2014 09-22 2454.tw (deutsche bank) media tek - facing stronger headwinds into 2015; downgrading to...

Deutsche Bank Markets Research

Rating

Hold Asia

Taiwan

Technology

Semiconductor & Equipment

Company

MediaTek

Date

23 September 2014

Recommendation Change

Facing more headwinds into 2015; downgrading to Hold

Reuters Bloomberg Exchange Ticker 2454.TW 2454 TT TAI 2454

Forecasts And Ratios

Year End Dec 31 2012A 2013A 2014E 2015E 2016E

Sales (TWDm) 99,263 136,056 217,566 259,024 295,211

Net Income

(TWDm)

15,688 27,515 48,240 53,434 58,653

DB EPS FD(TWD) 12.79 20.51 30.71 34.01 37.33

% Change 0.0% 0.0% -0.1% -3.2% -5.5%

DB EPS growth (%) 3.7 60.3 49.7 10.8 9.8

PER (x) 23.0 17.8 16.1 14.5 13.2

Yield (net) (%) 2.9 2.5 3.0 4.6 5.2

ROE (%) 10.7 14.8 22.1 21.4 21.9

Source: Deutsche Bank estimates, company data 1 DB EPS is fully diluted and excludes non-recurring items

2 Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses

the year end close

Intensifying pricing competition dampening mid-term margins outlook

________________________________________________________________________________________________________________

Deutsche Bank AG/Hong Kong

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.

Price at 22 Sep 2014 (TWD) 494.00

Price target - 12mth (TWD) 510.00

52-week range (TWD) 535.00 - 365.50

Taiwan Stock Exchange (TWSE)

9,135

Jessica Chang

Research Analyst

(+886) 2 2192 2838

[email protected]

Key changes

Rating Buy to Hold ↓

Price target 615.00 to 510.00 ↓ -17.1%

Sales (FYE) 217,388 to 217,566

↑ 0.1%

Op prof margin (FYE)

23.3 to 23.2 ↓ -0.3%

Net profit (FYE)

48,305.8 to 48,239.6

↓ -0.1%

Source: Deutsche Bank

Price/price relative

280

320

360

400

440

480

520

560

9/12 3/13 9/13 3/14

MediaTek

Taiwan Stock Exchang (Rebased)

Performance (%) 1m 3m 12m

Absolute -2.9 -2.9 33.5

Taiwan Stock Exchange (TWSE)

-2.6 -1.5 11.3


Stock data

Market cap (TWDm) 776,085

Market cap (USDm) 25,679

Shares outstanding (m) 1,571.0

Avg daily value traded (USDm)

102.9


Key indicators (FY1)

ROE (%) 22.1

Book value/share (TWD) 153.0

Operating profit margin (%) 23.2


Our latest industry checks suggest that competition in the China baseband market is intensifying faster than we anticipated. We expect MediaTek to continue having the highest overall market share there, but we envisage downside on ASP and margins capping earnings momentum in 2015 after the phenomenal growth achieved in 2013-2014. We thus downgrade to Hold.

3Q14 tracking in line with guidance rage, but upside potential limited We expect MediaTek to meet its 3Q14 sales guidance range. It anticipates GMs to fall to 47.5-49.5% from 49.6% in 2Q14. We note that shipments of MediaTek’s current most lucrative 3G octa-core SOC product MT6592 seemed to have peaked in 2Q14, while increasing shipments on lower-margin dual-chip LTE products could lead to GMs dilution for another one to two quarters before its low-cost solutions enter mass production in 2Q15.

More challenges in 4Q14-1Q15 We see competition from both Qualcomm and Spreadtrum as heating up lately. We note Qualcomm receives a lot more design wins than MediaTek in LTE on its early mover advantages, which could weaken MediaTek’s pricing power in 4G. As such, it is less likely for MediaTek to enjoy as high GMs for 4G as it had in 3G previously. Also, we are aware that Spreadtrum is making a comeback to WCDMA and even targets to enter mass production for LTE in 1Q15, which could further impact industry GMs given its well-known low-price approach.

