for applications as: e- compass, accelerometer, gyroscope, pressure, humidity, microphone, power management and memory products.

• WLCSP revenue in KYEC has increased significantly over last couple years. We expects this trend to continue in the future.

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KYEC rou mana ement team with dee industr ex erience g p g p y p

• Over 30 Years of semiconductor industry experience

• Chairman of KLT (Suzhou) and ZKT (Suzhou)

• Chairman of Dawning Leading Technology Inc.

• Former Manager of Manufacturing, United Microelectronics Corporation

• Bachelor of Department of Shipping &Transportation Management, National Taiwan Ocean University.

• Over 20 Years of semiconductor industry experience

• Special Assistant to Chairman, KYEC

• Former CFO of ChipMOS TECHNOLOGIES INC. & ChipMOS TECHNOLOGIES (Bermuda) LTD.

• M.Sc. and Ph.D. from the Graduate School of Mining, Metallurgy and Material Science, National Cheng Kung University

• Over 20 Years of semiconductor industry experience

• Former Vice President of EverLight Electronics

• Former General Manager of Intematix Company.

• Ph.D. from Graduate School of Mechanical Engineering, North Carolina State University, USA.

• 30 Years of semiconductor industry experience

• Former Manager of foundry business, Winbond Electronics Corp.

• MBA. from Saginaw Valley State University, Michigan, USA.

• ~20 Years of semiconductor industry experience

• Former manager of equipment engineering, UTAC/Taiwan

• Bachelor of Department of Electronic Engineering, Minghsin University of Science and Technology. MBA from Minghsin University of Science and Technology

• Over 30 Years of semiconductor industry experience

• ~20 Years of semiconductor industry experience

• Former vice director of material procurement and management, United Microelectronics Corporation

• Former Manager of quality assurance, Macronix International Co., LTD.

• Bachelor of Department of Electrical

• � Bachelor of Department of Industrial Engineering, Chung Yuan Christian Engineering and Enterprise Information, University. M.Sc. from Graduate School of Tunghai University. Electrical Engineering, National Central University.

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Financial highlights

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Financial Sna shot p

	Q1’18	Q2’18
Net Revenue (NT$ MM)	$4,580.8	$5,040.3
Gross Margin (%)	23.1%	28.1%
Expenses:
SG&A (NT$ MM)	$380.5	$406.2
R&D (NT$ MM)	$200.1	$222.8
EBITDA (NT$ MM)	$2,060.1	$2,382.7
EPS (NT$) - diluted	$0.28	$0.30
EPS (NT$) - basic	$0.29	$0.30

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Health business trends and ca acit investment y p y

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Revenue
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EBITDA

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( MNTD )
25,000
20,081.719,686.9
20,000
16,277.8 [17,128.5]
15,000
10,000
4,842.7 5,040.3
5,000
0
2014 2015 2016 2017 Q2'17 Q2'18
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(MNTD)
12,000
9,274.6 [9,810.8]
10,000
7,361.1 [7,829.0]
8,000
6,000
4,000 2,606.0 2,382.7
2,000
0
2014 2015 2016 2017 Q2'17 Q2'18
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Utilization Rate
100%
80%
55.7% 53.1% 60.0% 58.0% 58.8% 58.0%
60%
40%
20%
0%
2014 2015 2016 2017 Q2'17 Q2'18
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EBITDA Margin

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100%
90%
80%
70%
53.8%
60% 45.2% 45.7% 46.2% 49.8% 47.3%
50%
40%
30%
20%
10%
0%
2014 2015 2016 2017 Q2'17 Q2'18
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Optimal financial leverage enhances shareholder interest

Cash Flow from Operations CapEx

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(M NTD)
10,000
8,284.5 8,350.5 [9,075.5 ]
8,000 6,901.5
6,000
4,000
1,926.0 [2,033.4 ]
2,000
0
2014 2015 2016 2017 Q2'17 Q2'18
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(M NTD )
10,000 9,211.5
8,427.8
8,000 7,136.7
6,000 5,249.8
4,000 3,022.5
1,345.0
2,000
0
2014 2015 2016 2017 Q2'17 Q2'18
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Debt / Cash
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23.1% 34.6% 40.3% 25.9% 25.4% 34.3% Net Debt/Equity
(M NTD)
20,000
15,286.9
14,090.6
15,000 12,784.3 12,004.5 12,242.1 13,074.0
10,000 7,418.2
6,234.1 5,617.4 5,395.0 5,605.2 4,799.2
5,000
0
2014/12/31 2015/12/31 2016/12/31 2017/12/31 2018/3/31 2018/6/30
Debt Cash
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Overview of DLT ac uisition q

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Consideration � NT$457 million in cash
�
Financing Cash flow from operations
�
Shareholder’s approval of DLT
Conditions
�
Regulatory approvals
�
Anticipated Close Expected to close in Nov. 2018
�
Accelerates revenue growth, ~13.0%
� Accretive to EPS in 2019
Financial Impact � Pro forma liquidity in excess of NT$1.4 billion at 1.0x net
debt/EBITDA
�
Use of excess cash flow to pay down debt
�
Compelling opportunity for growth and scale
�
Strategic Complementary technology and capacity for providing turnkey
Rationale services
� Remove continued investment loss from income statements
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Com an website p y

http://www.kyec.com.tw

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