NTC — Interim / Quarterly Report 2019

Mar 17, 2020

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Nanya Technology Q4’ 2019 Financial Summary

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Safe Harbor

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The information 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. You are urged to review the information provided herein carefully, and please don’t distribute, reproduce or disclose the information in whole or in part without prior written permission of NANYA Technology Corp.

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Q4’19 Consolidated Income Statement

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	Q4'19	Q3'19	QoQ	Q4’18	YoY
Amount: Million NT$	Audited	Audited		Audited
Net Sales	13,116 100.0%	14,799 100.0%	-11.4%	16,958 100.0%	-22.7%
Cost of Goods Sold	9,739 74.3%	10,662 72.0%		7,986 47.1%
Gross Margin	3,377 25.7%	4,137 28.0%	-18.4%	8,972 52.9%	-62.4%
SG&A Expenses	562 4.3%	540 3.6%		562 3.3%
R&D Expenses	1,374 10.5%	1,345 9.1%		1,318 7.8%
Operating Income	1,440 11.0%	2,252 15.2%	-36.1%	7,092 41.8%	-79.7%
Non-operating Income (Exp.)	111 0.8%	432 2.9%		893 5.3%
Income before Tax	1,550 11.8%	2,684 18.1%	-42.2%	7,985 47.1%	-80.6%
Income Tax Benefit (Expense)	-265 -2.0%	-479 -3.2%		-32 -0.2%
Net Income	1,286 9.8%	2,205 14.9%	-41.7%	7,953 46.9%	-83.8%
EPS(NT$)	0.42	0.72		2.57
Book Value Per Share	49.78	49.71		54.02

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Q4’19 vs. Q3’19 Results Com arison p

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	Q4’19	Q3’19	QoQ (PPT Delta) Remarks*	QoQ (PPT Delta) Remarks*
Amount in Million NT$	Audited	Audited
Net Sales	13,116	14,799	-11.4%	 Bit shipment decreased by mid single digits% range QoQ  ASP decreased by low single digits% QoQ  NTD/USD appreciated 2.1%
Gross Profit (Loss) Gross Margin(%)	3,377 25.7%	4,137 28.0%	-2.3%	 Q4’19 Gross profit decreased NT$ 760M, mainly due to shipment & ASP decrease & FX impact
Operating Expense	1,937 14.8%	1,885 12.7%	+2.1%	 SG&A increased NT$ 22M, R&D expense increased NT$ 30M
Operating Income (Loss) Operating Margin(%)	1,440 11.0%	2,252 15.2%	-4.2%	 Q4’19 OP Income decreased NT$ 812M
Net Income (Loss) Net Margin (%)	1,286 9.8%	2,205 14.9%	-5.1%	 Net Income decreased NT$ 919M • Primarily from OP Income decrease of NT$ 812M • FX losses & others:NT$ 321M unfavorable • Income tax: NT$ 214M favorable

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*PPT: Percentage Points

Quarterly Financial Highlights

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Revenue (Million NT$) Net Income (Million NT$)

Gross Margin(%) Operating Margin(%)

59% 55% 53% 52% 51% 50% 47% 44% 44% 44% 42% 41% 40% 39% 40% 35% 33% 33% 32% 32% 31% 31% 28% 28% 27% 13,116 25% 23% 21% 25.7% 18% 17% 15% 11.0% 1,286 0% Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

20,000

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Cash Flows

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2019 Cash Flow

Cash Flows
	Q4'19	Q3'19
Unit: Million NT$	Audited & Consolidated	Audited & Consolidated
Beginning Balance	43,184	60,861
Cash from Operating Activities	4,798 -840 -2,992*	5,103
Capital expenditures		-1,106
Financial Activities		-21,673**
Ending Balance	44,149	43,184
Free Cash Flow(1)	3,957	3,996

(1) Free Cash Flow = Cash from operating activities – Capital expenditures

• NT$ 2.05 billion(B) investment to acquire FATC shares, and NT$ 1.1B currency translation due to NTD appreciation

• ** Mainly from dividend payout of NT$ 21.7B

Unit: Million NT$

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-5,496
17,407
Capital
Expenditures
Cash from -25,146
Operating
Activities
Dividend
and
L/T investment
57,384 44,149
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2019/1/1 2019/12/31 Beginning Ending Balance Balance

2019 Free Cash Flow NT$11,911 Million

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2019 Consolidated Income Statement

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	2019	2018	YoY
Amount: Million NT$	Audited	Audited
Net Sales	51,727 100.0%	84,722 100.0%	-38.9%
Cost of Goods Sold	35,233 68.1%	38,106 45.0%
Gross Margin	16,494 31.9%	46,616 55.0%	-64.6%
SG&A Expenses	2,051 4.0%	2,373 2.8%
R&D Expenses	4,926 9.5%	4,887 5.8%
Operating Income	9,517 18.4%	39,355 46.5%	-75.8%
Non-operating Income (Exp.)	1,708 3.3%	2,229 2.6%
Income before Tax	11,225 21.7%	41,584 49.1%	-73.0%
Income Tax Benefit (Expense)	-1,401 -2.7%	-2,223 -2.6%
Net Income	9,825 19.0%	39,362 46.5%	-75.0%
EPS(NT$)	3.23	12.80
Book Value Per Share	49.78	54.02

︱© 2020 Nanya Technology Corporation. All Rights Reserved. ︱NTC Proprietary & Confidential︱