Downgrading to Hold with target price at NT$510; risks We lower FY15-16E EPS by 3.2%/5.5% and reduce our target price to NT$510 based on 15x FY15E EPS. We move our valuation base from 2014 to 2015 and cut our target PER from 20x to 15x (the low end of its historical 15-25x PERs in the past three years) to reflect the slowing earnings growth. We think MediaTek has a chance to regain momentum in 2H15 if it can roll out new LTE products focusing sharply on the right segments ahead of rivals again. For now, we suggest a more conservative stance given a record-high QFII holding at 63% and potentially more downside to our reduced earnings estimates. Risks: faster/slower margins improvement and stronger/weaker smartphone demand.

23 September 2014


MediaTek


Model updated:22 September 2014

Running the numbers

Asia

Taiwan


MediaTek Reuters: 2454.TW Bloomberg: 2454 TT

Hold Price (22 Sep 14) TWD 494.00

Target Price TWD 510.00

52 Week range TWD 365.50 - 535.00

Market Cap (m) TWDm 776,085

USDm 25,679

Company Profile

MediaTek is Asia's largest fabless IC design house focusing on designing and selling mobile phone baseband/AP, tablet AP, TV controller, Blu-ray player IC, optical disk drive controller, and connectivity IC etc. MediaTek has been the No.1 baseband player in China manufactured smartphone phone sector since 2012 in terms of shipment with market share of around 45-50% in 2012.

Price Performance

280320360400440480520560

Sep 12Dec 12Mar 13Jun 13Sep 13Dec 13Mar 14Jun 14

MediaTekTaiwan Stock Exchange (TWSE) (Rebased)

Margin Trends

12

16

20

24

28

11 12 13 14E 15E 16E

EBITDA Margin EBIT Margin

Growth & Profitability

0

5

10

15

20

25

-40

-20

0

20

40

60

80

11 12 13 14E 15E 16E

Sales growth (LHS) ROE (RHS)

Solvency

-80

-60

-40

-20

0

11 12 13 14E 15E 16E

Net debt/equity (LHS) Net interest cover (RHS)

Jessica Chang

+886 2 2192 2838 [email protected]

Fiscal year end 31-Dec 2011 2012 2013 2014E 2015E 2016E

Financial Summary

DB EPS (TWD) 12.33 12.79 20.51 30.71 34.01 37.33

Reported EPS (TWD) 12.33 12.79 20.51 30.71 34.01 37.33

DPS (TWD) 19.92 8.42 9.00 15.00 22.80 25.54

BVPS (TWD) 105.3 143.3 145.6 153.0 164.7 176.9

Weighted average shares (m) 1,105 1,226 1,342 1,571 1,571 1,571

Average market cap (TWDm) 348,581 360,616 491,072 776,085 776,085 776,085

Enterprise value (TWDm) 252,368 214,213 312,951 602,823 587,945 568,159

Valuation Metrics P/E (DB) (x) 25.6 23.0 17.8 16.1 14.5 13.2

P/E (Reported) (x) 25.6 23.0 17.8 16.1 14.5 13.2

P/BV (x) 2.64 2.26 3.05 3.23 3.00 2.79

FCF Yield (%) 4.2 2.9 7.9 5.6 6.8 8.0

Dividend Yield (%) 6.3 2.9 2.5 3.0 4.6 5.2

EV/Sales (x) 2.9 2.2 2.3 2.8 2.3 1.9

EV/EBITDA (x) 16.7 13.2 11.6 11.2 9.4 8.2

EV/EBIT (x) 20.4 17.1 12.4 11.9 10.2 9.0

Income Statement (TWDm)

