Sto,cks, for act.ian .W.

efhlnk the memory market is close to what 'w'e think 'wiil~1 a, soft Iialildi'ng (down 16% be ~n rev,enUie n 2.0 '11 F)!l to be followed by a retu rn to 191 row1lh (up 1,~,QIo iin 201 ,2F). W,e belleva the collapse in PC, IDRAM IPriioes. ver the past two quarters i's oomiing to an o end, gi'v'en1he rise ln f,C memory' content and supply correction, Furthet:! whi'le the rise of srnartphones and tablets will oontmnueto hurt DRAM demand, we e,xpeH:i: boost to a NAND demand. The bmgger(but: lass appreciated) story ls that this m'eg,a-tferrnd 'will~ I~ Iy benefit th e love r.al~iindlu stry su bstantla Ily' over th'e co min g yea rs because it: rasu lts i ke I ~ a, big bo ost to sm n llcon area consu mptlon, Our analysms shows th at the transltlo n from feature phones to srnartpho nas and lapto ps with HIDDs to la ptops 'wi'th SSDs should ~ t-· /'1 ,'0"10 dl zt, - <;-0, I~ A t nemanc d mcrease S,I·1moonconsumption b 77'O'(k1 ano 2'0'-'1"OJ' respe~l!lvleuy. As Iaptop d sh[fts to tablets, 'w'e expecl D'IRAM area consurnpflon will decrease by 64%! but net memory consumptlon (~ncIUldiin91 N,AND), should lncrease by ,30%,. S,tJong N,AIND demand m,ay also help the DllRA.Mmarket ,as·cap,aoily could shift from DRA,M to N,AINID. Our top pick ~Q Ipl,ay th ls th eme ls S,a mSUIng EI'ectron los, given itts growing market share
~!I

St.oct
SEC (005000 KS)

Price
Rati ng
BUY BUY BUY Price bJr'g;et
j

90 1~O(JO 1,240 OOOt

Hynix (OOOGEHJ KS}

Toshiba ('6502 J P) Elpfda (6665 JP) NTC (2408 TI)

23,600
436

31 jOOOJ.650 900 5.3 T8

NEUTRAL
IREDUCEij;· IREDUCEij;·

951
16.1 14.3
,.!,..

Inot-era.(3474 TT} " lriltnati ng coverage

t Raising

fiT

Loweri ng PT

Prices as of 1December; 2IQ-10:locsl C1I..Jlffency'

,Analysts
C,W C,hung +82 2 378:3 2312

c.VII,en u ng_@ norm li fa,. com Masaya Yamasakt, CFA (Ja pan)
+81 :3 67~l3 119 0
1

~II n ,

g'

eo martp h I'e' n ~Q 0 "'c ,-_

Q,E'"

-0 C;;I,'

nd ::

,+,..... 1,CI,l)

1....1'c:l.-b, ets

'0 'IPI ','

4 IL,:,~ nd '1IL.Q'4'e" nO'1 ch

\f."

lillie'

0 n lea I ~tlI:
,I~

lie" d ~ rs h "l'lln 'W' t;:. re B"UY',', rs a . Q' ,...1,. '<:' '-e" ':,_, '_ e 'tlIl,
Q

-0

'I' '.c,'~

0'" . ,'!I

H lin 'IXI
j'lli '"

(DRAMI stablllsatlon + expandiing N,ANIDbusiness) and Toshiba (NAND) too.

masaya .ya m a,sa,k!_@ nom IlJ Ul. com Sidlil,sy Ho (US)

+1 ,212 2'9 ,8 432'9
1 1

<D Bo'om in smartphenes, tablets brings· a new R.enaiss,an'ce

~ D'RAM L-shaped price trend + further dlifferentiation

sid ne Y_'. h o@'n()mu ra .co m Mare,aUo A,hlll" CFA (Kar,ea)

+82 2 378:3 231 7 rna rle~:llo.a.h n@'n()mlura.ca,m T,et,su kazu Ts uru ham a I(Ja,pan) +813 :5255 1S28

® NANID - dlire,ct beneficiary of sh-ft in IT demandl

Nomura A no hor Re ports examlrnn t~e [key themes arITl l va Iluedrivers that e d
sector vffiews an d stock recom me rrudlaUorrrl for~ the next 6 to 12 rna nths, S

lm nde rpin

our

ErSt-SLI

k,a,zu. ts [j ru he m,a @'n()mlura .co m

Any auth,ors, 118,medOln thi,s replort alre researeh an,a.ysts un less othe.wi'se

See the Iim p-orla nt, d'is,c.Ols,ures and ,8lllallyst cell1ifica,tions

011

inld~cated., page,s, 59 to 164.

@.Actiion 'W'e are in the middle of ,8 rnegatrend - the rise of tablets and smartphonss. Whil,e 'we think this willi dent IDRAM demand in the short term, w'e belleva im, beneflt the 'wlill overall memory Industry substantially ln terms of ea,rnh1Qls,for several years to com e. Sa rnsu n g Electron lcs j s best IPre pa red for 1tlh transition, ~ OIJl r vi,ew" and OM r j,s n top plck, 'W'e are also BU'y'ers of Hy~ix. and Toshiba.

Sto,cks for act,ion

'W'e mamntamn B U'Y rati I11gson

Samlsung Ele~ronmcs, Toshlba and

Hynlx, We favour Tielf-11 memory

II

producers in vi e'w of posi~tive smgns 0111 'tlhe d emandl fro nt.

Stock
SEC (005000 Hynix (000660 KS) KS}

Catalysts The share prices of memory names move i'n tandem w'ith memory prices. With the bottom of the memory market in sight:, 'w'e see memory' share prices lik,ely to gather momentum soon.
Price Rating B UV BUV NEUTRAL
RE DUCE* RE DUCE*

Price
23,,600

target
j

BUY 901;000 1,2,40 OOOt 31 jOOOJ.650

~ Anchor th,emes 'W'e see ,8 rapid sh~ff in demand ,_,from feafura phones to smartphone and from PC,s to tabl ets, Those with p reduct po rtfollios that can benefit from this trans ltlon shoul d outgrow thos,e 1that ,8 re less 'w'ell positioned.

Toshiba (6002 JP) EIpida (6665 JP}

NTC (2408 T1l)
~ notera ('3474 iT}
0.

436
931

900

16_7 14_3

s.s
1'.8
PT

Initnati n 9 cOliJer.a~)e t Ra]si ng PT

! Lo.weri ng

Prices as of 7 Decem ber, 2i()'; 0; IOCB~ rrency ClJ

,Analysts
C,W C,hung

<D Bo,om in smartphenes, tablets brings, a new R,enaiss,an,ce

iin srnartphones and tablet pies that kicked off in 2H110 should w'ork posltively for overall memory demand despite the negative impact: on IDRAM. ,According to our sillcon area, consumption analysis, the transltlon from feature phone to smartphcne, laptop 'wi'th HDD to laptop wimh SSD' should increase sillicon consumption by' 7780/0' and 20'1%, respectivelly,. From laptop tOItablet, IDRAIM area consumption decreased by 1640/0 but net Imemory consumption (lncludlnq NIA,NID) should increase by 30%,. The boom (%) D'RAM -

+82 2 3783 2312

c.~wc~u ng@ norm u ra,.com Masaya Yamasaki, C FA, (Ja pan)

+81 3 6703 119 0
11

masay-a .ya m a,,s,a.ld@ nom u ~a.com Sidn,ey He (US) +1 ,212 2'9 8 432'9
1

sidney.ho@nomlura.com MarceUo Ahn" CFA (Kore·a),

L-shaped price trend + further dlifferentiat·on

The rise ~n PC memory 'lJontlent and DlRAM producers' reluctance to rnalntaln current: supply shou ld see PiC 0 RAM prices stab lllse after 11!Q F . For specia,lltjt '111 D'IRAMs, we believe the premium 'wi'I~1 narrow' from 2Q,11'1IF especially fast for mobile D'IRAM, when3~ supply has expanded rapl dly of Iate, All in alii!,the blend ed DRAM pnilce shou Id fall ra piidIy Ul n1tilll Q 11 F and decl iine moderately fa r th e rest of t~hey'e\ar.. 1
I'
1

-¥82 2 3,78B 2317 rna ~ce110. a,11 n@'nomlu ra .co m,

T,et,sukazlLI Tsuruhama ,(Ja,pan:) +813 :5255 1S2S

TIe ka zu. ts u ru he m,a @ n om u ra. co m tau

® NANID - dl~rect benefIciary of sh'"ft ln IT demand

F'.oIIQwiing mobile gadge·tsl' notebook. PC"s ,are also beg~nning to adopt NANDI nash as the maln stora.ge devi'oe. The supply-demand is liilk'ely to balance out with t.ypk:al seasonality in play, We forecast: NANID shipment value will grow by 21 '0/0' in 20'11 F and 17'%, in 20121F.,

® Samsung stands as our top p~'ck;BUY also Toshiba and Hyn~x

Gi'ven the magnltude of th'e ga,p in process technology, capex abiil~ityand differentiation in DRAM product porffollos (me"PC, IDRAIM vs specialty DRAMs) growing wider tha.n ever before, 'w'e·advise accumulating leading names only'. W,e remterate our BUY Irali ng on Sarnsunq lEIectronlcs (S,E.C)" T ash lba and Hyni'x~ Ou r top pick ls SIEe,., looking at itts growing market share in srnartphones and tablet P'C,s,. and m1s unmatched techno,logmcal prowess i'n key components ,_ mobile DRA,M, NAND" applicafion processors snd AMOtED'.

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Contents
B,attorn in 1Q,11F; Renaissance ahead
DRA,M: bad but already rei acted; focus on d irff:srentiation
NAND: the ernerqenoa of killer apps ,_,srnartphone, tablet and solid-state drive

3
6
7 8

(5,8D)1
Investment opin ion

D'RAM: L-shaped price trend + further cUfferent.lation

DRA,M demand DRA,M supply Capax to decline by 25'%, y-y with no further wafer capacity increase Outlook fur D'RAM supply/demand balance and price

'10
11 13 14 17

tn3nd

NAND
Demand: strongl embedded demand, weak USB!, card demand Supply': ,shifting from DRAM to NAND NAN D su pply/demand outlook. a nd price trend

21
211
,22 24

B,UY and hold the leadinlg names Industry models

NAND supply and demand Technoloqy migration

26 ,28
,31 ,33

Latest c10mpany views

Samsunq Electronics Toshiba Hynlx Semiconductors Elplda Memlory Nanya Technology Inotera Memories

,35

40
43

48
51

55

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Bottom in 1Q11F; Renaissance ahead

The boom iin srnartphones, tablet IPes" and cloud oomlpUiting that kicked off in ,2H110 has 'worked positively for demand for mobile IORAM, server DRAMI·and 'emlbedded 1:...'1 II~U_llilg p·C··..·· IO'ICIi'AMgra,p' h" 10''R"'AIM' Le"D' C··.·p· U H D"D' US· ..·B ,an. memory' . d -:,11\' ,' IIC •. NAND' 'Wlllile ...., rtl cards, 'W'e,see this m1eg,atrend rernalnlnq in play throughout 201111F. In QUirvi'e'w:, the sh[ftiing dynamic will have a negative iilmpac1lon ovelrsllllORAM demand, albeit to v.alrymngdegrees at leach appllcatlon level, and have a, very' p0611ltivelmpact on INANIO,. The net iimpa,ct on the overall memory market should be PQsi~ive' iin the long term,
.•..• ' 'C'

,A sea changa

1',-_

,:"ll:'

•.

_,

II"

..

'_,

in the memory market - net pos itive ~b ut clea rer 'winners and losers

NAND (SSD) Mobll8 DRAM Servar DRAM AMOLED

Source: PC OEM we bsU:es

Exh~bit 2. Notebook vs. tablet shlpment

(%)
25 20

_.

Iomll notebook (~nc,.N,€:tbook) (RHS)

('qt, ). i~·_.

_.

'ota~ handset (RHS)

{min)

_.Iablet (RHS)
............... ~ ~roPQr1:iQr. (LHS)

30

_.
--

S,m,amphone {RHS)
Proportion (LHS}

2~10-0 1,80:0 1~50-0

25

15 15
10 10
I.

1,20-0 900

10"'0--'
..

600 300
----"--+

5
----li--+" 0

o
2008
Source: ~ DC, Nom~ra estilmates

o
2008
Source: ~ DC', Nom~ra es1ilmat:es

2010F

20111 F

,2012F

2010F

2011F

2012F

T o b"' I~ ' t rrom t he d t nener anallyse 't h e nell: 'irnpac ",' . . e nemann ...!I s Ihlft on th memory "dl ustry, we '1. . ·Ie In-

use th e cones pt of 'sl llcon area 00 nsu mptl 0 n', Wh~I'e w'e have trad ltlo nailly used the (or Gb)' as a measure for the volume usage of memory device, w'e now find i't more effective to use '~siil~i area consurnptlon' as it more alos'e[~y rella,te"s to area-based con w,afer Uls,age. Fo r lnstance, 'whelil ,8 customer IPU rehases a tablet PC, the G1B-bas'ed s,torag e increases by 7 O'%! vls-a-vls a notebook: PiC.

'GIB

.a

Howsvsr, the actual siillicon area requi red for the, stQrag'9 increases a n[~yby around 3 O'%,. Given that memory' pla.yers, with both D'IRAM and NAIND techno,logy can shift tlt"eir I~ine,sfrom DRAM to INAND (or vlee versa) in accordance 'wi'th the market dynamics, wle lbeliev,e slllcon ,8pea, consumption iis better measure for an apples-to-apples comparlson .& ~ ...!I uynam • lor DRAPi.. ,ann INA-NIO"...!I "'-,IIVIU ...!I ...• ..... .nema nn ...!I • ICS.
J

Memory ~G[nba~

CW Chun.g

NOA\UIRA

'W'e find when one buys a tablet PC, i1nstead of a conventional! noi,eboQk, the sllloon area consurnptlon 'for DRAM falls by' 64 °10 whereas that for N,AIND increases, resultiing ~ a, 30'0/0' in crease in memory sll leo n area, As to the 5h~ftto an SS Dt-equlppsd n notebook from a Iconvent_ional~ notebook the sllleon consumption for total memory ~ ncreases by 20'1 % versus the, case of' ha rd drive-eq]u i'lPped notebook, The sh iff: in demand works similarly for srnartphones. The purchase olf one srnartphone, iinstead of a feature phone, consumes 77'8%! more memory sllleon area.
!'

Sm,arlpho nes as an e:xampl e, use

180% more sili'con area tha n 'featur-e phones

Exh.bit 4. Meg,a,trend: lmpaet on sUicoll consumption

(mm2) Demand sh i'ft fro m PC to (a) Tablet PC and to (b) SSDequipped PC • DRAM

NlAND

:3-~500 '

,-:flo

,;j,~",

'~On u

l'

2 ~5-'On '--,,) +201'%

2,176
De man d shift from feature: phone to smertphone

2,000

1~500'

1~OOO

1,020
'T

-rt"'8'Oi ',"_'10 544

500

20.2 (3' §:G' B': D'-'RA'"M' )"

, ",·!I '_:.lll"_" ":_

'PC,

Tablst

I'

,_.

.....

,',

{1GIB D'RAM + 30GIB

NAND)

~P'c· (3.,5GB DRAMI

SSD)

'-IF

64rGB

Feature Phone (O.11'GBDRAM +2GB NAND)

8m artphone 'Ul1.o..:_.", : --:...... ',-:'r (0 Je'G'B' DRA" ,M· + 2''OGB'

I I ~.,,: .

",

NAND)

Source: Nornu ra estimates

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh~bit 5,.S licon consumption rises on shift ~nIT demand

5i I ieon Area, (mm2,) J GB DEUis;ty (GB)
'3' ... 5
",
'

Si Iieon eons um pti On

(mm2) 1 ,'-0 8,5
1

PC
PC +SSD

3",5GB PC DRAM 3",5GB PC DRAM 6~GB SSD

310 310

3",261

:3.5

1,08S
2,17 6
1

34
3'9 ,5,
1

164.0
1.0
,30.0

Tablet 1GB Mobi~e DR.AlM 30GB NAND Featu

1 415
"

3'95

34
395,

1,0.20

re

phone 0.128GB Mobile DRAM 1GB NAND

,85,

34,
3'9.5

0.1 1.0
O ... :, 5
'

5,1

34
746,
202

Smariphone

512MB Mobi~e DRPJM

~6GB NAND
Source: Nornu ra estimates

34

16.0

544

PC DRAM 40nm DRAM 2Gb Gross die # Yield 1!139 800/0 911 228 10 2!232 310

Mobile40'nml DRAM ,2Gb 894 80% 715

21nm NAND

64Gb
304
;_:, l~

N!et dle '#

GB (Wafer Price: 1GB (US$) Price I w'Sfe r (U8$) Area per GB (mm2)
Source: Nornu ra estimates

85-[1)[ 25:9

179 20

017"111"1 ,_ 2,,' Ii)

1.0
2,070

3 [576 395
l

34

hi o we,ve r , g~ven that the dynamics of the mernory m a rket tend to swi'ng in tandem not on Iy 'wi'th de rnand facto rs but also with thle supply fa etors of each memory typ e, we h elleve each I,ype 'wiil~1ee rnlxed ups ,and down s, Also, the ma.'gnltu de of' the downturn s that each DRAM company explerilBnces should vary depending on: 1)i ~ts DRAM product rnlx; ,2) NAN D contrlbuflon, and; 3J cost: co rnpetlflveness,
!I

'We forecast 'the 20111F mem ory" market will shrink by 6% y-y, with the DRAMI market declinirllg by 21 o/~V-Y and the NAN 0 mark,et growing by 2'1% y-y

'W'e forecast thlB 2011 F memory (DRAM + NANID) market will~ shrink by 60/0 y-y to U8$5,7.4bn! with fhe DRAMI market decliining by' 210/0 Y'-'Y' to US!~l30,.5bn" and the INANID market growing by 21 % Y-Y' to US,$26,.9bn~ IQlmventhat the memory market grew' by 64'%! y'-y ~n 20'1OF, a 6% y-y decline in 2011 F can be deemed a soft I,anding,. lin our view', the memory market willibottomi out ~n 1Q,11 F and grow by '13'% Y'-'Yto US,$65.,11bn ln 2'o'12F.

Exh~bit 7. Memory m,a,rk,et, hlsterleal and for,ecast numbers

2008
Memory

36,303 24 02~
~I

21009 31~2,58 3

2010F
60,1954 N
38. 766
':! ',',

2101 1F

20112F

57,392
{B) 30 [518
l

65~ 118
13 33680 ,: ".',
~','

y~{%)
DRAM

22A20
(7) 1~!;8:38

y-y y-y

(%) (%)

13
22, ~88

(21) 26~,874t

10 31 ~4:38 17

NAND

21

50

21

Source: WS'lIS! Nornu ra estima,ms

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.b~t 8. Memo,r}' market tre,nds and forecasts,

{US$mn) Constant. rise of PC demand in developed countries Handset demand from devsloped economies Global tlilonth~y NAND sales {lHS) _. Global month~y DlRAM sales (LHB) Demand for' notebook in developed countries &. PC in BFUCs

Handset demand from BR~CS Srnartphone

DBC, MIPS,. ,3G

(%}

500

N"IPOD

Tablet

SSD
~u
.!i!,t'i;i"i!

--,

NlAND+DF(AM sales growth (y-y) (RHS}

Consol'idat'ion '& Re,tilrement af' 8Hl

300

200

p~ayers

{1(0)

lia~WaJl)e5e
Imel lDiOp~UJtt
Korean entry em try

o,
'78 79 SO 8,1 82

83

84

S5

86, ,87 ,88 8'9

00

91

'92 93

94

95

96

'97 98

S9

00

01

02

;Q3 041 05, 06, n7

08

os

{2(0)
'1'11

Major his,toncal mi Iestone 5

US/Japan Semioon.
Agreement

Anti dumpinQ agai nst

Korean tmalicei:S
{~uH' ar W Earthquake in .Iapan (95.2.)

Asia Crisis,

Y2K

Plaza Ag reement Dom~nam08 PC: RAM Rqrnrlrt., Dom~nam ~c DO

256K 16/bit

IEarthquJake ~n r,siwan (00.9) Wi nOO Wi n XP' 256M

W~n11.1 ,

Wi n!2.0 1f;M (Jap\I3Jn)

W~n95,
64M

Win9S,
128M

vist A
DDR 5,12M DD R2 1G
A.!VlISQ.

W~n7 64bitt

as

1M (US) 4M (Japan)

S~nG

DDRS 2,G Sandy Bridg;e

386 ('oollor) 486

Penti urn P,2 PS,

Dual Channel

Santa Rosa

Source: WSTS~Nomura estimates

DRA.M::: bad but a~rl'eadyreflelcted; focus onl diffre'lrentiation

The sh~ft in demand from tradltlonal [pes, to mobile ,computi'ng gadgets (le, tablets and smartphones) is ll kelly to 'wort: nega,tlively' for th e ove ral~1IDRAM market in our viiew.,
This is because the mamory ofieriings, ofthe,se new gadgleb;, stand Bit 512MI8,-'1GB substantii'ally lower than tihasle of P!CS!I ·whk:h usuailly' come 'with 3-4GB,. Hence, as more and faster new mobile computing gadglets, are used vis-a-vis P'C,s,the deeper til e short-term dent mn overall DRAM demand wlll be.
l,

C ILl rre I11It me'gatr:e nd i1111 IT i'nd us try

'is to work negati'vely on PC DRAM but pas ifively for mobi lei DRA,MOl ,All in, negatiVe

Meantiilme, w'e ina ,SEC,'s'Qlrip on the DRAM m,ark,eti is stronger than ever, owwng to i'ts eo h I," re a , n d s up"e' iII""II'OIr" ost Ie"8' d e rshl p T .... "l'lln' p ro J·,o·~·I'1n g" ""I iture D"RAPI;;il1 c ,lu e'Vp'"8'In"d,'9·'d m "~" 1 arket '00 IIU, o;!i..ill ~". 111llJ,!II,.II1 IJVlU iolv-d iand d .~ " .... ·"t'h ·.···.o.,.enpnQe "st t···· .. siraegy, s,UlIPpy·:emlan: .Y1namIIICS!1we accountt~· 'S"'EC"':~ or c 'SpUrsUI. lt or t e fiG":'Idl"" wh 1"11'"", I ~,II,/ V:I~~I','Q' ,R"A',· lI'r" V~Q' ~ cost O'W' 'wI:... e'Ire' -1">,0m 1, ..et , lto .......... eli"le'"I't' a rge' 'I~y control eo ID', : M' n n"j"",Oil::.'" bove lts own ',,",0~,: but' be I'",.~il':" '.. t;:.:"""',Q','. ,1,'.:" v",·' IP'_:.. 1~,V'I'Q
c:lli. c,cc . c '_

Qi'

0 iI;;lII,

c,c

'~I ':
"1'

'l,irV'Q,
."

c',

':c'

·c.

€" Q!,c:

'1,_"

.:',

SEC's grip on the DRAM market is, s'tr-onger than ever and we
be Ileve it now has ca,pabili'ty to co ntrol the [market

",

-'1

"····_·1·····'

·'1'

,._.,....

:, .,:

',

..

'I'··

'_",

'.

,.,:.

",

,".

"j

",.

':

•.•

I·

"

"'

.•

:.

F"C:'"

ca'ln' break ,e•'Ii,,'e·.n g,lIi\. •

_'c' c.' =e ·.>,'II'·.c· •

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 9. OPM trend of major DRA,M players

(%)
a , .... ::::!!. 6.1\\ On JtvJ S': ms uno makes
i;JI.,. ,.:!I'

1111" JIi,J ....

ne'u " j.

'I'~ ~ nlU1,'1i;iII s·,' ~'m";"11,,)1 11II'!1'I',e, '<;r'LiI' I1It' ILII ..IIer' I a ~, ~ ~ "'''''''

ro~''al~::::IIa 11 e;.iIo..oo.ne.,
..

__ .,s.~c
---Powerchip

__
""'I

• HYl1litx
""'I

80
a-n uu
"'!:-:.

, AU make money. 'Commoa iI.y DRAM] pries bubb Ira' ,stage, ....-:,.
-;.,.

· ... • -:". ~" AJ~' ~ I.... I ·.... " J. . II ;,.,~m'Ii;J n·eu

l;I'~'C'

--

Nany,a Micron

- EJpida

40
20

(40}

,/
(ao} (1(0)

"II
I

,
'r'

I Ii

--.

,I'.

a a

a
'T"""

0 0

'T"""

0'
('Ii)

0'
'T"""

'T"""

0'
('Ii)

0
'T"""

('I!)

(3

t?

(;]
'T"""

M
.

Cl
~

0'
'T"""

1.0

0
t?

a
'T"""

1.0

a
t?

(3

8
0'
'T"""

m
Q

f";.,.

d
&)

0.
'r'

ra
t?

00
'T"""

(3

00

a 0
t?

en Q d

en
~

0:

-o

LL
'T""" 'T""" T"""

U.
"r'

"

'r'

C
, ,

Unlik:e ln 2,0'10, 'where we have seen a marked contrast of ~iHiigh-1H!' vs ~Low-2H~', wa anticipate ,an l-ahaped , (as opposed to a ~V-shapedl~')1movement in DlRAM prices 'whereas. we see a ~UI-,shaped!' (as opposed to 'V-shapad') recovery mnDRA,M pi ay'ers , prolflttab ili'ty. We forecast the DRAM rna rket 'wi'lil s hrln k by 2,11 y-y m 20 '111 , wUh blt '% n F 9 rowth a,t,511% y-y and prices fall ling by 48 % Y'-Y.
,I

By· aIPpl~ilcatrnon::

PiC DllRAM: The price has already dropped to below cash cost for second-tier names and w1e see llrnlted SOOIP'e further declines. The rise in PC, memory for
content and DRA,M producers' reluctance to rnalntaln current supply Ilevel, in cornblnatlon, should see DRAM prices stabi'llise after 1011 F. In terms of mhe prk:rnng, t 111~lrSL-der 'I+ht ' 3' .. 10-P ' d we an t'" icipate ~ "'.I!o" p Iayers, 'WIlL' nh eir '""O· Ol Ius' Iower cos t" b ase t h an tl:-.. seoonon ,II lie tiier names, will continue to try to control prices, ,and we e,xlpeci prices 'wnh n the band of US$1 ,.QJUS$,11.,2/Gb.
i,.

Speciialt,y IDRAIM: ~n 2H110, the prices, of specialty DRAM has fallen rather moderately compared to that of PiC DRAM, expanding the premium over P'C IDRAM ,. From 2011 F" how1ev1elr 'w'e see the premium narrowing sharply" espsclelly for mobile DRAM:, 'where supply' has fes,t, expanded o,i late,
f

'W'e expect the blended DRAM ASP to drop rapidly thmugh the 1Q,11 F ,and then decllna at a modest place of 5-110% q-q for the, rest of 2011 as thle stabilisation of P'C D'IRAM prices is offset by' a moderata yet: con stant fall BOn special~ty' DRAM prl ces. In this pnilcing scenario, we estimate that SIEe ,and Hynlx 'wiill malntaln operatiing marqlns of 3 0-40% and 110- 0''¥o" re.sp1ea,ively, whiil~esecon d-tler names will not be able to stay 2 profltta.b lie - ie. 'w·e sea a profitless relcovery for seoo nd-tler players,
1

N,AND: the eme1lrgence of kUler' apps - smartphone, tablle,t and solld-state dr'ive (SSO)
FbllQwi1ng smartphones and tabllet, PC"s, w1e nOrte that traditiiona.1 notebook PCs are Ibeginn~ng to adopt NIA,NID flash as maiin storage device, ,joiining the group of killer appllcatlons for NAND,. With our IBs,tiilmates,sholwing global blt supply growth of 80% y-y ~ 20'111~, uppl~y and demand ls llka Iy' to ba lance out with typlcal seasonal ity in play, n s
Following smartphones and tab Iet pes, brad it iOlilal n otebook pes begiins to adopt NAND flaslm as main s't,or,age device

Memory ~G[nba~

CW Chun.g

NOA\UIRA

,Accordingly" w1e bellava the chance of a, severe supply NAIND ,siholiage· ls llrnlted for 20111F. Also, 'we see littl·e chance of a, priioe war in the NANDI flash segmlent oonsideri'ngl that the technology' gap betw1een leaders and fol[~owelrs is fair narrower than it ls in the IDRAIM segmlent

Exh.b~t 10.1 SSD to take o,ff

(%)
90 80
70'

• SSD P,enetratiorn i nto m obi ~ePC {Exc. Teblets) • Contr'iibutiion

to flash

dems nd (Exc., Tablets)

60

50
40
30'
20'

10

o~--~--~~~--~--~~--~~2007 ,21008 .2010F ,2011 F 2012F

_. Flash demand

.2:013F

2014F

Exh~bit 11. N,ANDflash demand

{fGb eq., units min),
':'0':'0" 80~
~" ."
,

Exh b t 12.1 NAND flash demand br,eakdownl

(%]
·250 ·200

"-' "-' .

'.

lIJIjiiiiiiiiiiiiiiiiiiiiiiiii'l-Y (~o)

(,%)

• us 18. C~,rdl
PMP
Ot~ef;S

C'C"D' ~QJ_

Calm Phone
Tablet IPC

• Digil~jlCamera

10':'0':'0'" ' 6000 ~

. ..........
"-' "-'

'.

'.

5- ~0':'0':'0"
"-' "-'

'.

,150 100

4000 ~
-

...........
"-'

'

"-'

..

':'0':'0" 30~
~" ."
,

"-' "-' .

'.

20':'0':'0'"
.
'.

·50

1~0':'0':'0'"
"-' "-'

'.

2006·

.2007

2008

2009

20110 F'

.2011F

2006

2007

2:0-0.8·

2:0-09

.2010F

.21011F

Source: WSTS~ Nomu ra estim~.ms

sourcs: Nomu fa estimates

Inivestment oplnlen
'WUh the differences in process techno[~ogy', capex capablllties, and dlfferentlatlon in the memory product porffollo (le, [PC DRAMI \15, spelcma.llty D[RAM and NANID) beiingl greater than ever, 'w'e recommend a,ccumulatiingl only the I'eading names, 'W'e contlnu e to favou r SIEe" as presented iin our Iatest PC sector outlook, Ctrl c-os,t,.. Alt mix, Dell ove.rc.apac"ty:~ and handset sector outlook." Android .momSint,um drives our p.refeire'noffJ for Samsung Electron~cs~ HTe' end ZTE' o'v;er,No,kia~,RlM end MO!T (bofh puollshed Ion 1 December, 20'10),. 'We select SEC as our top pick as it is g,ainmng market share ~nsrnartphonss and tablet [pes." and boasts unmatched t.e'chnollogmcal pro,w·e·ss· mnIk,eycomponents of those tw10 gadig'ets ,_ namely mobile DRAM" [NANID~ appllcatlon processors and .A.MOLEID:~ as weill as. technollogy [~eadershiip at both the component and set levels, whk:h should help to gene·rate substantial synergy' enects., 'W'e raise our priloe targlei, to W'1 ,2,40,000 (from W1 '1050,000) and maintain our 8,UY !rating,.
Fa'vou r players, w'ith produ cts that d~rectly benefit from the, liT demand ,shift SEC, Toshiba and
iiiiii

Hyni:x, SamsWl ng
the best pesltlened name a.long the, big tra nsltlon..0 U1f'
[iiiiii

top pick. .,Price ·target of

'W'1,240,OOO

Memory ~G[nba~

CW Chun.g

NOA\UIRA

B IUY rating 'wIDthprice tsrglet of ¥-650. Tos hiiba ls t~e slecond-biggesl NAND supplier, and we bel~i'ev'e it, is 'w'ell posltlonsd to meet the rils-ing demand for N,AIND-ba:sed storage. For the nuclear 'energy business" 'w'e see risks olf s,loWling new orders, iin Nort~ America ..Thls, however! is liikely to be fully offset wlth gro,wing demand elsewhere, iinc!~uding the IUK!, Vietnam, Fiinland and China, We also see good prospects for new businesses includmng new lilg~ting systems, rechargeable battarl es, smart, gllids and large solar photovoltaic systems,
OU r

Fo r Tosh lba, we reita rate

Toshiba - 2nd bigg,est NAND supplie1r.,Well positioned to meet 'the ris i'ng demand f'Oll" N,AND· based ,storage

For Hynlx, w1e lower our lFy'111 FOP' forecast by 34'% to reflect:: 1) weaker DRAM market trend:; and 2] slower-than-expected O'IRAM migration to 4xlnm-and-below techno[~ogy and the resultant widening tschnoloqy gap versus ,SEC,,,Our revised price tarqat for Hynlx of 'W3,1 !,OOO(previously W,33-"OOO)a·tmll'lmpli'e.s 3,11% potential upside i fro rn the cu rrent l'e'Vlel~ ..We rnaintaln 0 ur B UY call, Conside·riing the hi storilcailly' hiigh correlation betw'elen Hynlx shares and DRA,M contract prices o,i I~a,te,'w'e see the periiod I~eadm up to ea r1-y11011 F as an 0 pportu ne tiiilme to gamn exposu re to Hlynix, gmven that, ng the rapid decline in IDRAM prices appear to be over. 'W'e are NEIUT'RAl on Elplda and havle R.E.IDU!CIEratings for Nla,nya and lnotera,

Hynix - a company with biggest sh~ prnent propo rtion of s p ecla Ily
DRAM~ Als,o" its pos~tion 'in NAND market is, iilm provl ng

Prics Company Code Rat.ing 7..Dec-,2010

Pr~ee

Impli,ed upJ'

P/BV(x) FY'10F

PIE (x)
FY11F

ROE (%) FY10lF 20.5 411.0

FV11f'

target downside ('¥o)

37.6

FY11F

8EC
Hynix
Toshlba

0059(30 KS ...... _f_ 000680•. KS 6665 JP 6502 JP ,2408 TT

IElp~da

NTC
lnotera

34741 TT

BUY BUY BUY NEUIRAL REDUCE REDUCE

901,000 1~240~,OOO 23,1600 31 ~,OOO 436 650 931 900 16,.. 7 5.3
....
_"

31.4
4,'9.1 (3.3) {68.3) (45.5)

1.113 1.7 2.1

1.4 1.4
1,.9 . 0... 7 2.8

10.4
4·.1 1'9.5 5,.1 N/A. N/A.
!

86
.',.

16,..\ 4 17,.. 5 15.1 1,.6 . (42.9) (2B 9)

",
,"_.'
," '._.' I •. _.;

1:3.2
3-7 8
N/A

11.41
12.9 (27. 5) (21, 9)
u u

0.7
1.-8 1.2

14.3

7.8

1.7

N/A

Note: SEC, l=Iynix~Nanya n and ~not,ara coveroo loy' CW' Chu ng; 1::.1 an d Tos~ i ba covered by Masay,~ y~ masaJl\i plda Note: SEC"s IEPS and BPS. are based on 'the rot~,1number of :s~ares ,e·xcil uding treasu ry. sh ares source: 13,loombergfor prilcing; lNom Ijra estimates

Memory ~G[nba~

CW Chun.g

NOA\UIRA

DRAM outlook

DlRA"_".
'! ' : _.'.
." •

~I
_'

LI-S·····_··.·,h···.a ...···.··p.··:· · ..
·.,8.··· r:·_·i
._.:.. . . I .• , .. [.. . .' ..•. : .

r-I ca' tl ra' Ind' + '-:-urtlha' .

•. ' ...••. ':

1.

'

.• "

..'

. _. . "~."

dliffe,re·ntlia.tion
d ·t' ·t' ' t, . 'f' h U ·I'k·"· '",:·0····1·w h"lere we have seen a. ':.ra.s.lc conrJaSI, 0 iH'·IQI 1 HI~" 'Low 2: H~I.' ." _nile 2' 0": .' .~ ave vs. ow . " we
•

oj

,"

'j'

. _',

. _'

"1

. ,,-,

~.

'j

1_'"

..

'

",

.-,'

",

anticipate:.:_:,b' ~L e ..... .:,:.:! (as opposed to..:,:1ilV'.....'.1_;.;,. \:'~' : .:,:.:! '\ movement I~,''In D"'RA' prlces \:. ~J'.:_' \:" aned shaoed j .. .' M" I\;.':..".g and a _ I._ \i ::t:~ _.. an I-gIl' If:" '~'': I_~::.:I:~ . .: :,:.:! lI, .. : ",' 'Ll-shaoed' (.. '.3€"Pipo d to ~V···;-'E"·I-..·ane·d ,).,recoverv of D··RA·:1 nlave rs' P"II'"OI l'I~··y,_,· "o _'. II'"" '~J!":' Q,.,u·,11 ''''Itobl Ii.._ - ;001111, Ii"" ,;001111,.11'"""': .·.. :.·,.v .. '.·., .,11 .· .. ···M···,
-s. \:. ~ (.: ',_ 1 :_"'~:::.:.', (,::.:'

.<.:: ...... '

:._::

Ig.oO>:

,·€"ie· :-:.,Qi"'"

Tile current transltlcn should be negative for PC DRAJM a I11Id gr3,phi'c DRAM w'n ile pos i'tive for
mobile DRAM

,"

.iI;;lII,

The boom iin srnartphone, 1habllet, C, and cloud oompu~lIIng fhat kicked off in 21H10 has P 'worked to benefit o,f demand for mobile DRAM and server DllRA,M, but to the detrlment of PC·IDRAM and graphic DRAM., Yet, 'wnlen we consider the relative market size of each D··RA·· ppll ii"'!!·"'.34.'IO· net lm pact 'of above frend w'a ,Q ne"Qla'm"'v' fhe ove,u':.III e to ra _ b~.O: : ft;l'll IIV~ \;Q.IL In 'to he I,· I. ¢I.~.. ". t;:.,I.,/', IL.u ..I,I "".: .IL.'.:.:. ILl Il.:. DllRA.M market, lPalrticulla,rl~y second-tier DRAMI names that rely heavmly on PiG DlRAM. to
?:!i, 'iI;lII:1I'"" III:I! ...,. I ,~III.,..': C" I, .. :: I

'W'e believe this rneqa trend 'will remain in pllay throughout 20111. However, given that memory market dynamics ~.end to swing i1ntandem not: only with demand factors, but also 'wnh the, suppl~y factors at each DllRAM application level, w'e be,liieve 20'111 DRAM pnilees will~ present a. mlb{led momentum in terms of both DRAM application and the timing olf ups and downs. For ]P'C DRAMI, the price has already dropped to below caeh costs of second-tier names, ,and we see I~imited llkellhood 'of ~heml falling further, The rise in PiC rnernory content ,and DRAM producers' reluctance to maintaln current supply, in combinatlon, should have PiG DRAM price stablllse aft,er '1Q,1'1" in our view'. .As to the specialty DRAMs, tne prices have so far fallen rather moderately compared to those olf PC, DRAM:~ expandlnq the premium over PC, IDRAIM. However, the current high premium is encoura,ging D'IRAM names to shrrft their production from PC DlRA,M to spscialty D'IRAM, ,and we bel ieve the price of spe(:~a.lrty DllRAM 'wi'll oonti'll1U1e d eel iine to even after 20'11 _ ,Alii in alll:~'w'e expect the bl~endled D RAMI AS, p' 'wiillld rop rap idly in '1 Q 1'1 and conflnus to decl i'ne tn rough out .2011'1. We forecast the blended AS,IP willi fall by' 22% q-q in 1Q:11'1 F' and by' around 4'% q-q over the res,t of 20'11 F. On thi·s pri'GiRg scenario, 'w'e eelmeve 8,ams,Ulng and Hlynix. 'wlill maintain 3,0-40% and 10-20% O'P rnarqlns, respedUv'ely, wiherea.s second-tier names will not. able to remain proflita.bl'e - le, 'we ,an1t~cilpatea. profl'Ues,s rseovery for second-tier players, 'W'e forecast the DRAMI market wi II~ shrink by 21 '0/0' y'-y iin 2011 F, 'with bit g po-w1tlhore CB;St f to grow at ·51 % y-y whiille the, prices are expected to drop ,418'%,y'-y,.
Yet, w'e think the bottom of PC DRAM price 'is just a round the cornell"

Specialty D RAJM Price, shcutd fall thr:oughoUrt the year due to tin e expanded supply caused by widened premilum over PC DRAMI

Fir-om 2,Q'11jl we antlclpate the

pace of' the fa.11 blend ed DRAM in .ASPshould s,low down

(US$mn) ~ 0'0'0" 5~1.··.' '. 4000

...........

