DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.2April2019AsiaPacific/TaiwanEquityResearchSemiconductorDevicesSEMICONChina2019ResearchAnalystsRandyAbrams,CFA886227156366randy.abrams@credit-suisse.comChaolienTseng85221016795chaolien.tseng@credit-suisse.comHaasLiu886227156365haas.liu@credit-suisse.comSUPPLYCHAINRESEARCHAlowerprofile,yetstillaggressivedevelopmentpushcontinuesFigure1:ChinasemicompaniesgotocapitalmarketsforthenextfundingSource:Companydata,CreditSuisseresearch■Semiconshowsalowerprofile,butstanceisaggressive.Semiconthisyearexpandedafurther10-15%to100,000attendees,andtheshowdemonstratedcontinuedstrongeffortstobuilduptheindustrytomoveupthevaluechain,narrowtheICimportdeficit,addressnewgrowthmarkets,andensureself-sufficiencyofsupply.TheICfundsandmemorysupplierskeptalowprofilebutmaintainedsameconcertedefforttobuilduptheirindustry.■Investingthroughcyclicalslowdown.Keytakeaways:(1)Localindustrybottomingwithlocalpeersbutfacingamutedyear.(2)MemoryprogressslowingpostMicron-Jinhuacase.(3)Foundryinvestmentsmovingahead—HuaHong/Hualion212”fabs,SMICon14nmR&D,(4)ICdesign—surgeinnewIPOlistingstargetingnextindustrygrowthdrivers.(5)Packaging:SiP(system-in-package)andfan-outarethetrendsbutareattractingcompetition.(6)Compoundsemi—emergingasafocusareaforbetterlocalsupply.(7)Equipment—afewsuppliersemerging(Naura,AMEC,ACM).(8)Materials—severalwafersupplierswithaggressiveplansbutnoeffectivecapacityyet.■Foundry:TSMCtoppick,HuaHongoverSMIConbetterreturnsonlegacyfoundry.WeviewTSMCwithinfoundryasbestplacedtobenefitfromChina’sdevelopmentonadvancedcapacity,andpreferHuaHongtoSMICduetolesscapitalintensitya...