Sales revenue 86,857 99,263 136,056 217,566 259,024 295,211

Gross profit 42,073 44,759 61,532 109,110 124,487 141,510

EBITDA 15,074 16,202 26,971 53,888 62,351 69,147

Depreciation 2,729 3,696 1,727 3,384 4,940 5,753

Amortisation 0 0 0 0 0 0

EBIT 12,345 12,505 25,244 50,504 57,410 63,394

Net interest income(expense) 1,007 1,621 1,609 2,363 2,339 2,535

Associates/affiliates 37 1,038 1,775 590 529 590

Exceptionals/extraordinaries 0 0 0 0 0 0

Other pre-tax income/(expense) 815 1,455 919 411 -130 -148

Profit before tax 14,203 16,620 29,547 53,868 60,149 66,372

Income tax expense 587 971 2,062 5,647 6,715 7,719

Minorities -7 -39 -30 -18 0 0

Other post-tax income/(expense) 0 0 0 0 0 0

Net profit 13,623 15,688 27,515 48,240 53,434 58,653

DB adjustments (including dilution) 0 0 0 0 0 0

DB Net profit 13,623 15,688 27,515 48,240 53,434 58,653

Cash Flow (TWDm)

Cash flow from operations 16,707 11,403 39,573 48,687 54,856 64,562

Net Capex -2,002 -898 -605 -4,949 -2,399 -2,753

Free cash flow 14,705 10,505 38,968 43,738 52,457 61,809

Equity raised/(bought back) 0 0 0 0 0 0

Dividends paid -21,999 -10,328 -12,074 -23,569 -35,825 -40,124

Net inc/(dec) in borrowings 4,255 4,768 20,145 4,966 -19 -13

Other investing/financing cash flows 3,679 -4,903 48 32,369 -3,003 -3,269

Net cash flow 640 43 47,087 57,504 13,610 18,403

Change in working capital -5,195 3,584 15,159 55,485 20,175 20,180

Balance Sheet (TWDm)

Cash and other liquid assets 85,821 85,867 132,998 190,569 204,179 222,583

Tangible fixed assets 9,810 10,708 11,312 16,261 18,660 21,413

Goodwill/intangible assets 16,151 15,842 15,509 57,132 52,697 48,606

Associates/investments 14,628 69,529 74,261 16,794 18,043 19,413

Other assets 21,331 28,297 24,557 48,042 60,576 65,679

Total assets 147,741 210,243 258,637 328,798 354,154 377,694

Interest bearing debt 4,237 8,994 29,138 34,101 34,082 34,070

Other liabilities 27,176 25,475 34,145 54,302 61,271 65,771

Total liabilities 31,413 34,469 63,283 88,403 95,353 99,840

Shareholders' equity 116,328 175,774 195,353 240,395 258,801 277,853

Minorities 0 0 0 0 0 0

Total shareholders' equity 116,328 175,774 195,353 240,395 258,801 277,853

Net debt -81,585 -76,873 -103,859 -156,467 -170,097 -188,513

Key Company Metrics

Sales growth (%) -23.5 14.3 37.1 59.9 19.1 14.0

DB EPS growth (%) -56.6 3.7 60.3 49.7 10.8 9.8

EBITDA Margin (%) 17.4 16.3 19.8 24.8 24.1 23.4

EBIT Margin (%) 14.2 12.6 18.6 23.2 22.2 21.5

Payout ratio (%) 161.5 65.8 43.9 48.9 67.0 68.4

ROE (%) 11.9 10.7 14.8 22.1 21.4 21.9

Capex/sales (%) 2.3 0.9 0.4 2.3 0.9 0.9

Capex/depreciation (x) 0.7 0.2 0.4 1.5 0.5 0.5

Net debt/equity (%) -70.1 -43.7 -53.2 -65.1 -65.7 -67.8

Net interest cover (x) nm nm nm nm nm nm

Source: Company data, Deutsche Bank estimates

23 September 2014


MediaTek


Facing more headwinds into 2015; downgrading to Hold

Three key reasons why we turn conservative on MediaTek

MediaTek has demonstrated phenomenal growth in the past two years, thanks to its impressive technology advancement into smartphones, brilliant product planning and execution, as well as unparalleled customer support in China. However, we think MediaTek is entering a more challenging phase now due to three major reasons:

1. Qualcomm’s increased aggressiveness with improved China execution

We think the LTE battle between MediaTek and Qualcomm (QCOM) is likely to be tougher for MediaTek this time, although MediaTek has become a much stronger company now compared to its status when it first entered the 3G smartphone business in 2010. We generally view QCOM as the leading player in overall 3G and 4G, and we attribute MediaTek’s triumph in China 3G smartphone to its deeper understanding on local customer requirements and stronger FAE and turn-key support in China that QCOM was unable to match. For instance, MediaTek introduced quad- and octa-core products ahead of QCOM with strong customer acceptance, which propelled MediaTek’s shipments, expanded its market share rapidly, and improved its GMs in the past two years. However, we believe QCOM has become more experienced in China now and has thus made great effort to address China LTE demand properly and make its solutions available earlier than MediaTek this time. We believe MediaTek has been running at full speed to narrow the gap (and as a matter of fact, it has launched several LTE SOCs to showcase its capability), yet we think QCOM’s early entry has benefited QCOM from more design wins in 2H14 for mass production in 4Q14-1Q15. Thus, MediaTek needs to speed up in product introduction to catch the next design cycle in 2Q15.

With the current circumstances, we think it will be more difficult for MediaTek to lift its GMs through enhancing its product mix like it did in 3G, given QCOM’s leading position and clearly increased aggressiveness. We also think the LTE baseband market may enter the low-price stage faster than we previously expected given QCOM targets to sell its ultra-low-cost quad-core MSM8909 (S210) at US$8-9 in 2Q15, suggesting nearly no initial premium at LTE early stage vs. current mainstream 3G. We believe MediaTek maintains a similar timetable for its countering low-price product, but such a fast ASP downward trend will cap baseband product GMs for all players, including MediaTek and QCOM.

We acknowledge MediaTek’s LTE strategy is to come up with high-end products first to counter QCOM’s most lucrative businesses (S800), such as its MT6595 (high-end, mass production in 3Q14), followed by mid-range products MT6752 (mid- to high-end, mass production in 4Q14) and MT6732 (mid-end, mass production in 4Q14), and then lower-range products MT6735 (mid- to low-end) and MT6735m (low-end). MediaTek has not announced the timetable for MT6735/6735m, while our checks suggest these two mid- to low-end products will be in mass production around April next year. We believe the low-end product MT6735m will be important for MediaTek to increase its LTE

23 September 2014


MediaTek


market shares in 2015, but the likely ASP of US$8-10 suggests that its GMs may be barely around 40% initially, if not lower.

2. Spreadtrum’s comeback likely to drive industry margins lower

We note that Spreadtrum has recently entered mass production for its WCDMA products after going through a slow first three quarters of this year. Spreadtrum usually is behind in technology compared to tier one rivals; however, it is famous in its low-price strategy, as seen in 2G feature phone and TD smartphone. Our checks suggest that its new WCDMA products have decent performance and attractive ASPs. Therefore, this could start to impact MediaTek’s WCDMA business in both shipments and GMs from 4Q14.

Moreover, our checks reveal that Spreadtrum aims to enter mass production for its LTE products in 1Q15. Although we have some reservations on such an aggressive target, we think competition from Spreadtrum is likely coming soon in 1H15. This is likely to dampen industry GMs of for entry-level LTE products earlier than expected.

3. Product mix upside potential for 3G becoming limited

One of the key driving forces behind MediaTek GMs upside in the past three quarters was the increased sales contribution from its 3G octa-core product MT6592. It was well received by customers for their premium smartphone models for the China market in 1H14. MediaTek enjoyed very handsome ASP and GMs, as it was the only player offering this product at that time. However, with China’s domestic demand moving into LTE, we expect shipments of MT6592 to decrease as demand from emerging markets, a growing portion of MediaTek’s 3G business, is unlikely to be strong for this product given its high cost. Therefore, we think MediaTek’s GMs on 3G business may not be able to go up, while the increasing competition from Spreadtrum may soon impose negative impacts.

