TXC — Investor Presentation 2018

Mar 20, 2018

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Investor Conference March 2018

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TXC Confidential and Proprietary

Disclaimer

• Except for statements in respect of historical matters, the statements in this release are forwardlooking statements. Such 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 TXC to be materially different form what may be implied by such forwardlooking statements.

• The financial forecasts and forward-looking statements in the release reflect the current belief of TXC as of the date of this release and TXC undertakes no obligation to update these forecasts and forward-looking statements for events or circumstances that occur subsequent to such date.

• The statements in respect of historical matters may contain unaudited information, which may have certain deficiency or weakness so as not to fairly present financial condition or the results of operations of TXC.

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TXC Confidential and Proprietary

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Financial Performance P&L, EPS, DPS, CAPEX

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Quarterly Performance Stable Growth Benefited from various of markets penetration

Unit: $NT in Million

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000	0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
	14.Q1	14.Q2	14.Q3	14.Q4	15.Q1	15.Q2	15.Q3	15.Q4	16.Q1	16.Q2	16.Q3	16.Q4	17.Q1	17.Q2	17.Q3	17.Q4
Revenue(QoQ)	-9.8%	8.9%	6.8%	-1.4%	-14.0%	4.0%	8.9%	3.2%	-15.4%	8.3%	13.9%	1.7%	-19.3%	-0.9%	7.2%	0.1%
Revenue(YoY)	-6.9%	1.2%	3.0%	3.5%	-1.4%	-5.9%	-4.1%	0.5%	-1.2%	2.9%	7.6%	6.0%	1.1%	-7.5%	-12.8%	-14.2%

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Quarterly Performance Gain in Gross Profit

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Contributed by new products, new customers and product mix strategy Unit: $NT in Million
28.9%
28.3%
26.1% 26.5%
Gross 25.5% 25.3%
Margin(%) 24.6% 24.3%
24.8%
25.0%
24.2%
24.0% 23.6% 23.5%
23.5%
22.1%
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		14.Q1	14.Q2		14.Q3		14.Q4		15.Q1		15.Q2		15.Q3		15.Q4		16.Q1		16.Q2		16.Q3 16.Q4		17.Q1		17.Q2		17.Q3		17.Q4
Gross Profit						2014: 2,331M							2015: 2,235M								2016: 2,554M						2017:		2,185M
600 800		509		579		609 634 (yoy +6.2%)				533		491	581 631 (yoy -4.1%)					610		565	679 700 (yoy +14.3%)			603		513	535 534 (yoy -14.4%)
400
200
0
		14.Q1		14.Q2		14.Q3		14.Q4		15.Q1		15.Q2		15.Q3		15.Q4		16.Q1	16.Q2		16.Q3 16.Q4		17.Q1		17.Q2		17.Q3 17.Q4
		14.Q1		14.Q2		14.Q3		14.Q4		15.Q1		15.Q2		15.Q3		15.Q4		16.Q1		16.Q2 16.Q3		16.Q4		17.Q1		17.Q2		17.Q3		17.Q4
Gross Profit(QoQ)		-7.3%		13.8%		5.2%		4.1%		-15.9%		-8.0%		18.4%		8.6%		-3.3%		-7.3% 20.0%		3.2%		-13.9%		-14.9%			4.3%	-0.3%
Gross Profit(YoY)		-2.5%		2.3%		9.3%		15.5%		4.8%		-15.3%		-4.6%		-0.5%		14.4%		15.2% 16.8%		11.0%		-1.1%		-9.2%		-21.1%		-23.8%

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Quarterly Performance Gain in Net Profit

Resulted from overall costs control, high-end product sales

Unit: $NT in Million 15.1%

Net Margin%

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11.7%
11.8%
10.8%
10.4%
10.3% [10.6% 10.6% ] 10.4% 10.2% [10.7% ]
10.0%
9.3%
10.2%
8.0% 8.0%
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0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit	0 100 200 300 400 Net Profit
	14.Q1	14.Q2	14.Q3	14.Q4	15.Q1	15.Q2	15.Q3	15.Q4	16.Q1	16.Q2	16.Q3	16.Q4	17.Q1	17.Q2	17.Q3	17.Q4
Net Profit(QoQ)	-8.3%	9.0%	10.7%	-1.9%	-15.9%	-19.9%	61.5%	-11.0%	-11.1%	-6.3%	27.3%	14.3%	4.1%	-47.5%	34.8%	8.3%
Net Profit(YoY)	6.2%	10.0%	1.5%	8.7%	-0.4%	-26.9%	6.7%	-3.3%	2.3%	19.7%	-5.6%	21.3%	42.0%	-20.5%	-15.8%	-20.3%