_.

[)RA~ shipment va.lue

'Iiiiii'

iiiiiiiiiiiiiiiiiiiiiiii!"

DRAJM ship,mlent VDllie 'gmWllh

(%)
200 150

'

91' '_.' '_ ...

30'0"0 2000
91'
'_.'

100
50
",

. ~I".·"., . '.

..........
'_ ••

'

1 0':'0':'0:'
91"
'_.' '_ •• "

(50)

00

01

02

03,

O~

05

0'6·

07

08

09

10F

111F'

N'omuli"a,

10

13 Decem!ber2,'D10

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh~b~t 15.1 DRA.M den1,a.nd &. ,s,u pply forecast

C,Y
Total dsmand (1Gb eq. mn) 201)9 10,505 27.5 '10,215 20.8 1Q10 3~:331 2Q1D 3Q10

y-y (%)
q-q (%)
Total supply (1Gb eq. mn),

56.4

3.3
3 ~:.-_ 32~ '7

3,554 50.1 6 5, .. 3,516

4,000
44,.2

4Q10F 4,,58,9

2010F '15,4,79 417.3 '15,300 49.8 1.,01 38,166 72.-9 2'.,53

1Q11 IF 2Q11F 4~830 448

[11', •

3Q11F 6015 "

. .

5:,322

4Q11F 2011F 6~,8,71 23018 '''.'

__

2012F
-: ,

"

-.-

32,820

1,2.6
3,929 46,.0

412.1 1.~.7
4521
"

5",3

~9.8 10.2
5,,500 56.4

50.4
13-.0
6,001

~9,,7

48,.8,
23,,127 51.2 1.00 :30518,
.
"

.. 425
."

14.2
6,5'65
. ~. .

5,,061 52",1

y-y (%)
q-q (%)
De m,and/s
ill pply

57.5 6.0
1.00 9~:315

41.0 5.7
1.011 10,593

4lA.2
15.2 1..11).1
..

52.7

1 1.7
1.02 10,709
1

11 ",8
0.95 1,,085 (23,.9)

87
O~91 1,,426
..•.. (2919)
_, ...

'9 .1
1

~5",0 9.41
1~O5 B~206

32,986 . 425
_

Total s,1lipmJent v'allue ($mn)

y-y (%)
q-q (%)
ASP (1Gb eq.• ) y-y (%)

1.. 03 22,420 (ft7)

2.1'9 (22~7)

a 150
."

1.00 7,802

1.,001

336801 .,
.

173.9 97
1

1341.-9 13.7
3.011

779 1.1
,2.13

(4.0) (23",9) 1~,aO (33.~) (34.0)

,2.80 73.9 3.6

(13-.1) 1.4.0
(50.0) (22.2)

4.8
1~35 (55.2) (3.6)

(27.1 ) 5,.1
1.30 (52.3-) (3.7)

0.7
5.2 1~25 (30.6) (3.8)

(21.3) 1.32

10.A 1.,0,2 (22,.8)

q-q (%)
Source: WSTS~ No,mura estim~,ms

63.1 7.6,

21.8 (9.!S)

15.A

(41.9)

DRA.M demand
2 011 F PiC demand outllolok: tablet's
1

eannlballsaflen into PC:

lin 201 OF~ PC dem and growth came in at 1141%,lowe If than 0
UIr

'W'e revised down 2010F PC· (D"T + NB + netbook) demand growth forecast to 1,41,0/0 fro rn au r begi nnln g-of-th e y'8,a r est.iml~lte,of 1,5.5%. ~nclLJd tab lets, de rnand growth ing should be around 1'9'%,':l-Y ('w'e forecast 201 OF tablet PiC shl prne nt of 1l5mn unlts), Thouqh nei'ther srnartph ones nor tablet pies ,are litely to 00 mlpletlely replace tra.ditrnona[~ p'es, we stii[~1elli'ev'e the high penetm,tmon of both ga.dgets ilnto consumer life should be b a. neg,ative on traditional PC demand ,as,::'1) many functionalltles of pies can be performed on these gadglets (eg!l lnternet -surfing and music '& moving picture viiewing); and 2) consumer budgets for electronic ,gadgets ,are limited (iie:,the, more spent on mob Ie COmllP,utinggadgets, the [less [left for PC,s). Exh_bit 1,6.1 Less seaso1nality
('%)
Win 7 effect
-F

plfevi,ous expectatlcn, due 1.0 the penetratl 0 1m of' ta blet PCs

forward in 20 11 F
1

Ch ina eiec1

Averagle s'iinoe 200·0

20

15 10
5

o +-:-(5) (10) (1:5) (.20)

1009' ,2Q 3Q, 40 1Q,10 2'Q 3QF 40F 1Q11F 20 3QF ~Q:F'

Source: ~ DC, Nom~ra e-s1i'mate-s

In 2,0'11F, we look for d~ient PC, (desktop, notebook and N'etbook) shipment to gr,o'w' by only a,% 'Y-Y" off from 1,41,0/0 Y-Y' in 201 OF. In our vliew" the, popUl[~a.rity srnartphones and of tablet [PCs" of which consumers beglan to show rnaanlnqful acceptance from 1H 10, ls eating a.way at IPC demand. llncl~uding tablet IPCs", 'w'e expact total demand to grow 17'% y-y in 201 '1 F,. Meantiilme o,wing to the increase in data, transactlon called for by m;Qbiillecomputlnq (viia, smartphones and tablet IP'Cs.) and the, wider roll-out o,f cloud computlnp, 'w'e forecast th at server deman d will rise 190/0 y-'Y, contrl butiing to fhe expan slo n of the server D'IRAM market,
l,

In 2:011 client PC shipment i's

j'

forecast to gr-ow by 8,% y-y" Yet, w hen "tab le,t is in clud ed ~'the, , growth sho uld stand at 17% y-y

The demand for sm,artphone.s 'wlill also rise by 42% 'Y-Y',I on our estimates, and alonq 'wi~htablet [PCs, 'wlill contribum,e'to the rlse in demand for mobiille D'IRAM.

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh~bit 17.1 Nomura PC·shipment,

Sh ipm ant (u nit, ir1 0001 Total PC (ineludi ng x,S6servers),

forecasts
2005 211 !445 17.20 S!,473 ,2:006 234!O23 10.70 6!'966 7.60 227!O.56 17.30 141 !829 11.1 10.80 146!622 3.40 aO!4:34 27.40 200 7
1

2008 300.,4941 10",40 7,,752 290

Ill'

2009, 311! 149

1

21010F 355 ,151

l

2011F 383!3JO 7.'9.0 8!,2.52 9.40 :375! 118 7.'9.0 149!4,29 2.·80

2012F
422!914, H)'30 S,!827

27,2! 19 8.
1

(y-y %) x86se rve rs (y-y %)

Total Client PC·(desk'top&-+no,t,ebook-:s)

H3.30 7!531 ,8.10 264!667 H3.60 157! 100 7.10 1 07!56,6, 3,3.70

3.50
'6!36,1j, (17.'90) 304!783-

14.10

1 ,5416
l

18",50 347 ,611

l

7.00
414!OSS, 10.40 153!63.2 280 26,(J!455, 1:5.40 80!OOO 60.00 502!914, 116.00

292.,742 10",60 150.,488 {4.20) 1412.,253 32",20

(y-y %)
CI~ Pc. - Desktops ent

14.10 145 ,298

l

(y-y
\. J

%)

6",70 202 ,313

l

Cli'ent Pc. - No~,~:book$

63-!142 3·3.~H)

225· ,f:Jja9·
.~.!U.' ..

"''I,_v o,,"}. 10
Tablet PC

20.00

11.60
.50!OOO 2... ·3··3'1I"'Ii ".. ·.·:·u . 3'

(y-y %)
Total PC .. Tablet PC 2> 3;:·AI !02· 3"
'.

~~._

.'--,.

,"

272 198
[, "'" ~

.:l ._.'
I

311! 149, :3.50

370 ,151
l

433!3l0
17.10

(y-y %)
Source: Nom~ ra estimates

19",00

Exh~bit 1,8.Spec comparison

I
_pia

for ne'w tab_etC

_hWiU:dg

models (Iaunch,ed to, date)

HP sraw 500 Toshiba Folio 100 .....
'"
......",_

i..,.
1

,Gala xv

RIM IPliJYbouk

:5tnJ;a.'k

Dell

...

..
;~

Price ~!JJlnth cl;aite Screen Rest)1 LlIti()I1 mnnemsi'Cul

US:$49~H~29 4-10 111 9,7 IPS. lCD

:10.24x768 9, 55"x7'.4 7-):0, Sill IliIO Yes, 1GlHtz:

·.... S$:10,OO U
9-lIJ)

Urnknowrn UlrIt:e 20:1 (II

Unknown

']'" LCD 7, SUx4.

3MP il024x-oOO

·8.9- ILID
111

4Q10 10,1"' LC[)

1024.)(600 Unknown

Umkltown 1Q11
7 LOD :1CJi.24X'f$OO
rl

US$54·9.99
6~10

Sm LCD
,S(l<b::480 5'"x3.1I11xOA III SMP Ire a r 'lTijlc'ing

ICE FlIii2.jr?i
IV! u Itil- Touch

rea r

r~o.5

U'ijlci ng

Urnknowrn Unlknmvn :3 M P re;alif ·ri;lci'ng

5. :!l"x7 .6rlldll ,,4111

:1. 3-M P tirtJ(flt 'faciiltQ

'Yes 1. GiHlz S;almsllJng S5PC1:!l0 S;almsu nu App~ An diro i"D 16GB/32GB AnD rni'D

VGA. front mCinC!

'Yes
:!l.6GHlz lDrn II Atom Z530 ite
Windows. 32GB, 64GB Winclow 7

1.3MP web

ca m

Srf;lIP rear fa dngl 3rf;lIP 'front mdnC! Yes. 1GHz:

VGA

Yes
ilGHz NV.IDIA. TeglFa 2 An DlrQid rf;llarlket 1. 5Gi 13, Androidi WiFi,r

nrorri:: ·raei'm Q

~ppl,e A4
Apps Storage App Store il6GIB.r 32GiIB'1 Or 64GB

QS
Wireless

iOS 3.2 'WI Fi'I' 3G,r bluefLc;QUi

Qtnneri!:l on

2.2.

.2.•2

I/O'
Bi3t1tElry Ili'fe 'We'ight QDIM/Erf;llS

in

Iy

hours :!l.S Ilbs

Hli;li

Wi Fril, 3G, bll!JJIEtoOthi USB .2..0 7lhours 300 glraliTIS (0,,84 I bs) In

WilFli r blhueIDi)tih
USB 2.0 Urnknowrn IJIrnkrnowrn

3Gi, b~uetootlli
ILISB 2,(11 7 Iliours. Unknown

Marvell .Arnn;aIDa 610 Blambe:FJV Ap;p 'Wmild :15GB,3..2.GB Blli3tkJBemry' T;alolet OS by QNX
Micro

'Yes l,GlHlz QLlla knml'lil QSD 8250 .Arndroild IM;almett 16GB AIiID rtficl

:1..6

WI Fi ~ 3G,r hi uetcoth H DMI...micro US B

Wi F~, 3Gr blllJ,erootih USB .2,,0

Ulillktliown 4100 qri!:llllis

Hon

(o.·as Ibs)

nj.a 7.7 oz (0.4l8 Ihs,)

Qisdii3

llio!JJtSe

Source: Nomura IPC iFlarnwa,re initiati'an report on 30 Nav. 2010 by Eve Jung and Aria,na Kuo

Exh~bit 19. Spec comparison for new tab_et,PC models (still to come)
Apple

IPad 2.

(fseQ Chll5

A.Q!r

Lenovo LePadl

IMSI

AsPS'bl'k

Wind Pad

'See Tablet

--Launoh dlai5e Sem·~fll

Callfl'l@it"21

1Q:n 9 ..7!!' liPS· lUCiD

1Q11
71!! LieD

U1S$,:2,99=6~9 11.=:11)
"j'!!l

n21
Androldl :3.0

:10'!! ILCI!)

LiS$j[IOOO 4Q 1 ill iill'!! LCD

US;$499=6·99
4Q:IlO 10,!!' 1i~gra 2/ A'wm Andro~d ,2.1/ Wllndlows 32GB

US$3~9'~ .599 1Q11

iilll!!! :I!..2'!! LCD
'j'~r2

I>troi[~Sg61i"

as,

S na pdrag oinf iri&~ r.2I 2: Am,d! ro~d 3·.,0/ W~mdows ,

:Sn21 pdlli"~gOfli
Aflid rn~d 2,,1

2f Co n:! IS
''j

AIi"H:iI ro~dJ W~ndows 67i5g ~gatr·oln

SOOIi,ai(H~

W@~ghltt ODM/EIMS,

:16GB· .• 3,:l:GiE5.• 'Or' ·64Gi6

---------------------------------------------------------U;

Optlmua

Motoli'Oli!II SUn. raY

HTC

Nokflll

ST-Elrlcsson

AdWlinit

1:5001

Vep

1"';'f~ ,~.ia.:;. t

hTC

Launoh dalD8 Semt:m

Callfl'lel"a

4Q:1l0 til)!!' LCD :Il.3MP web cam

ir@g1Jj'~

US$'9~ 1Q11

10·
T,~gli"~, .2 Andl'>oldl :3.0 lI~gra 2 And ro~d .3,,0 3:l. GiS

4Q 1 ill 7'!! ~ '9'!! Ua,500 fi.o1ee,.go

IJIS$4CiIl 4Q10
:Il,O'!! 'T·l:!!gr~ 2. Andrond 700g 2.,2

Ptroi[~SS61i"

:2

as,
SOOIi,;;lig,a

And ro,[,d! (Gilng I!!!rb n!!i:2i·d!1 Ho·nevoom b)

1.6 GiE5

512 MII!5 IFlIH

We~ghltt OID'MIEMS,

Source: Nornu ra IPC iFlarnwa.re iniUati'on report on 30 Nave mber, 2011 lYy Eve J u ng and Ar~ana K~o O.~

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Slo·w [PC demand vs Igr-owing content in PiC + ·specia~ty DRAM

'W'e forecast DRAM demand will grow by ,41,9'0/0 in 201 '1F!I up 4pp y'-y,. For P'C DRAM, 'we ex~);ed growth in memory content olf 28'0/0 y-y I(V5 114%y-y in ,2011 F) to outpace growth O ln PC, sh prnents of onl~y 8,% y-y' (,20% y-y in ,2011 F). Our outlook of healthy maim 0 ry. O content Igro'\AfMlh comes I~a.rgely'on low PiC DRAM prlces. Also, ·w'e see tlhe sliiriinkling PiC shipment contrfbutlon from nstbooks, wh~cn consume only' around 11'GIB memory, in olf effect Iilftiinglthe a.vera:ge PC memory content, Meanti'lme!, w'e antillcipate a. temporary misalignment of P'C supply and demand, olwing to the launch of ~ntelr's Sandy B,ridig'e in January/Februa,ry .2011 The ne·w CPIU '1. a rchmt'ecture will a,lllow d ual ~·uncit.ionallityof tra,diiillonaJ CPU and gr,aphlc processlnq, thu s should pare OV91railiPiC component costs, whme improvling IPC performance, Ulntlil fhe me'w'CIPU archltscture becomes available, ·we be,li'eve PC, OEMs willi undergo inventory adijustmleni, and resu mle,IPC prod Ulcliion after the leu nch, Thus, whiil~e'w'e'fora cast PiC shipment growth of 5'0/0 q -q for 4Q1 OF" demand 'for PiC corn pone nts is I~ Iy to sh Iii nk: ike by' 5-'10% q-q. Then in '1Q,11F!I we expect PC shipments to de'clline by 6% q-q, 'whil,e P'C component demand stays flat sequentially.
PC memory content s,etto grow 28o/~ in 2011F on low memory prices amid declining sblprnent contnbutlen from netlbooks

v-v

II te I' s lau n e h of Sandy Brid gel n sh ould have a posi'tiv,e iim pact on PC content per box growth ami d 1Q111 PC unit preduetten F

(%)
16 ~

14
12

W'in2000 64,M,-> 128M

Nnw

10 8

6
4
2

Dual chan neil

256M->S12M DRAM

O+------~-----~-----~----------~-----~-----~-----~-----~----------~-----~-----~-----~-----~
'~99

Win :XP 112,8,M->256M

1

cost

per PC

Sandy Bridge 111

~OO

01

'0..·.·5..

Tn~ 'Ul1U'

~07

08

'0···9"·
...

Source: ~ DC, Nom~Fa esti~mates

Sh~fting to more profitab,[le DRAM at plications

'W'e forecast the shift in dlem,and from IPC DRAM t,o mlobiil~eand server D'lRA.M, whi'ch lbegan in 2,0'1O~·willlcontinue to be in work iin 20111F,. Our forecasts show P'l~,IDRAM demand grow"ng by no more than 37'%, y'-y in 20'11 F!I whrnl,emobile DRAM demand is I~ikelyto 'grlO'w'by 104%, y'-y,. lin contrast, to PC, DRA1M pn]ces, 'which have dropped sharply in 2H110! mobile IDRAM priioes, have stablllsed over the same period, m,ainlly on lbeniign demand. Here, w1e note fhat ,8 II IDRAM players, th e leaders in partruculalr!1 rapldl y oonve rting are their capaeltyfrorn PC DRAM to mobile IDRAM,. 'WIth thls backdrop, 'w'e look fur PC, D'lRA,M supply 'QlrolNlIhto moderate to ,37'% y-y in ,2011 whlla mobile IDRAM sUIPpl~yis '1IF, I~ikelyto 'gro'wth by '1250/0 Y-Y:~outpacing our mobile, IDRAM demand growtlh forecast of 104,% y-y. Hence, w·e'exped mobile DRAM prlces to weaken in earnest a,ler 2Q,11 '1IF and P'C DRAM prices to bottom out iin 1,0'111 This lmplles that the price premium F. enjoyled by mobile DRAMI over IPC DRAM ls likely' to continue to expand untiill 1Q:11 '1F and then fas.t shrink to aIOUInd ,30% by end-20'11 F. Meanti'lme!, thanks to the rnncrea,se in mobile data transaction and wider roll-out of cloud cornputlnq 'w'e estimla,te bo1h demand and supp[~y for server DRAM willi rise by 6'9% y-y in 2,0'111 , albove 'Olll r in d UlS~IrY averagle growth rate forecast olf ·49'0/0 y'-y in 2,0'111 . F F
PC DRAMI demand and supply are llkel y see growth capped at. 37'%

'y'·y in 2011F

Mobile DRAM supply set to

'increase by 125% y-y in 2011 F', oWltpacing our demand gro,wth 'forecast of 104°10 y-y

Server DRAM supply' set to , ..... ' I'l' Iby 6·9°1 .• - y..

grow

Memory ~G[nba~

CW Chun.g

NOA\UIRA

In 00 ntrast , w'e forecast demand for graphic DRAM willi continua to w1eaken after 1'0'11 F, o'wiing t.OI: 1) slowing IPC demand gro\YtI1;: and 2) the, launch olf Sandy Bridg1e CIPU, wh~cl1 is li'k1elyto negate ttN9! use of graphiic cards. We forecast demand and s,Ulpply' grOtwth for graphic DRAM at 2·3'0 Y'-Yfor 2011 F.

Graphic DRAM supply set 1.0' grow !by only 23'%".',

Exh_bit 21. DRAM propo DRAM,2010F)

(%.) 100 90
80

I'ional supply by players (PC DRAM vs specia~ty ~

-

70

60
50

~o
30

20
10

o +---

:._. SEC'"
...

Micron

Nanya

PSC

Source: Nornu ra esUmates

Exh.bit 22. DRAM bit growth forecast by appUcatioll ('20 11F)

1

(%)
1~0 120
100

80 60

~o
20

o +--Tota.1
Source: Nom~ ra estimates

PC

, Se·rv"e··-r
.......... .
"

'Graph~c

GE

ve« forecast

Ca.pex. to decllne b'y 25% y-ry w'i'th ne furthle'lr wafer' capaelty lncrease
'We forecast the, i'ndus,try DRAM eapex wiU fall by' 250/0 y .. ' in .2011F y

overall iindustry IDRAM CB[p,eXof USS9',,7bn {-.25% Y-Y)ifur 20'11 F. WhUe S·IE'Cand Hynlx are liik-ely'to keep their memory capex flat ag.ainst 201 OF, we expect. allocaflon adlustmsnts for IDRAM vs NANID from 7::·3 in 201 OF to 5::5 in 2011 F. For the non-Korean pl~ayer.s, 'w'e belli,ev,e spendlng at N.anya. and Iinoter.a, both of 'which spent substanti'a.lly iin 2010 to shift thelr trench Iline's to stack Iline.s~will declline mn20111F. Thus. the i'ndu.stry·-'wide wafer capacity increase will Iikelly be limited in 2011lF at onlly 5·% y-y'. 'WUh most of the cap ex: Iiik1elly gQ towa rds Iina upgrade actlvitlas, we be li'eve that: to e.ach p[~ayer'~stech nology mligration status, (ie, whether ml~gra.1tillon 50 su ccessfully) an d run product mix. (le, PC DRAM vs specialty DRAMI) willi be the k.eyfaaors for the DRAJM m a rket outl colic

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 2,3.1 DRA,M capex forecasts

($brn)

.2007

,2!010F

2011lF

6 5
4

3
:2 1

o
SEC

Hynb::

Elpida

MU

Inotsra

N anya

Rex"Chlip

PS C

W~n bo nd

Bit suplply by company (see App,endi'x: for' further dletails.)

S,slmlsUing EI'ect~oniles. C'wing to 'wa~er capaclty ,additilon and ,ag'gre5.s~veand successful technol~ogy ml"grati'Oln"SEC is Ilikely to register DRAMI bit growth in 20'1OF of 7',5'%, y'-y" raJi:si'ngl [DRAM market share to mora fhan 400/0' by 'end-2010F,. ,At:the same its tlrne w-··_.e·· S•EC·. 00' 4'IL",,,,,*, lill, '~,- I~eod,' v, Hlynl"v'W," 'W"-'l'd-:e'ln'- 6-0';;} mo: In~lLI..s>: more .... -,~Ie e' ichnolo 'g":Y:: :~III to 'nd" _" ' -, fore I!,II!,'~,Q,_ __-. II ,'!!PI: ,.-IIIIA" ]," l.v,I l~mL, (a ".'",11" th an one year vs second- tier players l~ rnaln Iy' owi ng to its smooth mligraiion into ,35nml techno[~ogy. Thls is th'B widest lead SEC, has enjoyed since 2006 and we expect th'e company to continue to hold ils lead~ng poslflon in the DRAM industry. Our forecasts, show ,SEC,~sbit growth slo/wing to 5,3% y-y ~n2Q11 F.
-ii"'!!''':IIC''t '1UI'8'_-'

SE,C - ,20'11IF DRAM market share of 45%, 'fol~ow'ing its I&~golden price strategy'"

'W'e believe it most no,i,eworthy that SEC, looks set to achieve a 450/0 share ofthe D'lRA,M market ill ,2011, hruttiJng management's longl-B'w,aited talrget. Whne S,IEC has so far ta r'get:ed bit growth olf "the in d ustiry'-a,vera.'ge pi us a,1 ha", we be[1 p leve that its [DRAM bit: shipments 'wlill grow at no more than fhe indusi,ry'-average rate from 2012,F onwards, Besi'des,:~'wIDth stark d~fferent_ia,tlionof ils cost reduction roadmap SIEC is lilkelly to the find mt easier than before to pursue its. ~~goldenprice stra,lt,eg-y'P1 Therefore" 'w'e ,ant,ici'p1ate the volatil[~ityof ~he ElRAM market 'willi ease considerably from 20112F onwards.
I •

Hyni!x. Hynlx ls I~kely'to maintain wafer capacity at, ,300kpml for the tillme beilngl. We recko n the ramp-u P' olf ,44nm tech nol ogy i1sde layed, and th erefora 2011'1F bit growth 'willi like l-y fa II short of prevlou 50 company' 9 uld anca of 45% y-y ~Hynbc is un dergoi ng Imilgratilon to 6F2-ba,sed 38nm technology (from alF2-based 44nm tech l1ollogy) " whlch c-an mmlprove'dle-per-wsfer by' as much ae 70% lf successful, However, whether the Imi'gratiion ls completed successfully remains to be seen, lin a, nutshell" the [p,aoeof cost red ucflon and growth in Q persting pro,fl't in 20111F' willi h~ng'e on th'e successfu I migralion to 3.8nm and the ramp-up of 4411m techno,loQY. EI[plida. Along with R,e.xchlp, irts subs idmaryiln Taiwan, E lpida is un dergoi ng m ilgratiion from 63nm to 4,Onm" skipping 5:xnm technology'. Havlnq ceased to procure 63nm,based Ira,w [PC DRAMs from Pow1erchip" Elplda ls ilnstead foctrlsilng on the ramp-up 100f ,4 Onm migration at Re'x.ch~p.At Elplda's Hlroshlrna fab, 'w'e understand that around ,50% of the, fab's capalcmty''willi be converted into 40nm and most Qf the fab's production 'will~1 b e.•Q . 'I"'e'd to m 0 b'I'[~e' lRA- 'In te ur ":.,j, of' ',·~.·c,·~_ sh IL! ,,_' l~,_' I., -'M" 1_' rms ap pll'lcot'1110 '.e' forecast Ellplda ~'e: mobile',- [l'RA'.' M-I , ~., D: .. 'n1...' W:.. ..••. ·'~~tlI~IL,c ._ ,b Q .. I _ '_ .-' . production wil[~'grow by' 150-2000/0 Y-Y~I'while PiC DRAMl productlon will remain fla.i.y-y. That said" we believe th,aJtmobile DRAM 'wijll be a, mludh more important sWling factor for E,lpida~ls,uture earnilngls, than Pt7_:,[DRAM,. Meantlime" althouqh f the ml~gm,tilonfrom 63inm stra,ig ht into 40n m 'willi allow 11 O%-p[~u bit gro,wth per w·aJ~era nd hence:~ if 5uccessful, O s ( lts cost: ,CO,m peti~ive ness 'will near that of Tier-1 players )1, rut ill be, a cha II'enging tas k w and success remsins to be seen ..
l
,1< .•..

Hyn'il::. - cap,acity' likely 'to be

maintained at 300kp,m ..38nm 6F2 'will be the major variable in 2011 F

Elpida - most aggressive in expanding mobile DRAM produettcn in 2011 F'

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh~bit 24. DRAM players" techno ogy' roadmap

,21)109 1Q 2Q :3Q

2010

2011
3Q
35nm 4Q 1Q

40
I

10

20

,2:Q
38nm

3Q 27nm

40

8a,m,s;ung Hynirx
Micron Elp~da

4'6nm

44-l1m
65nm XS

58nm
6:5nm S. 68nml 35nm 35nm 58nm

N,anya
Source: Nornu ra estimates

M'os,t of Powerchip~I:s, fabrication ls tiunniingl on 6,3nmXS techt1ollogy, which commands similar productivity as the Korean pi ay'ers, 5,Onm tech~oIQgy. However" with P'C, DRAM prloes ~O'w app roach ing the K:orea n pi aye r.5~~ reduction costs on 4x~m p t [~ ~ ueve IP .... IS Ih" tecrh nOllogy a,nd '18 III" b Iow P -'ow'erc' hOi,s cas h OOS,II I~ I'-,- o'w'env" Ip " un llk Iy t b Ip lie to oe " & Ing,·e
Pow'erchip.

psc

[iiiiii

should

DRAM pri'ees s,tay

around US$1.. 0·1 0120, Powerchi'p 0 is, Iik,ely to cut uti I isation of its legacy ea p,ac,~ty a 111 d face d iffi c u Ity
in tech mi'gration shorla'ge due to cash

ab Ie to reeo rd pos~tive operaf ng cashflow un less it can ·shift fast into 40n m tachn 0 logy. Should DRAMI prices ,stay around US$1 ,.OO-,'1.20~1w1e'would expect Pow,elrchip to cut utiil~isa,tiionof lts Ilega,cy c.ap,acily and face difficulty in tech mig ration due to cash shortage. Nanya and lnotera. Whiille the, shift from 70nm trench to 50nm stack, was more cha,lleng iingl than expected, b01tihNlanya and I notera are fast expandin 9 bit, produ ctlo n on improved yiel~d. Given '1 00% bi~ gllrovvih per wa.ter 'when one, shifts from 70nml s.tra.ight into .sO~ ,S uccessful mig ration should lead to s upplly overhang of 4010-, rn,
1'0'11 F. Yet, fh e high s uppl y growth a,Hrib utab lie to the ml'" ra~illolilinto 50nml technologyQ should abate from 2a~11'1F,. Further!1 both comoanlss are Ilikely to miglrate into ,40nm i'n 20'111 F. Given the ,40%, or sa pier-wafer bi't increase on the migration from 50nml to ,4 O nm, both are I~i kely to see bit 9 rowth in 2H 111lF moderate 00 rnpa red to 4'Q'1 0-11 Q 111F.
J

Nanya and lnetera - at last migrated to ,50nm iin 4Q1o.; 4Dnm migrat'iolil i's the next huddle

'Wmththeir h~gh exposure to PC,DRAlM, Nanya and lnotera should see a direct iimpa,ct on profitabiillit~,. and cashf ow from th e fall~ng PiC DRAM prices. In spirte of l,ag'9ing cost k II.\... th t·"~" cornpennveness anc d weaeneur ...!II cas h:1 ·lIIIO'W!1lliO'wever,.le suppo rt·. ohI nom Formosa group should keep both a,float iin th e nea r term .

Miicron. At Mmcran~the revanue contdbutlon from DRA,M has decllned to c.50%,~due th e expand ed revenue proportion of NANI D and the a(iqUlismti n of Nu monlx, ,8 U S0
Ol ~I

to

based Na'R, flash company, For PC DRAM, Mi'Clron uses ~note,ra as ~tsfoundry" 'whi Ie · '-.1' ...•...•....... rt.. .II. cron i, '_ Itl,: Is 1"Ii\:e" to ..... ... uen ··e M Ilcro n s own US·.. fab . earrn a ...It.. d "- r specia lin} DRAM pro,d......d!"on.· 'W·' expe c.t· 11\i'111 s
!

Micron ..... will focus more on NAN D expansion in 201'1 f', while re,lying on lnetera for P'C DRAM

future capex to go to'ward NA1NlD!1 and as such, D'IRAM bi~ 'gr'o~h from lts o'wn capacity 'wiilll 1m ke Iy' be lower than tihe i nd lliIsb)' avera,lge. Yet, Wihe n th e' p rocu re rnent from In ote ra ls accounted for (50% of lnotara's DRAM producflon), the, overall bit growth from 4!0'1 0 to '1 Q,11 s hould be above the ind us-try avera,ge.

Exh~bit 25., eo'st, per wafer comparison

(US$)

,(3Q10)

Exh~b t 26.," of di,e per wafe,r eomparlson

('3Q,10)1
II Samsung

2,~,500
IliI,A'2 . ~,~!UI~ '"

2 2000
,~.

2,,:0"71t:! . !.·v

. 1 B~· ...
~'._.'.i';~'

• Hynlx M~aron II Elpida

1,~,500

1,~OOO
,500

800
~OO

o
W
ID

o
46nm

:35nm ~~nm 38,noo 58nm

Mnm

165S Q5_.' x u _ S "' .

Source: Nornu ra estimates

Source.: Nomu ra estimates

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 27., Per~Gbcost, comparlson

1G[1lcash cost (US$)

2.0
1.6
1.2, 0",9 0.8,

1.8

1.9
1.5 1.,2

1.0

0.0
SEC
Source: Nornu ra estimates

HynliX

E[lpida

Nanya

lnotera

Exh~bit28., DRA.M supply and d,em,and forscast

(1'Gb sq., mn) 80':'0':'0" ~,"
."

_. _. --

1'ota.1 ,ch~:mand {LHS) 1'ota.1 supply (LHS) Supply/demand! sufficiency (RHS)

(,%) 110
105

...

6000 ~,"
__ "_

...........

'

...

100
95

znoo
~~,

90

o
1[009
Source: WSTS~ fJ'roiJornura

85
3009
es-tima,ms 1Q10
3010F

1Q11F

3Q11F

O'utlook for DRAM ,supplyJdlemand balance, and price trend

'W'e see
~,W(l

potentia I seena rtos for t~hefuture priciing trend of PC· IDRAM::

Our base case calls fo r a Ii1I n L,·, shaped" price 'trend..DRAM make rs' marg iIi1I shou Id bottom in
1Q11 F and moder,ately' recover

1') 'V4,hap'ed II"eOOv'ery. W'e .already s,aw' a,V'-shaped price recovery in the period from end-2008 through 2IH09',.Should 1thecurrent downtrend in PiC DRAM prices continua ~ 1'0'111 and the p riice~lfedI be I(l'W' ei~her th e' cash cost of Tler -,1 playsrs or th e nto F variable cost of secon d-1tmer lla,y-ers'J would expect s uppl~ycuts by Tler -,2 names, p w'e g,upply' shortage and then ,8 rapid rebound mnP'C DRAM priioes. (to around US,$1.5lG b). In thls case, companies unable to wUhs,tand Ilower plrofitabiil~ity rnlqht have no option but to go under" whmle leaders may also suffer temporary operating losses in '1H11 1IF., Thereafte r, le, in ,2H 11 F'" th e Ie,adiingl names s hou ld start, to generate opsratl ng ma rgins of 3.0-50%" 'wh iIe t~heto IIowa rs, mf~hey 5 urvi've, ,Sho uId see 20-3;00/0 OIP e ratl ng 1m arg ins, t In a, nutsnlellll' thls scenario presents a, severe ilow-1 H vs Hliglh-2H:' case.
1

2') L4,haped trend. In thls scenario, we· would expect DRA,M prices to di'vle to US$; 1,.00-1 .20 in ~he begiln n ing of 20111F (eq u~val'en~,o the all-ln costs of Tler -'1 play'e'rs t and the cash costs of Tler-Z names) and then to sidewalk thereafter. M,ea,niwhile, 'we Ibeli'ev,e plrofitabmlity would bottom iin 1'0'11 F and mloderately' recover, ,Along the reeovery, w'e' would expect S,IE'Cand Hynlx to g'enerat,e 2H 1'1IFQperating rnarqlns af 3 O-400/0 and 110-20~0!,respectively, whmle the Tiier-2, names jus,t barlel~ybreak even (from negative alP mn1HI'111 F).
J

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 29.1 Nomura's basel me,scenario for PiC·DRAM price (Base :: Red line] ~ ~
(US$/GB) 30'"
I•. _.

........ per 1Gb $1.0

........ IlJul~zationcut IPrnmos

bankrulpt B" shutt down 21GlB1PC OGlS,t .2%,

2.7 2.4

2..'1' 2:.6

3Xlnm OPM 30% ,4Xlnm B.EP 5'Xlnm OPM ·~40%

a5:nm

shut down

3GIBJIPC cost 41%

Recovery'

dwe to· botlil

t.5 t.o
05
. ",1.'."_

..' $2.7 per 1Gb 4xIlIm OPM 62% pxFtlm OPM 41'1% 65nmOPM26% 3G8/PC cost ~ 11 %

demand increase offio 2nd· tiler names,"' w~ilizaIHon cut

0.9

Under Sa mSllJng"s oon1Dm1

>o

',.."..

!iil) .....
U~

c.

>o

:z

Of the two scanarlos, we see hiigher chance foll~owing:

of 2,007-08, when~~its 'game plan was

olf an L-sha.p'ed

scenario

gilven the
SEC's "s 0 Iden price strate gry'" seems to work be,tte If tha nks to its, cost advantage share
I'

First, we note that. S,Ee's str.ategy· in the D lRA.M market is matemia.ll~y d inerent from that

to win more

market share and to induce tihe

'whole market to restructure in a 'way- that would help it, to outgrow' its peers, The new

and la.r-g market. er

s.tra.t.elgIY:~ oW'ever! focuses on contl nuln g to b u~ld mornentu min market share Qla.iins(le h reach 450/0 m a rket share by 2011'1)~,mal ntal n decent prg,flltab iIily a 5olowJly choke out Tier-2 phayers. W,e be,liieve SE'CLP-sne'w' strategy is sensible and suits its circumstances.

no

Exh.bit 30. Ope,rating m,a.IIQ n 'trend.of major DRAM payers

Only' SamsulI1ig m ekes Imioney", Under' Samsung's ccntrol' stage
I

~IIII!II. SIEC
---lPovurerchiip

__
IiiiiII _

.Hynix
iii

80
60
All loses monsy,

~_....::o,

---

IElpilda

--

Na.nya.

20

,
(20)
(40)
1 'I

,
,'_'

I.

(60)
(80) (1 00)

•, ...

J
"!:""""

I
I

t,

'

,\

.,
'1,1 'I

..., 1
I I

••

"

c
0
~

CJ

"!:""""

0
.

a
"!:""""

C1 (11.

0.

N
0'
-

,Ct)

0 .~

0 ~,

0'

'0

Cit')

a .~
.

eN')

0"

0
. 'T"""

• a
0 Ci)

U) 0
'T"""

(0.

a. ~

0.

a
"!:""""

ID ,0

a
.

.0
'-

{i}

a .~

~,

'0

a
.

ee .
0

•
a
"!:""""
.

,~

o .~

0.

"!:""""

C1 (11.

"!:""""

ILL.
"!:"""" "!:"""" "!:""""

._
u,
.~
't;'i')

0:

O·

SOUfO~':

The Campa! ny d ata, Nom[)l ra esiilmat:es

Memory ~G[nba~

CW Chun.g

NOA\UIRA

n -·o,-II"e"·e· " .nj"'!!"lal~sta ndmng" lUI IL.-_,~.:.- se 'In 2:.0 0"':' -7-:'-, ~I'n'a' Se' eo nd w" ;e' ~I'lnd: T'II·e···r-2·. arn e' 3.n IJ: · 'In' fa .r' ..- : a·n tho' 111_ :. IL.v'lin-.e I" III .11 IIII -'.:. -_. '"I:-.. lth ".... " 2·'0'0"8"Th'e' fInanCIS 'I muse Ie, WIIlIIII w,hOIh th 'I,' ::_'., Ilcl_llley can WI_II d$ILanO a. .&: II~' ID'L]'AIM'-'' IPnloe" I:-.. ra Illngir\-_ l .. nas
_.,.c_o: ,.
'c.

c;;I,

if."' :.Q

'W' -

-110>;",,-.