Revisions to earnings, target price and recommendation

In this review, we maintain our FY14-15 sales broadly unchanged. For 2015, we increase our shipment estimates to factor in potential upside from its expansion into the CDMA2000 segment starting early from 2Q15 (given it is about to launch MT6735 worldmode products in 1Q15), while we reduce ASP and GMs (from 47.2% to 46.2%) assumptions to take into consideration heating competition. After this review, we forecast MediaTek’s average earnings growth to slow to 10% for FY15-16 vs. 60% in 2013 and 50% in 2014, which is below the market’s optimistic expectation.

We lower our FY15-16E EPS by 3.2%/5.5% and reduce our target price to NT$510 based on 15x FY15E EPS. We move our valuation base from 2014 to 2015 and cut our target PER from 20x to 15x (the low end of its 15-25x historical PERs in the past three years) to reflect the slowing earnings growth. We consider 15x PER as reasonable compared to its local peers’ 10-18x.

Our earnings reduction may be seen as somewhat too mild at the first glance if compared to our target price cut. The reason for a greater decrease in our target price is based on our view that MediaTek is now a well-owned stock with a record-high QFII holding of 63%. Given the increased uncertainty in its mid-term earnings outlook, we do not exclude potential panic selling pressure among investors, as it usually takes MediaTek a few quarters to get through a correction, at the soonest, before the company resumes its earnings momentum through upside on either sales or margins. That said, we still think MediaTek has a fair chance to regain strength in late 2H15 if it can again roll

23 September 2014


MediaTek


out new LTE products focusing sharply on the right segments ahead of rivals like it did in 3G. For now, we suggest a more conservative stance given LTE is inevitable among all the players before the market enters a more mature stage after consolidation.

Risks:

1) Upside/downside on margins: MediaTek’s GMs are subject to competition and its product mix changes, while OMs are dictated by GMs and its opex control.

2) Stronger/weaker smartphone chip shipments: MediaTek’s smartphone chip business depends on LTE smartphone demand in China and 3G/2G smartphone in emerging markets. Also, MediaTek’s smartphone chip shipment is partly subject to its progress into global operator markets with CDMA2000 function included in its SOC.

Figure 1: Earnings revisions

(in NT$ m) Revised 3Q14E

Previous 3Q14E

Diff. Revised 4Q14E

Previous 4Q14E

Diff. Revised FY14E

Previous FY14E

Diff. Revised FY15E

Previous FY15E

Diff.

Net Sales 59,807 59,807 0.0% 57,621 57,442 0.3% 217,566 217,388 0.1% 259,024 258,979 0.0%

Gross Profit 29,162 29,162 0.0% 27,514 27,544 -0.1% 105,726 105,755 0.0% 119,547 122,311 -2.3%

Operation profit 14,555 14,555 0.0% 12,375 12,460 -0.7% 50,504 50,589 -0.2% 57,410 59,371 -3.3%

Net income 13,787 13,787 0.0% 11,747 11,822 -0.6% 48,240 48,315 -0.2% 53,434 55,197 -3.2%

GM 48.8% 48.8% 0bps 47.8% 48.0% -20bps 48.6% 48.6% -5bps 46.2% 47.2% -108bps

EPS(NT$) 8.78 8.78 0.0% 7.48 7.53 -0.6% 30.71 30.75 -0.2% 34.01 35.13 -3.2% Source: Deutsche Bank estimates, company data

Figure 2: Deutsche Bank estimates vs. consensus

(in NT$ m) 3Q14E 4Q14E 2014E 2015E

DB Cons. Diff. (%) DB Cons. Diff. (%) DB Cons. Diff. (%) DB Cons. Diff. (%)

Net Sales 59,807 58,502 2.2 57,621 55,854 3.2 217,566 213,388 2.0 259,024 242,971 6.6