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Income Statement

Summary

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Balance Sheet

Summary

Unit：$NT in thousand	2015	2016	2017
Cash & Marketable Securities	2,727,944	2,092,897	2,331,366
Accounts Receivable	2,878,003	3,033,271	2,585,287
Inventories	1,534,026	1,520,049	1,504,066
Current Assets	8,573,807	8,818,130	7,983,192
PP&E	4,570,352	4,277,905	4,369,810
Total Assets	15,580,415	14,841,968	13,402,799
Current Liabilities	3,444,554	3,156,105	2,276,802
Long-term Liabilities	1,396,615	1,912,681	1,961,406
Total Liabilities	4,841,169	5,068,786	4,238,208
Total Shareholders' Equity	10,739,246	9,773,182	9,164,591
A/R Turnover Days	114	112	117
Inventory Turnover Days	83	79	84
Current Ratio(%)	248.9%	279.4%	350.6%
Debt Ratio(%)	31.1%	34.2%	31.6%
Book Value Per Share($NT)	34.67	31.38	29.45

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EPS and DPS

EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS	EPS and DPS
Stable Profit Growth and High Payout Ratio Unit: $NT 2.2 2.2 2.2 2.5 2.5 2.8 0 0.5 1 1.5 2 2.5 3 3.5 4 Earnings Per Share Cash Dividends Per Share
	2.2 2.2 2.2 2.5 2.5 2.8 Earnings Per Share Cash Dividends Per Sha
YEAR 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017
Earnings Per Share		3.48		3.79		3.02		3.21		3.03	3.28	3.11
Cash Dividends Per Share		2.2		2.2		2.2		2.5		2.5	2.8	-
Stock Price(Apr. end)		43.55		46		43.55		39.9		41.1	44.5	-
Payout Ratio(%)		63.22		58.05		72.85		77.88		82.51	85.37
Yields(%)		5.05		4.78		5.05		6.27		6.08	6.29

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Capital Expenditure Expand the Economy of Scale Capacity expansion for new products, and to satisfy market demands

Unit: $NT M

Amount: $250M

• MEMS

• Oscillators

Amount: $380M

• SMD Crystal

• • Facility

Amount: $230M

• SMD Crystal

• ACAP Crystal

Total Amount: $860M

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Roads to New Growth Trend, Opportunity, Growth

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Global Timing Market

CS&A conservatively projected CAGR 0.62% which is about US$3.1B to 3.2B (Optimistic at US$4B TAM)

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XTAL & OSC Total YoY
3,500 1.10% 1.20%
3,000 1.00%
2,500
0.74% 0.80%
2,000 0.67%
0.60%
1,500
0.32% 0.40%
0.29%
1,000
0.24%
0.20%
500
0 0.00%
2015 2016 2017 2018 2019 2020
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IoT will drive the timing market growth – CISCO projected US$50B IoT devices by 2020. Growth market segments; Automotive, Smartphone & Wearable, Smart Home, Data Center, 5G

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Market Forecast Timing and Sensing are forecasted at stable growth

Global Timing Market

Estimated to reach US$3.8 billion by 2020 CAGR 4.2% (2015~2020)

TXC YoY 4% (NT$)

Forecasted 28 billion units by 2020 CAGR 8.5% (2015~2020)

TXC YoY (12%)

Source: CS&A, TXC

Cons:

MCU and AP integration will reduce the use of timing

Global Light Sensor (Ambient, Color, Proximity) Market in Smartphone, NB, Tablets, Wearables

Estimated to reach US$ 2.14 billion by 2022 CAGR 9.3% (2016 and 2022)

TXC great opportunity to grow

Forecasted 6 billion units by 2022 CAGR 18% (2016~2022)

Source: IHS, Yole, TXC

Cons:

Pros:

Everything connected is driving the timing growth

Sensors integration will reduce the use of standalone sensor

Pros:

Everything sense is driving the sensors growth

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Market Leader TXC #3 in Global, #1 in China

2015 Rank	2016 Rank	Company Name	Revenue (M)	Revenue (M)	Revenue (M)	Market Share (%)	Market Share (%)
			2015	2016	Percent Change	2015	2016
1	1	Seiko Epson	$427	$409	-4.2%	13.8%	12.9%
2	2	NDK	$338	$357	5.4%	10.9%	11.3%
3	3	TXC	$302	$310	2.8%	9.7%	9.8%
4	4	KCD	$301	$287	-4.5%	9.7%	9.1%
5	5	KDS	$201	$212	5.5%	6.5%	6.7%
6	6	Vectron	$163	$160	-2.0%	5.3%	5.1%
7	7	SIWARD	$95	$103	8.8%	3.1%	3.3%
8	8	Hosonic	$91	$94	2.8%	2.9%	3.0%
N/A	9	MegaChips	$35	$73	108.6%	1.1%	2.3%
10	10	Murata	$69	$72	5.0%	2.2%	2.3%
		Others	$1,080	$1,088	0.7%	34.8%	34.2%
		Total Revenue	$3,102	$3,165	2.0%

TXC started to gain Ambient Light Sensors market share, shipped over 120M units to Tier 1 Smartphones

Top 4 Suppliers for high-end smartphone AMS (TAOS, Heptagon) Broadcom (Avago) ROHM

TXC

TXC great opportunity to grow

(CS&A)

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To Lock and Unlock

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Today
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They are capable of these… Sense > Connect > Communication > Analytics > Actions > Value They built-in these…

Sensors Sensors Timing Timing (TXC) (TXC)

Technology (Wireless) 4G/5G BT, WiFi, etc

A.I. Lock/ Unlock Lock/ Unlock Real time, Security, etc. Clouds (TSE Solenoid) Software/Apps

(August)

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Trend

Digital is already here, and becoming Intelligent All things can sense, all things are connected, and all things are intelligent

The path to connect anything and anywhere is on going > Massive Internet of Things

New mission-critical control services being introduced > Mission-Critical Control

Moving into the era of immersive experiences, and hyper connectivity > Enhanced Mobile Broadband

(Qualcomm)

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Digital and Intelligent Data is growing every second, AI is taking place Changing the way we do things, machines do things

Mobile data will Data Storage will Big Data 6.4M Apps 30B grow grow to 1.8 volumes will reach available as of connected devices 18-fold in 5 years Zettabyte (1000[7] ) 247 Exabyte today, by 2020 (Cisco) By 2020, (1000[6] ) by 2020, CAGR 40% (IDC) CAGR 40% CAGR 58% (Statista) (Cisco) (Cisco) Mobility Cloud Big Data Apps Internet of Things

Intelligent Networks

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High Data Rate, High Traffic Accelerate the path to 5G Market is scalable to an extreme variation of requirements

Multiple networks Multiple RATs Tough to have one-for-all Scalability Cost-efficiency Reduced latency Automated system management Coverage (<1 ms)HetNets Green networks – low power Virtualized networks

Smart grid and monitoring Higher system capacity Smart cities (1000x capacity/km[2 ] mHealth Automotive Fitness Energy savings, High resolution video/ Games/ Entertainment cost reductions Public safety Tight sync for OFDM-based radio Too much overhead for some traffic types Cell edge problems 5G Reliability Latency reductio ~~n~~ Mission critical integration Targets Uplink too thin Higher data rate 4G  5G Integration of overlaying cells More interferences Higher mobility (100x typical data rate) Many applications each with different set of QoE Higher throughputs for some apps: 100x Lower latency for other apps: <1 ms Higher netwrok capacity: 1000x TXC

IoT=Everything connected Low power Mobility D2D=Direct Communication between devices Massive device connectivity Universal software

(100x connected devices )

Unsynchronized assignment for some apps Base station still close to UE Non-orthogonal signaling for some aps but still equalization in frequency domain Massive MIMO = more MIMO More Carrier Aggregation More interference coordination or cancelation (simultaneous TX/RX) More internode coordination Beamforming Network coding

Many applications each with different set of QoE Higher throughputs for some apps: 100x Lower latency for other apps: <1 ms Higher netwrok capacity: 1000x Massive device connectivity: 100x

Become the leader in 5G by delivering high quality, high performance, highly integrated timing and sensing solutions – zero risk concept

(Qualcomm, IS Wireless)

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4G, 5G and other Wireless

Will co-exists Various of standards to meet different application needs

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(IS Wireless)

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Opportunity Everything Connected, Everything Sense Create endless possibilities

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Drive the Timing and Sensing growth vs. Time for market adoption, change, regulation, etc.