2019 vs. 2018 Results Comparison

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Amount in Million NT$	2019	2018	YoY (PPT Delta)*	Remarks
	Audited	Audited
Net Sales	51,727	84,722	-38.9%	 ASP decreased by high-fortys % YoY  Bit shipment increased by low-teens YoY  FX positive impact +2.6%
Gross Income (Loss) Gross Margin(%)	16,494 31.9%	46,616 55.0%	-23.1%	 Gross Income decreased mainly due to ASP decrease
Operating Income (Loss) Operating Margin(%)	9,517 18.4%	39,355 46.5%	-28.1%	 Operating Income decreased mainly due to ASP decrease
Net Income (Loss) Net Margin (%)	9,825 19.0%	39,362 46.5%	-27.5%	 Net Income decreased by NT$ 29,537M mainly due to: • Operating Income decreased NT$ 29,838M • FX loss unfavorable NT$ 1,366M (2019: NT$ -186M, 2018: NT$ 1,180M) • Other income favorable NT$ 274M (2019: NT$ 1,304M, 2018: NT$ 1,030M) • Income tax favorable 822M (2019: NT$ 1,401M, 2018: NT$ 2,223M)

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CAPEX & Bit Shipment

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NT$ Billion

Mid-thirties %

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20.4
9.2
5.5
2018 2019 2020(E)
CAPEX
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Low-teens% Approx.
teens%
2018 2019 2020(E)
Bit Shipment (YoY)
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Capital Expenditure

(CAPEX)

• 2019 CAPEX NT$ 5.5Billion (B)

• BoD approved 2020 CAPEX plan is up to NT$ 9.2 billion, including 10nm-class R&D and piloting, and 20nm deferred payment, etc.

• Q4’19 Bit shipment decreased by mid single digits %

• 2019 YoY bit shipment grew by low-teens%

Bit Shipment

• Q1’20 QoQ bit shipment expected to be low single digits increase

• 2020 YoY bit shipment growth guided for approx. teens%

• Continue allocating 5~10% capacity to technology & product development

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Market Outlook (Year 2020)

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Outlook

• Macro : Optimistic market outlook throughout 2020, inventory normalized, and supply and demand gradually stabilized

• Sectors Outlook : Server demand recovery, mobile DRAM content growth, healthy outlook on PC shipment and consumer demand

• Supply  Conservative 2019 Capex, discipline bit supply growth in 2020

• Mobile Market: 2020 smartphone unit shipment grow slightly, 5G phone with 8GB DRAM sales increase; 12GB units increase in high-end models of Android phones

• Server Market: Solid server demand growth. Demand increase with 5G base station deployment, 64GB high-density module, and edge computation

Demand

• PC Market: Strong enterprise and gaming PC demand. Dual monitors PC, 5G laptops, creators (enhanced independent graphics capabilities) sustain DRAM demand. Microsoft Windows transition and Intel new processors helping new demand

• Consumer Market: DRAM demand in consumer segments including TV, set-top box, SSD, gaming, smart speaker, routers and smart watch…etc. to grow steadily

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Regarding of the Coronavirus (COVID-19) Event

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 In response to the Coronavirus (COVID-19), Nanya Technology has conducted a series of epidemic prevention measures complied with government’s regulation. Internal epidemic prevention measures include all personnel body temperature screening, use of surgical masks in conference rooms, catering health management...etc. External epidemic prevention measures include entrance requirements, video or teleconference instead of travel or visit…etc. There’s no abnormal cases occurred at current.

• The company's production line and subcontractors are all located in Taiwan, and the company has confirmation from its raw material and equipment suppliers, all have not been affected by the COVID-19.

• The company reiterates its production, sales, operation are normal, and expects the first quarter shipment will be in line with guidance.

• Nanya Technology will continue monitor the future development of the Coronavirus Event and will take appropriate measure to assure the overall normal operation.

︱© 2020 Nanya Technology Corporation. All Rights Reserved. ︱NTC Proprietary & Confidential︱

Nanya Business Review & Outlook

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• Complete DDR4, LPDDR4/X, LPDDR3 product portfolio, and begin volume

• shipment in server market

• Acquired additional 13% FATC shares, total holding 32%

• Optimistic market outlook throughout 2020

• 2020 bit shipment will increase teens%, grow in-line with market demand growth

• Successful DRAM proprietary core cell development based on 10nm class

• process technology

︱© 2020 Nanya Technology Corporation. All Rights Reserved. ︱NTC Proprietary & Confidential︱

NTC DRAM R&D Strategy

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To enable 30% productivity gain per technology node

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30%
30%
20nm 1Anm 1Bnm
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Advanced DRAM Cell Features

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Active Area minimum pitch 6F[2] cell design

AA-min Cell Design

Key Features

• Self-aligned epitaxial Si growth to enlarge cell contact area

 Cell landing pads to enable unit Active Bit Lines hexagonal close-packed (HCP) cell Area (BL) (AA) capacitors

• Bit-line air gaps to improve signal margin

Word Lines (WL)

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NTC Patent Portfolio

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NTC has accumulated more than 4000 patents. This established strong patent portfolio is beneficial to NTC technology development.

NTC Accumulated Patent Count

Count

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4500 4198
4000 3739 459 Increased
3500 3237 502
3000 2766 471
2500 478
2000
3739
3237 Accumulated
1500
2766
2288
1000
500
0
20161 20172 20183 20194 Year
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DRAM Technology Roadmap

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1A 1B 1C Active Area minimum pitch

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Thanks & uestions Q

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