KYEC — Investor Presentation 2019

Apr 15, 2019

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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] March, 2019

• Wafer Test Service

• Assembly Service

• 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$28,428.8 million

• Cash and Cash Equivalents[(1][)] : NT$4,786.6 million

• Employees[(1][)] : 8,425

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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 December 31, 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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4,000+ 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

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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 Q4’18 and 2018

By Manufacturing Process

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Final Test Burn-In
36.4% 3.4%
Q4’18 Assembly
20.9%
Waf er Sort
Others
36.7%
2.6%
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Final Test
Burn-In
36.8%
3.0%
2018
Assembly
15.7%
Others
Waf er Sort 3.6%
40.9%
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By Application

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Consumer
53.4%
Data
Processing
8.7% Q4’18
Industrial
7.3%
Others
2.3%
Commun- Automotive
ication 7.7%
20.6%
Consumer
51.2% Data
Processing
9.1% 2018
Industrial
7.2%
Others
Commun- 2.4%
Automotive
ication
8.8%
21.3%
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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 48.0% of revenue in Q4’18 and 48.8% of revenue in 2018.

(US$ Millions)

in	2018.
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 4,000+ 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 / 94KIP		HP93KPSRF	HP93KPS / PS1600
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 / J750HD / ETS-364 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.

Application of in-house tester

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CIS Tester
Integration Image
Process & Optical
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Logic Tester
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MEMS G-sensor Tester Integration of Motion & thermal socket MEMS Microphone Tester

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SOC solution
Integration of Analog
module & RF module
High Power Solution
Integration of Hi-voltage
module & Hi-current module
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Integration of
Acoustic chamber
& kit design
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LCD Driver Solution
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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 1998.

• 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 LCD drivers
Tester for analog/logic devices
Tester for MEMS
Tester for memory
E320 tester/RF E320 tester/RF M320 memory M320 memory
Tester for RF devices option for TV option for blue tester/1024 tester/4608
tuner tooth (4.0) channels channels
E320_P tester E320 E320 E320
E320 logic for power logic logic E320 tester/RF logic E320 tester/RF
tester management tester/512 tester/1024 option for GPS & tester/1536 option for blue E320 tester/RF
system IC channels channels BDS channels tooth (5.0) option for Wi-Fi 4
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
E320 tester/ E320 D-serial tester for D-serial tester for D-serial tester for
analog tester/analog LCD driver/1536 TDDI/LCD Driver/2304 TDDI/LCD Driver/2304
option for option for channels channels/1.3G channels/1.6G
audio baseband
devices
Tester for MEMS Tester for MEMS Tester for MEMS Tester for MEMS
accelerometer sensor Microphone Pressure sensor Gyro/Hygrometer/
sensor Environmental 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 MIPI 3.0G MIPI 4.0G
I1000HD/ I1000HD/
I500 CIS I2000 CIS I5000 CIS I9000 CIS I7000 CIS I2000XD I2000XD
tester tester tester tester tester CIS tester CIS tester
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
I300 CIS I1000 CIS I1000C CIS I6000 CIS I2000 CIS I1000HD CIS I1000HD/
tester tester tester tester tester tester I2000XD
CIS tester
Optical mouse 3M pixel Automotive 8M pixel 23 M pixel MIPI 2.5G
MIPI 3.5G
MIPI 1.6G
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KYEC develo ed ovens for burn-in test services p

• In-house burn-in ovens provide flexibility, custom tailored test services.

• Our burn-in oven is able to offer testing under wide range of power/watts for products after one single test setup.

• Our high-power burn-in oven employs the air-cooling technologies instead of the water-cooling used in the market available ovens, providing advantages of cost saving and easy maintenance.

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Network
GPU
< 1 watt / -40 ° C communication 50 watts 300 watts 1000 watts 2000 watts
10 watts
KYE601 KYE700-32 HP600-12 HP600-20 KYE600/HP600 KYE600/HP600
Oven Oven Oven Oven Oven Oven
1996 1998 2000 2002 2006 2008 2010 2012 2014 2016 2018 2020
KYE600 KYE680 HP600-6 HP600-16 HP600-20Z KYE600/HP600
Oven Oven Oven Oven Oven Oven
Memory Logic 20 watts Automotive GPU 1500 watts
(DRAM / SRAM) (Chipset) 120 watts 500 watts
< 1 watt < 1 watt
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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 1,200+ sets[(1) ] of in-house test systems and 270+ sets[(1)] of burn-in ovens installed on its shop floor. The decline of revenue from in-house tester in Q4’18 is due to the DLT merger.