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(Qualcomm)

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Everything Connected Connectivity needs Timing (Crystal & Oscillator)

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(IDC)
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TXC #3 in Global Timing Market

• Total Timing solutions provider

• • Market leader in product miniaturization and integration

Coming in 2017

• Miniature Crystals & Oscillators

• Wide Temperature Range Crystals & Oscillators

• High Frequency & Ultra Stability Oscillators

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Everything Sense Sensing needs Sensors

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(IDC)
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TXC #1 to launch

Smallest & High Performance

Ambient Light + Proximity Sensor in 2.5x2.0mm ceramic package

Coming in 2017

• Color + Proximity Sensor

• • PM2.5 Sensor Module

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New Growth Everything Connected and Sense Key growth products (Miniature, High Stability, Wide Temperature Range)

NFC, BT, ZigBee, RF4CE Miniature Xtal (1210) Low package profile, low ESR

WiFi Module Low Profile Xtal (1210) High drive, low ESR, wide temp (105C)

Wireless Module

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Optical Sensor Module Miniature ALS+PS (2520) Single aperture and slim bezel smartphone Miniature Color+PS (2520) Single aperture and slim bezel smartphone

GNSS Module Miniature TCXO (1612) Low profile, low voltage, wide temp (105C)

5G Modem

Miniature TSX (1612) High frequency, high drive level Miniature VCTCXO (1612) High stability, wide temp (105C)

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Particulate Matter Sensor Module Miniature PM2.5 Sensor Module

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High accuracy, integrated humidity and temperature sensors for environment monitor and control

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New Growth 5G Base Station, Small Cell & Networking Key growth products (Ultra Stability, Ultra Low Noise, High Frequency, High Reliability, Zero Defect Risk)

5G & Synchronization RRU (Radio Remote Unit) Close-in Ultra Low Phase Noise VCXO (3225) BBU (Baseband Unit) Ultra Stability OCXO (1409, 9775) Ultra stability Stratum 3 TCXO (5032) High Freq. Stratum 3 TCXO (1409)

Data Center & Synchronization High Freq. up to 2.1GHz & Ultra Low Jitter XO and VCXO (7050)

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New Growth

New in Automotive Applications Key growth products (High Reliability, Wide Temperature Range, Zero Defect Risk)

Infotainment & Telematics

Car audio Glass AR(2016) WiFi/BT combo Seam AJ(1612) GPS TSX AF(2016) GPS/WiFi/BT TCXO AK(2016)

ADAS, V2X, Self-Driving Surround View XO AW(2520) Rear/Front View XO AN(2016) Radar (LR/SR) TCXO AL(2520)

Security Electronic System

BCM(MCU) Glass AX(8045) BCM(MCU) Glass AV(3225) Cluster XO AW(2520)

Safety Electronic System TPMS Seam AJ(1612) BMS XO AU(3225)

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ADAS

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New Highlights Smallest, Innovative and Highest Integration

Highly Integrated, Smallest, Ultra Stability Oven Controlled Crystal Oscillator (OCXO) integrated in 9x7mm SMD package (Heater Ceramic Package Patented)

Highly Integrated, Smallest, High Performance Color+Proximity Sensor integrated in 2.5x2.0mm ceramic package (3D Stacking Ceramic Package Patented)

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Baseband Radio Access Network, mall Cell, Synchronous Networks (IEEE 1588, SyncE)

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Smartphone, Tablet, Wearables, Camera, IoT

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Business Summary Create Value for Customers and Achieve Growth

Key Business Segments

• IoT

• Automotive

• • 5G and Networking

1. Focus on new growth to achieve sales

2. Collaboration to accelerate technology and innovation development to achieve time to market

3. Highly market-driven strategy and trend alignment to maintain market leadership

4. Product mix and bundle strategy to achieve greater profits

5. Investment in facilities, technologies, and employees are crucial to achieve high standard of quality & performance, zero defect risk, and professional

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