\;1:-

-Q._:

.Ii11 : ~I

~' '.

jill:-..

substantlall y deteriorated ,and the-y a n~~ ot I~ n ikel-y to be ab lie to i ncrsase blt sup pl~y'with :':,M p c· I~ :.:. U ·w· . ·8--· ;. :., Ibolo'-',w" . .:..-¥ ".:" .. t~ v'.":.> 'Q,.I D'IRA·· ·:, 11I"1~IC"e'~a'I~I'ln-'g' . .::... "'. cas ....· c._:iost la 'lUre' ls ~,gmtua, "'I'IQ"It"!i1 ··'e·· sa "·w·· ln 2·.··0··:·07··--0-·:
. ", '. "_III . -,......~ .:. M;)IIQ-1I' "_')-Q. ....:_ ... '!I;jIj . :._" IJ. ~ __ ._,~ .::.. l~ I .... .:' Q.~:_:'.. II .
j." .•• _:. ._'_'.:.' •

Ti'elr-.2 players ar-e in far worse 'financial standing than 'they were 'in previous downturns

Exh_bit 31. Financial standing of T,a.irwanlese DRAM players (end-2:0106),

(NT$bn) • Cash

Exh_b~t32., Financial standing of T,a.irw·anlese DRAM players ('end~2:0'10F)

(NI$bn) • Cash _ Net debt

• Net debt.

100
80

100
80 60

60

20

20

PSC
source: Bloomberg

PSC

Ip·C-"'- melmory.--: ,..:- .- ·t-·· ··t has ···.·1re·a, Y fdJi _. d II~ he ;d' up fr .. miliu 'it. _ -10.···· pC·11us, ,grven . ' . _..... . "-, -' con en _ ,as,a -···d· II'me, '~;". '.. ' .." ea.,: -", roml . "'-r-I_A,Q_:- _,. the IDRAM players' wilUngne.ss, to shriff PC· DRAJM I~ine.sto .speci'alty IDRAM Ilines, we forecast th'e PC DlRAM supp l-y will slow .s~gnificantlly from 1Q:11'1F onward S, Iiikaly to provld e' bottom fo_-'Irt.-he' ID···R'A·-··-IM··- 1 :-._. fall • IP"lnl!l'c':'eI!PI ~IL! : :: .
-d Th' Ilf:
~I_ "

c. On DRAM

p~.ayers'supply' shift

'into mobile DRAM, PC DRAM supply i's Iikely to temper

:-

""-,,.

III ,:

.'Oil __ ,~-__

__

I . ,'.

_.

:__

Exh~b~t33., R.e1ce·nt PC: content per box trend

(;GI8) 4.,5 4.,0

---'Consumer ([)es~top)
,......... .. Corporate (Des ktop) ..~
---Av'@rQ;Q1e:

--3 ~ -

Consumer (Nlot-ebook) - Corporete (N otebook)

27.1"'

' .1 28."_. --~

2:.,5 2:.,0

- - - - .-

2.. 7
~

2.. , 8
_ r.. _ _ _ .. or

2.82.9
•

2.8

2.8

.-

..

-1------ __ -----_-----_----_---Jan-10 Mar-10

Nov-OS'

M,ay-10

Jul-10

Mea.nti'lme~, DRAIM players' capacity conversion from PC· D'IRAM to specialty DRAM ls I~ikel-yto result in a continued decliine in spiecialt.y IDRAM prices e'ven after 2Q111F. ~n lP\artilcul~aI"we believe fhat th'e price of mob Ie DRAM, whiich ls litely to see strong s,upply gr{JIwth!, willi drop 'even faster from 20.1'1 F., Wi~h the stabiillisstion of PC D'RAM I~ikel-yto be offset by the contiinued weakness in speclslty DRAM al1.e-r20.11 F~I e w forecast th'e bl~ended DRAMI AS,IP will fall by' 22% q-q in 1Q111 and bY' around 4'% q-q for the n;~s,tof 2011 F.

'W'e forecast a.contlnued decl lne 'in specially DRAJM prices ev,en

afte r 2Q 11 F .As, a res IiJIlt,blend ed

ii

DRAM price shoutd moder.atelly· decll'ine thro·ughoul .2011F des,pite stable PC DRAMI prices

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 34. lQolb~leDRA_Mprice trend

($) 16' , ----'L,og. Mobile DRAM DRAM (Oo,mlmodi~)I 'RAM} D L,og. (Mobile DRAM) {%) --Commooi~

400 350 300 250

200 150 100 50

O+---------------------~--------------2001 2008

2009

2010F

2011F

O~--------------------~~~~------~
2007 2008 2010F
2011lF
Source.: Nomu fa estimams

Source: Nom~ ra esUmates

Memory ~G[nba~

CW Chun.g

NOA\UIRA

NANDI ilash outlook

N,ANID
De,mand: stlronl'g embedded demand, w'eak UI,SIB,. card demand
'W'e forecast 2011 '1 IF INANID demand willi gro'w by' 78% y-y'. As 'W'9 have seen in ,20110, srnartphonss and tablet IPeS.will~be the m,ajor contriiibUitors for tile NAND demand, We ex~;uedsmartphone shlprnents 111,0 reach 414mln unlts (+42% y-y)" and per-unit NAND consumption to reach 16GB (+47% y'-y).
We forecast 20 11 F NANDI demand will grow by' 78,% y-y
1

Exh~bit 36.1 NAND demand and supply f'Orecast

CY
2007 '1!,851 180.2 2:008
1 .,

2019 '6;,,216

1Q110 1!976

2010 2,,357 66.8 19.3 2!478 18.0 20.,4 0.15 5554

"

:3Q11 2!955 7'8.4 25.4 2!851 7'5.0 15.0 1.04 5!,81'1

4Q10F

2010F
1

1Q11F ,3,,619 ,83.2 1.0

2Q11F 4,,1197 18.0 16.0 4!350 15.5 15.0 0,.96 6,,351 14.3 12.0 11,.46

3Q11F 5!010

4Q11F 6,,416 80.0 26.1 604'1

"

2011F 1'9 !323

1

20'12F :32,474 6ft1

'fotal D,ernand (,SGbeq. mil)

'!l-Y {%)

4!'033 1111.9

,3!5"66 1 0,,854 ,82.3 20.1 3!417

I

55.8
6145 ! 48_1

56.9
1.0 2!0159 64.8 9.0

12.7

Tl.2
21.3 5!24-6 ,84.0 20.6 0.17 7!241 24.6 14.0 1.38 (3.2.3) (5.5)

78.0

qr-q

(%)
1!,906, 191.8 4!,149 1111.1

'fotal Supply (8Gb aq, mn]

y-y {'Yo}

10!,805 15.3

3!7,81 83.7 110.1

1'9!411 :32,43,2 8 7'9.7 67_0

81 8
I • : ~. :

16.3 15.1 1,.16 7,,611 3~.0 5.1 1,.26

qr-q

(%)
0.. 1 9
14!,510 ,2iELO 0.97 '12!282 (15_4) 11,.12 14,,838 20.8

119.9 1.04 5!819 28.6 0.0 1.71 {29.3) {18.6) 2,.15 (1,5,.0) 1.11 ,22,,188

0.16 5!0113 '96.1 "11.0

0.10 5,,672 113.1

1.10 26!,874 .21.~

1.00 :3,11,438, ~1_0

63.,4 110.8 2,.24

33.2
4.6 2.04 (24.1) (9.0)

495 ".

','

(.2-4)
1,.5D (38.4)

ASP (8Gb eq.$) y-y {%}

7. 611
1

,2.16 (B1_1)

2,.41 (18.4)

,2.44 119.0 1.3

1.38

1.97 (30.0)

{otL8)

(8.2) (8.0)

(34,.9) (.2.1)

(.2:,5,.9) (3.2.6)

qr-q

(%)

{11.B)

(8.1)

Source: WSTS! Nomura estirl1H8,mS

Exh~bit 37. NAND shipment and shlpment growth

(US$mn) 3~,:500 _. --" NAND shlpment va~ue ,(LHS) NAND shloment va~ue growth (RHS)

(o/~)

~ 400 , 300 , 200 , 100

3~,OOO
2~,:500

2~,OOO
1~,:500

1~,OOO
,500

~---------~rHifHi+i~~IiH'I"

iioiHHl

+ifiOt1

+iIit!I1Nii-:· ...

~I.I

t--+fioiiIi~.

it+ifio"

ii++i1H+i iioii+i~f ~~,

1

0
(100)

