NTC — Annual Report 2015

Mar 11, 2016

Nanya Technology

Presentation to Investors and Analysts 16 March 2016 Joseph Wu , AVP & Deputy Spokesman

	01. Overview 02. Inotera Transaction Update 03. Accelerating 20nm Technology 04. DRAM Industry Environment 05. Financial Performance 06. Summary Agenda	01. Overview 02. Inotera Transaction Update 03. Accelerating 20nm Technology 04. DRAM Industry Environment 05. Financial Performance 06. Summary Agenda
	01.	Overview
	02.	Inotera Transaction Update
	03.	Accelerating 20nm Technology
	04.	DRAM Industry Environment
	05.	Financial Performance
	06.	Summary

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OVERVIEW

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NTC Overview

Corporate Facts

• DRAM Design, Production & Sales

• Founded in 1995, IPO in 2000

• Headquarters: Taoyuan, Taiwan

• Formosa Plastic Group (FPG) has 75.8% equity ownership

Product Mix

• High quality consumer & specialty DRAM products and multiple mobile memory solution.

 Technology:

• Now: 30nm (>95%) & 42nm (<5%) (JD w/ Micron)

• Next: 20nm scheduled for pilot run in 1Q 2017.

  • 1x/1ynm have license rights from MU

• Capacity : 60,000 WSPM* (12” )

• NTC’s 24% Inotera’s share will sell to Micron

• Plan to invest Micron through private

• March 16, 2016 © 2016 Nanya Technology Corp. placement

SiP = System in Package KGD = Known Good Die PoP = Package on Package MCP = Multiple-Chip Package

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Worldwide Coverage & Location

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INOTERA TRANSACTION UPDATE

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Nanya, Inotera & Micron (Now)

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Nanya, Inotera & Micron (After closing)

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Inotera Transaction Update

Transaction Price NTD 30 per share in cash

Status Update

• Definitive • Definitive share swap agreement signed on Feb. 3rd, 2016

• Agreement

Specail • Shareholders‘ Subject to approval by 3/29 Inotera Extraordinary General Meeting Meeting • Certain condition Approvals by the Investment Commission and Fair Trade Commission precedents in Taiwan, or necessary regulatory authorities in other countries • NTD 52.5B (approximately $ 1.6B) cash on Micron’s balance sheet (40%) Financing • Micron Taiwan will take NTD 80B (approximately $2.4B) Taiwan debt financing (60%) (1 USD: 33.2 NTD) • Partnerships Nanya will invest Micron up to NTD 31.5B through private placement • Transaction Close Target to close in July 2016 • Gain on Dispossal Approximately NTD 19.9B( Income before tax) will be recognized in Q3

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ACCELERATING 20NM TECHNOLOGY

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20nm Technology Plan

 Plan to convert 30K WSPM to 20nm Technology.

 Additional clean room space will be needed, output schedule for 2H 2017.  Total capacity remains at 60K WSPM. (30K convert to 20nm, 30K at 42/30nm)  Anticipated Capex of NT$ 23.63B for 20nm migration in 2016.

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Technology Ramp Progress

30nm 20nm Design Shrink Process Technology

1Xnm/1Ynm Process Technology

• 30nm Design  Start 20nm shrink to reach technology pilot 70% in Q2 2016 run in Q1 2017

• Signed 1x and 1y Technology transfer & license option agreement with Micron

 20nm DRAM ramp in 2H 2017

• Target reach 80% by Q4 2016

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Consumer & Specialty Low Power Server PC
100%
22.4%
Low Power
15~20%
12.3%
Consumer &
50%
Specialty
65~70%
65.3%
0%
2012 2013 2014 2015 2016(E)
Non-PC: ~85%
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DRAM INDUSTRY ENVIRONMENT

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Demand Diversifying

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Y2015 Y2016 YoY Auto +
Industrial, 0.1%
Unit : QTY(Mu) ｜ C/B(GB) Bit Consumer
QTY, C/B QTY C/B QTY(Y/Y) C/B(Y/Y) Growth Tablet 13.5%
0.2%
Cloud Server Mobile
15.6 85.1 16.8 110 7.7% 29.3% 39.2% 8.5% Y2010 PC +
upgrade
Server 7.6Bn modules 64.3%
+ WS (2Gb eq)
PC 288 4.7 283 5.2 -1.7% 9.4% 8.7% 11.6%
Tablet 202 1.8 194 2.0 -3.9% 11.1% 6.7%
P2P Auto + Consumer &
Industrial Others, 13.6% PC + upgrade
Smart 4.4% modules, 21.1%
1,398 1.6 1,546 2.0 10.5% 25.0% 38.2%
Phone
Tablet, 4.4% Y2016
LCD 36.1Bn Server
214 1.5 223 1.8 4.2% 20% 25.0%
TV +
(2Gb eq) WS
20.4%
Mobile
36.0%
M2M Car 87.4 0.3 90.5 0.6 3.5% 100% 107.1%
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Source: Gartner, IHS, NTC MKT

 Bit growth of 2016 in other consumer segments forecast to increase 16.9% yoy. March 16, 2016 © 2016 Nanya Technology Corp.

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DRAM Market Outlook

• Overall worldwide economic is conservative, low to moderate demand growth expected in 2016.

• Short term seasonal demand and demand in China market marginally improved in Q1’16, follow by potential consumer demand from Summer Olympics in 2016.

• Demand remain sluggish in PC segment, cloud computing growth under expectation, mobile unit shipment shows flattish but grow in content.

• Expect DRAM price fall moderately in Q2, price uncertainty expected in

• 2H’16 due to new capacity introduced by major suppliers.