• 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%
40%
30%
24.4% 24.5%
22.6% 22.2% 21.4% 23.4% 23.1% 20.7%
20%
22.0%
19.4% 21.1% 18.9% 20.6% 19.6% 19.4%
15.9%
10%
0%
Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
% in company's total sales % in company's testing revenue
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Note: (1) As of December 31, 2018

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)

• 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.

• Over 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

• Over 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

(NT$ Millions)	2017	Q3’18	Q4’18	2018
Net Revenue	$19,686.9	$5,520.5	$5,673.8	$20,815.4
Gross Margin (%)	29.4%	29.7%	22.0%	25.8%
Expenses
SG&A	$1,497.7	$449.0	$498.1	$1,734.9
R&D	$818.1	$241.0	$245.2	$909.1
EBITDA	$9,810.8	$2,627.8	$2,375.5	$9,446.1
EPS – diluted (NT$)	$1.87	$0.53	$0.34	$1.46
EPS – basic (NT$)	$1.88	$0.53	$0.35	$1.47

(NT$ Millions)

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8,000 60%
7,000
50%
6,000
40%
5,000
4,000 30%
3,000
20%
2,000
10%
1,000
0 0%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Revenue 4,074 4,346 4,417 4,293 4,358 5,057 5,431 5,235 4,869 4,843 5,173 4,803 4,581 5,040 5,521 5,674
Gross margin 28.4% 29.8% 27.1% 26.6% 27.2% 30.6% 31.4% 28.4% 30.4% 31.4% 29.7% 26.0% 23.1% 28.1% 29.7% 22.0%
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Health business trends and ca acit investment y p y

Revenue

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EBITDA
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(NT$ Millions)
25,000 20,081.7 20,815.4
19,686.9
20,000 17,128.5
15,000
10,000 5,673.8
4,802.6
5,000
0
2015 2016 2017 2018 Q4 '17 Q4 '18
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(NT$ Millions)
12,000
9,810.8
10,000 9,274.6 9,446.1
7,829.0
8,000
6,000
4,000
2,222.2 2,375.5
2,000
0
2015 2016 2017 2018 Q4 '17 Q4 '18
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Utilization Rate

EBITDA Margin

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100%
80%
60.0% 58.0% 57.1% 56.5% 58.4%
53.1%
60%
40%
20%
0%
2015 2016 2017 2018 Q4'17 Q4'18
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100%
80%
60% 49.8%
45.7% 46.2% 45.4% 46.3%
41.9%
40%
20%
0%
2015 2016 2017 2018 Q4 '17 Q4 '18
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Optimal financial leverage enhances shareholder interest

Cash Flow from Operations

CapEx

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(NT$ Millions )
( NT$ Millions )
10,000 8,284.5 8,350.5 9,075.5 8,427.8 10,000 9,211.5 8,680.8
8,000
8,000 7,136.7
6,000 5,249.8
6,000
4,000
2,354.0 [2,664.1 ] 4,000
1,673.6
2,000 2,000 1,158.7
0 0
2015 2016 2017 2018 Q4'17 Q4'18 2015 2016 2017 2018 Q4'17 Q4'18
Debt / Cash
Net Debt/Equity 23.1% 34.6% 40.3% 25.9% 25.4% 34.3% 41.9% 49.6%
(NT$ Millions)
20,000 17,047.0
15,286.9 15,009.9
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 4,722.3 4,786.6
5,000
0
2014/12/31 2015/12/31 2016/12/31 2017/12/31 2018/3/31 2018/6/30 2018/9/30 2018/12/31
Debt Cash
18
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Pro forma of KYEC financials post accounting estimates change

• KYEC’s Board of Directors resolved to extend depreciation schedule of certain test equipment to 8 years aiming to match cost structure to its daily utilization condition as effective from January 1, 2019 and onward. The equipment included in this change are probers, handlers and portion of test equipment.

• The variation of company’s financials post accounting estimates change are shown in the table as set out below.

Non-GAAP Net Revenue Gross Margin Operating Margin Net income Margin EBITDA Margin(1)	100.0% 100.0% 25.8% 30.3% 13.1% 17.5% 8.6% 12.2% 45.4% 45.0% 2018 Post accounting estimates change

Note ： (1) EBITDA Margin = (Operating Income + Depreciation & Amortization) / Revenue

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Com an website p y

http://www.kyec.com.tw

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