o~~~~~~~~j
05
Source: WSTS! Nomura esUma,ms

06:
"_'

~~~II ~~~~~~
07 08
09
H)F

~ ... ,

11F

In add ilion" S,SD (sollid-st~de· drive) demand ls Iik:ellyto incraase in ea rnest from 2,0'111 F. Already, w'e have sleen tablets ,applymngNA.ND-based storaqe, and Apple's Ma,cB{10Ik ,Air usl ng S,SD as main stora,lge ~ 4'Q '1 O~ The competitors 'wlill Ilikely full ow Apple 's lsad n by' expand ing theilr line-ups that adopt S SD. IFu rther, w'e forecast 20nm tech no,loQYwill Ibegi'n commercial adoption in 20'11, following 26nm, and thls ·wiilllreduce p'er~GBNA.ND production 0051 to US,$O.7'0...10. a,llo,wing customers to buy SSD' a.1ll. 8Q., around IUS$11/GB,. Also, we expecit: imbedded-type NANID stora,'ge 'willi find more demand. IOn the fI~p side, de man d for US,B ,and fflIla,,shards wi II Iitel~y be ea nni ballisedl as we expect IQllreater c penetration of h~gh-densi'ty NANDI embedded smastphonas and tablet P'C,sa,s mobile and wirele,ss, cornputlnq becomes mora popular,

Tim edema I1d for SSD is liikely to 'increase in eamest fro m 201111F

Memory ~G[nba~

CW Chun.g

NOA\UIRA

'W"l!lt-h'"'major sources 0f INlA'',','i nernanc 'w'e expect m'O:'~1 pnones an,d srnartpnones b"'le u, rt Ik 4""l_ 'lin ,',' NIO'-ddt '-"'.', ILO account for 3;~lO/o (33;0/0 in 201 OF), and the contributlon from SS,D to enlla,rg'e to 10% iin 20'111 (7% in ,20110F). ln contrast, mhe proportion from US,B and fls:sh cards ls Imkely'tlo narrow to 19% (12QfiJ iin 2010F) and 23% (27% in 20'10F)" respectively, ~n 20'111F.

Mobile phone and smartphone 'will take up 38% in total NAND' demand whereas tim e contribution 'fr-om SSD willi also enlalrge to '10°10 'in ,2011

Exh~bit 39. N,AND demand splt

i\70'
(Of)

iPod

sh~Jfl~e

iPod Nana .iPhone

• US,IB ,C~ rd
('tiL) ilIl·.

30

iPod Touch

• P'~p
Ot~era,

SSD • Digifta[1 Cam~

C;~!I[IIP'~OfiiE!: If'abl,et PC

25
20

• MadBook A'iir

Tablst Pc. 6%

100

80 60

15
10 5

.tt
3%,

50/0

3%

20

o
,

o
06 07 08
09
110F
11F 200B

2007'

2008

2009

201 OF

201111 F'

Source: Nom~ m esUmates

sourcs: Nomu fa estimates

Exh~bit 40. N,AND coati, vs HDD price

(US$),

Exh b It 41., SSD' to 'la,lce o,lff inl PC storage appl lcatlon

(%)
266
:50

• SSD Pene:fration into noteboo ~ (Ext,. I eblets)

300 ,2:5-0 ,2100 1,5-0

100
'

Contr~but~on to nash demand (Ex,c",Tablets)

121 7'2

50"
__ ·o_"

43

30

o
1'6Gb M[Le 32Gb, MLC 42['!1m 35nm
~O8

32(3[0 3x :3~nm

64Gb

2'6nml .c11 IF

164Gb 3x 20iliim ~12:F

1'09

1'1OF

'113F

2001

2008

,2{~-OQ OF 20111 F 2012F 2013 f" 2014 F 201

Source: Nornu ra estimates

Source.: Nornu fa estimates

S,upply: ,s,hifting from DRA,M to N,AND

'W'e forecast industry-wide capex fur NAND 'wlill grow by 82% Y-Y!I 'with S,IE'C and Hynlx 'which a re both likely' to Iower spendl ng on D RA,M, ralslng spen ding on N,AINiD by 620/0' y-Y ,ana ,320% Y'-'Y, respectivel~y, in 2011 F!I and Toshiba and Mlicron Imkely' add new w,aJfer capacity iin the y'eaL 'Thus ~I e expect total glo bal INiANIO w,aJfer capacity to gn)'w' w by' '17 % y-y. Given that mig ration of on e glen eratlo n now' incraases per -wa,fa r bit: prod IUCUO n by on Iy ,50-60!%, (vs 80-,1 00/0'fo r past miigratiia n s], WH fore cast th e ind UlSt.ry~ls. a.veralge bit, growth will be around 8,00/0 y'-y ln 2,0'11F.
'We forecast industry-wide capax

'for NAND willi gr-ow by 82% V'·V in 20'11 Iindustry blt growth is
ii

forecast at c.80%

S,BIn'lllsUing Electroniics. SE!C has, been shifting mt5hybrid Fab '12 to NAND' from DRAM~I and w'e expect tha conve rs~ wi II be fi n iish ed by 11 111 ,0 n top of fhe ca paolty on H F. conversl 0 n, its IFab 116is slated to start NIA,N 10 p reduction from 2HI '111 . Our basel iine is F that the wa,fer capacity at Fa,b 16 willi increase tOI 30lkpml by lend-2011'1IF~,but mhe actual ramp-up speed will be l~a,rg'ely'depend ent on tha fUitUlr'e NANID market s ltuation, Wmth the assumption of 3;Okpm 'capacity at the Fab16 at lendi-,2011 F!, SE!C~Is.total NAND c.alpacitty 'will .stand at 405kp m at end-,20 11'1 IF, up from 350 kprn at 'end-,201 OIF. ,AIso, 21 run-based 64Gb is liikelly to be SEC,'s outling,-edig'e N,AINiD product in 2lH11F ('IS 32nm-bas ed iin 2010)".
1

SEC - wilth Fab 1,2 converslon to NAND and Fab 26, cOlmi'ng on line,
NAND capa,city to reach 405k.pm by end -2:0 1'1IF, fr-om 350k,pm at end·20'10F

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Toshiba. At the lend of ,Septemliber 2010, the shipment p ro porflon of 32,nml-andl-below'

process reached 90%,. Toshiba, lntends to ramp-up production of 24nm processes in 20'111 ~t:has lowered ils FY11 F blt growth guidance to 60-70'% v«. from 70-80%, y'-y F. prevlousl y.. It decided to close its 8~'I~i at the Yokka lch ii Fab 2 at the end of 2,0'10 six. ne rnonth s lea,rtl than iinitlia,ll~y i a nned, and focus resources 0 n th e 112"Ilnes, The ier p company plans to mligrale' to 24nm It,elchnollogy, glet thle Yokkalchl Fab 4 to full capacity, and complete the Yokkaiichi Fab 5 in ,2011'1F.
I'

Toshiba - plans to ramp-ill P ,24nm tech no logy , have Fa b 4 at fu II utl Iis,atjon and complete Fab 5 by 20'11F

Hynilx:: Post the retirement of Hynlx' 8·~~apacity in 2007',;,;.;2008,its, INANID technology c had Ilagged beh ~ lth1epeers, However, it is p utti ng iin a great dea I of efforts, to reclaim nd

Us lost posltlon mnNAN DI. Having expanded the Fab.111 from 30kplm of begiinning-2009
to 80kpm at the end of 20'1 0, U ls expected to fu riher ad d w8,fer c.apaci'ty into the fab, I~ Iy to brililg it up to 120kpml by 20111-end. ~nterms tlech noloqy, Hynix 'w'a,,sbehln d ike peers, by around one y'ear during 2008.-w20'10 yet: 'w'e·now reckon the gaipi has fast narrowed. Hyni:x: is to begin volume production of 20nm-basled INAND mn3'Q11 and should this road map be executed as plan ned" Hynlx should stand head-to-head to the I~eadmng peers in terms of technoloqy, IIMIFlas h. Mi cron expects bit growth of' 800/0 y-Y' in 2011 F. Th e company CUi rrently runs a.t about 100 k W1plm, ith th e au tput split 5,0150 be1wee n Intel and M lcron The new w 300mm IMIFS, fab ~nSingapore willi belgl~nto ramp ~ne\arly 201 '1"'wi'th the expledatiion of ramping to SOk wpml by end-20111 F,. Ramp beyond 160k:wpm wil[~depend on market conditions. IMFS has a maximum capacity of '100k wpm and wiil~1eq]ui'rle a,total capital r lnv.·'8', "'. le"n'~ f US····~2···' M'·' 1II1 1;i"'I!1~ ..' 'v" ns ~7··5--:-'Q'f of ~lLI..e· 'W" fab w·,lh"llle·IL~ ow'm"s strn , ~,I_:...:,·.;p .. '-, '3··:'bn "ICIi"'iO'1:"!Ii VII,rI In1r"entl"y" II 'O,..li().: o r"l',W· '... . m·, 1111. 1~1II1'".'.ne ',,' 'IPII",' , , ' Intel ,..
,II',

Hynlx, - Continues to put jn efforts to reel aim the lost positio n 'in NAND

[I IFir __, i ng,apore fab M S

to

beg in

producttcn in eaFly 2011 F

th e other 25% ..The m,ajority of today."s output: is 25.nlm MILe wiltlh the remainder be ina 34nm,. ·W'e explecl Milcron to milQlrate the m,ajority of itts output to 20nrn byend-,2011F.
I'

Exh~bit 42., N,AND capax outlook

($bn)

.2007

2011F

3 :2 1

Hynb:
Source: Nom~ ra estimates

Tosbl ba + Sa ndhsk

1M F[lash

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 43. NAND cost comparison

(US$)

4,
''0

2J3

·a·

. 26
"_'

2.4

1.8

1.U
;Q!,

c
Toshfba SEC
56nm Hyn'i~ T'oshi be Hrynix SIEC, ~ MFT 511nm 48nm ,~3nm 41nm 42nm 34nm

H~nix
32nm

SIEC Im~la,sh Hrynix

32nm 27nm 26nm

16G

16G

16 GI
i

16G

16G

116,G

SEC 2!6nml

16G

32G

a2:,G

164GI

MG

MJG

Source: Nom~ ra esUmates

Exh~bit 44.1 Bit-per-w,a,fer growth through a technology migration

(,%)
120 1110%

H)O
!O',_, _-,-,' 70 5"7"Oi

0.0"

511%

45%

40
20

o
5121Mb SlG (160nm)
2003,

1G SIL.G 2G SlC (t20nm) {90nm}-

4G MlC {90nm}, ,uv~ 2\1'11niiii:

8G MILC 16G MlC (63nml) ,(51nml) 2{]06

3~G MILC 32G MLC 64(3 lFBC

{4:2nm)
2D08

(32rmm)
2010

(21rmm)
2011

2D01

Source: Nornu ra estimates

N,AND sup'ply/deml,8,lnd out.look and price trend

'WUh the su pply growth Iik:ely to s,Urffichentl~ymatch prospects of stron 9 demand gr,O'wlth" 'we forecast: a. well-balenced INlA,NIDmarket in 2,0'111 Altnough 'we expect to see F. seasonal w'e\akness ~n 1Q11 F, th'e market should see the supply/demand balance return from 2,Q11 F" when new' gadg'ets 'wiith hiigh-GB Sb:u"tl:ge are slated tOI come on sfream. In 2H11 F" supply' is likelly to fall short ofdernand as the adoptlon of ·SSD picks up. Thus, in contrast: to 2011OF wh men has seen a, flattls h market ,sUua,!tmonwe anticipate ,a IQw'-'1IH and ni'Qh-2,IH sltuation iin 2011 F ..
II

'We look for balanced N.AND supply and demand iln 2011Fjl albe'it with some seasonal 'weakne6s in 1Q11F

l'

In terms o,f pnilcing, we expect only a 15% Y'-Y'diip iin NAND, priices. mn20'1 OF, followed by a, 33(a/o y'-y decline in 2011F. Given fhat one-genera,t,ion migration now' improves per'w,afer bit production by only ,50-600/c, (V5, 80-.'1000/0' for past mi'grations.), we expect perbit: cost reduction of only 3,0-35,% 'Y-Y',I whrncn is less !tnan the ,av'er,ag'e h~ston]cal decline ~ 500 1 0111 arountd ",Ijo . y-y.

'With the latest m'i 9 ratio n havi'n 'wea ker per-bit cost reduction

91 a

'impact, we expect NAND price to decline by' 33Dk y'-y in 20111F (vs a decnne 01'15% in 2010F)

Y'-,

Memory ~G[nba~

CW Chun.g

NOA\UIRA

(8Gb eq., mn) 8~,OOO

_.Tota~ demand ~lHS) _.Tota~ supply (LHS)

--" Supply1de:m and suffiich;~:ncy(RHS)

(%)
120 115 110 105 100
95

90
~ 8'5
..

..

'

""

o
1010
Source: WSTS~ Nomura esUma,ms

so
,

S,010F

1Q111lF

3Q:11F

Exh~bit 46.1 N,AND price trenld

($J8 Gib)
I

_.q-q chng. {RHS)

--·Price: (LHS)

f%.)
30

5
"'*
iI

20 10

3
-

:2 1

I
+-__...__...__...__...~__...__...__...__...~__...__...__...__...~__...__...__...__...~__...__...__...--+~O)

(10) (20) (30)

20'·'0:8',":
'

..

",

2009

2010

20t2F

Source: WSTS~ Nomu ra estima,ms

Memory ~G[nba~

CW Chun.g

NOA\UIRA

'Wmththe differences in process technol~ogy', capax capabllltles, and dlfferentlatlon in the memory product portfolio (le, [PC DRAMI \IS, spelcma,lltyD[RAM and NANID) oeiingl greater than ever" 'w'e recommend a,ccumulatiingl only the leading names. 'W'e contln ue to favour SEC, a.. presented iin our latest PC, sector 0 utlook, ctrl' cosi, AJt s mix, Del (JveroapacItY~1 and handset, sector outlook, ,Android' ,momentum ,drives' our prefere,noe for Sa;,msung' Electron.ics,. ,H'~C end ZTE OVisr No.kia~,RIM end MO'T (both published on 1 IDecemliber, 20110),. W,e select SIEe as our top plck as it is ga,inmngmark:et share in smartphonss and tablet PC,s"andboasts unmatched teoonollogical prowess iin Ikey components of those two gadigets ,- namlely mobile D'RAM, NAND, appllcatlon processors and ,AM'OLED~I as well as technology leadershiip al both the component and set, Ievels, 'wh ich sh Quid help to 'gen era,I'e su bstantlal syne rQY el1ects,. W,e raise our price target to 'W'1112,40!IOOO ! (from W11,050~OOO)iand maintain our IBUY rating.

Fa'vour players, w'ith products that directly benefit from the, liT demand ,shift ~ SEC" Toshiba and
Hyni:x, SamsUi ng the best posltloned nam e a,long the, biQ lira ns it ion .. 0 Ulf' top pick,., Price 'target of
riiiii

'W1,2:40,OOO

Fo r Tosh lba, we reita rate ou r B IUY rating 'wmth price targlet of ¥-650. Tos hiiba ls ttrie
sleoond-biggesl NAND supplier, and we be[~i'ev'eit, is 'w'ell posltloned to meet the riising demand for NAND-be,sed storage. For the nuclear 'enelrgy business", 'w'e see risks olf s,loWlin9 new orders i'n N orttri America. Thls, however, is Ii'ke Iy to be full y offset with growing demend elsewhere, i'nc!~uding the IUK~IVietnam, Fiinland and China, We also see good prospects for new businesses includmng new liighting systems, rechargeable batterl es, smart, gmids and large SQlaI photovoltaic systems, For Hynlx, w1e lower our Fy'111 FOP' forecast by 34'% to reflect 11)weaker DRAMI market trend; and 2) slower-than-expected [DRAM mligraliion to 4xnlm-and-below' technology' and the resultant widening technollogy gap versus SEC,. Our revised price ta,rget for Hyn i'x of W31 ,000 (prevlo usly W3,3 ,0(0) stl I[~ implles 31 %1 potent,iall upslde from the current I'ev'eI. 'W'e mal ntaln our BUY ca II,.Con sidering fhe h~storica Ily h~gh correlation ibebveen Hynlx shares and D'IRAM contract prices of late, we see the period leading up to early 11011 F a.. an opportune Ume to garnnexposure to Hynix" IQliven that the rapid s

Toshiba - 2nd bigg,est NAND supplie1r., Well positioned to meet

'the ris i'ng demand based ,storage
f'Oll"

N,AND·

Hynix - a company with biggest

shiiprnent propo rtion of s p ecla Ily DRAM ..Als,o, its position 'in NAND market is, iilmprovl ng

de-iIi""l 'III na
_ ":'~>

'I" D: ,','RA--·----M--- r, -I I1II

Ii"'""

nrl

II"'!!1Oe" ~Q

'!OIi:1i"'""

appear to' be",

,c;;I, -_-.:

: :-_-

0- 'v':-e' r ,. '--_

'W'e are NEIUT'RAl on Elplda and havle R_E.lDU!CIE ra.Ungs for Nla,nya and lnotera, ,See the acoompa,nymng company reports for more details.

Priee

Pr~ee

Impli,ed upI'

P/BV(x)1
FY'10F

PIE (x)

ROE (%)
FY11F

C'ompany
SEC

Code

2 Ratll1lg 7-Dec .. 010

Hyriix
Toshiba

0059r30 KS 0006160 KS 6665 JP 6502 JP 2408 TT 347~ TT

IElp~da
NTC lnotera

BUY BUY BUY NEUTRAL REDUCE REDUCE

target downside (o/.Q) 37.6 901 !OOO 1!240!000

23 600
91

i.e

31 000
11

31.4
~f_:9.1

436
931 1,6,.7 14,.3

650 900 ~J, 3 '.

'_

7.8

(3.3) (68.3) {45.5)

1.7 2.1 0.7 1.8 1.2

FY11F 1.~ 1.~ 1",9 0,,,7 2.8 1.7

FY10lF
20.5

FV11f'

'9'7 tt7 1"9'.5

5,.1
N/A N/A

10.4,8.6

113",~ 17",5 15.1 1",6 (4,2.9

1 )

1:3.2 37.8
N/A N/A

~1.0 11.~ 12.9 (27.5) (21 ",9)

(28.9)

Note: SEC, l=Iynix~ N anya, and lnotera covered by' CW' Chu n9; lEIplda an d T osh i ba covered by Masay,~ y,~masii3Jk:i Note: SEC"fij IEPS an d BPS, are based on 'the rota,I number of shares ,@,xdl uding treasu ry sh ares Source: 13,loomberg for prilcirng; INom u ra estimates

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh.bit 48.1 DRA.M players: share price performance

(Ju1 1 0 :~ 100)
1

---'[Hyn~K - - - - - . [lElpl~da

---SEC
Nanya

---Inotera

120 110
100 -t=."at

90
80

10
60

50+-------------------~--------~~---------------------1['0/01 10/08 1[0/09 10110 10l11[ 10/12

Exh~bit 49.1 NAND players., share price performance

':. " ... '.''.:. (J U 1110''~:.~~ 10'0')
I•.~ .

---Hynix

---SEC

---"8andiisk. - - - Tosblba

120 ~

110

90
'8"'0':
. .. _ ..
,

10+---------~--------~--------~~--------~--------~-1['0/01 10/08 1[0/09 10110 10l11[ 10/12

_ 1.1i)

11111

2J)
1,.,5,

t.o
0,.,5,

SE.C,
Source: Nornu ra esUmates

[Hynnx

Toshlba

Elpida

NTC

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Appefildi~

Summary fotal demand (1Gb eq.! mn)

2009

1Q10 3,337 5fi.4

2Q10 3,,554 50",1 6",5 3,,5,16 44",0 5",7 '1.01 2Q10 1,252 60",6 16",4

3Q10 4,000 44",2 12",6

4Q10f' ,4,589 42.1

FY10F
15,479
47.3

1'Q,11F

2Q11F 5~322 49.8 10.2 5~SOO 56.4

3Q11F 6~I015 50.4 13.0 6~I001

4Q11F 6,811

FY11F 23,038

y-y (%)
q-q (,%) fotal supply (1Gb eq., mn)

10,505 27.5 10,2'15

20.8

4,830
44.8

:3.3
3,327
5,7.5

14.1
,4,528

:5.3
15,300
4'9.8

4'9 .7 14,.2
1

48.8 23127 ,
51.2

3,929
46",0

5,061

6,565

y-y (%)
q-q (,%) Su pp ltv I Demand Su pply ('1Gb eq., mn,) Sa,m,sung

44.2
15.2

.52.1
11.8

52.7 9.1
1,,00 3Q11F
-

16.0
1.. 03
2009

11",7 '1.02 3Q10 '1,,550 80",2 23",8 783

8.7
0,,97 2Q11F

45,.0 '9 .4
1

1.00 10.'10 1,076 70.7

1:3.2

1.0'1
4Q10f'

1.. 1 0

10..95
1'Q,11F

1.05
4Q11F ,2,4,11 44,.9 11.0 1,295 4,540
1

FY10F
5,583

FY11F 8,511 53.5

y-y (%)
q-q (,%)
HYWHX

3,220 43..8
,2,328

1,705
7Et5 10.0

1,855
72.5

2018 ~
-

2~226

73.4
3,17,2 36.2 ,2,,189 37.1

61.1 8.8 1 ~015,1

-

~3.6
10.3 1~177 50.3 10.9 1~I090

S.8
1,007
:39.3

123
11'2 ~, 4"t).u

764
41",3 5",7

902
31.5 15.1

y-y (%)
q-q (,%) Elp~da,

27.7
,2,035 50.3 1040 ,

28",7
2",5

38.9 5.3 1~OOO 48.1 16.9

.5..4 635

11.7 856
:34.7

43..7 10.1
1,110 51.9

43.2
4,116

675
48",4 6",2

709
38",5 5",0 360 31",0 (11.9) 173 5",7 15",7

770
16.6

y-y (%)
q-q (,%)

5'6.1
(3.8)

53.7 9.0

47.5
,2,408

8.6
454

11.1 1,623
5'6.1

7.3

rotal M i eron
y-y (%)
q-q (,%) Total N,anya

48..8
609

400 10.5..1 17.6 146 (7.'7)

409
77,'£3

537
:34.2

578
41.2

115,17
71.2
6.8 399 130.,,9 1.8 453

33.5
26.0

677 4'9 .2
1

48.4
1,588 110.3 1,196 1013.8 1,11.2:

2",3
149 0,.2 2",1 176 18",5

287
81.2
66.3

755
24.1 868

1S.3 377

7.6
39,2 162.5 3.9

'9 .8
1

420
46,.4

y-y (%)
q-q (,%) fotal lnotera

3~S.6
65'9

1.57.9 :31.4
,414

5,.4 48-4
60.6

206

y-y (%)
q-q (,%) P'owerofJl~ p

40.9
615

'94.4
(3.:3) 278 7'9.6

178 (16,.9)
1",1 356

308 44.5
72.5

435,
146.5 5.1 403 29.8

31.7 1,323 96.0

320

100.9
:34.5

154,,,1
4.2

(14.3)

'9 .0
1

310
138,J~ 11",6 79

319
6~t3

3'90
40.3

y-y (%)
q-q (,%) Wnbond

(9.6) 193
36,.2 2'16 {60.1 )

,24.4 74 13.5..3
14.5

113",6 14,,6 81 46",5

2",4 86 67",6 22",2

440 23.6

4,79 2,6,.4 B.8 130 52.9

29.4
448 40.2 311)

6.5 85 30.9
4.9 10'1

3.0
93

3.2
10,5

9.2
120
~8.1 14.3 90

y-y (%)
q-q (,%) Promos

92",6
6",4

65.6
323 4'9.7

2:5.0
9.4 100 .51.5
(1.:3)

32.7
12.9

8.3
80 {21.0) {11.1 )

66
3'9.5

70
43",2 6",1 3,,5,16 44",0 5",7

100
42.9 0.0 5~SOO 56.4

y-y (%)
q-q (,%) TMal su pply

48.1 18.A.
,4,528

(3 ..5)
10,2'15
20.8

5",2 (1 (to)
6~I001

14.6 23127 ,
51.2

3,327
5,7.5

3,929
46",0

15,300
4'9.8

5,061

6,565

y-y (%)
q-q (,%)

44.2
15.2

.52.1
11.8

52.7 9.1

16.0

11",7

8.7

45,.0 '9 .4
1

Source: Compa,ny data" Nomu rcaesUmates

Memory ~Glnba~

CW Chung

NOA\UIRA

C:a lends r yeslr

Tetal Demand (1 Glb eq .. mn)

2009 10",505

1Q.10 3,!337

2Q10

3Q,110 ,4,!OOO

4Q 1OIF 4,,589

2010 15,479

1Q111F
4~830

2Q11F
5!322

3Q'11F 6,,015

4Q11 F' 6,871 ,!

201'1 IF ,23,038

3,,554

'Y-'Y' (%}
q-q (o/~) Com puter 'I.otall

.t'!I'7·: , 5·. •.
,t£

--

.56.4 3.,3
2!56,1

50.1 6.5
2,,7'00

44.2 12.6
2,!994

42.1 14.7
,3,,377

47.3
11 ,63,2

44.8 5.3
,3~553

49.8 '10.2
3,!'912

50.4 13.0
4,,446

49.7 14.2
,4,! 956,

48.8
16,867

8,034

'Y-'Y' (%}
q-q (o/~) PC To ta II

2,8.5·
6,489

.57.0

s.e
1.0

5-1.2 5.4
2,,071

39.5 10.9 30.4 9.7 90!485

9.B

36.7 12.8
2,,563

44.8
8,!'917'

38.7 5.2
2~614

44.9 '10.1
2852 !

4B.5

46.B

45.0
12324 ,

13.6
3,,24'9

11.5
3,!609

2!012

'Y-'Y' (%}
q-q (%) Shtipm en~ (units in 11'(00)

27.7' 3·11,.243,
3J3,
2 6"0'6 .'.
"

.52.:9 85!0112 .26.1 (7.1)

2!95B

43.9 3.0 B4~101 20.5 {1.1) ,3!078

28.6 12.8
95,~5j60

,37.4 355,.'157 14.1 3,.139 20.4

3,480 !

29.9 2.0
B'9,A54

,37.7 9.1 90,.672 78 1.4 3.!932 .27.7 7.6

1!078

43.0 13.9 98!727 9.1

B.9 4 ,114
l

40.B 11.11 104,.517' 9.4 5.9 4,.316

28.B

,382 383,.370
7!L"'i. .:a'

'Y-'Y' (%}
q-q (o/~)

4.4 5.6 ,3 ,35,2

l

5.2 (6.4)
3 ,653
l

7.6
3,.'13B

.Averag,e oontrenits per box (M B)

-',-,

"

4,.01B 28.0 4A37 27.5 149,.4.29

ii"iiCi ,~.o.

'Y-'Y' (%}
q-q (o/~)

.t'!I'3" <1i L£':'IIU' ,2,764

,21.,3 8.7
800

Hl5
4.1
840

18.8 1.9
8S9

23.2 6.8
951

23.5 9.0
962

31.1 4.6
1 160

4.9
1237' ,!

Desktops

v-v (%}
q-q (o/~) . runn In !U .....•. Sh"II pm sntII ( its . Il'nO'O)

17.2 1,36,.170 f!;t5-} ,2,537 29.5.

,2,853

32 ..8 ,2.2 35!318 '10.8 (4.8) 2!900 '19..8 7.4

917

286 5.0 3S,~844 11.5 1.5 ,3!000 15.4 3,.4

91'9

22.6 58 36·!7011 4.8 ,2.4 3,.'100 17.0 3.3

1,!0111

21.4 6.9 3,7,A,35 0.9 2.0 ,3~,250 20.4 4.8

1,,200

25.9

20.3 1.2 3S,~189

28.3 '12.0 36,,.,597 ,2.1 4.0 3,!770 .25-.7 7.7

1 ! 336

"

30.5 7.6 38!06:O

,30.1 6.7 ,39,.583 5.7 4.0 4,.000 23.1 ,2.6

1,!,B48

'Y-'Y' (%}
q-q (o/~)

6.7 2,.994 18.0

4!046

{0.4) (6.0)
3 ,SOO
l

3.1
4.0 ,3~,900 25.8 3.4 1 606

,A.verag,e oontrenffi per box (M Bo)

'Y-'Y' (%}
q-q (o/~) N otelbooks(ex:. Netbook)

20.7 7.7
1~240

3,.711 240' .
".

'Y-'Y' (%}
q-q (o/~) Shtipm en~ (unlts in 11'(00)

32.2

fj6.4 0.,]

5·1.6 0.2 3.7,~6·85 31.2 {3.6) ,3~1120 15.6 4.0 86 47.2 0.4 ,S,~761 Hi8 {0.4) 10.4 1~,260 26.0 0.8
226

29.2 10.0 41 !072 13.2 9.0 3,.150 14.1 1.0

107'

31.3 18.7 46,~554 11.4 13.3 3,~300 17.9 4.8 96 (4.6) (10.,2)

41.8 1164.,.4.22 22.3 3,!076 16.0

35.2
3..3 44,~698

45.5 78 45,.249 .20.1 1.2

3!78iQ

"

6! 030

58.9 20.2 5,2!444 27.7 15.9 3,~9.20 24.4 3.7

63

,53.9 15.0 ,58,.393 25.4 11.3, .4!050 22.7 33.

45

49.0 200,.7-84 22.1 3!754 22.0

255

134,.4,22
2",8.

v-v (%}
q-q (o/~)

39! 1112 41.,5

(6.4)

14.3 (4.0) 3,~550 18.3 7.6

,A:vsrag,e contrenm per box (M B)

,2,653 28.6
290

3,!000
'17A5

'Y-'Y' (%}
q-q (o/~) Ne1jbooks

21.2 6.5
70

1.1
86

77
29.9 37!891 10.5 10.7 1!,241 17.5
1!015

'Y-'Y' (%}
q-q (o/~) Sh ipm 9n~ (un its in 11'0(0)

274.14. 34,.285 197",7' 1'1.0 1,056 25.8

583

78.1 (15.0) B!800 35-.4 ("18.4) '10.4 1!,250 31.6 4.2

209
'

,31.6 24.6 10!830 14.0 23.6 1,2.0 1,.,270 15.5 O.B

265

(10.2) (20.0) 7,6QO (13.6) (20.0)

B.5 '1,~3iQO

(18.8) (9.3) 6!840 (21.9) (10.0) 7.5 1!310 40' .

".

(40.9) {9.S) 16,~1156 (43.,2) (10.0) 6.,2 '1,~320 3.9 0.8

,420 5B.6 14.1

{53.6) (29.5) .4!309 (54.6) (30.0) 4.1 1!330

,2.3·

(3,2.11) 24!905 (34.3) 6.5 1!,282

3.3· 1!602

'Y-'Y' (Ok}
q-q (o/~)

(111.9)
(12.3) 9.9
'1,~3iQO

'9,~500

N a'fioook Ratio {%) Avsrag,e contents per box (M Bo)

'Y-'Y' (%}
q-q (o/~) x86 Servers

8·.3 2.4
315

4.0 0.0
335

0.8
,368

O.B·
479

'Y-'Y' (%}
q-q (o/~) Shtipment (untits itn 11'0(0)

1'9.6, 6,366 {117.9} 11,.446

45.6·
Servers 1,081

~. 8"'> '7
,"

86.1

'72.6 17.0 1,.-883 15.0 . 40'

",

7.,5 1!782 ,25-.4 (4.7) 15!000 46.,5 '12.8

-----

B.3
1~1a.1 0 25.8 11.6 47.9 6.7
,450

62.4 19.2 2~J071 10.8 10.0 11'9,~500 46.6

B .3·
'_'

'74.2 7,.,546 18.5 '2' 16' S' "0'

.

60.4 6.2 1~1967

10.4

102.6 98 1!987 9.8

1.0

,520 14.2 2,.232

1.B

57.8 8,.,252
9.4

2!066 9.8 4.0 26!00'0

'Y-'Y' (%}
q-q (o/~)

(5.0)
",:.
!.

8.0 27,.500 41.0

5.B
975 3,!,275

,Averag,e contents per box (1M B)

1116,~OOO 18.!000 ,50.0 12.5

5114

.1

2'1,~800 45.3 11.8

676

,23,!'700 48.1 8.7

76,2

24 ,.268. 44.3

v-v (%}
q-q (o/~) Enterprise

47.0
1!938

44.4
9.7
86.2

,390

583

'Y-'Y' (%}
q-q (%)

3;9.6, 1 ,. 141
0<1i
rllU

72.,5 '19.4 340 ,25-.:9 9.7 147!000 37.0 8.:9

83.0 15.3 3.50 287 2.9 164!640 42.3 12.0

82.8 14.3 360 24.6 ,2.9 182,.:915 468 11.11

78.2 13.3 3·70

'79.3
1A20

73.2
16.1

109.2 12.6 400 '14.3 ,2.6 243,.703 48.0 98

67.6 13.2 415

15.3

67.4 13.11
.30 4·.....
1 ""

109.0
11,.0.'

Sh ipm en'fi (un its in 11'000)

3:90 14.7 5.4

1~3'5

'Y-'Y' (%}
q-q (o/~)

Hl4
2.8 ,201!591 49.3 10.2

24.5

16.2
3.6
rjI,!"\O ''}.ill
.t:;;. "".'

15.1 2,50,3'99 468

3.8 .265!87\9 45.4 9.1

Avsrag,e oontrenits per box (M B)

'Y-'Y' (%}
q-q (o/~)

118,3'94 3;9.2

1170,.,583 ,221!951 44.1 5-1.0 10.1

,..J.iIioIio'!J!

44.0 9.2

Memory ~Glnba~

CW Chung

NOA\UIRA

C:a lends r yeslr Wo rikstations

--------

,2009

1Q,10

2Q10

3Q,110 208

4Q10lF 23,2
!:'J),
~'~.'_'

2010

1Q111F

2Q11F

3Q'11F 335

4Q11F'

201'1 IF 1~,268 1033

'Y-'Y' (%} q-q (%) Consumer 'Y-'Y' (%} q-q (o/~) Game C:onsol e (M alin/C PU) 'Y-'Y' (%} q-q (o/~) Fllat Pa nel T\I (LC D) 'Y-'Y' (Ok} q-q (%) Fllat Pa nel T\I {P D P) 'Y-'Y' (%} q-q (%)
C'e II Phone (ex. ,Sma rt Ph one)

464 1£:)"'3 947 :S8.1

711 1'7J3

159 78.2

179
7B 0

776,
1012

68.7 16.1
550

263
65.6 1,3,,4

299
i012 '13.,8
,855

372
1006

611.2 12.0

4. .5
,36,1 11'19.8

t2.1
,426

11.6 70.2 '1111.,2 27.6

36

11.2
1,~,307'

2~039
115.3

7'311
'102.5
4.0 28 6B 0

998
811.3 16.1
3,2 7B4 1OJ)

3,~891
90.8

105.8
17.9 20

125.8
29.3 118

8..5
17 '1fL'7

100.9 11.0

86.11
30.9

91
28.0
421
214.8

29
48.3

44
21.3,

133
47.1

6.5

19.9 (8.6)
1110

57.1
'100.9

('.28.3) 134
,28B.2

Hl6
94 ,3011.1 10.3 6
'16B.1 17.9

(23.6)
124 45.1

5.6
1,40

,36.6
2119

85
5'13.1
41.f~

204.9 11.1 8
118.B

131 '118..,2
19.4

164
48.9

647 53.8

49.0 13.3 8 28.2 '12.6

66.8
33.7

(5.9)
30 1.35.5 406,
o

17.1
'9

13
112.0
1

5 2 60.2 4.2

10
96.8 22.5 114
33.9

7 34.2 (29.0)

111
9.6 17.3
1119 4.5

36
19.2
440

14.5 16.8 113

7.D
8.4

,30.7
105

270
~5 8'
raJ\.lll"'

93
73.1 9.2
305! 38B ,28.,3

93 54.1 0.3 30 6! 3,29 24.5 0.3 39

23.8

'Y-'Y' (%} q-q (o/~)

48.2
12.7

50 0
• "_" •• ".

104
11.9
(B.7) 32.5!000

104,
11.2
(0.3) 3,,24,.000 5.B

8.4

8..4
350! OOD 1,.304,.210

5.8 363,0'00 '1,~355,.000 ,2.0

5.B

Sh i pm anTI (units in 0(0)

'Y-'Y' (%) q-q (%) ,A.verag,e conterrts 'Y-'Y' (%) q-q (%) Smart Phone 'Y-'Y' (%} q-q (%) per box (1MB,)

1 ,038,864
l

336,,..553

343,!000

(4.1) .33
4,1",6

25.7 9.9 40 18.0 ,2.6 252 205.0 53.2 80!533 96.0

30.0 400

24.1 5.8 41
7.9

25.5 39 19.5

6.4
(B.7)

11.9 5.9
4,2 5.0

3.9
41 4.3

6.4

(0.3) 41 5.1 0.0

480 1:9,2.4 ,21.2 1101,.000 103B 4.1

39
34.:9 2.10

41
5.1

42
,2.4-

0.0

2.5
327

0.0

2.4
544

0.0
644

3,29

123
106.1 9.2 54!306 48.8 0.:9 291 38A5 8.2
21
1132.1

164
122.,2

396
2211.0
21.4

68.1
17,2,~3'76

33.0 6'1,~6S8 505

13.5

Shiipm anTI (unlts in 0'00)

'Y-'Y' (%} q-q (%) ,A:vsrag,e oontrenm per box (1MB)

188.8 16,2.9 29.8 95 ,(lOO 291 A96

l

116.2
13.3 '104! 000
29.1

97.3, 18.5
11,2,0'00

138.5 414,0'00 42.0

6,24

9t7 ,000
l

23",8 2·39 3,5,,,9

76.6
18.0 440

69.1 ,3111
.55.5 1115

786
2.1

17.9

3.0 670
67.4

341 47.6 17.2 25

61.4 15.0

5-23 79.1
18",9

v-v (%}
q-q (o/~) Dig ital 'Y-'Y' (%} q-q (%) Tablet PC 'Y-'Y' (%} q-q (o/~)

609
'78.5 '16.4
33

7.7 737
67.4

55.6 11.3

63.6 10.0

107.9

ss II Camera

10.0 3'9
25.2

10.0
46,

73
3·Bj)

31
44.B

38
40.5
22.2

30
3Q.9 (20.0) 25 13.4
fj,~500
(13.8)

148 29.2
,351

.51.9
38

(19.6)

24.5

34.1 '10.,3
,44 558.7

23.2 20.2 202

802.0

U5.2
80

9 28.1
,4!18B

22
'163.2
7,~542

.836.1 82.1
11 ,2,~OOD

g344 50!000 2,33.3,

'72.3
8,!000

153.4 ,23,!.500 211.6 '95.8. 1,.100

1,B9.5 29.420
I.

Sh i pm anu (unlts in 0(0)

'Y-'Y' (%} q-q (%) ,A:vsrag,e oontren[s per box (M B) 'Y-'Y' (%} q-q (%)
260

144.6 28.1 260

80.1

186.5 50.0 850 226.9

21.4

,23.1 700 1'092

40.0

3BO
46.2

500

B17
18'03
:":.": ••• ",'

sr,e
74 28.4

Portabl eMus ic Player

'Y-'Y' (%} q-q (o/~) Graphic 'Y-'Y' (%} q-q (o/~) source: du ,'i;:;:'
WS- • "TS'!

,58 12",9

16
33.7 ('18.0)

17
31.1 5.5 108
43.1 13.8

118

24

16
2.9 (32.2)

17
1.2

18
{0.9) 5.8 171 9.8
3.8

71
(4.0)

26.8 1.9

24.5 33.3
210

{14.6) 14.9
198 (5.5)

3.7
165 .52.5

334
30",1

95
37 ..5
(9.7)

156
85.0 44.2

568
'70.3

167
75.8 (20.5)

701
23.3

9Q.1 34.1

(1.3)

15.9

"'-II ~ II"iIU

m~ Urei estu ares. ..~,....... E!'o--~"m""'41. . ....c i

Memory ~G[nba~

CW Chun.g

NOA\UIRA

N,AND suplply and demand

5 Exh~bit :3. N,AND model: summary
Summlary

and
1Q10 1~9176 56.9 1.0

supply
2Q10 2,351 66",8 1B",3 2,4,78 78",0 20",~ 0.95 2Q10 851 78",5 26",3 640 55",~ 15",0 313 1 15",9 17",2 179 75",9 21",8 460
81 ",1

fotal demand (1Gb eemn) y-y (%) q-q (,%) fotal supply (1Gb eqmn) y-y (%) q-q (,%)
Supplly I D'emand Supply (8Gb eqmn) Sa,mlsung

2009 6,286 55",8 6,145 48",1 1.02 2009 2,030 26",9 1,166 87",8 186 83",6 428 (1 3-.1) 1,135 65,,,0 6,145 ,48,,,1

:3Q10 2,,-955 78.4, 25.4, 2,,851 75.5 15.0

4Q1 OF
I

3~566 82.3 20.7

FY10F 10,854 72.7

1Q11F 3.,619 83.2 1.5, 3.,7,8,1 83.7 10.7 0.'96 1Q11F 1., 300 91 .6
...

2Q11 IF 4,191 78.0 16.0 4,350 75.5 15.0 0.96 2Q1 1IF 1,505 75.7 15.8 1,059 .. 655
.
',

3Q11F 5,090 72.2 ,21.3 5,246 ,84.0

,

4Q11F 6,4,16 811,,0 261 6,041

,", III

FY11F 19,323 78.0 19,418 7'9.7 1.00 FY11F 6,512 7'9.9 4,893 69.3 ,2:,320 70.0 ,2:,083
132.8

2~059

ea.s
9.:5 0.96 1Q10 679 5~2 ~ .' 19.0

1.0~
3Q10 952' 76.3, 11.1 6616, ....
..._

10,805 3~417 7,5.8 81.8 19.9 1,.104 1.,00 4Q10F 1~ 1:33 ...•. 988 19.1 9'13 71 .0 17.0 440 59.4 27.5 3,16 114.9 2~.4
525

.. 206.. 0.,97
"_
"

76",8 15",1 1.06 4Q1 1F 1964 ,.

.

y-y (%)
q-q (,%)
Toehloa

FY10F 3,821 78.4 2:,889 63.6 1,365 73.7 895

108.8

3Q1 1F 1,1[44
'

~. 8'32
.,_.
,"

556
58.1 ~.2 26,7 61.,s ,-3.. :3
.
,"

780

y-y (%)
q-q (,%)
sandtsk

14.7 '937 68.,5 2.7 450 68.,5 2.3, 3'94

.
'

,"

21.'9' 345 72.5 10.2 ,254 1:37.1 42.1 [440 42.4,

(~.:3)

y-y (%)
q-q (,%)

13.0 500 59.7 11.1 44-6 149.5 13.1 750 63.0 23.0 4,350 75.5 15.0

1.5..8 1,341 71.91 ,216.6 620 7'9.7 ,24.0 56,2: 1.21.4 ,216.1 890
102.3

73",3 12",6 1,556 711,,416",0 150 711,,5

1

21 ",0 681 115.8 21 ",3 1,000 911,,5

1

Hynix y-y (%)

q-q (,%)
IMFT

147 101.0 ((l.,2)

seo
73.:5

y-y (%)
q-q (,%)
Total s,upply

7.6
2~O59
.

21 ,,,1 2,478 78",0 2~1,,41

~8.7 19.3 3~417 81 .8 19.9

1,805 5,9.0 10,805 7,5.8

y-y (%)
q-q (,%)

.:. 648
"_"

2,851 75.5 15.0

168.6 24.8 610 60 ..5 16.2 3.,7,81 83.7 10.7

3,250 SfJ.1 19,418 7'9.7

18.7 5,246 84.0 .. 206..

"_
'

12",46,041 76",8 15,,,1

9.:5

Source: Compa,ny data" Nomura estimates

Memory ~Glnba~

CW Chung

NOA\UIRA

Exh~bit 54. N,ANDmodel: de,mand

Callendar Year fotal Demlal1d (8Gb eql. mill) ,2 019
1

1Q10 119'7'6
569

2Q111

3Q10

4.Q:1DIF 31566
8,2.3 20.1

2010lF

1Q1111F

2Q11F

,3Qil1F

4Q,11F

2D11F 19,,323 18.0 iI 690

"

8 286
1

2 357
1

2,955
13.4,
25.4

10,854 72

3,619 83.2
1.S,

4 197
1

.5,,090
72.2 21.3

8 416
1

y~y{%)
q-q (%) USB Flash Drives

,vu.itJ "''"''0

66.8 119.3

1'8.0
16.0

80.0

1.0

,26.1

987
2 c.o
00

298
53.9 {0.2}

3,18
4,1.2

337
25.,3

373 ,2:4..8 11.0

601100

1,327 34.4
22:4,200 ~2.8

356 19.4, (4.6) 50 00:(]

l

387
.21.1 8.6 51,.500 (5.2)

448
33.2

498
,33.3 111.0
.. ...... se.,.000

'ii=Y CYo)
q-q (%)
Slhipment (units, in (00)

27.4 211,500
(S.7) .8~ ~80

6.6
54,.,300 21.5

0.8 56,500 6.8

,4.1

~5.f 54,000 (4.4)

,4.9 B~500

~981100
{16.5J

52 100
1

'i=Y {%)
q-q (%)

21.1 {8.B.}
5 800
1

5.0 f4 6 300
1

(5.1 )

(f.1) 37
9,.100

.Aver,algeconb~nts per box (1M8)

5,.081
[66.5

30 12: 0,0"0" u,. ,','

116.2

(~7.6) 7 300
1

30

6,~ 100
11.,3 1.f

f,./OO
28.3 5.5

Y~Y {%)
q-q (%) Flash Cards

26.4 9.4

1.8.9
3.3

25.'9[ 15.'9[

39.3 ~0.4 iI 183

"

44.4
1.1

35.0

3.4 673
,3.1.1 114.1

,2 188
1

587
14.4 1.8 2~8l5f2 18.S
,~ 1.,2:}

780
33.0 15.9

879
5.2.4 12.6

2,919 33.4

906
54.4, 3..11 .238l00:O

1 004
1

1 356
1

4450
"

Y=Y {%)
q-q (%)
Slhipme~lI {u nits,

46.1

49.2
10.8

5~ .6
~7.8

.54.3 114.6 261 1000 6.8 4.1

52.4

m oo 0)

84511'8~ (5.6) 2,.649

225 283
1

,235,000
,4.5

Y~Y {%)
q-q (%)

"18.4 3. ~ 3,.060
111.3 "11.3

250 000 1.[6,

1

242,000

255,,000 8.5
5.4

~,00.2:,000
7.9 4,547

9.3 3,218
21.5

8.9
{4.8}

1.4
~.1 4,.250 389
9.0

4.,3 3.1AOO
21.,3
1

[6,.4

,Aver,algecontents per box {1M B)

2 f,50
1

3 6100
~O.O 59

3 900
1

4,750

5,.200 44.,4
9.5

Y=Y {%)
q-q (%) Sollild·State Driwrs

,54.1

{3.5}

,41.8 8,3

39.7
~1.8

4~.3 iI,,945
1145.4

14.6

~1.1

399
338.5

145
120.1
9.4

il76 .8.6.3 21.0

I U,,· 2[0(1;0"

220
~08.9 20.3
2,400

251
89[.0
13.9

792
go 0 U_UI 8,180
51.4 '9(2,418 31.3

282 94.,3 12.,5, 2l9~O 10.,5, 11.,3 98 000

l

,3,76 113.9
,33.2

541
145.3

'7'46 1'9t7. ~
,38.0

Y=Y {%)
q-q {%)
S h~pme~lI {u nits,

43.8 4,500 87.5

28.6

m oo 0)

5 ,800
1

1 730
1

2 6:50
1

3,.500 1'5.0
118.6

5,./00
115,. ~

16,650 896 11'9[,604

29.4 429

Y~Y {%)
q-q (%)

115.8 701'379 245.6

33.1

42.9

60.0
20.0 94,~000 30A:l ,4.4
112 69.9 11.4

B;5.6 10.4
971000

8.1
861000

15-.6
90,.000

26.7
~34,.000

,Average contents per box {M 8)

~10,.000

1,2.3,,000 30.9 ~1.8

Y=Y (0/0)
q-q (%) Celli Phone, (ex. Smart Phone)

65.4 1.2

.3.0.4 4.7

14.1 3.2 1.25 61.3 11.3 356 000

1

14.0 1.0 10'8 24.8

(13.8) ,325l000

.22.2
12.2 il04
9.1

38. ~ 8.9 il10 {12.2.) 2.5 363 000

1

245
,54.6

,86
30.6 11.4 305 388
1

96

420
11.5 1,~304,,270

un
(4.6)
2.1

Y~Y {%)
q-q {%)
S h~pme~lI (u nits, in (00)

ao. 2
110.1 306 ,329
1

23
~,355,000

(3.2) 324,.000
5.8

1,.038 864
1

336,053 20.f 9.9

343,,000 ~.9
5.9

Y~Y {%)
q-q (%)

(4.1)

28.3

24.5 0.3
,320

24.1
5.8

25.5

6.4,
t9 ?\.'! \0.'-

2.0 5.8 3~0 {13.9) (3.1) ,2 023

1

3.9 325
(1.5) 6,,499

6.4

(0.3)
330 3.1

.Averalge contents per box {1M 8}

24~
[61. ~

290
40.8

342
35 ..2 6.9

312i1"1i UU 30.0
5.3

330
36.6

340
17.2
(5.6)

320 (6.4)
(3.0)

Y~Y {%)
q-q (%) Smlari Phone,

44.8 "10.3

4.1
934
298.4

(.2.9)

Y~Y {%)
q-q {%)
Sihipment (u nits,

451 241.1
20.8
541306

602
2113.5 ,33.6

928
292.0 54.1 .80,533

-- 233.3 20l3'.4
22:.0
951000 291.49~:

11132

3,113

1,260
~79.,5, 11.,3
97l00:(] 78.tEl 2.11

114!89
141.3
18.2

iI,,727
86.0 ~5.9

1'8.8
111.2 ~12,.000

1108.8 414,000
42.0

m oo 0)

~72!,316 23.8
5,.541 ,221.9

61,.6>58 So. 5 13.5 10,.000 108.3

~01,.000 63.8 4.1 15,.100 5,1.0

13.5

1D4,OOO 29.1 3.0 "1/,000 44.1

~2.6

Y~Y {%)
q-q (%)

48.8
0.9 o ~'0,(1; UliUI'U

96.0
30.6 1~,~800

f[6'.6 18.0 ~2 .200

1

69."1 110,935
91 "1

111.9 1.1 18,.500 ,5,1.6 8.8

.Aver,algecontents per box {1M B)

Y~Y {%)
qr-q (%)
Portable Media PI a,yers

129.1 19.1
203
245

~oo_o
18.0 229 10.5 8.8
24

~31300

16,015
47.0

f11.8

se.s
9 .0
1

11.6
211

3.4

811 111.4

30~
14.9 321

946 ~6.6 89 66."1

214 5.4,
(29.1 )

236
111.9

259 13..1

3·05
1.0 111.9 41 4,1.9 ,20.8

il 015
J

Y~Y {%)
q-q {%) Dig itall Sli II Cam,e ra

119.~
35

1.3

(22.f}

98

ro.o
34 4~ .6 ~8.1

54
24.1

il7
140.0

20 73.9
114.1 10 106.2

29
42.4 20.5

,25
,46.tEl (~2.2)

28 44.9
13.4

127
43.4

Y~Y {%)
q-q (%) Dig itall Ca~col'der (M!e~ory)

51.0
20.8

(~,4.8}

23
1.30.1

9 1650
4.9 29 12~:.3

1.2 82.4,
16.4

14
6<5·.8 15.4 '90
50.S.

45
933 199 64.~: 384

15
69.11

17
[68.5

20
65.1

23
[6·6.9

Y~Y {%)
q-q (%) Portab Ie Navigation Sy,stem
---

75 66.5

11.1 33 72.0
116.1 64

7.0

15.1

~6.1
71 50.0

116.6 il04
114.7

Y~Y {%)
q-q (%) fabl!et PC

121 [64.1

47 61.'9
43.2

46
62.8

53
[6,1.7

275
37.3 iI 889
"

(52.5}

90.6

(48.6)

15.3

32.9

4,5.1 941 348.3

108.5 270 168.8 8.0

110
72.9

210
90.1

21.5 2.S,

281
340.4 ,30.1
221 4,1.9

451
.3.08.6 60.4

Y~Y {%)
q-q (%) others 525

1.50
25.0 3.4

il55
24.0

155
14.8

180
10.3
3.2

620
~8."1

19·0 26.1' 18.8

250
6~.. 3 ~3.B

930
500

Y~Y CYo)
q-q (%)

112.2 m~U-rei esur t:I,il-'E:!.o ~!Io·m""'41. ...~ I

'~,i';; .....

3.3

0.0

15.8

· oource: WS- "TSSourc""~ .....•.

"'-II ~ U"iIU

Memory ~G[nba~

CW Chun.g

NOA\UIRA

Exh~bit 5,5.DRAM mlig ·,a.don roadmap

,20 09
1

2010F 3Q 15 50 35
4Q 1Q 2Q 3Q

Hynix

Elpida

P,o,werehip

(%) 90nm 80nm 68nm 56nm ~6nm 35nm 80nm 66nm 54nm Mnm 3Bnm 90nm 70nm 65nm 50nm 4\5nm 38nm 90nm 70nm 65nm ~5nm 38nm 90nm 70nm 65nm 50nm 4\5nm 38nm
110nm

1Q
30

,2:Q

4Qf

1QIF

2011f 2QF' 3QIF

4QJF

15
60

50
20

25

15 35 40 10
5

30

20
45

10

40
30

45
42

40
:50

35

35

10 10
45 45

55 10
5

20 55 25

10 ~5 ~5

9 . !\1.01 501

10
7~ 16

67
25

6 60
34

50
45

40
57

3-

30 57 13,

20
50 3'0

~5 ~5
5

~5 ~5 10

~O
~5 15

25 30

....

45

50 50

30

10
85
5

5, 75,

5 65

65
5

85
5 5

10
5, 5,

50 30
10
5

35
40
10 10

~5
5

35
5

25
65

201 601

10
20

~5

55

70
30

50 50

30 10

10

90

100

100

100

100

100

100

100

100

Re,xehiip

50 50

30

70

100

100

100

so
10

40

60

90

60

20

10

~o

so

95

89

N,a,nya

9DIlm 70nm 68nm 54nm ~Bnm

~2nm

100

100

100
5

90
10

70 30
100
95 5

90

73 25

50

30

10

~5
5

60
10

2
100 100

75nm 70nm 5.!\1.nm stack ~8nm

~Onm 110nm 95nm

100

100

96
5,

65 25

~"

.115

15

55

a5

90

SO
20

10

65 35

·.!\1.9 59

16

Micron

78nm 68nm 5Bnm ~Bnm

~Onm

22 5~
9

8 1~
59

4B 61

4
62
34
55,

40
55,
5

19

21

45,

3S 3S

20
35

15
35

10
35

3 35

25

30

45

~5
5

~5 10

~5 15
2

45
25 5

3.!\1.nm
Source: Compa,ny data" Nomu ra estimates

Memory ~Glnba~

CW Chung

NOA\UIRA

5 Exh~bit 6. NAND m~grat,iolnlroadmap

1

2009 (%) 70nm 63nm 51nm 42nm 35nm 32nm (3X) 27nm 21nm 10nm 56nm .4I.3nm 32nm 24nm 21nm 57nm 48nm 41nm 32nm 26nm 20nm 12nm 55nm 35 65 1Q09 2Q09' 3Q09 4Q09 1Q10

2010F 2Q10 :3Q1 O

I

201'1F 4Q10F 1Q11F 2Q11F 3!Q.11F 4Q.11F

Samsung

20 70 10

20 62 1.5
3

10 50 3,5 .5

10 40 3,5 13 2

.5 25 30 30 10

.3 21 23 38 1.5

2 10 1.5 40 30
3

2 .5 10 20 50 13

1
3

.5 20 55
16

1.5 50 3,5

40 50
3

S 40 40 1S

Toshiba

40 60

3'0 70

H)

·80
H)

10 70 .20

H)

6'0

50

30

10
·8S S

10
'-

30

5'0

70

80
.'

..

10

10 50 4)0

:5

'30
5S

10

10
3,5 65 30 65 .5 10 50 40 .5 50 40 .5 .5 3,5 40 20
3

70 .20

Hynix

3,5 60 2

30 60 10

25 50 25

20 40 40

1.5 30 50 .5

10 .20 60 10

64
.

4S
5S

.2,8

17
·80
.

H)

.5
60
5S

IMFT

34nm 28nm 22nm

36
. .~ I

72

7.5
1.5

4,0

as

30
55

20
45

10
40 5'0

4S

80
3

35
,6'0

1,5,

3S

Note: Percentages ind ifcate proporson of output Source: Compa.ny data, Nomu ra estimates

C,ONVI'CTION CALL

'CONV~CTION 'CALL

CONVICTION

C,ALL

C'ONVICTION

CALL

®Action 'W'e antici'plate Sarnsung's (SIE'C) aamlnqs willi bottom i'n 1'Q'11 F, driven by all Us opendi'ons. The stock is, tradlnq at a, 15% discount to tttie market ,average PIE " and 'we expect earnmngs to recover from a, bottom in 1 Q:111F. We advise accumulatlnq the stock. before an anticipated lnflectlon point from 1Q,11F. SEC remains on
Nomura'sQ ',,',:'0'c'IIII.III~I~c III l~[le,t'':s Q C"" I:"'rIivm~ill~Ot"'!io ~I ' a ". ,.,,' 1._ I !PI
0 ii;;lI

Closing price ,en 7 Doc

W9J1,flOO

W1 ,240~OO'O
(~rotJ'lil W~ ,05QOOO}

Ups~deldownside [Difference: from consensus

FY11 F nm profit (Wbn) [Difference: from consensus
Source: Nomura

;:)76>Ol ,.:J' "" ,," ,to

19.5% 14,791 7.SOk

BUY""'" I ,'

II Catalysts
'WmthLC,D takmng tttie lead" w1e believe m,ajo[r .segments that are now muddling th roug tti hard s hi'IP'swrn II botto m one by one from 1,Q'111 F. ~ ,Anchor th,eme,s In our vile'w', S,E,C·is best prepa red among its. peers for "rl sing technology" such as OLED' display, spaelalty DRA,M, N.AIN[) and srnartphones. With ~ts proven competltlven ass ln mhe above spaces, Sarnsung shou Id recover from the current downcycle ahead of its peers, ln our vi'ew.
I'

Nomura vs cons,ens,us
'W'e are more posmtmve ttl a~ithe street on Samlsungl's abil~ty to differe~itmate ~tself from peers in terms of cost
comlpeti~iveness and mlarlket.slhare.

Best prepared for Irenaissance

<D Earnings to bottom in 1Q11F
.After posting record-hlqh results ln 11 H10, SEC,'s earnlnqs nave been decli'ning. We expect earnings to bottom in '1Q.1'1F ,and recover

K,ey 'financials & va~uations

31 Dec, (Wbn)
Revenue
Reported Inlet pmlm

FY'Or9 FY10F Fy'11F FV1.2F

136,,3,23 1.53,f539 1611001 191,131 1Q,. .23 1 1Q,. .23 1 128,.981 29 .3
1

9 ,57:2,
1

1[5,.732 1[5,.732 106,.11 1

1411'f~1 14l1'91 99l7'63 (6.0) 10.4

Nomn al ised net profift Nomn al i sed EPS (W} Nomn. EP S gr-owth {%} Nomn.. PI E (x)

9 ,572,
1

64,G,18
71.8 16.0 5.6 1.9 0.9 15.0

641.2
9.7
43 1.6 1.4

th eraafter,
(Z) Mlemo,ry ,':111"

a..0 2.9 12 1.1

EVl1E IEnrDA (x)

4.0
1.4 1.6 1'6.4

margins to bottom in] '1Q111F

~O'IU\1I""Ii U:}i;1I'11Ii

Prios AJoalk (x)

Di\l idend ~el d f%)

ROE, (%} Ne-ftde btf,eqlLluty (% )
Eam ing s revi sio
IllS