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FINANCIAL PERFORMANCE

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2015 P&L Results

2015 P&L Results	2015 P&L Results	2015 P&L Results	2015 P&L Results	2015 P&L Results	2015 P&L Results
	Unit: NT$B
	Q1’15	Q2’15	Q3’15	Q4’15	2015
Revenue	12B	11.2B	10.3B	10.4B	43.9B
Gross Profit Gross Margin (%)	5.7B 47%	4.7B 42%	3.9B 37%	3.1B 30%	17.3B 39.4%
Operating Income Operating Margin (%)	4.8B 40%	3.9B 35%	3.0B 29%	1.9B 18%	13.5B 30.7%
Non-operating Income	1.5B	0.8B	1.8B	0.03B	4.2B
Net Income Net Margin (%)	6.3B 52%	4.3B 38.1%	4.7B 46%	1.9B 18%	17.1B 39.1%
Capital	24B*
EPS	2.61	1.75	1.94	0.77	7.07

•Company highlights:

• Debt ratio : debt ratio 42% after equity funding.

• EBITDA Margin: 32.2% of Q4’15, BVPS: NT$22.55 of Q4’15.

*BVPS: Book value per share

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2015 Financial Highlights

Net Income

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(Million NT$)
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Earnings Per Share

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(NT$)
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Book Value Per Share

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(NT$)
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11.77
28,242
7.07
17,141
2014 2015 2014 2015
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22.55
17.19
2014 2015
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• Net income of NT$17.141 billion(B)

• Net Margin 39.1%

• EPS NT$ 7.07, BVPS NT$ 22.55

• Debt ratio 47% vs. 60 % in 2014

• Shipment up 16.3% YoY.

• Cost /bit improved >20% YoY.

• Recognized IMI’s profit of NT$ 4.4B

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2015 Cash Flows

	Q1'15	Q2'15	Q3'15	Q4'15
(Unit: Million NT$)	Audited & Consolidated	Audited & Consolidated	Audited & Consolidated	Audited & Consolidated
Beginning Balance	7,268	7,429	7,189	3,747
Cash from Operating Activities	5,311	4,418	4,622	4,171
Capital expenditures	-964	-782	-1,320	-775
Long-term & Short-term loans	-4,541	-3,993	-1,853	-3,994
Investments and others	356	118	-4,890*	-46
Ending Balance	7,429	7,189	3,747	3,104
Free Cash Flow(1)	4,346	3,636	3,302	3,397
(1) Free Cash Flow = Cash from operating activities – Capital		expenditures
* Mainly due to cash dividend payout to shareholders

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Business Highlights

Rights Offering

• Completed 320 million new common shares issuance at NT$ 36.5 per share

• Received NT$11.68 billion

• Investors including: Kingston, ADATA, Cathay Life Insurance, Mercuries Life Insurance, Taiwan Post, etc.

NTD 12 Billion Syndicated Loan

• Nanya signed an NTD 12 billion five-year syndicated loan agreement with 15 Banks

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Capex & Bit Shipment

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NT$ Billion
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Capex 25.25
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Bit Shipment (YoY)

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11
5.61 5.8
3.84
2
2011 2012 2013 2014 2015 2016
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53%
28%
16%
Up low-teens
Flat -8.6%
2011 2012 2013 2014 2015 2016
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• NT$3,842M Capex of Y2015.

 Capital Expenditure (Capex)

• Estimated NT$25,253M for 2016 Capex.

(20nm Conversion Capex in 2016 guided for NT$ 23,632M)

• Bit Shipment

 16.3% bit shipment growth in 2015.

• 2016 bit shipment guidance to increase low-teens yoy.

• Estimated bit shipment flat in Q1’16.

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SUMMARY

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Key Takeaways

• Support Inotera share swap transaction target to

close in July, 2016.

• Start 20nm technology pilot run in Q1 2017.

• Expect DRAM price fall moderately in Q2, price uncertainty expected in 2H’16 due to new capacity introduced by major suppliers.

 Cash dividend of NT$2.8 per common share will be proposed to the AGM scheduled on 6/22.

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Thanks & Questions

“The slides herein and the presentation made during the conference contain forward-looking statements and are provided for information purposes only. Neither Nanya Technology Corp. nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements or undertakes duty to update the statements. Investor(s) is urged to review carefully the information provided herein and shall make investment decision after conducting their own investigation.”

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2015 Income Statement

	Y2015	Y2015	Y2014	Y2014	YoY
Amount: Million NT$	Audited & Consolidated		Audited & Consolidated
Net Sales	43,876	100.0%	49,108	100.0%	-10.7%
Cost of Goods Sold	26,568	60.6%	26,939	54.9%
Gross Margin	17,308	39.4%	22,169	45.1%	-21.9%
SG&A Expenses	1,867	4.3%	1,987	4.0%
R&D Expenses	1,954	4.5%	1,378	2.8%
OperatingIncome	13,487	30.7%	18,805	38.3%	-28.3%
Non-operating Income (Exp.)	4,190	9.5%	12,928	26.3%
Income before Tax	17,677	40.3%	31,733	64.6%	-44.3%
Income Tax Benefit (Expense)	-506	-1.2%	-2,481	-5.1%
Profit from Continuing Operation	17,171	39.1%	29,251	59.6%
Income (Loss) from Discontinued Operation	0	0.0%	-1,056	-2.2%
Net income attributable to noncontrolling interests	30	0.1%	-47	-0.1%
Net Income attributable to NTC	17,141	39.1%	28,242	57.5%	-39.3%
EPS(NT$)	7.07		11.77

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