Op. Income 14,555 13,834 5.2 12,375 12,794 -3.3 50,504 50,253 0.5 57,410 55,743 3.0

Net Income 13,787 13,331 3.4 11,747 12,270 -4.3 48,240 47,955 0.6 53,434 52,932 0.9

EPS (NT$) 8.78 8.49 3.4 7.48 7.81 -4.3 30.71 30.52 0.6 34.01 33.69 0.9

Gross Margin (%) 48.8 48.5 0.3 47.8 48.0 -0.3 48.6 48.5 0.1 46.2 47.0 -0.9

Op. Margin (%) 24.3 23.6 0.7 21.5 22.9 -1.4 23.2 23.6 -0.3 22.2 22.9 -0.8

Net Margin (%) 23.1 22.8 0.3 20.4 22.0 -1.6 22.2 22.5 -0.3 20.6 21.8 -1.2 Source: Deutsche Bank estimates, Bloomberg Finance LP

23 September 2014


MediaTek


Figure 3: MediaTek P/E band Figure 4: QFII holding ratio reaching record high of 63%

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MTK QFII holding %

%

Source: Deutsche Bank, TEJ

Source: Deutsche Bank, TEJ

Figure 5: MediaTek sales revision

Sales (NT$ m) Revised 2014E Previous 2014E Diff. Revised 2015E Previous 2015E Diff.

Feature phone 11,122 11,115 0.1% 6,860 6,837 0.3%

Smartphone 118,021 117,915 0.1% 153,852 150,347 2.3%

Tablet 14,805 14,791 0.1% 18,333 19,375 -5.4%

Others 73,619 73,567 0.1% 79,979 82,420 -3.0%

Total 217,567 217,388 0.1% 259,024 258,979 0.0%

Sales %

Feature phone 5.1% 5.1% 0.0% 2.6% 2.6% 0.0%

Smartphone 54.2% 54.2% 0.0% 59.4% 58.1% 1.3%

Tablet 6.8% 6.8% 0.0% 7.1% 7.5% -0.4%

Others 33.8% 33.8% 0.0% 30.9% 31.8% -0.9%

Total 100.0% 100.0% 100.0% 100.0%

ASP (US$)

Feature phone 1.43 1.43 0.0% 1.19 1.19 0.0%

Smartphone 11.36 11.36 0.0% 10.65 10.98 -3.0%

Tablet 12.24 12.24 0.0% 12.39 12.28 0.9%

Others 7.14 7.14 0.0% 7.53 7.45 1.2%

Shipments (m units)

Feature phone 262 262 0.0% 195 195 0.0%

Smartphone 349 349 0.0% 488 464 5.2%

Tablet 41 41 0.0% 50 54 -6.5%

Others 347 347 0.0% 359 375 -4.4%

Total 999 999 0.0% 1,092 1,088 0.4%

Source: Deutsche Bank estimates

23 September 2014


MediaTek


Figure 6: MediaTek quarterly income statement forecast

NT$ m 1Q13A 2Q13A 3Q13A 4Q13A 1Q14A 2Q14A 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E

Revenue 23,974 33,276 39,008 39,798 46,005 54,133 59,807 57,621 52,574 61,623 71,088 73,739

COGS 13,884 18,891 21,867 21,608 23,779 27,309 30,645 30,107 27,890 33,307 38,423 39,856

Gross profit 10,090 14,385 17,140 18,190 22,226 26,824 29,162 27,514 24,683 28,316 32,665 33,883

Opex 7,003 8,497 9,274 9,787 11,413 14,063 14,607 15,139 13,865 14,763 16,143 17,365

SG&A 1,464 1,891 2,078 2,285 2,312 3,453 3,409 3,371 3,165 3,328 3,554 3,761

R&D 5,321 6,219 6,683 6,972 8,427 9,813 10,167 10,890 9,989 10,599 11,516 12,536

Employee bonus expense

218 388 514 531 674 798 1,030 878 711 837 1,072 1,069

Others - - - - - - - - - - - -

Operating profit 3,087 5,888 7,866 8,403 10,813 12,760 14,555 12,375 10,818 13,552 16,522 16,518