E ': have ~lI"Ondled &'oIIIIO'W'I'ng n"'e ",'00' ' __ ··.····.····.·_;::lli;;;iI,OIIII ·,:-:,IIlII~·,::': 1I',:H'llil> IUIF, Eall"'ln'lnge 'In S',' C"'::~sD':.' RA" 1M- operation boom i'n 1 H110. Hlowever:, ,given that the m,argin gap between ,SEC and ~ts,peers has 'widened more than lever be'fore and second-tiers' fiinancial status. has ,aJet'en rate 0 su o5ta ntj:aIly:, we be,1 0 ieve the downtrend wllin not last lonq, 'Wi~Jh su pplty 9 rO'wth I~ kely to sllow down after 11 ,111F and Q demand to pick up, we expea, SEC·:~s, rofitability to recover, p The NAN D' operation iis Imkely'to be, fhe d~n:!!c1! nef ci,ary' of the boom be ln srnartphonas, tablet PC,s and S,SD" After seasonal ,adJustments in 1,0'11 F, we believe mh'eNANIO market will experlence healthy grQwth ln 2,Q 11 F and beyond"

20.5

1 Il3

Pr-evi ou s Inorm. net prom

Chang e from pre-vious {o/~)

15,.819 {0.5) 106,.695

14.1976

18,.018 6.~

(12)

Pr-evi au s norm. IE: IPS 0N)

101.1013 1.21~533

IKorea
IIIIIIIIIIIIIIIIIIIIIIIIfPIP II'Itis

960,000

~ al IMSCII Ko, rraa

I

110

105

860,000

® Panels - differentiated and constant gr'owth ahead

'W'e forecast mhat profltablllty i'n t.he panel business will bottom in 1'0'11 F, just as, we think i~will for IDRAM" S,EC has dlstlnct technol~ogy leadership rnn,AMOLED" wh~ch should lead to diiffenenmrna,lt,edi growth in th e panel busl ness, mnour 0 plnlon,

S10,(lOO 760,(lOO

I I
~----'Ii..

110,000 ' '*', ___,-.,.....-..,....-~_----r___,-.,.....t::f.)

80

o
N

""
""

0
"r

'0

.'t""""

....--

,0
''t""""

,r.-')

"t'

...-!l!)

;0
"r

;::;. '0
"'['"""

CD

t-

....-'0:;)

0'

"" Cli'

;0
"r "r

'0
....-....--

....-3m
14.3 19.3 3.~

1m Absolute (VV) Abso lute (US$)

Re·lalive to Index 16..1 13.. 8 , 12.. 6

,6m
1,4.6

® Handsets - to benefit from 'w~dlerroll-out of Andro'"d

In the, handset business 'w'e bellieve SEC',s Android srnartphones have successful Iy' slettiedl into the [market In our oplnlon, 20'11 F 'willil be a. plvotal point wherle the number of Android srnarfphones sold will begin bJI surpass the iPhone series, and the as eco-system 'whidh has been regarded as an ,Achilles!' he et, will improve in earnest. We estimate S,IEC will ship 77mn srnartphonas and Galaxy' Tabs, ool~ lecli'Yle Iy, in 2011 '1IF up '14.8% Y'-Y.
1

2.4J5
(ft2,) 117~391 82.0

Market Gap (US$m n)

Est i mated free float (% ) 52-week. rranQIH (W)

901 ,100017361000 290.~ [Eas,y

3-mth avg daUly tu mover {U SSm nl Stock bor Ir{)wabiill~ ty. Major

,sn arahcld ers

Corp.
NClTfUI'a

(%) 7'.5
5.6
estmakG

Sam,s!1Jng Uffe. lnsu ranee Samsung

I'

Sa.JIli'Ce:: (~m1Ipaillf,

SamfSlJng Elactronf,c,s,

CW Chun.g

NOA\UIRA

® D'igital media -

marg ins to normal lse throughout

FY1'1F

For Tvs, 'w'eak'elr-tlhan-expeded demand growth and se'vere priioe competition have weighed on rnarqlns, In particular, TV inventory adjustment, which we believe is liilk'ely by' end-,20 1O:~ should furtl1er impact p roflta bll it.y,.Yet, 'w'e'forecast rna rg~n n ormallsatlon fo;.11'" th,'e' TV,'!E"·e· "I operat "0' ;." ',II"2·····1" ' t h 0 nk"EO, the b·e"e· 'In ot lnv'le"ln~o' 'eadJ'IIII,EO"'m' In t he', ' 01II F , to ry' '.:' Ie' t n "v, .'!II.'IQL home appliances, slegment, SE,C,',sag'gn3s.s~ve investment has strained profltablllty, 'We bellava this ls temporary and forecast marpln lrnprovement as weill as market-share growth in 2Q1'11F.,
l!c'II,llllc' Q'c,IL, 'c': c.~I,c"IL"c'llll ~II" 'c'
0'\'1)

iI;JI

1,,'0

'c'

'0 ipI'.'Q'c'

;i"'!!eiI, ~

'.'

c·

I~,:.

'.~

,:

Reatfirmling BU'Y; ~·fting PT to W1,,2i40,IOO O

I

'W'e antic~plate SE,C,will achieve '17-118% ROE from ,2H11 F-FY'12F. Based on aUlr revi,sed Fy'11'1 BPS, of W650,252 and our new targlet IP/BV multiple of '1.9x:~, F w1eraise our price target to 'W1 ,,240:~OOO il'e maiintaining our BUY rat,ing. 'W'e prsvloualy wh applied a targle1r, ultiple olf '1.6.x; but gilvlen that 1) 2,IH11F ROlE ls likely to come in m lhighe r than our ofillgiinal~ forecast: and 2) the pros pectlvs upward earnin g,s tre nd m erlts a I~owelrrisk: premlam (m.le. from the, top-end to the mid-end of' the historical band) 'w'e Imft th e targlet mu Iitiplie fro m the previous 1 .Bx,
f

Dle.spite I~kely'we\ake r e.arniings, momentum from ,3Q:110 '1Q,11 wh icl1 we be llava will~ to '1IF~, only be tamporary, SEC I~ooks,to be W1ideniingthe t'echnology' gap agamnst competltors ln mlemory" panel (,AIMOtEJD) and TV. In the smartphone segment, where SEC has I~a,gged~ ls fast: catchlnq up on mornentom it: missed unt,il1lH10. INo'w'that memory and it: panel are the twol major ,swiing fa dors for its share performance, ,and we expect the stock: to ga,iin ground in 1011 F,~ advise, bu ying before the botto mi. 'w'e S,E'C i,sgaining market share in smartphona and tabllet: PC and, w'e belleve, has second-to-none technoloqlcal prowess in keY' components used in tlh'ese two gadg'ets - mobile DRAM!I NAND" applicatlon processor and AMOLEID. Its technology' leada rshlp at both the component and slat Ilevel wi II glenerate su bsta nt.ia.llsynergy' effects, in lour oplnlon,

Risks to our Investment view

S,houldl the 'won stlr'elngrthen faster tha n expected, cost redUidiion impact (in 'won) wou Id slow and won-translated plfomltscould ceme in below our estimates.

Exh~bit,57'.1 SEC:' handset revenue fo,reca,st

(Wtn) 1.4

• Sm,a,rtpifJ1one
• FeBtUI~€:phone:

12 10
8

:2

o
09
10f
11f

12f

Source: Comp~,ny data Nomu fa esUmates

SamfSlJng Elactronf,c,s,

CW Chun.g

NOA\UIRA

Exh.b~t 58.1 SEC:: OP and ,s,hare price (FYO:3~'6)1 ~ ~

(W1000) 800 _.
_. Qtrly OIP - DRAM Qtrly OIP - L.CI[) Qtrly OIP __ _ Qhly OP ,_INlAND Qhly OP ,_Te~ecom

Exhiblit 5'9. SEC: OP and share price, ('FY09 - p esent')

(W1000) 1~1~00 1~1200
_. QtJrly OIP - D'RAMI Qtrly OIP - LCD Qtrly OIP - D'M _. ... Q~rly OP - NlAlNJD ,Q~rly OP - TeIEH::om

(W'trn)

(Wtn)
1

6,

--

S hr iPx (LHS')

--

S hr IPx (LHS}

600 0':'0' '

..
'

1,)1000

800 600
1 ,2:

~"-

AI

200

~OO
200

O+---~--- --""""---T---r-----+'O __
03/01
03107 04/01 04/'07

o _'__~:""'-.....,....-----r---r---........ -08/01

--___'_ 0
1

05/01

05/07

09/0 1

O~VOl

10/01

10/07

11/01

111/07

Exh~bit60.1 Earnings forecasts

Rervenue

(W'In)
Semli

M,emory

DRAM
IFlals,h SRAM Sys-US~

IFY09 26.8 18.8 9.3

f.2
0.4 4.6 25.8 37.6 34.1 ,2:.9 51.2 28.5 9.1 4.4 3.5 5.1 6.2 136.4 1 ~2:7'5, 106.1

LCD & OlE,D'

fe·lecom

iI=Iand:oo,t
System Dligibll Media

TV
,

iI=Iom,e,.A M,on~tor
Prlrr~er

PC
Others fotal

KJRW/US$, Salles ,(US$ bl'l, y Salles Igr<rw1h (o/~,y .. )

1Q11 8,;1 5.5 3.5 1.9 0.1 08 6,.8 9,.2 8.6 0.6 12.6 6.4 2.5 1.0 08 1.3 11,.4 :341.6 1!145 :30,.2

2Q,10 6_a ,41.5 2..2: 0.1 1_1 7.8, 8.8, 8.0

9.G

3Q10 10.7

f_B

O_f

1,4.5 1_5 3_.2 1_1 0_91 1_3 1.4 31.'9 11,'160 32.1

52 2_3 0_1 1_4 8,.11 11.11 10.4 0_8 14.11

f_O

3_2 1_1 0_9 1_4 1.11 40.3 '1~,1,86 14.0

4Q10F 9,.3, 6.1 3.9i 2.2 0.1 1..4 7,.7 112,.6 11.8 0.1 114.4 1.2, 3.0 1.1 1.0 1..4 1,.3, 4-0,.8, 1.,1201 36,.4

FY10lF 31.8 26_0 ~7_1 860_4

"

4Lf
31.4 41.6 388 '. 2_8 55.7 28_0

1Q11F ,8,.4 S.5 3.4 2.1 0.1 1.1

2Q11F

S.t2
. 58 3.0 23 . 0.1 1.0 7,.8 11,.7 11.1 0.1 13,.9 6.1 36 1.1 1.0 1..4
'-.
" ,'"

7.7
11,.5 10.8 0.1 12,.6 S.9 2.8 1.0 09 1.3

~ ~_8 4_4
3_f 0_.2: 5.3, 153.6 1,153 133.2

t.s

1..5
39,.3 1".i08D 36,.4

,31,.2 1~100 ,33,.8

,3Q111F 9;9 6_1 3_6 2_4 0_1 1_8 9.0 '12.5 ~1_9 06 '14.1 6_1 3_6 1_1 1_1 1_6 1.2 41.1 1,050 39.2:

4Q'11 IF 10.11 IEl2 ,3.1 2.5 0.1 11.9 '9.8 1:3,.2 t2.B 0.6 14.9 16,.8 ,3.4 11.1 11.2 11.1 1.4 4'3,.3 1 ~0(20 42.5

IFY11F 31.6 23.i3 ~4.1 9.2 0_3 6_3 34.3 48.9 46.3 2J3.

FY12F 42.2 25_8 ~5_4 ~0.2 0_3

s.e

55A
24.9 13.3 4_44_2 6_[)

45.8 64.4 61_9 2Jj 60.3 23_{ ~1_0

4_4 4_8
1_{ 6.3 191.7 1.ooa 191.3

5.6
161.0 1,063 151,(;,

Semi!
LCD &,OLED Tellerom DigRa~ Nledia fotal ,(lttRW" fotal ,(US$,)

2001 20 20 9 21 5, ('9)

1Q11 56 40 5 18 2'1 49

2Q,10 56: 31 {4) 20 17 29

3Q10
44

4Q10F 16

4 116 10 12 17

s a

23. (,1) ,4

2010lF 41 18 11 9 13 25

1Q,11F 3 12 25 0

2Q11F

(4)
1 34

,3Q111F (1) 11

4Q11 IF .21 B :1 6 17

20'11F'

1.2
{1 ) ,2 15

13 17· 5, 14

8
12

(4)
4 1'1

,2012F' 1.2: 34 32 9 19

2G
,

01' mlargin (,consal idaied), (0/0)1

Serni

2001

8
114 9 20 11B (1) 7 111 6

memory

DRAM
IFlalslh SRAM System -LB.I LCD & OllE,D' fe·lecom Dligibll Media fotal Opell'atiifi (W'Im) Serni

1Q11 24 35 39 .... 26 34 (1,) 7 12 4 13

2Q,10 31 ,4.2 ,49 28 35

3Q10 ,32
46 53

,2:9

11 1 ,2 1,3

6, 10

34 :3

(2,)
12

4Q10F 23, 35 41 25 34 2 2 101 (2)

S'

2010lF 28 40 46
"

34 3 7 10 1 12

2f

1Q,11F 19 21 32 .... 20 34 3

3
11 0

2Q11F 21 31 34 26 32 4 5 10

,3Q111F 22 33 35 31 30 8

4Q'11 IF 24 ,36 ,31 ,3~ 2, 11 1

20111F' 21 32 3~ 28 31 7'
13,

,2012F'
24

8
10 ,3 11

8 8
2
111

:2
9

10 2 10

35 38 31 31 11 '9 '9 3 1.2:

pr-ofit (,oonsol idated)

memory

DRAM
IFlaisih SRAM System-LS.I LCD & OllE,D' fe·lecom Dligitall Media others fotal

,,~,y ..y

2001 2:.11 ,2,.4 0.9 1.4 0.1 0.0 1.7 4.11 3.11 0.0. 10.1 ,81

1Q11 2,.1 1.9 1.4 0.5 00 0.0 OJ) 11..'1 0.5 0,.1 41.4 651

2Q,101 2.'9 2_91 2_,2: 0_6

3Q10 ,3.4 3.4

,2:_1
0_7 0_0 0_0 0.5 1.11

D_O
'

D1 ,0;9

D.G
0.4 (C1L'1 )1 5.0 88,

(D.2)
(0.1,) 4.9 17

,4Q10F 2,.2 2.2 16 0.5 0.0 0.0 0,.2 1,.2 (,0,.2) (10.1 ) 3,.3, (4)

20110lF 11.5 10_4 ,_9 2_3 0_1 0_1 2.1 4.1 1.4 (0..3) 11.1 62

1Q,11F

15 1.1 0.4 0.0 0.0 0,.2 1,.2 0,.0 0,.0 3,.1 (,31)
"

r.e

2Q11F 1,.9 1.8 1.2 0.6 00 0.1 0,.4 1,.1 0,.2

,3Q111F 2.,2 2_0 1_3 0_8 0_0 0_1 0.7 1.2

4Q'11 IF 2.4 ,2.2 I~:~ 0.0 0.2

0.8
1.11 10.3 10.0 4.7

2011F' 8.1 7_5 4_9 2_i3 0_1 0_42.1 4.7'

,2012F' 10.0 9_0 5_8 3_,2: D_1

0_9
4.1 6.0 1.7 (10,.1 ) 22.,2: 37

0.4
0.0 ,4.6 1(5}

1.9
(0..1) 1EL1
(9)

00
3,.7 (2,6)

4.2

Source: Compa,ny data" Nomura estimates

SamfSlJng Elactronf,c,s,

CW Chun.g

NOA\UIRA

I:nco rna state nnt (Wbn)

Year-end 31 Dec
FYD8

FY09

FY110F

FY11F

FY12,F

Revenue
Cos t of 91000S sold Gross profit,
SG&A IElmployee, s hme expsrs 9

12~ ,.2941 i8'Q -1Ul:;») iQ"'

'~I
1

136.~323 (949593)
41,.13·0

153.~63H (~OOl71B)
52~921

31.,532

(25 5·[)0)

(30 147)
1

Ope raBin 9 p rnfit EBllDA

lDep reciati on .A1molt'i sati m

(80) 10,903 16.,127 (9'18.56) 22,,0.63 (10 9 11 )

1
1

(36 1lEU) 902

1

161.,001 (107~429) 53~512 (31~B21) 400

116~ ,'", 1 30~4.20

191!~731 ( 125·~.s42)
65,.894,

(44~13.2}
40[)
.22,,162 39,.430

117~6&D

.28~993

earr

(240)
6.,032 (56)
8:38

(24B)
10,90:3 (203) t71.3 (222)

(10 800) (483.)

1

11~66{)

(13·,18U) (495) 16~144

20.3

lNet 'i ntelf8st expense

Associmes & JCEs Other income Earn ings befo re taJx

Income tax Net profit a.fte r taK M ina rUy ~tJ1t-er€Sts Other items IPrmerr-ed dlv ldends Normal'isad N PAT IExtracrd r ti18J'Y items.
Reported NP.AT

(236)
6.,578

(&I) 2.~01·3 (1163)

19~519

(116~760) {50S} .22,,162 344 2!~311 (98)

.24~7.20

2.~189 (98)
18~438

1.2, 191
(29431)
'9,.160

(68B)
5·890 .,
..

l36an} t
'l'

==.

(~394}
15~o.,",

(5·~9~ ) 1
19,,529

15~85D

(3164)

(18B)

(118)

{253}

{406}

5526
:'
"

~.

:. .

'9,.572 '9..51'2

15~132 15,132

114~1'91 14,1'91

19,.1.23 19,.1.2:3

5526 .,.
4117 ,

Iblivi oond s Tran stell'"to reserves 'Valuation and rati 0 ana lysis fD normalised PilE (x) fD normal lsed PA~ at price target (x) lReported PAlE (x) Iblivi oond y~e l[j {%) IPrimJcashiftlow (x) IPri~Jboak (x)

(809)

(19186)
8,386·

{1 839}
l

(1!9S1)
112~8D4

(2~ 136)
16,,987

113,893

evIEB IIDA (x) ev IEB rr "x)

Gross rna rgin (%)

IE181. DA. marglin (%) 1E181. mawgitil (%) lNet marg'in {%.) IEffecti ve tax rate (%) Iblivi oond pa.yo uft (Ok) Capex to sal 85 (%) Capex to depr€ c latlo tJi (x) lROllE lROA

.27.7 38.2 .24.0 0.6 9.9 2.3 8.3 .20"6 .... 260 13.3 5"0 4.6 ~0.5 ~4.6 ~ 1 .B 1.5
,
",

UJ.O .22.0 ~3,'.':9 0.9 7.0 1.9 5.6 ~0.5 30.6 H3.2 8.0 7.0 ~9.9
.

9.1'
~·3,4

8.5

aa

1.4 5.9 1.6·

6.1' 34,.4

ias
11.5 Hl.2

10.414.3· 9 .0 1.6· 4.61.4 4.0 7.0 33.3· 18.9 10.0

1

8.0
11.0

1'.0 1.1 3·.61.2 2.9 49 34.4

1 1

We f nd tlhe stock iiis·trad ing at: a 16% d lscount to ~he·

IK10SPI',s averaqe PIE

''If'li, Q Lf-U.U'

11.6· 1 D.O
2n 11.2
·:-:1 . '- II .U

~.a8
11.1
~.3,6

t2.4

63 0.8 ~5.0 ~2.7

1.9 .20.5 17.5

18.4" 13.4 14.1 1.1 16.4" 14.1

133
1.5,

(%) (p retax 0/0)

111

10.1 7.5

18.3· 11'.3·

Growt

(0")
.23"1 (1"7) (32"B) (25.B) (25.5)
t2.t1l

lReverllu® 1E1B1.DA 1E1B1.

Normali sed ~IPS Normali sed IFD~ PS

36.8 80.8 11 .8 ..•. 132 ~

.

~21' 31.4 620 64,.2 64,.4

48 49 (8.6) (6.0) (6.0)

1~t 1 2916 3"1'.3· 2913. . .... 2913.

• L_ : •• ', .'

'_

Per sham lReports d IEPS ~) lNorm ~PS (W) f'u I~. d ilut,~d nerrn llElPS (W) Book. va lue ID~··S fi'!_)
Source:

pe r sham (W)

NO mulra estmstes

31,161'9 31,61'9 3.2,480 .395·,651 5'1500

47~.~453 S.pOCO

106~111 10E),p111 92,p46H .SJ7058 .~. .,.' ~3.,0(]O

•.. ·1 "

.' .

99.,763 99!p763 86!p937 650.,25·2 ~4.,000

1.28:~981 1.28 981 1~21398 ra1!p267 ~5!~0(]O

1

SamfSlJng Elactronf,c,s,

CW Chun.g

NOA\UIRA

Cas hfllo'w (Wbn)

Year-end 31 Dec
~I8ITDA FYDa 16!~21 (3.!~J35)
~ !~68

FY09 22.~063 7!~2a.5 (1 O!~42) 1'9..186· (8!o'25) 10,660

FY110F '_'.-.: ! 28993 . 353

FY11F 30!420 5.,45-9 (6-!73;3) .29,146 (23·!594) 5,,552 (2'!4126) {23;'f) {~501} 5!~934

FY12,F 39!~430

Oh a ng;e ~nwo 00 nlg cap 1t3~

Other 0 peretl nlg cashfl ow CaLS hflo,w from e pera.tioln s Cap ita.11expendtu re
F'r,. cashfl,ow [Red I!..I1ction 'Inl nvestments [Net acq ur.si t10ns [Red uotlo n 'Inl otlh e r LT assets .Ad d iUi ttl inl otiher l T' IIla b~1 IftiBS
Adjustments

6 5~1
!W·

{6!8.51)
.22,489 (20'! 910} ... ...... 1~579 (3!1'32) {1[ 21.2) '."! 3,420
r

(9!269) 36,,61.3 (2.5~573) 11,,100 (2!56B) (251) (2~.322) 4!~8S0 1D~843, (1 !981) (2~322) 60

13· 360 ..! . (14!302)

(942)
~ !B3O

(31'6B)
'- '9' :':'''''-

~ !~t36

(6 283)
9

.2!173 (5365)
: 9 •... :.:: • .-

(3!07B) 1.,23'0 ~16.2 (871) 33~ (3!078) 19.2 (3,,427) 1,33·5,

We fa recast FV11 F capex of' W2,3.5tn

1 .~ .... -008 1~O63 (611)

CaLS hflow

afta r iIIlv8,sti ng acts

232 (11!3,15) USO ,2!173

~ !128

,5~314
{1!839}

Cash dMoolnds !Equity iSSIUB

[Debt issue Conver~lbl e debt ~ ssue Others

42
3~420
I'

(~,507}
60 1(~286)

(3200)
"'.)'

-.:",

. "9

.'

'.-"

,:

CaLShflow from I nancla I acts Net casMlow Beginninlg cssh !Eln d inlg cas. hi ~Ind inlg net debit Sm.m::e: No rnura estmatea

.2,,151 .2;983 5832 . !.'. B!B1,5

"

(3M)
702 ~0,~149 ~O!a51 (3;,21L

(4J24'9')
6,594,

28
~O,B5,1 ~0!87'9 {~86.2

..

'.

"

B,~B~,5
1 O,~ 14'9 (530)

~0!B7'9
~1:~41'3 (1[.2~7181

8 640
._.' .,Il-·, !

Balan'a $heet ,(Wbn)

Ali

at J11 Dec

FYOa B!B1,5 4573, . !.' ..:.,' 12 ,OM

;"

FY09 1 O,~ 14'9 10,~734 17,~a~ -8

.. :: ".':' 9839
,~

FY110F

FY11F ~O.l1819 ~1 i~~8 .21,,292 ~4.,802 1 !~2~B 59~6D9 ~4,~459 65!20.5 2,~958 4!~7911 141~o.21 6200 '!w' ....". ~1 ,0~,3 24,,7~2 41~925

FY12F 17!413
~ 1!4

Cas n & eq u Uv,alents M arketab le s ecu rifles

Account s re ceiva.blel

~0.~B51
~ 1,~4 ~8

ra

~9,~61'1 ~4~6B2 5,~432 6'2~O§5 ~2,~033 53,,300

Invento ri €:S Other C1Uwent assets.

Total cu assets LT invsstm e nts fi xed assets. Goodvill1l1
Othe r intangi b le assets

ITem

9!493 14!O44 48,,969

.23!~041 ~4!~9,22 (4074} " ! 62,787

!):~611 54..211

1~ !. '" 378
,4.2!496 787
~ !611

8~9B5
,~: . 43560:.

~r~021
1ti~792 3!~01.s 518 6 " !~ .
J

Othe r LlIr assets. Total

iltSSets

~!~256 4,,168 1 tl18D

2.11842
4,,426 134,655 9;~21'9 ~O,~175 22,~565 42~O19 1,~24.5 3,,581

105301 ,! . 1 ~ !'200 -.

164,,869

Short-term

deoft

594 6". .~ 1

t1l !~ .,'.". 15'9

~ 1!~921

Account S paJysb IB

Other

CIU went lie bil itl

es

5~5B1
15!33O 32~207 6!U55 4!O05 42~377 4!-801 ~1H 178 55,!420
~ !BOO

8~235
17!~69~

, .! ...... 26900 42,,979 53 6

1

Total cu ITelnt liiabil'it ies

Lo nlg-telrtl debt ConV'B'rnble debt

31,,81 6
1

3,~67.3 3581
:P" .

B~7
3!~665 46,407 4!208 1 ~9 77',8

Other LlIr Ii B,il n ties

Total Habi'l'itiH M ina rity ~n[.erm t [Pltmerr-ed stClC k,

3!~15,2 41,261 4136 !'.:'. 1H3 17-8

39" 13·$
1 3:~2~ 1 ~H 718 65:~1B1 3,,756

46,845
3;~73B
1 19 77,8 83844 . .
.
',~"

Comm on stock
[Reta,ined 'earni

nlgs

9tt648
,_.I

1~3!~63,5
(1 !661) 112,865 164,869

[PltqJOs 00 d i~d ends

Other eq u it '1' a nd reserves

Total sh arah,o Iders,'1 eq u!ity Total eq uirty [Uq lUid ity (X)I

'."'

(670)
,.-: .... --

58,,111 105,301 ~
. .

69,834
1 L1.2,. 1 SO

84~O72 134~65§

{1! 139} '9640.'6 .' '.'.~ :.,_.

1

& Ii abUit iles

141~o.21

au rre nt ratio
Interest cover
[La,ve,rage, [Net debt!~B

1.52
107.6

~ .10

~48 ." o
35)6.5

1.42

1 .46-

53.7

na

na

rr [)A

(x,)

0.54 ~4.9

[Net debt!equ ity

('0/0)

netcasn nst08sn
40.0 37.3 ,26.7
.. 506
'

net cash net 00611

nell casll1

net caslh

Activity (days) [Days reeelvab Ie [Days inventory' [Days payablle Cas hi cycle
So!J.m::e:No mulra estmates

35,0 35,6 .23.7 46.9

44,.5 44,.4 33.4

:

46.4

42.3, 43,.,2 33,.4 52.,2

50.~
36.0 60.5,

55.6-

@,Actiion

· .,' CI()5U~gpmce on 7'0,ec

u

Vil'~6"

Toshiba's NIA.NID OP margin i's i'rnprovi'ng on ongoing migration and a. [more favourable product mix, NIANID demand is robust and the ,average bit price has fallen only slightly. We have a positive vjlew on Toshiba, for mhe dominant positiion of lts N,ANID operation the Ionq-term growth potential of its nucle,a r power b usi ness. and th e mi d-term growth pro spacts afforded by ne'w' busln esses,

IPrioe ttl rget Ups ideldownside IDiference flrOlml consensus FY11 F net profit (¥b n) IDiference flro'lm coosensus
Source: Nornu ra

¥650
49.1%
37.2%

140.0
~Jl%

/I

Catalysts The NAND' operation will benelffit from growth in the smartphona and tabllet, devi'oe markets, NAND flash 'q[ualiti,y has polarlsed as process geometnile,s continue to shrink and our ,attention ls on rnarqln trends at Toshiba, which has managed to avol d ,a dec11 in prod uot (~I Iit.y,. ine ua

Nomura vs cons,ens,us
Our profitabili~,youtilioolk, 'for Tosblba's NAIN ID fI ash operatillOm1i mn 12/3 'is more buII mah 'tlhan co nse ns us,

~ Anchor th,emes 'WUh the smartphona .and tablet devmce markets expected to grow'~ we are focusing on man ufacturers' efforts to put in place glo bel p latfo rms to ca pture dema nd i'n

related areas,

Kley flnanclals &' valuatlona

3'1 Dec, (¥bn) FY'09 FY'10F FY11 Fl FY12F
'B,~291.2 (1[9,.7} (1[9,.7}

<D Earnings - more bull~ishthan company tar'gets

For IFY''10'"F 'w'e proJ·e~ ope'lI"a''"lng pr'I""+OI& T""' .. ,, Q IIIllil .• ',' ',_,,',,_' of the ·,_,'lil:,IL.· ~::.. IVllli, of"V'26""Q':'b[n 'E!"llIlgl:-..tl'yahead' IL.
I.' ,._, ",' __

I,~l~,

I.

'I_

company's targeted

¥'250bn. We expect earnlnqs improvement, to be driven by' the electronic devices segrnent:~1 wh~ch includes. NANID flash [memory" diiscrete semiconductors and small LCD's., For fha semiconductor slegment, 'w'e project opendJilng profit of ¥'1120bn:, ahead of the company's ta.rg'eted ¥1 OObn., For lFy'11 F" 'w'e forecast consolidated operatiingl profit will~ expand 27'% to ¥3,30bn, Ulnde~p[inned by' growth in 'earniingls, iin the NIA,NID flash business and recoveriingl orders in th e social lnfrastructnre segment (Z)

Reverriiue Reported net profit Normal~sed nlet pro 1iiit NormaUsed E PS {¥} Norm. [EPS. groMh (%) Norm. PIE (x) EV IE[8,rf1DA (x)
l

6~ 100.0
9.!iO 9.5-.0 :22.4

1~ 100_0 '1~600_0 140_0 190_0 140_0 190_0

33- 1 44_9 35_6
9_{'

(4_9}

19'.5
[B,.O

41_8 13_2 5.. 1

1_9

4U), 1_6,

P'rlloofbook {x)
Div1idend ;yield] (.0,)

2.3 (3,.2} 1_{' (19.. 7}

(4..9}

2.~

1[.~
11[.4

~_4
15_1

2_3
17_9' 1_2

RO[E{%}
Earrll[i ng$ re,vts,iOIl'i$

1[.5
9S.0

~_3
140J) "'J;3--' 1
,J ..•

Previau So norm. met profllt Change from previous (o/Q) Previau s norm IEPS (¥)

190_0

.22:.4

Semiconductors - NAND mar-gin to imp ove

'W'e estimate, NAND' O[IP margins were 1,5%! in '1Q: FY10 and improved 6pp to 2,11'0/0 20. AUhough we expect margins to det,eriiarrate in ,2H in 0'" ·w II.[he' of g, _:.:. 'w'e' v.~ FY'--','"1' 'wmng&10· lrn pact V. rapid: y'e'n appre 'i""I'la't"IO'[n pro J'e···.....&1
'j :_",
1 ••• :.·.

Share pr~ce, rel,atilv'e to MSCI Ja,pan

(¥)

'0'

' ..

I~.

.•.._: •. .

'I

~...

":_:.

-'_.-

,IV

IJ

i'-

",:

.•••.:..

:",

:::_""

.:I·II!.:'~

':_._

.:.:

~~

:_..

__ II!,':'-' :'

I.:.

560
510

1[)5,

[margins. will~ be aroundl18% in bot,h FY'1 OF and FY11lF as, the product, rnlx jl!mprov'es, supported by'the shiH, to finer process technology ,and the Ilisiingl ratio of embedded products for smartphones and other ap pi j'cati 0 n s, 'WUh system lSls, prospects of slowing demand for g,amle equipment and TV appllcaflons are a concern, burt we expect the buslnass to [move iinto profit as CMQ[S ii!mage sensor appllcatlons expand beyond th e cu Ilr[ent m alnstay of mobil e ph 0 nes to incl ude d j'gita I cameras, ~n dlscrete semiconductors, we eXlP,ed solid [glro'wrth i'n demand Iparti'cUl[~a,rly' power tr-ansi'stors. for

100

95

460
410

360 +-~~----~~-.

90 85 80 15 ~~~~----.-~~10
'0

m
~ ~

,.
0' :c::::
'(ti, ....,

0 ..,,-_Q

IJi...

Qi)

1: 'rei

:i

"" c.. ,<

~

..,,-Q;li

:::>..

,.
0'
,::I' ~,

:c::::

....---

0' ,.

::Ii ....,.

,0)

-e= ~

'0

:::1,

n 1),
,0'

0' ,.

'''----

'0

::0

:~
:3m
10.9

Absolu~e (-¥) Absol LI~e~US$l Relathle to ![ndex:

1m 3_8

1 '7' (11.. 1)

12.1
,5'. 1

16m (:2:.2) 88
.-

'

<ID Re~tlerating BUY rating

'W'e reitera.te our BUY mli'ng., Concerns have e,mer-ged about risks of deedi'ning profitabi Iity' in N,AIND and prospects 'for [9rolNtih i'n fhe nuolear energy' buslnass, Yet, 'we belrneve earnlnqs in the NAND flash busl ness willi continue to expand in 2011 F as srnartphones, ta blet PC,s " and solid stale drive (SS,D) applicatkms support demand.

Market cap (US$mn) 62=Week ramgle (¥) 3=mll av~ daily tumiO 1J.er(lIS$m ~)
l

(.5.8) 1~8.47,"5
111

.5:',ilI.ni~'OI:,i11

~~·~~.u

166_0

T·os.hlba

MasayaYamlasa.k~, CFA

NOA\UIRA

Valuation methodology
'W'e calculate our priioe target of'¥650 usiing a sum-of-the-parts terrn lOP' trends ~n each ,segment [method based on mld-

Risk,s, to Olur' investment view'

,An escalation of price oo[mpletitiion in N,AINiD flash m emlory could cause mh'e share lpln]ce to slJIbstanmma,llly nderpsrform our IPriioe targlet Prices of IDRAM and other memory may u 11 uduate d epen ding on the su pply-dernand bala nee, and we see a risk of ove rsupply i'f ne'w'market entra,nts 'w'ere to embark, on m,ajor capex programlmle,s. Toshlba's digimal prod ucts are a 1,50 S U sceptl b Ie to price' com petltl 0 n. ~ the n ucllea r pOW'B r bus.i ness, we n identify prOjlect execution throug h to plant com pletlon as a risk.

101'3,

1l1/3F

12J'3F

01'I· 1

3'13'F ~.~ ," ...'_'

I

Income sta.temlent

Sa.lles

6~,291~12
(:3.,4)

6 7'[0[0' [0'
-, '.:.<'.

7;,10 0.0
1

o/b y-y
Operatiing profits,
01:' 10

16.,S
lU-",:, 2,e O' [0' 2,.1x.
J

6".0

125~12 (3,.6) (261~15)

(-AI,O.···") -'-m.~'.

-.<_1,

y-y
2:.0
34~4
0.5
.. y-y

M a.rglii nl (o/b) Pr-etax. p,rofits

01:' 10

",'

3·s
i ':'

330.0 2:6".9[
1

[7,600.[0 70 400.[0
2'1.2 5:3

4".6 29"0' ..0'1 A150" "'iIi" ..:,: :,.' ', ...

1 .~'.

'_

'

.:_

..

Ma.rglinl (o/b)

·3.,0
950
,

Net profits
01:' 10 .. y-y

(·343~16)
(-5 3'") ::i.~;
.Ii'] 5.-:'" ~ AI ,7':,' •......
".":_',

(19.[7)1
(0 ... 3) 297.0 4.7
":":~.";'"

4".1

·3[70.[0 27.16 4.'9

· 19",'-0·""'~
.
\.~:." ,:t .•

. ...• [<~.

140.0

Ma.rglinl (o/b)

1.,4
.£l

47',.4, 2,.0

3·'5~'7"
I .:

.[0"
"':_

..

25
3110.0
4.1

", 7· "7," [0;

": I:

.'· 5.~
"']1

.l"":_;·

3~IO. 0"1
~ "I. e-

4?3'..• 9' £'.,.: 0-

20···ng·"··
3.3 :3'11.8

16.5· 35,7.5· ·5.5·

Source: Compa.ny data, Nomu ra estimates

4.,1 32:[0'· [0' 4.,,8

.' ,,":".1 ',": .. ."

4".2:

5.0

330.,0 4.,'9

400,.0 5,.6 340,.0

I•. _

400.0
1

5:3

4,8,:'' ',

3·50.0 4.16

Note: Resullts exc~ude the d i:8ioonUn~,@dmobil·@' phone bu siirlless.

TOB h ibe

[6502]:, consol ildlab!d f nanel 81 datta.

(¥bn)
10/3 11/3F

112f3F
I

13/3F

IBa.lan ce! slhee.t

Curren~ assets Cash .&. deposi~ts, No·tes & accounts recelvaole InventOiry assets
Other

·'.",:.1.0 2 720' C!,I":

343,.,8 1,,083,.,4
2 732'
",.,1

2'761 6 267.41 1~, 184,.4l!

.
.'
."

I'·

...

~I"

~:.

I•••

~.,

158·.,3 .,. §"'·3·l:',II ,'_,',,:"UI.I 530 9

'I I' .
",_: .'.'.1'",

'795. 6
1

6114,..2
-..:..' 2 6',',·8''9: I.1'6,'"
~I . - . ", ,", _,-

lLon9~'~enT~ sse~ a investment loans Prope!rt}t, plant & squ iprne nt

Other

C!. " "','.:.,0

··,8" .AI~ 4 2..~~,.:.".Q." .2,811.7 1~~.2.23.S -8-.211.9 5·19.3, 2~ 74l!4.1

1

2959 9 g ..... _ 2,t::7:: s .

':1. ,., . ,.
,. c·' ,.".: ." .

11,2,96.6 870.9 5.24.5

':"·'···IJ ....•. 28495 :.:_'
i ' '. .' ~. . _.

·3,115-.0 ·.,t:!"5 II 2·U·c.·., -I'll 1,387.9 · 932 3 .. g 5·'2'...':' 7:' 2 '94'" ic:::' . " ,·'0·.··· 0"
.
_ "_:" -..... .1' :._.. ~.

... .' ····1· _

.1 .

... ,' . 1 ,,·.:.'....0 089 ,

~

1,,111.2 ..'1

6119 ..5 978'7 1~,091,.-3

. ·;:·.···1."

,t::·3··'' II\'I119.' .'

[J ",' .. 1

1,0.211.7

Total ass/e·ts

5,453,.2

1~~0'90.4

5 110 •.. .2 ~,4l!88,.4l! 2·, 8'~7 257,.4l! .257.4 1 ~~.2169. 3, 1~,191 .'!3 1~,039,. .2 1~~060.0
.~~ 'c"',

5,4511.2

5,590~5

- _',!':-,: 6382•.... 11,12'1.7 "1'110 8':"9"' 5.. II ,'c' , . BOg 5 "~'.-.:.~ ·.,. AI 2,6:83.7 257.4 11,3415.1 11,08.'1.2
": i _'1

644.,6

..

16,06;0.0

1,211 ..1 1,08·8·.6

2,78;9.2 257.,4 1,43;9.8

1,092.0
1 ,807.11 ',: .. ....... 1 ,0"'5'9" ,'5.....

lLon9~'~e!rmli~abii~i·e·s I lOI~lg~t,erml borrowings UnlPa.id Ire1i!i ment benefit, re pension costs

Other

1~835.1
1~109J5 7"\'19 4"
1
~ ~" III'

1,~·802.4
"\'I ~~., ..... ~

0[6'' 9' •...."'5'

.

11,8,0'9.7 11,06'9.5
7410.2 0.0

." ..

(to
311.,'9 447.,3

'7"·2",5'' ·'."16,'' . .. .
,

7.32.9
• '_. ,"

747.,6

IMi nanty interests

.Shareholders'

e91~~!y

0,.0 -330, ..2 '197.5

0.0 33"0" 2'"

'_:'.

0.,0
3302
,:..·1.,:.. .• 1

," ··'1

330.2

::~ s 98-0 ..-

1,13,3.,5
I_

Total Iilabi Iities, .& aha reh olders[·

5,4511.2

5, 590J5

5,809.4

6 06'0 0
'.

....

~',

'

.. -

,.:

'.: ' .. _ .••

:.

®Action

Closing price ,en 7 Doc

[Ric,e~arget

,Am,Hynlx our ne'w' prica target is W3,11 !,IOOO!I down 16'0/0' from W,33",OOO:, but still 27% above 'to.:,- v., nt Q' I", nrl'ce·A M.:g, euc'h ~"'.. BUY:- ii""!!'''!II11 Q'. I:~~I Q' ,,', e'II""lng fha h'"llgl:-.. he curre ' share ~ .:,. eo d .,: oUII" eta' nds Consld .. ,,' IL.", ' ,'U historical correlation between Hynlx's share price and IDRAM pri'oes.:, and the near end to the rapid fallI i'n IDRAIM pdcas, we see the period through early 11011 offering a good technical buy opportunity.
11 "_ I ~, ';,;),.,,', Ii ':

W31~OOO
(~rOO1 W3 ~O() O}
i'j; ';J'

Ups~deldownside [Difference: from consensus

FY11 F nm profit (Wbn) [Difference: from consensus
Source: Nomura

'1 '"T ,to ilOl 3..3%

,.

1,16,17

II Catalysts
'Wmthhi'gher exposure to spelcrna,lfty DIRA,M and NAND, we think Hlynix~'s e,arn~ngs 'wi'lll have soft-landed an d started to rise I( le, no ha rd-lan ding) by 2Q:11 F,.Once this is '1 eonfrmed, we expect the share price tOIrebound strongly.
~ ,Anchor th,eme,s

..12.90/0

Nomura vs cons,ens,us
Unlike 'tlhe mI8flk:et,'we focus mlore on Hyn ix! s albmilimty ge nerats co ns tste 111. to cashflow (on exposure to speciiallty
DlRAM and N,AND). W'e aliso '~Iag 'its

'W'e see

stark dlffersntlatlon beM1een those WliIthsheer exposure to spaelalty D'IRA,M and NANID~ and thos,e without. 'We expect the former to see a, soft-Ilanding out of the 'correction vls-a-vis hard-landlnq for the latter,
,8

mnexpensN:e vailluation.

K,ey 'financials & va~uations

31 Dec, (Wbn)
Revenue

FY'Or9 FY10F Fy'11F FV1,2F

7',909 12,0.50 2,.9 45
1

<D C:ut FY111F OP fo,re,ca,st by 34%, to W1.6tn

'W'e cut: FY11'1F revenue to W1 '1tn (from W12tn) and Q!IPto W1.6tn" (fro m W2. 5tn )" to relfllect s lower-the n-expeotsd IDRAM mi g ratiion into ,4.xnm and resultant widening technollogy Ia.g vs SE'C. Despite the downtrend, 'w'e bellevs Hynlx's exposure to specialty DRAM (higher D'IRA,M n;~VlenlJle contribution than peers) and NAN D (wihe re its, cornpstsnca has substantially improved) 'Wi'li lead to more ,stability in Us lOP' than for pure-PC, IDRAM players. W'e forecast 201'1 F DRAM bit gro,wth 01'440/0 '1'-"'1' and NANID blt 'gro'wth of 133% 'Y-y..For Fy'11 F, 'w'e see capex at 'W'3,.4tn (W3.4tn in FY10). W'e see earnings boioming ln 1'Q'11F and then heoadi'nglup.

Reported

Inlet prom

(422) (422)
(712)

1.617
"

Nomn al i sed net pr-mit Nomn al i sed EPS (W} Norm. EP S gr-o wth (%} Nomn. PI E (x)

2,.'945

1 617
j

2~032 2,.032

4,.9 9 1
1 1

2,;140

3~M4
25.7

na na
fj,_ 7

~a

(45_1 )
B.6

4_7
2_9 1_7 0_0 41_0 41_9 3,.250 {S.4) 5,.5,09

6,.9 2.7 12 0.0

EVl1E IEnrDA (x)

Prioe llJoalk (x) Di\l idend ~el d f%) RO,E, (%} Ne,t de btf,eqlLluty (% )
Eam ing s revi sio
IilS

,3.4

2:_4
O_()

1.4
0.0
17.5

(7 .. ) 4

111-.4
5.8

91_8

21(12 2.457
"
'

Pr-evi ou s Inorm. net prom Chang e from pravlous {o/~) Pr-evi au s norm. IE: IPS 0N)

2~179

(34_2) 4.1164

{S_7'} 3~693

~ Spa'e·ally IDRAM and NANID as shields

K'ey lnvestrnent poi nits: 1) diversiflication of th e·IDRAM portfolio (froml P'G DRAM to specia,llty O'IRAM) has subslanUal~ly' eased earnlnqs vQI~at.ility'IS peers, and 2) Hynlx has made a mat'eri,a[~improvement in NAND technology', na.nrowing the ga,IPwith the leaders,

IKorea

co 311 .0,u. ,.
2@J)OO 27 J)OO

i!!fiiiiiiiiiii~lPlmea

~I MlSellKIOI'EII,a
I

1 .iI.no

l 1 SO

,''''I-'U

25J)OO
231)00 211)00 19.000 ~~~~~~~~~~~~~~~
,m ,0
'N 0

;.-,,!
....
...

120

110
100 90 80

® PIT' revisedl do'wn to W3,1"O'OO but. maintainin'g BUY

In line 'with our new 2011 earnlnqs estiilmates, 'w'e cut ou r PT to 'W'31 ~OOO, own 6% from W3-3!IOOOpreviously (bum,wIDth27% lmpllad d ' upside) ..C'onsideriing the high hi's,toriical~ correlation bet,ween Hynlx's shares vs D RAM contract p rices, 'we se,e the pe rlod throllilg h early 1'0'11 as offerin g a 'glood buyiingl op portu n ity espeel ally Qliven the nearend to the rap ld fal~1 IDRAM prlces. iin
f

'..--

...
;0

"l""""

'0
'.,,-

0'
T"""

00
..,-'
(,0'

(\I').

"l""""

o
T"""

,0
'..--

00
..,-'

'0
-.;:-

1.:(';1'

t-

00

,0;:.

.0'
..,-'

-.;:-.;:-

1m
{O.6,)

3m
9.8

16m
(11 ~4)

Abso lute (W' A.lbsolute (U S$)

Rei atlve to Index

{2. 6,) {3.9)

14.5 (1.7)

(,3..J.} f (34.5)
12.,32:2 ,"

Markel ca p (U S$1ill [D) Estiim ated ifree fl oat (% )

52-week range (W)

64_0 29~ 1 0012.0,1100

2212

® Risks to our investment view

The Ip!ace of cost redu ctl 0 n and prod uctivity im prove rnent is notlcaab Iy s.loWling ..However, tliie ramp-up of Hyn ~x' recent migr.ation into 44nm 5 has been well short o,f expied,atiions,. Ilfthe commercial development of 38nm-6F2 falls short of' Qluidance" the gap 'YS SIEe would grow and p:os.siblly see Elplda and Micron close that gap,.

3-ml h avg d.ai~y turnove Stoe k bor r-oVlt.i3,bili ty

Ma]or sh a reholders MiJrae-Asset AM NPS (o/Q)-

r (11S$.m n)

Hard 6_,8
6_1

Hy,n.x S·smlconduetor

CW Chun.g

NOA\UIRA

FY'10f
Irwbn~ %)
Sa.les Ope raf ng prollilt OP-DRAJM OP - NANDI Non-ope ratl ng prcrnt N'9:t profit DRAM bi~shipment (11Gb eq., mn)

fY11F
N·ew

Old
12.,365 3,,611 3~231 210 (264) 3~250 3~210 :38 2.62

Di.,,,-

Old
11~'9'77 2~4J63 1~,a,13 628 (125)

New 10~782 1~623 9~0 524 11 1~617

Difif. o/.Q (10.0) (3~.1) (~3.0) (16.,5) N/A (3~.2) (3.,5) (3.,5)p (8.3) (~ O)p
J. "_.. .

12.,050 3~285 2~98~

{2.5)

{g.O)
(7.6) (27.0)

1:53 (345)
2~9~5 3~172 :36

NVA
(91~)
.. : .F'i - .

2~457
4~742 48 1.162 (38) 2~253 1.52 1.19 (33) 1~O63

(1.2) (1 ",6)p (1.9)

4~514
44 1.48

o/~c"i'-Y'
DRAM ASP (1Gb eq., US$)

o/~c"i'-Y'
Flash butt shipment (8Gb eq., mn)

29
895

2 .. 57 27
895

(2",~)p
Oc"Q

(~2)
2~(}83 13,3 1.11 (34) 1~O63

(7.6)
(19J))p (1 ..5) (0.:3)p

o/~Y'-Y'
Flash ASP (8Gb eq., US$)

109
1.79 (25) 1~152

109 1.77
(26) 1~152

D.Op
(1.2)

o/~Y'-Y'
W:US$.1
Source: Nom~m estimates

((l,9)p
Oc"Q

0.0

Exh~b~t6,2.1 DRA.M OPM compar son (Hyn~x vs SEC:;,qu,a.rterly) e'lo)

80
60
40

_. M,a.rgin dirffelrential --'SIEC

20 O~~~~~~~~~~~~~~~~~~~~~~~~~~ (20)
(40) (60)

(80)
(1100)

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: Nom~ra estumates

HYln.x S,smlconduetor

CW Chun.g

NOA\UIRA

Exh.bit 163.1 DRA,M ASP VB Hynix, share prj ce (2003,.016)

($) 30
ll!iiiiiiiiiiiiiiiiiiiiij;:

Exh.b t 164,. Hynix:' OP vs share pr ce ('20103-06)

(VV') 40~,OOO
_ _ Qtnl~ OP' - NAND (RHS) Qtnl~ OP - DR.AM ([IRHS) (Wbn)

DR.AIM ASP (LHS)

Shr Px (RHS),

(W1000)
, ,Ala:: ~.

ll!iiiiiiiiiiiiiiiiiiiiij;'

1!OOO

25
20

~-Shr
II
I

Px (LHS),

,800 600 ,400 200

30

30':0':'0':'0"
.. ~," r' , ..

15
10

, 20

20000
-,_. ~I' '_.' '_-

..

I----~~----------~~~~r-----~~O
,10
,(2·" '0·....... "0:')'
.

{400)

o
03}01 03}07' 04r/O1 04-107 05101 05107

'0
06101

o
031'01
03/07

04/01

o4r/O7

{ISOO)

05J01

05/07

06/01

Exh~bit 65.1 DRA,M ASP VB Hynlx share prj ce (2009,·11)

Exh~b t 16,6,. Hynix:' OP vs share pr ce ('200 9-11)

1

as ao

($)

~iiiiiiiiiijI'DRAM[ ASP (LHS)

Ijjiiiiiiiiiiiiiiiiiiiijo

(W'OOO)
, 40

(\",,),.' \'~'-'~M'

Sh r Px

(RH S)

_. _.
ljIIiiiiiiiiiiiiiiiiiiii!!O

Qtfll'Y' 'QP - NAN D (R[BS) QtflliY' 'QP - DIRA_M (RHS)

(Wbn)

Shr Px (LHS)

1 ~,200 1~OOO

, 30

800
600

20

20000 .. ~'''-'
. -'
"-

400 200

I--~~------------------------~~O
10000
-,_. ~I' '_,' '_ •..

,'.("2'" "0·' '0' :.)

.
._,"_"

{400)
0",0 +------r--------,r--------r----~----..,.....----_+,0

o +---~--~----r---r-----r---'
09/ 01
1

{ISOO) 11/07

1091'011 09107

10101

1 0/07
1

11/01

111'07

09/01

10/01

10/07

111'01[

Exh~bit 6,7'.1 HYllix {W1000)

EV/EBITDA band
(W'OOO)

40
-,4 .. x O
30
_,

60
3 ,:5x
u

2,..!5,x
2.. ,Ox

"

50
40

3.. ,Ox
20

2.. ,:5x

30
,20

1,,,:5 x 1.0x

10 1[0

O.-5-x

05

06

07

08,

09:-:'
"_,'

110

11

05

06

07

09

H)

11

Hy,n.x S·smlconduetor

CW Chun.g

NOA\UIRA

I:nco rna state nnt (Wbn)

Year-end 31 Dec

Revenue
Cos t of 91000S sold Gross protiil.
SG&A IElmlPloyee s hare expe rs e

FYD8 6829 (J1387) (558) (11347)

..
,"

FY09

!-'

-,

1,~9n9 (69283) 1!,626, (111434) 192

,2,898

FY110F ~:~t050 (712~7) 4!'83:3 (11 54B)

l

FY11F ~O,782 (7~533) 3~249 {1626}

'.

FY12.F ~l~711

(1~.B85)
3~886

~-

,.

"

{1,.701} 2!,11'9 5!'361li {3,.18~} 2~119 (32) 4

Ope raBin 9 p rnfit EBllDA

lDep reciati on

('1,,905) '914, (218.19) ('1,,905) (3-29) 1 (2 ti26) (4j'159)

I

3~2B5 6~0-41 {211 62}

1

1~623 4,70'2 {~O19) 1~623 (125) 4 13,2 1!,634, (11} 1~611

(291'07) 19'2 (403) .2 (160) (:369) (53) (422)

,Aimol1t'i af on] s

earr

lNat 'i ntelf8st expsnse

3~28,5 (2M}
4

Associmes

& JCEs

Other income Earn ings befo re taJx

(85)
2~9-40
,5

(5)
2,1,416 (114) 2~O32

Income tax Net pnltiU a,fte r taK

M ina rUy ~tJ1[.eroots Other items IPrmermd dlv ldends Normal'ised IN PAT IExtract'd haty items. Reported NP,AT Iblivi oond s Tran sfell'"to reserves 'Valuation and rati 0 ana lysis fD normallsed PilE (x) fD normal lsed Pf~ at price target (x) lReported P'AIE(x) Iblivi oond yf e Id {%) IPltimlcashiftlow (x) IPri(:';9/book (x) ~V/EB IIIDA (x)
leVIES 111Ir "x)

30

(4,,129)

2!,9-45

.... tax l Beg · ""- pay- In come: .ax In ms IIlV,.

(4,729) (4,,129) (41'29)" j' (422) (422) ("422) 2,945 2,9-45 2,945 1,6117 1,617 1,611 2,032 2,,03,2 2,032

FV12f

na na na
35.1 20 ." ,23.0

na na na
~2.3 2.4 6.7 100.0 . 206 36.6 2.4 (5,3")
,

41",1'
6.2

8.6

iC' 0, U'.Q f1I, 0

4",7

11.3, 8.6 33 1.4 3.4 9.8 30.~ 43.6

~.U
l!' iI"1I, U'.Q

24
1.1'

29
5.3, 4o.~
50.2

hla
(8,2) 13.4 {27.9) ~69.2)

Gross m,argin (%) lEIS DA mmglin (%} IEIBIT mawgfn (%) lNet marg'in (%)

rr

...

1E1if~cti va IDJvioond Capex to Capex to

tax rate (%)

pa,YOUlt r~) sal €5 (%) depr€ c latlo tJi (x)

na na
36.9 . 09
'

na na
~5.7 0.5 (7.4) 1.3

273 ,24",4 (0.,2) 28.3 1.2 41.0 ,21.1

1.0 32.9 1.,2 11.5 10.6-

2.8L2 2.1' 6-.1' 33,.0 45,.5, 18-.5, 11'.3 :)"3, 3,0 . ,.ul.u'
Q

L~
18-.4 13,.9'

lROllE (%) lROA (p retsx 0/0.) Growt

111

~63.7) (12,1)

(0")
(20,6) ~67.5) (488.6) (837.3) (837.3) ~5.8 2~7.0
5,24

lRevenu®

IEIBITDA IEIBIT
Normali sed ~IPS Normali sed IFD IEPS Per sham

na na na
(1'12) (112) (112) 10033
":
,~"

10-B.6l~6~46

(10.5) (22.2) (50.6)

(45. ~) (45. ~)

az
14.0 34.3, 25,.1' 25,.1

na
118,

lReported lIEP.s 0N)

lNorm ~PS (W) f'u I~' d ilut,~d nerrn I~IPS

f1N)

Book, va lue pe r sham (W) IDP,S f'I'!_)

Source:

(101,210) (101210) (101210) 1 ~!'932

4:~991 i!;t991 't991 ~4,~299

'.:,',

2:~740 2,,740 2,,740 ~T~039

3444 .. _:_ 3444

. "~~l,~~~

3444 :~ .20 483

1

NO mulra estmstes

HYln.x S·smlconduetor

CW Chun.g

NOA\UIRA

Cas hfllo'w (Wbn)

Year-end 31 Dec [~[IBITDA, FYD8 914 180 (7',83) FY09 .2,~898 (9 22)
1

FY10F 6041 1(]~

,

FY11F ~t702 1,,31'8 (~!,865-} 4~215,

FY12F ,5,,36'0

,~"

Ohang;0 ~nw~)oong cap'lml

Other operat.'1 nlg cashfl ow CaLS hflo,w from 0 para,loln s

(204)
(26,2) 4,,894 (3,,6(0) 1,.294

(836)
114D ~I " (1[9240) (:11]0)

3,11[
(2:10,19)

Cap Iim,llexpend'bum
F'II"'. cashfl,ow [Red ILI1ction 'Itil lnvestments [Net acqulisi t1ol1s [Red uotlo n 'Itil otlh er L T' assets ,Ad d IiUttl in otlher ILT IIla oil 'lftiBS Adjustments CaLS hflow aftelr iIIlve.sti n9 acts

{2~-} 5~88,7 (3; 41.2)

" ,I r

(2'1208)
(215) (214) 439 (~ ) 993
1

(.26)
313 3f8 (168) 497 ~,~036

2~47'5 93

{~550} 665
(19) 18-3 ~9 {18,2}

(2~)
(0) f9 .2 1II294 .

{245}
9:0
{6!>4}

(3,203)

1~1S9
,3 {897'}

665-

Cas n diM OOin ds [lEqulity issue

[Debt issue Conv€f~lbl e debt ~ ssue
~ ! 8M "

(456)
"

(~!,500) 36.3 (19) (11 ~,51'9') ", (226,) 1~~49,3 1~~268

"

Others CaLS hflow from fii nancia I acts Net cashtilow Beg [tin [tilg Gash
[!Eln d [ti;g cash [~Ind l:n~g net debit Sm,m::e: No rrl..JlM estmatea Balan·C8 $heet ·(Wbn) As

379 (319) 1"B84, ('1 ,I, ',' ~ 3.19) 2053

, ~ I " .:. •

(2'93) 287 78473~

{1[ 19} (1 , . 0113,)

'

.'

(1~437)
(77,2)
..,. ""iQ,~ ~~~~U1il

734 7 138
1

t5~,s
5:~43-1

7.41 1,~5~ 8 2,~265 3,~53.f

1,~491,3 :~t03,1

704

at 31 Dec

FYD8

FY09

FY10F 2,,265 1,~663 1,,028

1IQ2' ~u,·

FY11F 1~I,493

FY12F 1~~26,s 1~~90.3 1~~294 (79}

Cas n & ,~quUv,a[lents.

s ecurities Accourn s reeeiva biB, lnventori es Other current assets Mlarketab[le

734 151 ~!092

193 ,2,,770

t5~,s
~,~730 1,p051 87.5 5,1&0 328 1 O,~ 13:9 46:9 271

1 ~~7B1
1,2~1

Total cu rmm assets L T investm e nts [fi xed assets, Gaod\M111 Other inta nglib l:e 8JSS,~t:s Other LlIr assets

{191 }
4,29,5 254

302
1.2!363

5~418 235

400
iC'1I./.I1

~1,,125 464
5116

11 447 444
!

4,.3816 215 ~1~~966

424 33,3

u~

33·3

Total iltSSets Sih crt- term de oft ' - Ill. - bll A :CC:OUII .-do 5 PaJya.UI €I Other current lialbil itl 08 Total cu ITelnt liiabiiliit ies IL(Dltilg-terrn debt ConV'B'rnbl e debt Other LlIr Iis,il n ties Total Iiiab iilitiH Mlinorit.y ntiit-erm t Preferred s,to:: k, Common stock [Reta,ined 'earn ngs [PIt(pOs 00 d i~lldends

16,,575 .2!593

16,.38.7
,2~971

17~758
2.,007

16~77:3
1~~52~

11,.383 1~~4,1'.2
8918 1~~450

1"1-8 ~!927
5,~2J8 4!361 91.8

74 O
J

747
1,r,832 4,58.7 2,~817 9118

7B6
1~~,450 3,76,1 1~~OB2 9~8 90·9 6,7,20

~~~9,22

5,633
306)0
-,~
,

'.'.

3,820 {~~B}
9f8

533 111~049

9f8 850 L1o,46:1

940 9,322

91',s
5,,298

,2!31 6 ~!356
1

,2,~96'6 934 ,~~020

2,~96.g 3,~734 1,~73:3 8~436 117758 ~

.

2,~96-9 5~~35,1 1~~73,3 110~053

2~~96H T~3B,3 1~~73·3 12,.085

--

Other equ it 'j' a nd reserves

Total sh areh,o Iders,'1 eq u!ity Total eq uirty & I i,abUit i,es [Uq lUid ity (X)I

~ !B541
5526
,

""

~921]
L16,38'1

16,~5,75

116~173

11,.38.3

OU rre nt ratio
11tii[-er-estcover [Leve·rage· [Net dlebt!~B [Net dlebUequ

0.53 (5m8)

0.92

1.18

1.14, 13.0

0.5

~24

6s..~
0,,13, 0,.8

t.15,

rr DA

(x.)

1 .. 1 8 11.29.2

LB8
91.8

0.59 41.9

0.43,

it.y ('0/0)

20.2

Activity (days)
[Da:ys flee elvabl e [Days inv mtQtry' [Days payab l:e 45m8 .54",~
c; ~, 3U!lI&

5,7.3

5,1.4

62.4
42.3 17.3

5,2"37.666.5

58.3 54.,2 37.,2

51.3
5B.,2 39.~

Cash cyc[le
So!J.m::e:No rrl..JlM estmates

75.4

76.3

@,Actilon 'W'e expect E,Iplda to fa II i'nto th e red at the opercdi'ng level j'n 11/3 H 2 ,as a. res ult of a steeper-fhan-antlclpated dedlne in DRAM prices and the .str,ong yen ..lookrnng ahead, our focus i's on the launch of 4Xnm mobile DRAMI., NEU'TIRAlL rnalntalned.
[lPr~e target c

¥931

3 •.3'i:t{ 1111 ..16.1%

-

II Catalysts
'W'e see frrn demand for rnoblle DRAM unde~plinnmng Elpida'.s earnlnqs. In particular 'w'e expect 4X·"nm I mobile lD"'R"A',·to,',,1.,.:,. a' ecatalyst '&011"" aamlnqs;;;;:J "I" Jan -] M''Or' J '. .:. \ "','0:", '. . ':.', M' be ::t;:.,.iI;::4I,~:QIi. 1 1. II ,
,II II:': , " ,A:':,' .. ','1111'
,'e

[ID iffere nee from consensus

Sou roe: rNJomura

-40.70/0

1,11

,,,:':,

1111,' .. :

1111'.

'i1;::41 .

:t Anchor

20'111 onward, th,eme,s

Nomura vs cons,ens,us
'W'e expect: DRAIM pfl~ces to 'fallillmore steeply 'tlha11 ~he consensus. As such, au r profi t, esti mates for Eillpmd are a Illower mhan consensus.

'W'e expect a.ttention to focus on tne speed at wihj'ch DRAM manufacturers are m ovm to ine r proeess geometries,. We also antlcl pate renew1ed growth in the ng [mob Ie DRAM market drlven by the expansion of the smartphone and tablet devlce markets, and 'we are therefore aloselly 'w,atdhing trends in snare.

Ke'y flnane als '& 'va~uat,ions

31 Mar (¥mn)
Rev,enue

FY09 FY10F FY1'1F FY12F

3 USS
1

<D Earning,s to recover from 2Q, 11

'W'e estimata Elpida has, been in the red on a, [monthly basis since November as falling PC, lDRAIM prices have hit hard, and W'9 projec1l th e company 'williI fall into the red for '11/3 H12.We project earn irilgs will recover from 1213 01 as DlRAM price' decl lnes gr.ad ua,llly ease. (%) Sh~ft to

Reported net profrt Normallised net pro;flit Norma~ised IEPS ('~) Norm. e[F'S grovrllh (%;) NOrtm.

36!,~0 36!,~0 1[82.65 ~.2:.6x 5.1

3 US5
1

~4. 54 '~4.0 0.8 1.0

0 000 0 000 24.62 {0.9)

1 1

9 000 9 000
1 1

44.32 0.8 .2:1[ .0 4.0

pJE ex}

3.7.6

lE:VIEB IT[)rA. (x) P ricejboak ()!;)

Divlde~dy~e~d f"%.) ROc (%)

:3.2 0.1
0.0 12..9

39 0.1
0.0 1.6

0.1
0.0 .2:.9

,45nm process, as planned

Elplda has been concentrating efforts on low-powsr-consumptlon D'IRAMs, Iiong a O'omlp,any' stJlength, and was the flrst to supply 45nml process lDRAMs for mobilile devlces, In 2011" 'we prolect sharp growth ~ sa les of products for sma rtphone an d tablet PiC appllcatlons. lhe n [milgratiion to 45nml process has been go,ing accordinq to plan (with ,4·5nm process products set to account for 50% o,f the Hiroshima plant's p reduction capacity an d 1100% of R,ex:ch lp's at ,end-,20 110)and 'we expect that migration to contribute to cost savlnqs iln 2011.

Net debtieq ~~1Iy(0/0)

Earl1ings revi
8ii0l18

1.9

1.5

1.3

1.2

Previous norm. net pro,fiit Cha,nge trom prevtous (%) P revilous norm. IEPS {'~).

(¥)
2 62'O
l

lj!iiiiiiiiiiiiiiiiiiiiillPl'ice Rei MSiGl ,JaJp~n

2 12'O,
l

17'0 1.50 1:30 1110

<ID To r,educe external procurement

,Along with 1111-3 2 reSllillts:~lEIpld a announced a cut iln its month Iy' PiC Q D'RAM production Hom 230 1000 to '170 1000 wafers. We expect onl~y a. small cut in prodluc1tirOnat the Hiroshi ma p lant, 'which uses an old process 'with most of the culba,ct achieved by red uoi ngl e·xt'ernal procurement (silnoe external procurement leads to losses if pnilces are falling sharply) ..We expect almost no imlpact on lDRAM supply-demand,
1 1 I

~l620 ~l120 ' 62'0

m
~
'C
g,[II
.

90

10
~ ~
C

...-u,
>ilU

'0

'"'91

Il1ti

dO

....--1=
~ ~

',.----

-c
.

o·
..---'
,~

c..

...-~

~: ,

:~ .g' u ..., ...., -c e» 0

:::11 ::Ii

c
....--.

C'

...--

10

...--

'C

c ...-:;?

o 3m 8m
(4~;.1) (3'9 .5)
1

Abaolute (¥) A~8olute (US$)

lRelattve

1m 15.5, 13.2 10.3

(7'.1'3) (6.2)

to

Ind-~;x

(13.1)

(54,.2)

® Keepinllg NEUTRAL rating

'W'e take a sngh~ly' cautlous vjle·w on the stock in vi'ew of prospects the company wffi II s,lilp ilntio th'e red at the operatiiingi level j'n 11 H 11,and '1/3 expectatlons of 'widening gaps. bet,w'een Elpida and the two Kore,an . ... . companies. W' are wa,mtlng to see 'wh·et·har conso Ildatl ··e [I': atlon . l·aiwan's In I D'IRAM sector works in E.lpida~s favour, how fast the company regamns share iln mrQbne D'IRAMs, and prag[[ress in improving tha balance sheet by such means as reducln g lata rest-bearln g debt
I

Ml~rnet cap (¥m~) 02=weelk raruge (¥) 3~mfih,~,vg da~llytumover (¥mn)

100,~OOO 7116~2,~B9 1 65.4

Elplda M,emory

Masaya Yamlasak~,CFA

NOA\UIRA

Valuation methodology
'W'e continue, to base our price ~,arget,on IP/BV~Iial(;toring iin EV/EB,IJIDA and our DIC,F
miodeili.

,An escalation undarperform

in DRAMI price cornpetltlon could cause the share price to substanfially our tarqet price, Prices of IDRAM and other memory may fluctuate

de pen ding on the S,UI pply-darnand balan ce, and 'w'e see, a risk of overs upply irF pl~a.yers 'were to embark on major capex programlme,s.

Elplda M,emory

Masaya Yamlasak~, CFA

NOA\UIRA

lEIpi de. Meim

o'lY

[6565,): conso,llidated

fi nanlciall data

(¥bn91 exoept whel~e, noted)

09/.3
Income Salles s·t.tament 33 1.0
L

1013
,461'..1)

11/'JF'

12J.3F 540.0
(6 g\ J
.lD .

1313F
~n iiI\ 5·~v..u

,580Ji
2tll.2, 452.0
'12BAJ 22.'1

% Y-'";I C'OGS
G MSS proflts
Margin (%)

(1 '8' AI)'
•· •• lll~·.

tll17,.1

41.1 31,8,0

:3,.7 I~U5,2.0
~ °80'" '17.5 68.0 '12.11 30.0
....•.....

(86,.1)
(26 ..0)
6'--1- 3'"
"_: .1','

es.o
1Sl1
62.1

,~52.,0

88..0
1,@'3"" UI.I' 68, ..0

S.G&A expenses
% aiif' sales· Opelratiin 9 proflits % Y-'";I
As

es.o
!I[)." ".Ii)

18.,5
('14,7.4)
(414,.5) 4,.1

t3.3
,2,\6.,8

11.7'

1.2,.6

60Ji
2.,2x 10.3

2'CtO
(66..7) 3..7
4.,0
liI1, ill U.I~

IE: f'Ii '0" ,~v.·._.,

No noperait'iing inoorne ~n~e;mst & d ivude;mds ImoeUved Other No noperafiing expenses II terest paid n Other Rec!ulliriin 9 prmits

Margin (%)

1..0
3,.2 25.,;5

5.7 2.4 '1.1

'1.3

5.4
4.0

,~.O
i- Illii ll 1I~.IIJ

0.43.u'
I!;:!'

0.4
3.6
'14.0 '11.0 .. :3..0··
,_,"

3,.,6
14 ..0

11"1'.0
110.6 6,.4 12.,3 2,.6 '1.9
,!),.3
'.'

6,.tll

19,.1
(·1G8.a}
(51,.0)

11.0 3.0

11.,0
3.,0
L1,CtO

50Ji
4.,1 x

20.0
1100.0

%Y-'Y
Marglin (%) IExlraordi nSI")' Qls.ins IExlraordi nSI~ 101$800.
IPretax. p roflts

2,.1 14,.1
( 18·"0'" 8'.).
••..•. ",lll,':

86 3.0
1

(80.,0) 11.,9

:36
',_

(to
0.,0 1(tO
.2,.,0
~:.-

.. ' O.0 . 00 ""0'-' .•..- .. 0·· ..

Co rpo ratio n tax.

1~,ffectJlve rat-e (o/~) tax IMinonty ~ntelres.ts
INle,tIProfits

(1.,9)
1.,0 0.,0 (,178.9)
(54,.0) 94.,8

8,.9 '1.1

3.0 50.0 1.,5

t~l3
4,.1

3.0
12.0 3€L5 'S"v 11-.1...
·.1.\;

20.,0

5.0 25.0
e '0'"
'l) •. ._."

3.,0

3,.,1

5.0
(86.,3)

9.0
80.0

% Y-'Y
Marglin (%)

0.1
t2'1.8

e3 U.'.'·_,'
130AJ

1[D,e[rec~at~on p As, % aiif' sales,

0.,9 120 ..0

22,.2

1.6
1100.0
17.9

28.,6
'8"8',e . .... ·..•I'Ij)

26.1
~~.":'

22.4

Capax
As, % aiif' sales,

""'3'•.... 8

26S

94 34.5 7.4

1150 19.8
37AJ

60.0 11.1

80.0

38,..0
1'..0

'14.3 40.0
7.1

6.4,

Source: Compa,ny data, Nomu fa esUmates EI P id,a.IMennlory [6665]1:: conse I idated 'fi na nei,a.1 ,data.

(¥1bn) 10f3
B,a.llenC9' shu,t

11131F ,337.9
'107.,2
'129.5

112J3F 329m3 111U;~ 120m5

1,3/3F
341.S 116 '9! 125.0 65.5 34t.11 521.1 501.4

Cu rrent assets Cash & deposits IlSiIIIan d acoou nt receivables Inve nt<Qryassets Other
Ilong-t-elrmi assets,
IProperty!

27'8.3, '1'13.8

3,26.4 1'13.3, 122.6

,53.9
1i9'<9 •.,_" t)'l) 0'"

128
'17.6

6,7.8 33.4 1601.11

63,.2
33m8 5411m1 5211m4 1{t7

1)lant and equ ipm ent

44.5 16,8-70 1616-7.4

'19.6

'6,21.11

Other Tctal as&ebi, Cu rrent I ~abi11itI1 es Short-term bo,rrowings INotes '&, payab lies Olher
Ilon9,-'~,elffil Ilsbl litles
ll,ong-t-0lrmi b©rtaw'iings

9 65,.3
1

5.'96.4 24.1 947.5

.2.7'4.,2

,3:10.6

,561.4 19.1 9391 278 9

'16:3.9 56.5

870.5
205mO 93m9 52m6 585
282m9

19.1 862,.'7'
187.0 73'9!

'1·jQ7· n 'u- .• .::1

1153.9
,53.6

48.3 '9,tll.4 ,3,s8.,2 ,3,27.0

16,1 2:
"IIQ.Q s:: LU'l) •.:)

,56.1
3,26.5 ,2.7'5.11

56.5
282.6
230 11 52.5

5,AI,t:;!' 585
" .. .Ull ~

283.1 230.1 53.11 392.6, 339.1

Other lNi®,t assets Owners' ieq~"'itt¥ Aceum u lated other com prehens ~veincome INi®iw' stock. ri'ghts

,5·1.4
346.8 .2.77.0

230m1 52mB
382m6

,377.6
,3-25.11

'H33.5 (16.2.)
02 '9'19 '9!

330m1 (211.,6)' 0..3

(13.3)
0.3

(21 J5)

(21,.i5)
1.3 73,8,

0.3
73,S

IrIIJfiin()rity nr~~ ~ reats

Source: Compa,ny data" Nomu fa esUmates

62.9 947.5

9391

73.,8 870.5

862,.'1'

@Actiion The demand transitlon from traditlonal PC, to feature phone and to ,Smla,rtphone should be negative to INianya, as it, focuses onlly on PC DlRAM. Wle aliso belrneve its technollogy is at Ieast one generation beh lnd that olf lead ing player.s. Aecordlnq Ily, 'we expect oo~tinUied book valua erosion for Nanya, m the medlum term, 'We i'nit,iate ooveragla wUh a RE,lDUCIE m,tillng ,and PT olf N'T,$5,.3 (potentllia,1 downside of 68(a/o).

Closing price ,en 7 Doc

[Ri<)e~arget

NT$16.70

NT$S.. 0 3
~ 0 '3,Of -U'O., ,to

Ups~deldownside [Difference: from consensus

FY11 F nat p refit (INT$n"n ) n [Difference: from consensus
Source: Nomura

..68.8% {13,222)
na

II

Catalysts If IPC DRAM prices stay below Nany'a,'s per-Gb cost levells" its net asset ls likely' to ""'0' In£ill~nlille' ero d" e' ln I, 0' , ,lllr V,'',_,'' W'':, • to -"I'e III '~
!Ii,.iI' " _,' ','Ii', " "',

II;,;;!',:

~ Anchor th,eme,s 'W'e find ,8 rapid sh~ft, in demand ,-, from feature phone to Smartphone and from P'G to tablet. However" we believe INanya, can barely benefit from the transition due to its w'e,alk cost oomlpetiti'ven ass ,and poor p reduct po,ritfollio.

Nomura vs cons,ens,us
'W'e see Ilrmli ted potentmalll for a strong recovery rnnPC DRAMI.

1Q11F bottom, yet profitless ra,co'vary to anl,sua

<D Lllonlg-a'w,a,ited70nm yield lmprovement
'1'0

K,ey' flnan c'iaIs & valluat,ions

30 Dec, (NT$mn)
Revenue Reported Inlet piFolTit
Nann al ised net pr-oWit Nann al i sed EPS (N l$,} Norm. EP S giro wth (%}
Norm. Pi E (x) EVtE BrrDA {x)

FY09
42,456

FY1Qf

fy'11F
l

FY1,2F

-57,318 :5 738 ,64,378 B

(20~ 76'6) (10,267) (1 3,;2:22) (11n 900) (:2.o~ 76'6) (1 0,267) (1 3 ;2:22) (111 n 900)
(7.25)

come in 4Q'10

(2.88.)
rr1a rr1a

(3.28) na lila

(2.95,)
ilia rr1a

,AI~hough Nanya faced substantlal chall~enge.s in shifting QJmonda!'s 7'0 nm trench lin e into Mi eron '5 50nml stack in the past, its yield from the 50nm taehnoloqy has lrnproved rapidly. Gliven 100%, per-wafer blt production enhancement: from th 9 70nlm to 50nm conversion, w·e exp ec1t Nany.a:'s cost to improve rnaterlall y aft,er 4,Q 1OF.
l i

na. na.
na

Pries Jbook (x}

Div idend ~el d ("YO)

1.1
~).O

18.8 1.8

44.8 .2.8

26.8
5.5

0.0
(27.5) 201.1
ll1Ia ll1Ia ilia

0.0
(42J~)
358.9 na na na

0.0
(65.2)
64,8.6
ll1Ia ilia ilia

ROlE, (%) Ne,t de btfleqlLl~ty('% ) Ea.m irna s revi sio

IllS

(63,.4)
181.9

,According to management, Nany,a plans to beg~n 40nm volume production mn20'11, [but as 'we lexpect productivmty Q a in of ()nlty 40..w50'% from the shift 'from 50nlm to 40nm, 'w'e belliev1e growth from this production m~gratiian ls likely to temper d own ~n 20'11 F. (%) Yet,1 DRAM prices have faillen too

Pr€vi au 6,rJ orm. net profit Chang e from pravlous {o/~) Pr€viOU6 norm. IEPS (Nl'"$)

,steeplly
38
(NT.$)

Taiwan
i!!/IIIIIIIIIIIl/IIIIIII!Ar~Ge Rell MSCI la,i~,n

In spite of tlhe techn 0109Y m i'gratiQn" Nan y,a h as yet to post a, profit as P'G DRAM prlces, 'whk:h account fur a, majorilt.y of IN,anya.~'sIDRAM total production cost, have collapsed sl nee 3,Q10,. 'Gmve pe r-Gb production n DOS.tof US,$1.5 an 50nlm and US$1,.11 on ,4kxnm, barri'ngl a, rapid reco'V'9Iry of PC, IDRA1M pnices, 'w'e bel~i'9v'e it is unlik,ely fur Nany,a to post a, pro,flU in th'9 n ear term ,.'We forsca .. an opera,tling loss of st O"-F •. __g-"'blil , NT$S''_-,::'~-::-' I 10''r FY:-·'-1"
I

33 J
.28

, 1 ~o 110
:c'1 DO :c,80
...

130

l .23
I

90

18
1-

,70 ,60

13+!'------------~----~~!,------~~50
,maoo
'0

I,

_I

,~

"'-'

"'-'

...

o
r:t'J

'0;:-

...

a "'-'
Ci<

'0

'0;:-

....-'0 ....--

® Thanks to Formosa" Nanya can stand current h,a,rdship

and a va.gue outlook of earnlnqs improvernent, the possl bi'l~ityof a s hort-term Iiq uki irty shortfa II seem to b e Iimited tha nks to :SUPPOlrtfrom its parent, the F ormesa gro up.
I'

1m
Abso lute (Nl'$) Abso lute (U 5$) Re~ativ,e,to Index (1.5)

... ...3m
0' ...

,13m

Despite Nla,ny'a,'s stretched financial

(1.3,} (4.6,}

Market cap (U SSm n} Es'Um ated fl'r-ee float ('% ) .52-.oweek. rang e' (NT$) 3-mtl1l avg dai Ily turnover {U S$m n]
Stock borrowabill ty Majjor sh arehold ars (% ) NJaruya last ics P Formosa Chern.

(19.7) (33.3) (114.7) (2,8.1} (33.2) (:5fl4} :2.,:2.36

40.8 33,. 5BI'15 .,30

® FY1l1 F capex to drop 45%, y-y

Nanya he:s planned INT$,112bn eapex for FY11 F (vs NT$22bn for IFY'10l. 'W'e think Nanya may triml the amount if its cashflows in Fy'111 come 'v-P -.4\~'ill!!lon ',.', "_-, Q' ;01", ·O'Wlne-, '_d w-'&e'lII" pa city ,;Qi._, -n die- at sta Q' i;;;l._ , .• lo I"Q, .' ',tJll! "ml Ibe"I,' 'w '1]+'"", e'"A,!_ e If4r.ILQ,iL.','IIII., N' a nya ~'eo self'1-._1111 we add ','_10. ofI lnotara's~,"-b: b..J II,.,j_' af'-' c'fl'pa'r."'llhl _ "kpm' I'" as :>__ of end' -' IFY"'oI'I'O-' '_' 111_' and 'I~ ',.1111, 111'_ ',_ '_ 5'0"" 'v__ ,', 501_',
>
I • ;i"'!!oO I~ti,_' _-,~ _/ 'I,

5.33
Har-d .29 .44.9

125kp m:, Nanya's D'IRA,M 'wafer calpacity would be around 12,Okpml.

1

Na.nya Tech.nology

CW Chun.g

NOA\UIRA

® Initiate witlh REIDUCE andl a price target of NT$!.3

'W'e iinitliate coverag,e of Nanya with a R.ED,IUCE [rating and a price ta[rget of NT$5·,.3!1 based on 0.9x: FY11 F' IBVPS of NT$5.9. The demand fransltlon from tra.ditiiona.1PC, to feature phone and to ·SrnIB.rtJphone should have B.neg,ative lmpact on Nlanya, a.. ii. s focuses anly on PC D'IRA.M. Furth er, its t.etC:hno,logy stands a.t.least 0 ne 'genera.tion behind that of leading players, mn our vi'e·w·, ..Aocordingly~ 'w'e expect oontiinued book v.al~ueerosion €or IN.any·a. ~nthe mediium tarm. Barring a drop-out of even 'w'ea,lk'erDRAM player and a. stronger-than-e:xpecited DRAM market reoovelry, we belleve the share ls over-valued by around 68'%.,

® Risks to our inv,&stment v~ew

If INanya~'s migration into 4,Qnm ls fa.. than expected, its m,arlgl~n ster mlay' come "n above OUi r oaselli na nu mber, Also the exmtof w'ea.k:er DRAM players and a, strong'er;..thanex~;ueded DRAMI market recovery could push Nanya's 20'111F results h~gher tha.n our
forecasts.

(NT$bn) 100 80 60 40 20 • Nle1tdebt

o
,2007 2008 11Q10 3Q10

Exh~bit70., Earnings forecast

[J'RAM sales (NT$mn)
,~q-q ('~ )

2009 37j'178 18 1j"1501 13

1Q10 12007
"

.2:010 '13~595 13 89 ~25

3!Q,101 12',,912' (5) 26

4.Q10F 11,.010 (15) (25) :3~5 (15) (24) 287 66 81 1 (.49) (58)
:2

2010F 49,,5,25 31 1,,5501 35 755 ,24 ,2: 9 3

1Q11F 12,10,5,2 ~
-

2Q11F '13~713 14 1 ~31 14 1 392 4 162 1 10

-

3!Q,11F 14,.,0118 2 9 43-'9

2

4Q11F 14~106 1 28 441 1 28 420

5

y-y {%) DRAM sales (USSmn)

,~ q-q ('~ )

(18) 112

2011F 5394'9 "

-

9 0

316
(17) 12:5 146 (8) 6 , 3
'

404(5) 29'

377
9

'9 1j'688 '9 1j'S88 '1101 1 (418)1 1 (417)1 (12,.092) (22)

13

y-y (%.)
Shipmen~ (1'Gb eQ9.1 mn) -,
,~ q-q ('~ )

96
1.49 2
0

609
36 ,2 (17)1 3 (:31)1 (16,!621)1 (44)1
!!

~7316
6, 2

0 377 :31 1:58 1 (17) (61) 1 (25) (54) (4~2'18,) (35)

9 3'9:9
2

y-y (%.)
ASP (1Gb eq, $)
,~ q-q ('~ )

3
1~

13-1 1

46 1 (5) (13) 1 (3) (30) {2j'B21,) (20)

y-y (~f)

- (I -,

Cost {1Gb eq, $)

q.. ('~ ) q ,~

(10) 112 , 3 2
'

{is)
22

0
(53) 1

95
..
"

(61 )
~

3
4 22 (1,,049')
(8)

3{13) 10 (1 ,821)1
"

y-y (~f)

- (I -,

(3) (1 729) (14)

(33) (38) (5~505) (50)

(4)
(58)

0
(51) (2~549)

(9)1
(10,.104)1 (20)1

D'RAM OP (NT$,mn)
a,p margin

(2,,504)
(~8)

{14)

(1B)

Source: Compa,ny data" Nomura esUmates

Na.nyaTech.nology

CW Chun.g

NOA\UIRA

Year-end 3D Dec

FYD8 36!312 {53! 6(4) (17,3·52) (B:'!2 (7). '.'' .:

_, a1

FY09 4.2.~456 (489816) (&,359) (9!560) (15,,~n9) (1,,1.58) (12!387) (2!3.74) (15,,9'19) (119679) (3! ~.55) (20,,1'.54) (12) (20,1'56) ,
.

FY110F 5.7_~3~ 8 (558 .:. . .. ." !Im) ." " " 1~34B

FY11F 58,.738 ) (60~97~ (~233·) ,( 9~105)

.

FY12,F 64!~31·.a (64!'98~ ) (~603.') {9,.705-} (L1~.308) a 5~482 3~.a16) (~ (1,.974) (1a~308') {2~.500}

Revenue
Cos t of 91000S sold
Gross protiil, SG&A IElmployee, s hme expers 9 Ope raBin 9 p rnfit

( '9lf)"~) (8,212)

(26,,619) (11,,203) (1 1IJ;89) (3!1·.27) (26,,619) (1 !6'[)8) (8!4.21)

(36,,648)

(11~93a) 3~439 (13~403) {1974} (11.!93S) (~250}

'! ~ "

EBllDA
lDep reciati on .A1molt'isati m

7,61)'2
(13,!880) (1Il9r95) (8,212) {1!6M}
..... ....... (63]) )
,

earr

lNat 'i ntelf8S1

€lxpelnS€

I ..

.....

'

".. _..:~

com petlflveness an d the fal ~in DRAJU prices, Nanya wm likely stay iiin a, loss in FV11 F

Due itQ ~he 'weak cost

Associmes

& JCEs
(10
.

Other income Earni'ngs befolM tax Income tax Net profit a,fte r tax M ina rUy ~tJ1t-er€S ts Other items IPrmerr-ed dlv ldends Normal'ised INPAT IExtracrd iti18J'Yitems Reported NP,AT Iblivi oond
S

,536)
'. 1

{68~}
(1,.869) 1 ,,641 (13:!222)

(68~)
(113~489) 1,,58'9 (11~900)

(6)
(36,,654)

26.9 (10,,2 57)

(36,,6.54) (36,654) ('36,654)

(20' 166) ." (20,1'66) (20,766)

.'

(10-" 2 67)
1

(13222) -~ (13:!222) (1~222)

(11~90D) (11~90Cr) (L111 ~ 90[1')

(10261) ~
.

Train stell'"to reserves

(10~261)

'Valuation and rati 0 ana lysis fD normalised PilE (x) fD normal lsed PA~ at price t~get (x) lReport.e d P'~IE (x) Iblivi oond yi e Id {%) IPrimJcashiftlow (x) IPri~Jbook (x) leVIES IIDA (x) leVIES 111Ir (x) Gross rna rgin (%)

na na na na
28.. ."
"

na na na na
1.1

na

tia

na
na
8,1'

na

Ina
175.1
.

na na na
239' '---.._. '. 5,.5,
"_.

1.S.

2.8
44.S.

na na
(47.8) (30.9)

na na
(~ 5.0)" (2.7) (37.5) (48.9") . "

~B.8
118,

26..B

Ina
(3.8)
0.9
(20.3) (22.5)

na
(0.9) 8.5,
(1 fLO) (18.5)

lEISrr DA mmglin (%} IEIBIT mawgin (%) lNet. marg~n(%) 1E1if~ctiva tax rate (%)

1aa.
m

24

(13.3)
(100.9)

(~ 4.4)

(fl.9)

IDJ vi oond payo u t r~) Capex to s~ €5 (%) Capex to depr€ c latlo tJi (x)

hla hl8
34.3 1.1

na na
35.5 1.2

na
37.61.6(.27.5) (fiB)

Ina Ina
20.4 0.9

na na
18.6 0..9' (65,.2)

lROllE (%) lROA (p retsx 0/0.)

(78.4)
(21.4)

(63.4) (~3.6)

(42.9)

(SuS)

(8.. B)

Growt 111 (0")

lRevenu'9 {31 .4) ~6.9

35.0

2.5,

IEIBIl"DA IEBIl"
Normalised ~PS Normali sed IFD IEIPS Per'share lReports d IEPS (N'T$) lNorm ~PS (NITS) f'u Illy'd ~ lut,~d nerrn I~IPS(NT1)

hla hla hla hla

na na na na

na
m

(54 .8}
":
"

.. 6 ... 9'
."

'_"::

59.4

na

Ina Ina Ina

(3.28)
(3,2B)

Ina Ina na
(2.95.) (2.95) (2,95) 3.05

(7 ..85) (7.,85) (1.,85)

a fY.:j, u.~

(7 ..25) (7.25)

'\2.·" ,00\_. .• ~J.

("'1,00\ L.c;KJj.

Boo k,va ~ pe r sham (N 1Ir$) ue IDPS (NT$)

Source:

(8A57)
~5,Jj1

(.2.,55) iI"rII2·"8:' ~.
",'

(3,28)
6..00

NO mulra estmstes

Na.nyaTech.nology

CW Chun.g

NOA\UIRA

Year-end ~I8ITDA

3D Dec

FYDa {1 111203) (121474) 13!193

FY09 (1[~~ 58) (121490) .2.~561 (1'1 1) -' (151086)

,

FY110F 7Ji02 230 {1 1011)

FY11F 3,,43,9

FY12,F 5,~4B2 (~~,524) (1 '" 143) 2,,814-

Oh a ng e ~nworld nlg eap It8~ Othe r 0 peretl nlg cashfl ow

CaLS hflo,w from e pera.tioln s Cap rta.11expendtu re
F'rea cashfhJw [Red I!..I1ctio 'Inl investments n [Net aeQlu'l.sit10ns [Red uotlo n 'I nl otlh e r LT' assets .Add iUi mini otlher ILT IIa bil Iftles l Adjustments CaLS hflow afte r iIIlve.sti ng acts
Cash dMoolnds

(2,. 128}
(928) 383 (12,ODO) (11~6,17)

(9,,884)
(121445) (22329)
" C'

na

,. 6822 (2~ 5 69)

,",

I,

':

,'.,

(~2~OOO)

5·!321 (10) 14!465 (191409) (2L1956)

,

(26 '16-7) 4.~69.2

_, C'

(14,741;' .' {28!E)

',_ I", ,,:
c'

(9.~186,)

.2.~585 (90)

(6~509)
(25,489) (241465)
-e

(1 ~!)-} ( ,4 3·(5) l

329~ "~
':

6,207 12,3

2.2,516 B8

{6,.330}
(_-11~,6,17' J

(2.2~1664)

C'

(18,766)
-

.'

(9" 186,) ~
~"

!Equity iSSUB [Debt issue Conver~lbl e debt ~ ssue

Others

(~48) ' !", 22816 I,:, (654) 22,,014

~Oi1l22
122 1 ,086 111~630 ("7 l1,36) _,
"

9532
- .II' ._.

20~OOO (~4~,534}

5~ .,:519
-''',

O1LS hflow from I nancia I acts Net casMlow

Begrnnrnlg cssh !Eln d rn,g cas. hi ~In d rn,g net debt Sm.m::e: No rnura estmatea

3~646, 11~151 ,2,p506 13,~663 67,~99~

,24~966,

,$,466, (3,720' } -~
,

58
,2!448 ,2500 e, ! ':' 69 61'0
'I" ':

113~349
6,p5,21 ~9,877

13,p663 6,527 1-5,24'9

~9,p871 ~6:~10·1 1;9,~81 0

8 6,86'6
1

Balan-a $heet (NT$liin)

Ali atlD Dec
FYOa ,2500 ':" ! ':' 5,!O51 5,!8ID ,2,109 FY09 13,p66.3 290 1.2.~91'.2 7,~821 ,2p543 37,296 15~914 68~591 13,p79'4 (211'08) 13,l953 9,~458 9~120 2,p328 ~1,,496 ~1 086
" ,""

FY110F 6.p527

FY11F 19.1,817

FY12F 161157 ~2:~951 ~2,~494 3,p189 44,79& ~9,~10·1 82:~7()1 ~21290

Cas n & eq U w,a lents

M arketab le s ecu rilles
Account s re ceiva.ble,

Invento ri €:S
Other C1U went assets

Total cu assets LT investm e nts fi xed assets. Goodvill1l1 Other intangr b le 8JSS 0ts other L lIr assets.
1

ITem

2,p829 45.~288 ~9,15,7 80,52,3 ~2,290 (12'~.209} 145~05iO 5~,,863 B,p750 4,p661 6,8,274, 5,1,,880

15,,536
2(]9~
","I '., ..

.27,433
~9,~151 17,,926 ~2,~290

69! ~gr 1 n '923

'

~'

'

(~,22) 116,,490 1 ~ !885 8844

, ~,,:"~' r

{6 001)
l

(34~785-)
1,24,16·5 51:~354

Total iltSSets Short-term deoft

Account S paJya.b le

130,805 4:3.,811

3Sp6B4
1(]~661 ,2,p51 '9
48,9,2445:~970 6B4 95,578

Othe r C1U rrent lie bil itl ,08 Total cu ITelnt liiabil'it ies
Lo nlg-term debt

11373
21302 ~

7.~198 3,r835 54,90,5

37.~9(]5

9,~B61
5,p25,3

66,,469
4416~3 71H 111,861

601,231
174 8B~313

ConV'B'rnbl e debt Other L lIr Ii B,il n ties Total Iiab i'litiH M ina rity ~n[-erm t [Pltmerr-ed stClCk,

569
93,,379

69'2
..

L1,20,846

Comm on stock
[Reta.i ned 'earn nlgs [PltqJOs 00 d i~d e nds
Other eq u it '1' a nd reserves Total sh at ,0 Iders,'1 eq u!ity

461934 (4315<55) 241198 28177

,

34,~O41

40,324 (201252) ~7,3M

(9 B88)
I

40,~3.2~ (33,,413) ~7,354 ,24~204, 14§~050

40324 ' ':w'"

c_

(45~,374) ~rp354 12,304, 1.24,165

en

"

13,,21'6 37,37'5, 13,2,.953

3-1,425
,~

Total eq uirty
[Uq uid ity

& Ii abUit i,es

116,~490

130,80,5

(X)I
0.57 (16"6)

au rrent retio
Interest cover
[Leve,raga· [Net [Net

0.16
(9.5)

n.so
(5. ~}

0.66(5.3)

0.67'

(4. ~)

o ebt!~Brr [)A (x.)

o ebUequ it.y ('0/0)

na
247.1

na 1[81.9

99] .
-,'

25.26

~4"56'

201 ~

. 35B9
'

648.6-

Adivity (days) [Da:ys reeelvab Ie [Da:ys inventory [Days payabl6

1045
'_'l n'

17.5 51 .2

11.4

,39.2 ,88.3 15.5

55.3,
58.2 68.4

65.~ 60.5, 41.7 71.9

..... 69'3 66.,2

5,2.3 83.3

Due

itQ

fhe weakened cash

'69.9
588
....

Cas hi cycle
So!J.m::e:No mulra estmates

flow ,genera.~ion, he ne~debt ~ ratlo wi II ra pidly increase in 2012

®Action

' .. ' CI()5U~gpmce on 7'0.ec

u

NT$14.30

Inotera has substantially ~ mlproved its p reduction cost base, 0 n an lnereasl ng proportion of production at 5,Onm and lmproved yields. Bum.he PC DRAM price has t fallen so much that if it stabll lses from 2Q.111 as 'w'e forecast, i't will still be below F!, lnotera's par-Gb productlon cost. 'W'e hlitlia.te oo'V[elrag[e 'wlith a REDUCIE call, Our price target: ls NT.$7.8, (downs~de [of 45%).

IPrioe ttl rget. Ups ideldownside IDifarenee flrOlml consensus FY11 F net profit. (Nrl$mn) IDifa renee flro'lm coree nsus
Source: Nornu ra

NT$7.80

('13~276)

II Catalysts
Should the PC· IDRAM Ipri'oe remain bellow lnotera's per-Gb cost, 1thecompany's net assets wi'lll oonmi'nUie be [eroded. to
~ .Anchor th,eme,s

na

Nomura vs cons,ens,us
'W'e see Ilrmited prospect of a strong recovery rnnPC DRAM prices.

'W'e are .seeing a rapid sl1ift in demand ,-,from fea.ture phones to smartphonss and fro rn PC,s to tablets, But Inotera does, not look: weill placed to lbeneflt from tile transltlon, ,given weak cost com1iP,eti1Uv[eness ·8 lacklustre product porffollo, and

Cost ilmprovements Inot sufficient p' j·lca dllacll-Inas to 0"--:--5'8t D·····

•.....•..•......•. '"--_,1 •.• -' "~ "'~.'.' ....' .... '' _ .......•..•.......•

K,ey 'financials & va~uations

30 Dec, (NT$mn)
Revenue Reported Inletprom

FYQ9 FY10F Fy'11F FV1,2F

36" 104 (111477) (111477) (3.1'9.) 42,0 80 45 3;9.8
l

.50,333

{11~128) {13;27[6) (1 0~,587) {11~128) {13;27f;:) (1 0~,587) (2.45)

~8

Nomn al i sed net pr-oifit Nomn al ised EPS (N 1'$) Norm. EP S gr-owth (%} Norm. PI E (x)

CD 7 0nm yield improvement

1

'1'0

kick in during 4Q10

(2.93)

(2.34)
n8

Like N,any,a! Inotera has faced a sigmlificant ;(:ha.lleng[ein sh ifting Q:imonda'.s 70nml trench line lnto Miarorif's, 50nm stack, with the conversion taking much longer than ori'gmnally planned ..Yet lnotera's 50nm technology i's now,showling substantially lmproved yi[ellds and, given 100% per-wafer bit production enhancement through the conversion from 70nml to 50nm!1 'w'e expect lnotera's per-Gb production cost 'will decline by 3;5'%1 q-q iin 4,'Q10lFand ,another ,26'0/0 q-q mn1Q,'11F~ B[eyond that, lnotera is pl~anning to begin 40nm volume ~rodudiQn in 2 011'1lF. But given onlya 40-50% prod IJclivily g,arnn from mheshift from 50nm to 40nml!1bit, growth ls 1~~lkely ,slow' from 2!01 '1lF!1 our vi'ew'" to in
1

na. na.
fj,_ 2,

n8

na na
5.8 1.7
"

n8

EVl1E IEnrDA (x)

Prios AJoolk (x)

6.0
1 :2

61
.

1.1 OJ:)
(23,.2)

2.3

Di\l idend ~el d ('%)

ROE, (%) Ne-t de btf,eqlLlut.y (% )
Eam ing s revi sio IilS
Pr-evi au s Inorm. net profit

0.0
(211.9)
139.3
1118 1118

0.0
(28.'9.) 182.4

0.0
(31.4 )
247'.9
1118 n8 n8

122,.0

Chang e from pravlous {o/~)

Previous norm. EP.s (NT$)

n8

na na na

Taiwan (%) Yet,[ the IDRAM price has fal~en

teo much
3,1
26
l'

lnotara's D[IRAM selnng prices to Nlanya and MicrQn are, set at {m a rket D'IRA.Mpries - (I notrera's cost + mark-up cost )/2 '*' Inote ra's oost} 'which factors in both cast factors and selllina priice factnrs, In 4,Q,10:, a, rap id reduction m costs prompted ~ n nota ra to lower its sell in9 prl ce to Nanya and Mmcron. Despmt[ethe sharp fa.111 costs, barrln 9 a rap ld in reco'V[elry'in PC· IDRAM [p riices" 'w'e'th ink it ls un I~ikelythat II otera will n turn a profit: in the near term ..We forecast an operatiinglloss of NT$4~6bn fur 4Q,10lF ,and NT$12bn for FY111lF~10'111 ls Imkely'to mark lth "t-.JI",· 't h e L. U . L)OILLOm, L. II' 'w'e L)e le'V[e,WI '1ma mla,'gnl.une 01 qual rt I'Y Iosses see n .er decliining a.s DRAM price failis moderats nom 2Q'111 F onward. Smillll:, 'w'e see IIm lted pros pects of Inate ra retu rn m ng to the black m FY 11 F. We i n h e lleve one d eterml nant 'wi'lllbe 'wheth e r i't s uccassful Iy' rn igrate.s to ,4,Onmtechnology"
~IL\.,.

(NT$)

ifllllllllllllllIIIIIIII!!iRrice Rell MSC I la,iiMi,n

1

100

[110 100
1 90
l 80
170
-.! ._

120

2,1
16

11

''t'"""

'0 'N

,m

+-~~----~------~----~--~~50 o
..,-'

eo

..,-'

0'

...----

;0

''t'"""

-.:t

...--

!l!)

0 ...----

,~

'0 ...---

f';..

0 ...--

...---~

0'
..,-'
Q'i;

'0

...--'00 ...---

0,

1m
Abso Iute {NJ T$)

...-...-...-3m

,6m (25.5) (1 '9. 7) . (51.0) 2119\2 36,.6

{O.3,) {0.2.) {3.4)

{114.'6) (9.4) (.27.9)

Abso lute {US$}

Re·lal ive to Index Market Gap (US$m n) Est i mated free float (% )

52-week. rranQIH (NT$)

3-mth avg daUly tu mover {U SSm nl Stock bor Ir-owabiill~ ty. Major

28.20/12 J10

7'.5;2

® F'ormosa support lessens current hardslhip

Har-d
29 .8 29[.7
1

"~., stretc 'e[: t D'esph!e IlL,S, ~ h dl fInane ~ I & ,I!I ng an:d n." Iaex 01 VIIS,IL)II_. n IlLS a. I.oOIL_ Ulle k ",' II "L. "II'ly- o "' ea rnln g5 outlook, 'w'e sea Ilttla liikellihood of linotara mcm a short -term ng I~ dity sh 0 rtfall, given the support of th e Formosa group, Inote ra's lqul j~grandmother company",

,sn arahcld

ers (%)

Nanya 1 echrllollogy

Micr-on l'ecnllndogy'
Sa.JIli'Ce:: (~'Cfi1Ipaillf,
NClTfUI'a

estmakG

Inotara. MemorIes.

CW Chun.g

NOA\UIRA

@ FY111 F

capex to faU 62°/0 y-y

··w·

thou[gn we th mnk. this co ulld be triml mledl if casbflows fall snort of t.he company's expectation s..IFro rn a low oil 53 kpm in 1 009, its "oeil"e"r """~" :'. Ii.. 1k';8!E" recovered ¥ :,':._. "1' '::'I'O"'lk""pm' 0'1 'In I 'I"e' '·w·mt·h· the ILl.. 'Ist .. orlca I norm I :~ and capacity I11I :.001 : ~_ .. ' : to O 'In' .,~II: I:!._, '3·;··Q·····',1· :." 1111:" 111... I: 1111001 :
II ~" ~,II~:

Inotera expects FY'11 F capex of' NT$20bn"

'we expect

ena-2010F capacity of 130klP'm~

lnvestment opinion
Our priioe tsrQlet: of' NT$7.8·0 is set a,t,O.9~x: estlmate of' FY11 '1 IF B'V'PS of NT$,8. 6. our Inotera has substantial I~ymprovsd its, p reduction cost bas/a on an incraasl ng pro portion i of production at 50nm and iimlproved yiie·lds. But, the IPC DRAM price has fal~llen so .. I ,Ik ILlIII,a!1 ~f'\i. sta . st I WI Sill . e, :{. IlnOILiera, s "_. [mUGIIII 41L\.,. ·t· ~ IlL,S, ,Ib··.'I~·· .... fn ,,' 2""Qi:"11 IF as '." :.. I .·reca,s !' !It' ··,..··'11 ,.4'11 bs b·'e"1ow ': ~. "',,·4.·· .:, ',< per us/as roml ~', "1' ::',':.': we Gb produotlon cost, Barning the wlthdrawal from th'e market of even 'w'e.alk'er IDRAM players, and a re.sult.ing strongler~t~han-expedtedl DRAMI market recovery" 'w'e find th'e shares a.re over-valued by around 45'% ..
1

l'

fa'

:','"

:::'.,'

Risks to our investment v·ew

If lnotera's [miigratiion to 40nm occurs 'ea.rllier than we expect, marqins could exceed our forecasts, A wi~lhdlra.wallfrom the market of even weaker DRAM players, and a, resulting s,tronger-than-e.xpecited DRAM market recovery, could present an upside risk to 'Our FY'11 F forecasts ..

Exh~b~t71.1 notera: cash and net debt tr,end

(NT$bn) Net debt

80

60
40

20

o
2006

2007

,200a

2009

1QH)

2Q10

3!010

,41Q10F

Source: Nornu ra esUmates

72.1 notera: quarterl y forecasts Exh~b~t

2009 O'RAM sales (NlT$mn) 36,104 1(4) 1,098 1(8) 659 (13) 1~7 6 2~'1
0

1Q10 11 518
".

,2 Q,10
i

3Q10
9~963

11,258
{2)

4Q'10F 9340..1 .", : (6) {27) 29 ,2

1

.201Of' 42,080 11 '1,311 20

1Q11F 9~939

2Q11F '11,338

3Q11F 11,.730 3

4!Q,'11F 12.,3,91

2011F 45,3'98 8 1, 421 8 1,196 107 0.8 (48) 1.1)1 1)1 (12 042).
,~
,

yy (%) -.'

q-q (%)
DRAM sales {USSmn)

(10) ,81 3f;0 (9)

'9:3

(12)
~

6
(14l) 311

14
1 355

16
3.3 388

51 352
{2)

18
:367 3

:312 (12) 7 178 1

yy (%) -.'

q-q (%)

6;

14
1 4135 5 141
08
'

16
33 4'94 '9 ,6,1 0.·8 (3) (17) 0.'9 (17) 7'9 (244,7) '.

8hipmen~ (1Gb eqmn)

,206
(3)
'9~

56 116 (14) 18 2.0 14 32 2.2

.'

{26)

308,

868
32 1.. 5 {9) 1~9 0
1(9,,577)

yy (%) -.' yy (o/~) -.'

q-q (%)

73
44
1.0 {46) {49) 1.4 {49) 9'6,

(14l) 41~ '35 ".:".

'.

18
453 .
.
' ..

(1)
1",7 (12)

,ASP {1Gb eq$)

1.7 (6) (1) 1.9 (1)

172

101 0... 8 (21) (51) 1...1 (51) 75 (3,986)

1:5~ 0. 8
u

q-q (%)

9 (5'9) 1.0 (5'9)

8,2

15
2",2

Cost (1'Gb eq$)

(1) (5~) 1.0 (5~) 81

yy (o/~) -.'

q-q (%)
O'RAM Of (NT$,mn)
OP marqm

32
.'

15
170 (2,58'1) (26)
"

200 (1,,'142) (10)

(,9,141)
(,27)

(1,.219) (11)

(4636).
..

(2,,858) (25)

(2,152,)
(23)

(%)

{50)

(23)

(~O)

(20)

(.27)

Source: Nom~m esUmates

Inotara, MemorIes,

CW Chun.g

NOA\UIRA

Year-end 3D Dec

FYD8 31!540 (521294) (14,7',55)

FY09 36,~104 (449143) (8,,6.39) (11002) (9,,64,1)

FY110F 4:~tOBO (495(I5) (7,425) (119(5).! ,,"'_

~:.: I:', " ,: '" l :': ,

FY11F 45,398 (.55,. 6,2} 6 (1D~263') {1!118} (1~O4,2) ,23~514 (34,,83;3) {18,2} (1~O4,2)

FY12,F 50!~3:l3 (51!734) {740Cl) "' _!11 ' {1,816} (9~216,) ,22,,413 (30!'906) {182} (9~216,) {2!200} 74,5 (10~6711)

Revenue
Cos t of 91000S sold Gross profit,
SG&A IElmployee, s hme expers 9

-'

"

(41110)

Ope raBin 9 p refit EBllDA

lDep reciati on .A1molt'isati m

(18,;925) 8,,.800 (2111'1 1) (13) (18,,9i25) (21243) (600) (21,7'68) -8 (21,1'160) ,.

..

(933O) -"
,

20, 154(291~H)3) (1 92) (9,,641) (119697) (1 39) (11 1477)

,23~240 (31111B4)

earr

(9330) ,
, "

('TIT)

On w·ea.k. co-st: com peflflveness ·and frailin9 DRAMI prices, Inote ra ~ooks set for a ~ossl'"'lma.kinglfV'11 F

lNat 'i ntelf8S1 €lxpelnS9

{114,Z)} (3.2~) (11,077) (5'~) (11,,128)

f' '.~OOO}'

Associmes

& JCEs
-'
"

Other income Earnings befo re tax Income tax Net profit a.fte r tax M ina rUy ~tJ1t-er€Sts Other items IPrmerr-ed dlv ldends Normal'ised INPAT IExtracrd r ti18J'Yitems Reported NP.AT Iblivi oond S Train stell'"to reserves 'Valuation and rati 0 ana lysis fD normalised PilE (x) fD normal lsed PA~ at price t~get (x) lReport.e d P'~IE (x) Iblivi oond yr e Id {%) IPrimJcashiftlow (x) IPri~Jbook (x) leVIES IIDA (x) leVIES 111Ir "x) Gross rna rgin (%) IE18 DA mmglin (%} IEI8IT mawgrtil (%) lNat marg'in (%)

(1L1,1477)

639 (13!403) 121 (13:!276)

84
(1 D~.581)

(211160) "
,

(11,477)
"

(11,128) (11128) ,

(13~276·) (13:!276) (1~276-)

(1D~·581) (1D~581) (L1 O~5B1)

(2L11'60)c' " (2L1,760)

(1 L1417)c _, (11 , 417)

"

"

(11 "l128)

na
na

na
3.7 1 .0 15.6

na na na
4.1 1.1 :'. 62 ::_:

na

tia

til a til a til 8

na
na

na
Ina

2B 1.2 6.0
118.

2.9 1 .1

3,1 2.3· 6-.1

til a

5.8
tila

na
(39.3) .23.4 (50.4) (58.0)
,

na
(23.9) "

rr

( fr.6-)
55.2 (.222) (.26.4)

55.8

('26.7) (31.8")"
,

(22.6) 51 .9 (26.5) (29.2)

Ina Ina

(14.1')

M.6(18..3-) (21 .0)

na na

1E1if~ctiva tax rate (%) IDJvioond pa,YOUlt r~) Capex to s~ 96 (%)

Capex to depr€ c latlo tJi (x) lROllE lROA

na na
163.6 .. 09

na na
.21.7 03 ('23.2) (8.0)

na
1.26.~ 1.1 (.21.9} (7.3-)

4-4. ~
06
.",.1

3~t1

0.6(31 .4)

(%) (p retsx 0/0.)

(35.7)
(14.3)

(28.9)

(9iJJ)

(1'.5)

Growt 111 (0")

lRevenLH~ IEIBI"fDA IEBI"f Normalised ~IPS Normali sed IFD IEIPS Per'share lReports d IEPS (N'T$) lNorm ~PS (NIll) f'u 11)y-~ d lut,~d nerrn I~IPS (NT1) (1 ~~t2) ~62.9) (6'98 1)
.,":' ""'1] /

(3.8) 1.29.0

~6.6~5.3· rB

1J~j
~ .4

10.9 (4.1)
til . a Ina til a

(11~r13,3) (1 l!tr13,3)
I

na na na

Ina Ina Ina

na

Boo k,va ~ ue IDPS (NT$)

Source:

pe r sham (N 1Ir$)

~6.. 2) 5 ~6.·52) '~6 52) .. ~5.02

(3.19) (3.19) (3.19) ~3 .. 55

,_..
._.

-,ji
_.

"_"

(.2.45) (.2.45) (.2.45) 1 1.61

(2.93) (2,93) (2,93) 8.63

(2.34) (2.34) (2,34)

., 625 .

,"

NO mulra estmstes

Inotara. MemorIes.

CW Chun.g

NOA\UIRA

Year-end 3D Dec ~BITDA

FYDa B!BOO (1 !JJ81) 5·!351 13·.!DM (23!879) (10,8,08)

FY09 20.~154 (2!640) (4!9 51 )

1

FY110F 23.~240 7663

;11 .":: ..

FY11F

FY12,F

.23,~r14
3!~208

.22!~4:r3

Oh a ng e ~nworld nlg eap it3~ Othe r 0 peretl nlg cashfl ow

CaLS hflo,w from e pera.tioln s Cap ita.11xpendtu re e
F'r,. cashfl,ow [Red I!..I1ctio 'inl inv€6 tments n [Net aCQlu'i.si t10ns [Redu']ctiorl in other ILT' assets .Ad d iUi mini atirer l T' Ila b~1iutes
Adjustments

7
(1,441) .21,,033 (20~OOO) 1 :II 033 '

{8081) "'!', ~.'

.22,8'17 (53':"!"." .' ': '. ( 69) l,
1

(~119)
.22,00:3 (20,OOO) 2~OD'3

1.a,564 '.! .', .. (7818)''.'.' ~746,

(30,252)

~,~23.2 5,97-8 (21 !1'160) 13!900 (1 !2.89) (11 !642) 6,~920 (6,,011 )

201

CaLS hflow afte r iIIlve.sti ng acts

Cash dMoonds !Equity iSSUB
[Debt issue Conver~ibl e debt ~ ssue Others

(:30,051)•. 3!~8(]8 .21~446

2'~001] :'
,

"

1~033,
(1 O~754) (6~'944)

2i11i "'il'EiQ u! ,iJt,J

1.2~987 (614)
i':!'

~2 . 4BH
.37,,743 7~692 5.~31'6 ~3~0e:8 13,339

~3,~537 3~063 5~066, ~3,,069 ~8,135 11,329

~O!~754

O1LS hflow from I nancia I acts Net cashtilow

Beginninlg cssh !Eln d inlg cas. hi ~Ind inlg net debit Sm.m::e: No rnura estmatea

(6~944')
(5~9111) ~8! 13,5 ~2:~224 10!~2S6

(34)
5:~4~O 5:~37'16 59,~586

UI~U~

n,,).I.I1

:;,!410 7~! t94

Balan·a $heet (NT$liin)

Ali atlD Dec Cas n & eq u iv,alents M arketab le s ecu rifles
Acc:()urn s re ceiva.ble, FYOa 5,!410 400 .2!139 .2938 ' ! .... 4!151 9.~5,2'9 345)0 '."
,~
'.'

FY09 5,37 0:.

,,~..

FY110F ~3.,06H

FY11F ~8,~135 8!~7.26 4J~;90

FY12F ~2!224 a~742 4!~8S9 87 ,25,951 9'r~85,'9 5314

. ·'!W· '. '

6",517
3~686 2.~311 .25~64'3 123,598 5. ,314
1

Invento ri €:S
Othe r CIUrrent assets. Total cu

ITem

555 18,911 97,~685 5:~800 (2!006) 12~396, 22~783 3~725 ,2~852 2:9,361 ~,2,~17'9 2.8

Hi
3,1~8]8 108,765 5,~314 234 146 ~2111
.

assets

15742
"

LT' invsstm e tJ1m

fi xed assets. Goodvill1l1 Other inta.ngi b le other LlIr assets Total iltSSets Short-term deDt

114 ! ~62
8JSS
1

0ts

4~380 (2!014) 13.2,!,271 25,! ~10 3~535

~ ! 9l1J ':"

{2215)
'," l

_:

'~5~O}
1,28,544, ~H~040 ~2!~89,5 4!~747

152:11341

~9.,04}O
9,703 3:r51'2 3,2~J15
."

~9,~040

Account S paJysb IB Othe r CIUrrent lie bil iti ,08

~2,87'2
4!~739

Total cu ITelnt liiabil'it ies

Lo nlg-term debt ConV'B'rnble debt

30~6,21

36~6S2
10~4,23 30
l.!

36,,683
63!~19 30 '100,1'92

5~ !4941
38
,

6736-7
.~'"

'.

Other llir Ii B,il Ii t&es Total Iiab i'litiH M ina rity ~tJ1[.eres t [Pltmerr-ed stClCk,

22 99,,70,5
" . .' •
','

82~153

7'1,56,8

1D71D5 ,
"
',',"

Comm on stock

[Reta,i ned 'earn nlgs [PltqJOs 00 d i~d e nds Other eq u it '1' a nd reserves Total sh at en ,0 Iders,'1 eq u!ity Total eq uirty [Uquid ity (X)I

33!375 (12!5'91) 29334. '! ':'. 50,,11'7 13,2~271

39,~77'5 (24!068) 33,~121 48,82,8 12:0,3'9 6

1

46~11',5 (35·!0'95) 41.~55'6

46,~175 (48624)
.:., ",". ," ~r

46:~17.5 (5'9~379) 4155 o !~"':'".' ,28,352

J

41,~556 39~10 6
1

52~636
152~341

& Ii abUit i,es

146~2111

1,28,544,

au rre nt ratio
Interest cover
[Leve,rage· [Net [Net

0.51

0.64 (5.7)

(l19
(6.5)

081' (6.0)

0.71 (4.2)

(Et4)

o ebt!~B rr DA (x)
o ebUequ
it.y

,8J)9 142.1

.2.96 122.0

3. ~6 13'9.3,

3.03, 182.4

3,13, 241'.9
1

('0/0)

Activity (days) [Days reeelvab le [Days inventory' [Da:ys payablle Cas hi cycle
So!J.m::e:No mulr:a estmates

45.7
, :'1]< 268 -,'

62.0 ,26.1
o

69.9 ,26.3, 49.5 46.7

61[.5,' '_
,

- '._,". 633

'._,',

28.~ 740 15.6

39.9 32.5

296
'!

."_.

30 9 81 .5, 12.8

- ...... 585

'_

-"

Due to weak casbflow gener:aJtion, nEri debt ratios are fu recast to keep rlsln 9 ~ n

FV121f

Memory

I GI,oba~

CW Chu:ng

NO.d\URA

ANALYST CER.T~FICATION,S
We" C,W Chung" Masaya Yamasald, CFA! .s~dney Ho, M,arceU-oSeongsoo AfJ1nand Tetsukazu Tsuruhama, hereby certify' {1) that the vi,e:w~ €fxpressed 'iimth ls Research Irre:pOIIT accurately reflectt ou r personal v~ews. abo ut any or a[11of'the s ulble;ct,secJUl~itiesor' issue rs referr-ed to ~mth is. , [R!e'sealr~hreport! (2) no part of' OU r co m pensatlon was, is o,r''wi[11 diirecIIWy ind ~rectly related to the speelllc recommend atl ens or views, be Q,r expressed 'iin'~h'i'sResearch report and (3) no part of our compensation is tied t-o any speelflc inves~ment. banking transacflons performed by' Nom ura Secu nit]es Intema~i:ona ~,~nc., NomUI~,a,~ ~ ntern~i'ona,1 plc or amy oths r' N,omlura Grou p oom pany,

Issuer

Tiek,ar

C I[os,.ng price dale

(\01'1...'.uII"'!iIO" JP"Y""II ;;:;111 4' r'
_>

[ELPIDA, MEM'O[RY~~NC.. [Hyn'itxSem'iioonductor Inotera Me modes N,anya TedfJ1nology Sa,mlSunl9 !Elec.tron los
lOSHIBA CORPORATION

6665 JP
0006 60 KS
1

10

[lie;c

20 1[0 '

----------~------------------Neutra[1 8 ~1[ ~47li~8~,49~ O~81[ 2 5

J

[Ra.li ng

D'iselosu res

24500.00 KR',W
14.7!STWD 16.70 TV\ID 91['9fJOO.OOKR',W

10 [lle;c 20 1[ 0 10 Dec 201[0 1[0 D,e-c,2010 10 Dec 201[0 10 !Ole,c 20 1[0 '

Buy' Not Rated Not Ra,ted BUTY Buy'

:3itl,8,~47 ~4e,~18 1

:347,~TT 2~08n' 005'930 KS 6502 JP

108 3i4~18! 7 !48~,~9! ~ 12,4 50 81[

43,2.00 JPV

Dilsc,losures ~eqluliredlin the UI.S,.

41 In the past 12 m,Q,nths NomUl~,a,Secu rltles ~n~e:rn.a.tio.na~ a nd lor its affi U,a.t.es lnc, has managed or co-m anaqed a. pu bl'iic or R.u[1 1MA offeri ng of'the co m pianys. e seeu rltles in the past 1[.2: mo nths, lB· rsla,ted COl11llPEM11Sati on In the, past 12 molllths
~I ~

ManagerlCo-Manager

48
49

NomUI~.a. ecu rltles ~n~I~n.a.tlo s nel the past 1,2 rmonths,

Possible IB

nc a ndJor' lts ,a.1m1 has received ceropensatlon fOlr ~ ia~s nvesnnent ban ki ng se rvloas from ~he com pany in

50

services mrom the oompany In ~fJ1e next th ree months. Nomura Ben.efic ial'Owne rsh;p ,o,fSecuriii $$ D'~selo$u fU. NormUI~,a, secu rttles ~ nte:rn.a,tio,na[1 nc and lor its am I'iiates be ne'ffici,any ,owns 1% or more of' th e com mon eq u ity secu r'ifljiiooo'f 1uhecom parry,
~I ~

re hl,tad eompensat~on in the nax13 months, NormUI~,a, secu rttles ~ n~e:rrn.a,tiona[1nc, and/or its am Uates expects t-o receive or 'iint.endlsto seek co m pe tJ1salmion ~nvesllm€nt ba nki ng for
~I ~

Dilsclosures reqlui~ed iln the EUlfopea,n UIl1~OIIl1

3 Lead
1m anagar/'co

..laad ma nag 91r' _e,l!Jrit~ieslrela,t9d derlvat:ives offeri n 9 of'

'OV1~ r

No m ura Intennait'iiona.1pic or' an affiil'iiat.eiin fh e glo,ba[1N,omura 9 rou P has been [I ad manag er Of co-lead ma nager e months ,of a pu b~i,clydiisclosed a.flfel~of the issuer's secu rifles or related derivatives
4 Marlket mak,er

th e prevfl ous 1,2

IIjJ

Nomura. Intennat'iioma.1pic or an affiil'iiat.eirnthe globa[1 Nomura group, ls a market maker or [Iiqu'i'dity provider 'iinthe: securltles,' .... 'v.'~ ..:.,~~, n.f th n lssu ~r erivat 'IVD~ 141. . ·111 r~d··
g; . g;
I~j til

related

InvMtment

bank;l11g services

No m ura Intennat'iiomal pic or an affiilii'ate in fh e glo bel Nemu rs 9 rou p' is. party '~1IJan aJg reeme nt with 1uheissuer rslatl ng to the: provislo n o,f investmlemt ban~iing services ~wh~chhas been in e,1iFect ver ~he past 12 months-or has g'irvemrise dur'iing tile same peri,od to a payment or o t-o the pro mise ot payme n~. 12:,'
,,'

Nomura 1'% shareholdi[ngs

No m ura Internat~onal pic and/or capita ~o,f the: lssuer,

nm am[1 lates

In ~he 9 lobal Nomu~,a 'group have sherehol dings exceedi ng 1[ of the: total Iss uedl share: %

Dilsclosures ~eqluil'ledliln Japan

81

1'¥~[Disclosru re The ccmpan ~es 'iimthe: gllobal Nom U ra gn)u p beneficially own 1oy~ or more o,f the: commo n eq u'iiltyseeu titles .of the lssu er,

Dilsclosures reqluiredl n Korela.

108
Li[qui d Ity Provi dar 'fa r E,qu[ity l;
III ked

'Wa rr,a.nt
~I

NormUlr,a. i nanclal Investme nt (Korea) Co. Ltd. is a [Iqu~d ity provlder (LP) or LP '& Iss uer for E LW wh ~ch th e urnderly~m91 'iisSamsung F i E[Iectron'iics {005930,. K'Sl~and holds, 51~ 599! 090 warra nts as of 10-Deo-20 10", 118
Li[qui d Ity P revl dar 'fa r E'q u[ity l;
1

III ked

'Wa rrant

NomUI~,a,Financi,a.~ Investment (Korea) CO'.~I Ltd. is a [Iiqu~dity provider (LP) or LP ,S; issuer for ELW wh~ch the; umderly~mgl'iis Hynlx .germleon d uctor (0006 60. KS )I~and hol ds 5~,~307,~230 arrants as ,of' 1[ -Dec-20 10. w O

Memory

I GI,oba~

CW Chu:ng

NOA\UIRA

Pre'vious Ra,tings
Issuer IELPIDA. MEM'OIRY~~NC. IHyn'itxSem'iioondllctor Not Rat-ed N,ot Rat-ed IR,educe IR,educe NeUtra.1 Newtral

Date of' ctila,nge

06 Jan 2009

09 Aug 2010
13' 0 a uec 20'10" zu u 13 Dec, 2010
03 Ju~2009

Inotera Me mories
N,anya Tedhnology Sa.msung IElectron los IOSHIBA CQ'RPORA TION

1,2 Jun 2009

W,('tlOO}

W('UOO)

1,4iJO 1,~OO

::35 ::30
:25 :20 15

1,om~

soO ~oO

10
5

o ~-----------------------------------------------'lli'i'ElC",atl~iEI:ssiiilmaD

O-~-------------------------------------------------Dy ,c.w Chun:g on ~ [~, 110

I

-----.,

iii iii

•
~ Iii ~

~:2 _ ~tlJmg systa .

E!

S;
,~

.~

o ~5

"'1--_...... :
29 Oclt :2008

ClJ.VfII'aga,.ass~1 by (liV alJllI'Ig 00 .5 Mar, 109

.,

IB I;;!",i

~ ~

filii -_
__ ~=F-__ --~--~~~--~--~~--~

- ~ ~--~--~--~~

IDee--m ~r--oa

Jun-08 :5.Sfl-,(JB, Dae=Oa ~r--Og

Jun-09 Sap-0J91 ~~g

Irkr-- ~O Jun-~O ·~1

~(i:-

~{D

ELPIDA MEMORY~INC. (6665 JP)

,.,t"Ii_j,;'l=J.__.._____;"ftftll 0 ~ e~' ~~lJr--~~.~ ~ .'
~,,= ~

4a2.
4mft.., 3®i4Q ._ 35'94. 3328. -

I
, I

3u12-, _ 2-~~IK 25':60

2:B04: _

~m;..
~'19~;, ~5Q6. t :2Sa .

7~S'. '!s~~12,
;milil'jii; ~U:I -

=.
-' I

elosin ~ Pli",i~~:
R@ ~~f:n:!r~!i@ d~'ij~fi n

Ch

tEI~ ~~-

~t'jo~ la__ t, ;~ Dt''@p O~w.lrE!te

Memory

I GI,oba~

CW Chu:ng

NOA\UIRA

C Ies ilnfa P'rica 04- Nov-.20110 1O-Sep ... 0 110 2 30-Jul-.20 10 20-.Apr-2010 2El-Jan-20 10 06- Nov-.2009 05-.Aug-.2009 13- May-.2{J09 09 Feb-20Qr9
c -

1300 20110 1601 1387 1.286 111115 1050 7.25

1100 1560 2100 1900 1500 1350 1150 1100 700 6.29

06-Jan-2009 06-Jan-2009 05-Jan-2009 598 23110

~~3~~'Q
OI!JR1tev·'~ .py

'~I11 '

se,
,

'~Iioa~_

.---

S1ell~n2~ .

~.'
25~t
11:~g_
11".

II

2'00i6:,J.@

j _ I( ~ ~.

l~
_, •

.:2 OO~ f~11.

~

J ~. I

'..• ;

!I ~

ClDsin I; I~f,ice' Re commne nl'datio.n I~h 31iii Je ~

,2'Q[i9lt!l~ ",

J _! . ~ i,." •

~~ice' '!I1;slIi;e't: IDf'Q~ 1~9ve rs~'e

Rati ng 462

~~~~~~~~~~~~I

Price Target
650

·531
01,-Feb-20 11 0
30-0,ct.-2009 467 ·530 '3'8'AI
,:,_,
.~.:.~

700
620

6~0 560
Buy
-------------------------------------------------------~l

11,-Jun-2009 20-.Apr-2009 30-Jan-2009 06-Jan-2009 06-Jan-2009 05-Jan-2009 08-Sep ..,2008 28-,Apr-2008 409 409

320 373 389

549

Not. Avai'l abille for 1 notera M emIQ[fi]es. Not Avsi'l sbl e for INanya Tech n01ogy

Memory

I GI,oba~

CW Chu:ng

NOA\UIRA

Ilmpo,rta,nt Dis,clos,ures
Im porta nt disc~osu res may be accessed th rcu 9 h '~hefo~lowingl webslte; http:ltVilWW.rn()mura.co mlresean:hlpa,'~;1'E3S!d isc~osu res/d Iseles u res,. aspx-, If you have diiffiaulty with th is site or you do not h avs a password, please co ntaet your No m U fa Secu nities Internadonal ~~ sa[1 nco esperson (1-.877865-575,2:) air erna'iil 9 [Jpsuppo rt@nomura,.com for asslstsn ce,

COmilflict-of;·1nterest dlilscillosures

Onllilliinle avail ablillll~tyaf researclh and add~Uonal confl.ct-of·!lln~,erest,

BLOOMBE[RG,. Im porta nt disc~osu res may be accessed th rou 9 h '~he:left ha nd side of the: No m u fa Disdl osu re 'web pag e http://WVifW.nomura ..com/resea.rcih or requested from Nomlum Securiiflji'es Intemlati'ona,I" lne., on 1[,-817,-865-075,2",~Hfyouhave any diffi,cul~ies with the: webs'i~-e! please email grpsupport-eu@nomuraJ.com for tech nieal seslstance, t-· I~ .... r~i"!.t"Io'!'" c·omn.t"lo~ns based upon i·'~'r'!']ou~,.:;:i~u;jI6, ·In...udlne~ fhe .;I;1']r--m!f!~ i"bVbnu~~ ,.:;:i ..... ~'!']on factors IIIVIl .. "_ II .. !~: 1111· 'II'-... tal Irii.~III .. 00 ~ . cillllo. :'-~Il....-::ii; ¢;;-t". III::' '0- it'iii!'~n~i"·lng ls report .. !O!v~1~~IIV~u : ~¢;;II: i5Iilbl·111_i5Ii~~U : __IIIVa 11 I lwij'~, lh~,~: analvsts resoonslble ~ tor t"lr,~j.;\.:;:iu- III _:_.11111_, __,flt h~,'I;.r~ pori ion of wh ~ch ls generated by Investme nt Ba.nking activ"iflliies",
-b .... ;;:j; ;;:j;
1

dliscllosu res Nom urn Japanese Eq uity [R€'sean::h is, avai~able '~ileCib~on~callyor c~i!e 'iinthe: US on NiOM U RA,.CO'M~,REUTERS" BLQO'M BE[IRG and f nts IHOMSON ONE ANALYT~CS. For cl'iients in Europe~, Japan and elsewhere ln Asia it is aJvai[lable on NOMURAmCOM~ REUTERS and

Industr)l Specia[1lsts Id entlfled in some N,omu ra Int-el~n,atio plc research mpOI1$, are em ployees 'with i n the Fi I'm who a re res pon sl b~efor th e na~ sales. and trad ~ng effort ~ the sector for wh'iich they have coveragle", ~ndustry Speicial lsts do not contrfbute in ,(1ny man n er to the: cont-ent .of' n research report in wh'iich the:~r na miss appear,

48% have been a.ssigned a Buy I~a.tjngwh'iich~,for purposes of mandatory dlsclosures, are dlatSsified as a !Buy rating,; 4~% of cormpan'iies 'with thhs rati ng al~,e: investmenrt ban king] dIle nts oill~he N[omu ra GlrOli p~. 31% have bee n a.ssigned 8 N eutral r-a,tj wh'iich~,for purposes of man d atory dlscl osu res, is, class'iilffiiedas a Hold rating:: 54% of com pa n~,eswir~h ng 'tthh, raf ng are lnvestrne nt ban ki ng c~i!ents ofthe Norm usa G rou pi:", 13% have bee n a.ssigned a Red uce ratl ng which! for purposes of m andatory d'i'sclos ures, are class'ii~ied as a Se[11 rating:: 11 % of com panles wn~h B ,tth'i's Ir,a,tingare investment banking c~i!ents ofthe NorrnUlr,a, Groupi:", As at 30 s,eptem ber ,2010.

IDlllsftrjlllb ution af Iratings (G loiballl) No,m u ra ,Gilabal IlEq u ity Research has 1878 com panies, unde ~ coverage,.

BplarliilaUon af Nomurals equity research r,atlng syste,m in Europe, Mlddl,e Eas,t and Af'rlca" US and Latin Ame,rica for rati IIIg5 p u bl is ned from 27 October 2008 ls ~ r".£j,[I~tI!''i;';~ illII lndlcl.!albu II. . ¢p,A_.: !ii7ll.,jl¢;iU n.t"lol"*- ~,. 'V....,: acalnst ~ soeentc'(,.; benII.... ·1~lll\, ·._ ~I Ilullll!ii7_ $.... ¢;;i5Ii",11111II_ IV.I'!' ; ial sto .... .... IHn.gif!iJ.Vp~"""''a...;![0 ~rm~"n""'~ hm~'i'~·'"ld~F'iI...:i'~'~d '!']nd~" UIl;JI, ""-"Il,J't,..'",k .... III'~: -~. III _:_svstem :;;,.,'¢.'.~ 1_, 0, II..... ~,I!I v ~ ;:;I' ;:;1'11"....,:11 l, Y III' ~¢;; In I o:~ 1~lb~,;:;I' ~~",I .01 liv'llIII l ...~ r·~t-·lng An ,_ "1_'S'ttrs' ...' aIso.- "I'ln~ca®e· .... _ __ .. pslde to pr·~cet- rget d eti1_ _ '_,. ('·fa val ue__ CU rrent - prl ·00·)·/C!1· urr-ent- prloe ~_sub~ect- to 1·1 ·~ed man I age m ent a~~ . may -d 1- .._' . aooollUtte·u _... . _. .. a ned as ... _.·11rm I ~_ .' _.:_.~ I _. _ ..'.: : . I _._ ~'_ .. _ . _ 1_ _ .. _ _.._ ~ I
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dliscr-etlon. In most cases ~the fai r va[1 wU I equel the ana ~y."S'~~'s ue assessment of' the current intn nsle fa,irrval ue ot the stock usi ng an appropriate ~val atlo n me~hodlology such as dis()()u nted cash 'flow or mu Itiple analys,~s~,et-c. u ,A ratl ng of Buy_!i ~n ~ dlcates that the ana ~ys~ expects the stock to. outperform the Ben chmarit over the next 12 mornhs, ,A ratl ng of INaulra[1"~lnd ieat~s ~hattt he a na[ly:st expects fh e s~ck t-o perform in !'iin wlth the Be nchmark over ~he next 12 months, ~ e ,A ratl ng of Rad uee', indiicat-es that ~he a na~yst expects the s1t-octt-o Underperform the Be nebmsrk over th e next 1,2 rno nths, ,A ratl ng of RS,..R,a,ting Sus pended', ~ lcates that ~he r-a.1l1 and 'tar-'g l)or-icehave be,en ,suspended tern paralri[II)l'o com p~ywtr~happUcable nd ng et t regul,a,tions, a,ndlor fi rm po~icies in ceria.i n ci rcu mslta nces inc Iudiing whe n NomUlra. is ac~irng]iin an advi,sory capacity 'j n a mlerger .ar s,tra~egie '~ra.nsaction involving the: company", Bench m,a.rks alrre:as fol[1 OWS: United States/E uro pa: Please see va[1 ation mellhodolog ies for: eX1p~ U anatio os' ,of releva n~ben ch mar~ for ,stndi<s (acc:e$s~ble through 'tthe left hand s,jde o,f the: Nomura Disc~osure w-eb page~: htttp:Hww~w.nomura.comhes,ea~ch)~,Gllobal Emergin;g Markets (ex .. As i a]~MSC,I Emelrg ing] M,arkets !e:x-A$,ia~, unless CD,th erwise $,tatedl iiinthe: valuation m,e:thodology",
I I I

STOCKS

SECTOR,S

,A IBu 1[1 ,smnce~1indi,ca,tes that tl1e an a,lyst expec~, l1lhes~-ctor t'O 0 utp~,nFormlthe: B·e;nchm,a.rkdur'iin9 th€: next 12 months. ish' A IN;eutr,al' stan eel ind iCEdes'~hat the: ana,ly"S~expects the sector to perform in l'iine:wn~hthe Benchmark diuning ~he next 12 mlon1hs,. ,A IB'N,rish' sta nee ~~ ~cat-esthat ~he a[tJ1a~yst nd ,eixpects the; sectnlr '[to unde rp:errorm thei B,ench m,a.rkduriiing th€: next 12 morn~h$.. Bench m,a.rks alrre:as fol[lows: United States: S&P 500; Europe: Dow ,JQne's, STO:XX 600; G~oba,l[ Emerg ing Markets (,ex-Asia,): MSC,I Errnel~girng] Malrk!ets ex-As'iia,.,

af Nomlurals e'qulty research rating system ':or Asian companies 30 October 2008 81i11d in Jl1apan f'rom 6 J a nUlary 2009
Explanar1ionl
STOCKS

under coverage ex Japan published fro,m

Stock, r-eoomlmernda,~i'ons, re based on aooolu~ valJU~ttionupside: (downsJdel, wh~ch Is defirned as (Price Ta~et - Cunrent. Pr'iice) l Cunrent Pr'iicel a subject to Iirn'i~t-ed manage m€:nt d~scre~ion '" ~n mlost ,ca,ses" the: Pni,oe T a,rget WiI[1 equal ~he a na~yst)$ 12-monrth intMns,~c, a [I a.1] of ~he s.tock~, v u on b~ssd on an a ppr-oplria1t-e a,luat'iion Im!e:thodo~ogy S uclh ,a,sdisco IUnt,ed ca:sh 'flow ~m uItip~,e: liia.lys'iis~, v a et'C,. A IBuy' moomrne nda~~on 'iindieams. ~ha~pot-en(t~alupside ~s15'% or more. ,A IN;eutral' reoommendatt~on ~ndiea~$. ~ha~pot-en~~alupside ~s~ess than 1[5,%, orr downsIde is I,ess,ilihan 5%. ,A IRed uca' rrecom men da,tion ind~,cates that potenUa[1do:wnside Is 5'C% or mlore. ,A rati ng of IRS or mR.alI:i S uspended 'iindie~~s ~hat '~he rat'iin9 and ta,rget pri,oe have been suspended t-em po,r,a,M to co m p'~y'with appl ieabl!e: ng Iy regul,a,tio.ns a,ndlor fi rm poUcies in ceriai n ci rcu msta nces incl udiing whe n Nomu r-a,is actingl 'iinan adv'iisol)' capacity 'iina merger ,or s.tra~e-g ie 'ttransa,ction involving th e suqject com pa ny. Seicur-ities, ,andl'or co m pian'i'e.sthat arr'e:labe~led ,as,'Not rated· air shown a,s INo min'g' ,are nat in reglulalr researoh ,oov1era:Q,e the NomUlr,a entity of ·Id~nt-~·fi~fid .. ~ Iwij't"Il;JI,III¢;;;(. ·Int-·h~ it'iib~-nnfi~r In" -~~tJo~ ,;i;). 'vullU~...;![ It ~X_oll.,jl 'nn-nt-·nllU~ng . ~,"_ ..•..rlbllll~, 111111011-·· .111 ·fnom·No~miii"~.. r\n[I~t-:!']F'ilnIt'!'u"h S~"i '~-r'!iI-:!'~It'!, . It'!'hni III.· ~~-~p~"""'"V .11; I: IIIII'~, or ~dd"I~¥'!']on~1 i no~ ·r"",,.j!'i'iii!'~m,,,,"I¥·lon II UII~ ~ o.l!llll'~ ,II'..... ,d·· ......_ ~"'II.;'II 111l!lod ci IlL;f -t"fI'n...;!!·or '~!~IIII I¢;;_ IIIVoo.-.16, Ii;Jo' alb 1'.··· 111V' co··"m····n~'nl~I'~'~
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Memory

I GI,oba~

CW Chu:ng

NOA\UIRA

SECTOR,S ,A I[Bul[lish' rait'iing means most stocks in the sector have (olr the we'i'ght-ed avelr,age reeorrmendatlon of the: stocks under coverage ls) a positive absolute: recommendation. ,A IN,eutr,al ra,tjng means most stocks 'iinthe: sect-or have (or ~fhewei,g hted average reeomme ndat'iion 041 the stocks under oov€:ra,g!€:is) a neutral absolute: r-ecommendation, A I[B'&I,rish' ratl ng means most stocks in ~he sector have (or the 'weig hted a,verag e reco m mendano n ,of the stocks un der coverage ls) a negatifve absolute: reoommendaflon.
l

ExrPlarllilat~on af Nomura1s equity research ra,tlng syste,m in Japan published prior to 6,January 2009 (and ratings in Europe, Midd~e Eas1 anld Africa, US and latin America published prior to, 27 IOcto,ber 20(8)
,A rating of 111 !1,Strol11g or bu-yf~ indh::ates that the analyst expects ~he stock to ou~perform ~he Benchmark by 15?to or more over the next. s'ltx months" ,A ratl ng of 121 !Bury'~ ~ndleates '~hat the ana ~y"S~xpects th e stock t-o outperform the Ben ch mark by 5% Ol~mo re but less than 15?to ove r the: next or e six momhs, ,A ratl ng of 13 or !INeutra[I' ~lnd ic~~,es~fhat'~he ana ~y"stexpects th e stock to either outpe rtorm or unde rperform th e B,ench m ark by less th an 5?to ov!er '~he next. s'itx months", ,A ratl ng of 141 !IR,educs', indiicat-es that the a nslyst expects the stock to underperform ~he Benchmark by' 5'% or more but less tha n 15'% over or '~he next. s'itx months", ,A ratl ng of 15 or !1,Se[1 ~Illind~,cates that the an alyst expects ~he stock to. unde:rpe:rlform the Bench mark by 115,% mOI~€: ver th e next slx momhs or o Stock,s labeled "Not: rat.ed 11 or ,shown as, 'No rati I1lgl al~€:not. ~nNomera's regulalr research coverag e" Nom ura mIg ht not. publ ish add~1fI onel reseereh reports con ceml ng this company, and it u ndertakes no obi ~ga,ti:ont-o' update the: analysis, 'esti mates, pro] eenons co nel uslons or o1jher intormatlon oontal ned hel~€:~n '"
1 1

STOCKS

SECTOR,S

,A I[BuIIIish' stance, indi,ca,tes that th e an alyst expects l1lhesector to 0 utperforrn the: B,e:i1chmark dur'iin9 the: next six months. ..... "C;J!jl _. Iii7it,.;;Lti, t-,J)...,o.._:l'V r.,1401' . po...t....... IIII . ,~: w-!!jlh11J111¢p_¢p _. ';";;1111 1i5II11~,..!Jun'-ng- no""+S'!fvmonths,,j,,, . _. ... B'on........ .. U .. _.... ~ I!~I~ I¢pAl -_.11,,;. 1'_··. -m.".,. 'm... ,A INeu£r~11 stan .... 'In..!J~ .~ ., __ Ii. ,~ . .. -.. Blllli,..~~n 10 I~ ates ,!jlh,~tIII . -(;I . ~h~ anaby.:i;lll~ oxpn ............. sect .....t- .....~I-I'u -rm ~ l"I'ln~ I[ ~,III'~, G:, ... l!11~ "".¢p __ ..-....nlll· ... A IB'ea,rish' sta nee ~~ ~cates.that ~he a nalyst expects the; sector to unde rp:€rform the! Benchlm,a.rk dur'iing the: next six months. nd Bench marks alrr€:as fol[lows: ,J apa,n: TOPIX:; UI11 it.ad States: S&.P SOO~ MSC~ W,ortd Tech no[logy Ha rdware &, Eqtiiipmennt; Eu rope, by sector Hafrtwaflf5/Sf5;mlc-onducturs: FISE W' Europe IT Ha rdware; Tetecoms: FTS,E W' Euro pe Busi ness Selrvices; Business Servjces~ FTSE W Europe,: Auto & Components: FTSE W Eur.ope Auto &. Partsll Commu.nications' equipm"en;t~FTS[E 'W Eurr-ope II H a,roware: Ecology Focus: 8100 m be rg Wonl d En ergry'Alternate SOUI~O€'S,; Global Eme r'gin'g Mar1kats: MSC~ E me:r'ging M arkets ex-Asia,
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411)..0

+!I)..,o

Explarmla1iormllaf Nomlurals e,quity research rating system for Asian companies to 30 October 2008
STOCKS
1

under coverage ex Japan published prler

Stock, reoomlmenda,ti'ons, are based on absolu~«eva,lua/~ion ups~de: (downside), 'wh~ch ls defined as, (fa,ir Value - Currennt Price}/Currern~ Price, subject to lim'i~t-ed manaqement d~scr~tion", ~n most cases, the! Fa,ir Value will equal the analyst s assessment of the current lntrlnslc \lfa'iir ,a~ue of v the stock us'iin9 an appro pri8~ valu8Eiorn meth odologry- Sijoh as D lscou nted Cash Flow or M u~t1 ie a na~yT;is,etc, However~ if fh e analyst. doesn't p th ~n the: ma rket wi n revel ue l1lhestock ove r the ,specified ti m e horizon due: It-oa, lack of eV1ents or cata~y.sts,~the n the fal~val ue may diiffer from ~he k i ntrnslc fsfir va[1 In most cases, thelrefore, ou r recom m!e:ndai~ionIs an assess me nt o1f the d rlTmrence between current. market price and our ue" es\t'iimate:of ou rre nt intr'iin.sicmi r va~ue, Reoomme nda\t~on.sare set with a 6-12 month horizon unl,€'ss,speclfled oth€rwIse", Accordiinglly ~'with in this horizon ~plrice vol atiilm1y ay cause th e actual up$'iide or downiside based on the prevai[1ing market pnice 'Eo, d i1ier Tir(Hm the: upside ,or downslde m imlpl'iied by the recom mendatlo n, ,A IStrong buy- recom mendatlon 'lin leates l1lhatupside is more th an 20?to, d A IBuy' recomme ndstlon 'lindlcates that upside ls Ibetuveen 10% and 20%" ,A IN,eutral rscomms ndatitIon ~ lcates ~hat upside or downs ide is less tha n 1 O'~, nd ,A IReduca' rrecommen da,tion indicates that dnwns.ide ~sbehiveen 10% and ,20%" ,A IS&I[I' recom m,elndatiorn ~ndicatoo '~hat downs I'de is mOlr,el han .20 %, ~
fl

SECTOR,S

,A IBulllish' rait'iing m!€ans mos\t .st-ocks in the sec!Uorhave (olr the we'i'ght-ed avelr,age recomm'e:ndation of the: ,s\t-octs.unde~ coverage ~.s),a positive absolute: r~commendation, ,A IN,eutr,al ra,t] ng means mlost stocks 'iinthe: ,sect-or hav!€: (or lfhe wei,g hted average rncomme ndat'iion 041 '~hestocks under oov€:ra,g!€:is) a neutral absolui€: r~commendation, ,A IB'N,rish' rrating means mos,t st(l:cks in ~he s€ct,or have (or the 'weight,ed averag e rr€oom mendatio n ,of the s,f,ocks un de:r coverage is)1a. negatifve absolute: r~commendation,
fl

DISC:[LA~MER,S
Ih is, pu b[1 icatio n co ntains mlat-eniial~ha~has been plr,e:palr"€d the No m u ra, enntmby ntified on th e ban ner at the: t-op or the boUom of pag e 1 by ide o n..n.1n.li-n'~[11 it-'IO"'S O"'~ nf! ~mni'n Nn;m·IUla ,n...t-~t-~fiS or~'I-n ~I~I'_ ~ ~,_ _ I....~,V ~~p-.h.!lll- ·th --"""o~,afi~mn[ln,y~~~~nd ,!jlh,n"I'lr oit,.;;U'~: ~,MI[I'I'~t-~on"'" sno .... i"'fi~'-paffl-iv~· bl_"III"'" ~i"'fi ~fi~d II ~11111¢p_ WIII·':>1ii7 ¢pll ~ IIl·~IG:.:>_ ~HI ~,'G:_~~~I hIG:I~ . ~'Fild IfII ~ppl"'''''~''''lo w"itil).. I~ WillI[· R;I:;.II "·.·111__" of ... III~ """,111- """,110 .".'VI on pagle 1 he rei n or e[l.seWlher~ identiilffiiedin the pu b[1 ication, Ami iates and subsidiia,rie's, ,of Nomu r,a Holdi ngs" Inc" (001[1 ecti~vely,~ the ~Nom ura, G mu p'), inc~ude:: Nlomurra S'€-CUlritiesCo"'~l'~d, fNSC,T) Tok.yn,~Japan; Nomur,a ~ntem a,tIona[1p[1 liU n~tedlKi ngdom; Nomura SeoUlrities Int-ernational ~Inc", C f N S~ NecwYo,rkll NY91No m ura, Int.enne~~on I)~ a,1(He ng Ko ng) Ltd, ~ H o"'g [Kong; N,omura F inarncia~ Inves,tment (Korea.) ICO",~ Ltd,,~Ko,rea, (Inform a,1]on on Nomura ,ana[lty,s1ts registered with the KOlr'eka Financi,a,llnves1Iment ,AssociaEion fKOFIAT) can b~: found on thle K'OFIA ~ntran.e:t. t a Httpifdis"k()lffiia,,,or,kr )ll Nom ura, Si ngapore Ltd"" Si ngapore (R,egistratio n num h€r 19720 114,~~M) E.~r~gul,ated by th e Mo nets 'Y' A1Jthority of S ~n a,porn); 9 Nom ura Secu f1itJ es Si ngapore P~ Ltd, ~Sfinga pore (Reg istrati:on nu m ber 11 '9\870252 ~E ~reg u~at-edby ~he M one:tary A!uthority of Si nglapore); ea p'lilta[1 omu ra .secur~t~es Pu bl'lic Comlpa,ny [limited l' Nlomurr,aAustra[1ia LtdL~Aust~,a~i,a(AB N 48 00:3- 03,2 513).~ regul,ated by th e ,Au.sllr,aUan N s'ecu rities and ~nves~m ent. 'Com mission and holder of' ,an Aus.tral ian fi nanc~al .seM oes Iicen ce rnumber ,2-46412; P"J", No m ural ndo nes~a,~ Indonesia; Nomura Seourn~~e·sM,a,lay~ia Sd n, Bhd,,! Ma[1 ay,sia; Nomu ra Int-ernational (Hong Klong) l'~ 'll Ta ~pei B ranch ~Taiwan l' Normura, Fi na nc'iia,1 ,Advisory ,and SecuI~ities (~ndiia,)Prwvat-eLirm~i,ed ~Mum ba,i, ~ ndfia. (Reg istered Ad dress~ Cee] a,y [House ~Level 1111 Pilot F ~Shivs,agar Est81t-e ~[)ir, Ann~e Besant Roadll W.arli,~Mumbal- 4JOO01i8,~India,; S.EB~ R,egisrration No: SSE INB011,2:919030~ NSE INB231,29903~! INF2311,2:91903~,~ ~N[E 23112:9903~),
"-,j!' i ~i"t"fIl 'I.;i!'~'~;~¢l' ~,. "_
!~

Memory

I GI,oba~

CW Chu:ng

NOA\UIRA

TH~S MATER,IAL IS: (I) FOR, YOUR P[R~VATE INFO'RMAT~ON! ,AND WE ARE NOT SOll'CITINiGI ,ANY ACTION BASED UPON[ rr: (II) NiOT 10 BE CONSTRUE[) .AS AN OFFER 10 SELL OR, A SOL~C~TATION 'OF ,AN OFFER TO BUY ANY SECUR~nr INJ[ ANY JURIS[)~CTION WHE.RE SUCH OFFER OR SOLICITAI~'ON W'OULD BE ~llE;GAL; AND (~I~)BASIED UPON INFO'RMAI~ON THAT WE CONSIDER RELIABLE,. NJ[Q'MURAGROUP' DiOES NJ[OiT WAR,RANT OR REPRIESENT THAT THE PUBLICAI~ON ~SACCURATE! COMPLETE! RELIABlE.! FIT FOR ANY P'AJRTICULAR, PUR.POS[E OR, M[E.RCHANTABLE AND DiOES NJ[QT ACCEPT lIAB~LITY FOR, ANY' ACT (OR DECISION NOT TO ,ACT) RIESULT~N'G FROM US[E OF THIS PUIBL~CATION AND RELATED D.ATA. 10 TH[E MAX~MUM !EXTENT PERM~SS~IBLE ALLWAR[RANTI[ES AND OIHE[R ,ASSURAN'CIlES BY NOM[URA GROiUP ARE HER.EB,Y EX:CLUDED AND NOM[URA iGIR,OUPSHALL HAVE NO L~ABIL~TY' FOR THE USEll M[~SUSEll OR [)~STR,IBUT~OiNJ[ THISINFORMAT~ONI. OF Opl nlons expressed are cu rre nt opl n'i'ons as of the: oniiginal pu bllcallon data appsari n9 on th is mat-er~al on Iy and the ~nfol~ma1liiQn~, ud ~nglthe: i ncl Qop'iin ns '00 nta,imed here'iin~I rs s ulbj.e;ct, chan ge wi~holut notke, No m u ra is un d er no d uty to updlat-e this pu bl'iica,ti n. l]f'and as appl'iicable! NS l's io a to o in\testm,ent [banking relationships! ~mvestm,e:ntbanking and non-lnvestment banlkliing compensation and seClUrmt~es O'wnelr,ship (identified in this. l)! 'iiT' report as 'D'isd(ls,ures [1R,equ'iired the: Un'irt-edSta,tes in any! eire specified in dlsdalmers and rE=[latedi dlsdosurss in 11lh'iis report, ~n add lit lon other members ot the: NQom fa G1roup ma.yiroOmti m €I to 1t'iime u pelITonmi nvestment ban kirnglor other ,seM coo (~ncludiing acltingl as advsor ~ma nager or len d er) for! Olrsol idt investm!e nt banki ng or other bus'iiness from:~ coropan les m erulo ned he ~e:~m rIlher! the No m ura !Glroup~1 nd/or its officers, '"Fu a d ~rectors andl em ployees, incl ud ~m perso ns ~~without [Im ltatlon, 'iimv.olved~nthe: preparation or lssua nee .of this, ma/~uelria~ 9 i may! to ~he ,extemt pel~mitt-ed by applicable ~aw and/or regula/~~omll have long or short positi'ons in! andi buy or :se[ll!the secudtles (iimcludflng ownelrsh~p [b~l NJIS~! refere nceo above l'! or d erivanves ('iin cludi ng opnons) '~helr,eo,fll com pan ~es memlo ned here'iin" or related seeu ntles or de rlvatlves. ~ add mt~om ,of n l' the NJlomuraGro up! excl ud'iing NS IIImay act as a market ma kel~and pr'iincl pa[lllWi 1[1 to buy a nd ,sel[1 ing ceriai n ,of the secur'int'iiesof com panles men~~om ed hel~e:~n,. Further, the No,mum iGlroup m,ay buy and sell oerta'iimof the seeurlnes 'of eompenies mentioned here'iinll as agemt for its clien~,. Investors shou ~dconsider th is report as on Iy a, sl ng le faetor in makilng 11lhe~ r inlvestm,e,nt.decislon and! as such, the report sh OU Id not be v~ewed as idlentifyi ng or s.uggestingl a[11 nslcs, d ir-ect or i ndrect, th at mlay be associ ated 'with any investm ent decislon, Please see th €I fu rIlhelr dii:sc~ai ers 'iin m th e disclosu re inillform atlon on com panles covered by Nomura analysts avai leble at WVtlW. nom u ra.co m/research u nder th€i ID lsclosure' ta b. NJlomuraGrou p prod noes, anum ber o]f'd iffere n~1types.'of research product i nclud imglllamong others, fumdlamemta~analysis,~ q u a,ntita~ii~J'e analys ls a nd sho rt term trad ing ld eas; recommend a,tiens contel ned in one ly1peo,f research product may diiffer fro m recom mendatlo ns oontal ned ~nother types of research product, whe~her' as a result. of d~ffe,ring time horizons, me~hodolog'i'es or otherwise: 'it is. possible ~hi31~ indiMdua[1 emp'~0Y'e>es, of d·~ "'" NJI omera may' IIIl...lave .. ~111~remt p:e:rspectlrves to 1t6111S ~catllon", pu bl· '" NJISC and 'Other non-US members Qofhe: NQom ,G1roup{i .'e. exdl ud ing N S I)! the:~rorflcers, drectors an d em pl oyees. may,~to the extemt it rel ates t ura to non-Il S issuers amd ts penn itted [by a p pl lcsbl e law, have act-ed u po n 'Orusedl th is. m~~ ~ia~prior to" or irmmed ~a)t-e[lly' ow. ng! n~, pu bUcation. f'Ol[1 Fore'iigln-cun~e:ncy-deno mi nated seeu ritfles, are su bJecittto fluctuatlo na in exeha nge m~lI€=:S, coul d have an adverse ,eiflect on the value or price: of! ihat or lncome dlenlv,edfr-o'Qm:~ investment. ~n,addiilli'on!inV'es~n3 ln secudties such as ADRs,! the values of whioh are 'iin1ilue:ncedby for-,e:igm ~he . ,"........:"Iy assu m e cun~,e:ncyns kr, . cu rren cies, errecnve The seC!UI~n~~es descrbed berel n may not have been reg lstered un d er the US, S.ecurities Act of 1933! ,9 nd, fI n such case, may not be offered or sold 'iinthe: U nfit-edl tates or to US persons unless fh ey h ave been Ir,eg S ~s\t-elr,ednder such Act or except in ecmpllance w'illlhan exem pflon from u th e n~gIstr,atio n r8Q uirem ents o,f s wah Act Unl!e'ss,'9 ove rning ~arwperm ~t-s,,o~herwise! you must contact a No mura e n~i~yin y.ou r ho m!e:J urisd'iictiion fiT' yo,u wa nt 'to use: au r s~ Nices in effecting a tJransaction in th e secu nitie.g me ntioned ~ '~h'j'sm,ater'iia,l. n Th~,spubl'iice.tion h e.s been appm~ved for diistribu~i'on 'iin'~heU n~t-edl iIlgdo m and Eu mpean Union as. imlestm ent r,eooal~,ch Nomura ~nt.e:ma,~i'ona K by ~ p,~c. IP ~c.I)!whiah is ,authoriZ!ed a,nd reglulated by th e U K F~nam ('N · cia~ Servioe's, Auth ority fFSA.') ,and is. a, m1e be:r-of '~he Londo n Stock Exchange:. m It does, mot cons.titute a persona,1 recomrme ndat~on :1' a,s dej'rned by th e FSA! or take ~nDt-o a:ooount the: pa,riicula r' 'i'nv,estmen~obJectives.! fi nan cia[1 situatio ns! or needs. 'Of ~ndiviidua,1irnvest-ors. It is. int.e:ndedl0 n~y'for 'iinvestors wiho a r'e le~ig~ble cotln~e:rpa,rniies'or 'pro~e'ss,~onalcl ~ents.1 dlelffiind by a,g e the FSA! amd rmay not,~thel~e:fnre,~ lr,edh:;1bribu~d retail ,cUents as. d,e,fined by the FSA", ThIs public~~iion rmay be: distributed 'iinGermany v~a be to NJlomurra nk (D eiutsch landl) Gm b H" whiich fis aurtholriz,ed andllr€g u[1t-ed in Glerm,any by '~heFede ~,a,1 ancial Su pelNisory Alithority fBa Fi m").. Ba a Fiim Th~,spubl'iica,1Jj ha,s been approved by Nomura ~nternati'on.a.~(Ho ng Kongl) Ltd,. C N~I K').~wh'iich 'iisfegu[1atedl by the Han 9 Kong Securiiies ,and on H Futu res Co,mlm'iission~fOlrdlistniibuUon in Hong K'om9 by NIH K,,, TtI'iis Pub[1 ication has, bee n ,a,p'p ~oV1ed dlis,tniibution in Alus,tral~aby Nom ura, for Aus~ra,Ha,ltrl! whidh ~sauthorized ,and reglulated in Australia by ~he Austral~an SecuriUes, and ~nves,tment CommissIon fAS,~C'). Ihis, pubUcatjon has, a,lso been a p~rf(DVea d istFib~tio In in M a,lay-Si,a Nomura Sect! ~ities MaJay"Si,a n B hd. In S,ingapore,~ 1th'iis for by 3d publ icat~on has been diis~ribut,ed by Nomura S,ingapore L'iim~t~dfNSl~) andl'or NJlomurEi, Securities S~nga,po,re Pt.e Ltd fNSS,'). NSL and NSS. accepts legal re$pomlsib'iilfl~'for ~he co,ntent. o,f'~h P ublica~iomIIWli1ere it concerns seicu r-ities~'FUtU a nd fore~,gn exch.ange! issu ed try the ~rfOI~e n am U,ates'1m ~s r~s ~g I~e's,pectof red pie nis who are mot aCC!~edi~ed!expert orr institullion.a~ ~nJvest'Ors, delffiined by the Se,curities ,and Futures Act: (ICha.pter ,28B),,, R,eci'pi~n~ of~hTs a,g p ub~ ication should oontact NSl Ol~NSS {as the 'ca,se:may be) in res peel of mal[ters ,a,ris,~mfrom! or in oon neetio n with l' ~hIs publ iCal~iom n~ 9 '"U ess pr,ohibited by the provIsions, 'Of Reglulaiion S o,f the: U.s.., Secur'ifljiies Act ,of 1933! '~h'i'$ mater'iia.l is, disiribut,ed in the Urnited States! by Nomura Secur'iilli'es Intemla~i'on.a,I,~nC.ll,a,US-regist,e:red brokelr-dea,ler! which ,a.coe:ptsresponsibfllity fOlrits cont.e:nt$ ~naccordance with the provIsions of ~ Rule 115a6! undelr the US Secu rifi.es Ex,cha nge Act o1If 11934. ... Th~,spubl'iica.tJllon ha,s mot bee n ,approv1edfor d istr'iibu1fl in ~he K] ngdo m of Saud~ ,Arabi,a or to c~i!e:ntso~helr'~han 'pmfess,~oma.lcU,entsl ~nthe: U n'i~-ed on Arrab Em ilrates by NJlomuraSa udii Arabi,a! N.omura ~mt,e,rn a,tiona[1p~,cor a,ny o1lherrmem belr of ~he NJlomurra GI~OU P'!as the case mlay be", Nefl~herr~h'iis pu b~ ication nor any oopy the r,e;ofmla.ybe take:n or ira ns miHed or d is.tr'iibumdl' directly .or ind ir,ectly! by a,ny person other th a,nthose ,authorised t-o do so into the K~ngdoml of Saudi Arab'iia,or in the United ,Arab Em'iirat.es or to any person ~()-catedin 1theKliingdom m S,audii Arabi,a or to cHents other th.an 'pro~e'ssioma,1cHents' imthe: Un'i~t-ed Ar,ab [Emirates. By accepting t-o'receive this publ'iica.tion! you represemt that y;ou are not [Ioca.t-ed~n th e Ki ngdlom o,f Sau di AJra.b~a Olrthat you alr,e,a p~lofessiona~ d ierlf in ~he United Amb Emirates amd aglree to cormp[ly'with these: restrictions.. Amy fai[1 to com p[lt~,. ihese res~r-ictions may constmtute a v~ol,ation 'Ofth e I,a,wsof ihe Kingd om of Saud ~Ar,ab'iiaor ~he United Arab Emirates", ure 'with No part of '~h m ateniia,1 ~s may- be (i) copi ed! p ho~co p~,ed!Ol~diupl'iicated 'iinany- form! by a.ny means:; .or (i'ii)redlis,tniibuted'without th e pni'or wTiii[ten co nsenITtof th e N,omu fa Grou p member idem~ii'ruied l1lheba nner ,on page 1 o,f th is report Furth er 'iimfo , in rma~i'on on any o,f the secu ritj es me niioned ,onha,s been dlistr'iibut'ed by !e!lecltr,onictransmissilon! such as, e-ma'iil! then such transmissiom hel~e:~m m,ay be obita'iined upon request If this, publ'iica1fl ca nno1tbe: 9 ua,rant-eedit.o be SeCflJfe:or e r-ror-fir,eie: 'iinlFonm,a,tio,1n ldi [be irn~ue , a:s oou ~oe:p.ted!,oornupt-ed~I()lst destrayed! an~ive ~at-e,or ~m oompl!etell 'Or co nta,in viiinuses,.The se:nder '~hel~e:for-eoes, not acce pt ~ Uty for any errolrs or ,0miss,~ol1 'iinthe: conten~-s,of this pu bl'iica,ti'on!which may alrise ,a,s d iabi s a result. of el!e-etron~ tran.smission,. 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N IPic ,and .other NormUlr,a, rou p enllt'ilit'iies G m,anage co nfl'iia$. idenllt'iiied '~hl~oug the fnl[1 h ow'iing: thei r' Ch inese W,an! co nfidenlIJiiaJilyand indepem denc€: pol'iici!es,!m,a.~nl1l:-e o1f a Restridted List amd a W,a,tch Lhst! perso nal accou mtdea~ing rules! pol'iicies.,and pmced ures for mlanag'iimglco nfl'iicts .of namce interes~ ani-sing from the ,aUo:cation,and pricing of secur'iilli'es and 'iimpartia[1'iinvestm!e:ntI~e'sealr;ch and dli:sc~osureto dlients vta cl~ent docum,enta,tion.

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