Net non-operating profit (loss)

835 1,256 1,169 1,044 688 1,393 679 605 626 689 739 685

EBT 3,922 7,143 9,035 9,446 11,501 14,153 15,234 12,980 11,445 14,241 17,261 17,203

Tax 186 427 619 830 1,362 1,605 1,447 1,233 1,144 2,124 1,726 1,720

Minority income (5) (7) (12) (7) (8) (10) - - - - - -

Net income 3,741 6,723 8,428 8,623 10,147 12,558 13,787 11,747 10,300 12,117 15,535 15,482

EPS (NT$) 2.79 5.01 6.28 6.43 6.46 7.99 8.78 7.48 6.56 7.71 9.89 9.85

Gross profit margin 42.1% 43.2% 43.9% 45.7% 48.3% 49.6% 48.8% 47.8% 47.0% 46.0% 46.0% 46.0%

Operating profit margin

12.9% 17.7% 20.2% 21.1% 23.5% 23.6% 24.3% 21.5% 20.6% 22.0% 23.2% 22.4%

Net profit margin 15.6% 20.2% 21.6% 21.7% 22.1% 23.2% 23.1% 20.4% 19.6% 19.7% 21.9% 21.0%

Source: Deutsche Bank estimates, company data

Figure 7: MediaTek LTE SOC roadmap

Company MediaTek MediaTek MediaTek MediaTek MediaTek MediaTek

Chip MT6595 MT6732 MT6752 MT6795 MT6735 MT6735M

Stage Mass production In promotion In promotion In promotion R&D R&D

Core No. 8 4 8 8 4 4

CPU

architecture

ARM Cortex

4A17+4A7

ARM Cortex A53 64-

bit

ARM Cortex A53 64-

bit

ARM Cortex A53 64-

bit

ARM Cortex A53 64

bit

ARM Cortex A53 64

bit

CPU

frequency2.1-2.2GHz 1.5GHz 2.0GHz 2.2GHz 1.3-1.5GHz 1GHz

Process node 28nm 28nm 28nm 28nm 28nm 28nm

GPU PowerVR Series6 Mali-T760 Mali-T760 PowerVR G6200 Mali-T760 Mali-T761

Screen 4Kx2K 1080p 1080p 4Kx2K 720p Quad HD

Video 4Kx2K 1080p 1080p 4Kx2K 1080p 1080p

Air interfaceLTE TDD/FDD, DC-

HSPA+, TD-SCDMA

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA

LTE TDD/FDD,

GSM, TD-SCDMA,

WCDMA, CDMA

LTE TDD/FDD,

GSM, TD-SCDMA,

WCDMA, CDMA

Connectivity 802.11ac 802.11ac 802.11ac 802.11ac 802.11ac 802.11ac

MP time 3Q14 4Q14 4Q14 4Q14 2Q15 2Q15 Source: Deutsche Bank, company data

23 September 2014


MediaTek


Figure 8: Qualcomm LTE SOC roadmap

Company Qualcomm Qualcomm Qualcomm Qualcomm Qualcomm Qualcomm

ChipMSM8974/8074

(S800)MSM8926 (S400) MSM8916 (S410) MSM8936 (S610) MSM8939 (S615) MSM8909 (S210)

Stage Mass production Mass production Mass production In promotion In promotion R&D

Core No. 4 4 4 4 8 4

CPU

architectureQCOM Krait 400 ARM Cortex A7

ARM Cortex A53 64-

bit

ARM Cortex A53 64-

bit

4-core 1.7GHz ARM

Cortex A53 + 4-core

1.0GHz A53

ARM Cortex A7 32-bit

CPU

frequency2.2-2.5GHz 1.2/1.4-1.6GHz 1.2-1.4GHz 1.5-1.7GHz 1.0-1.7GHz 1.1GHz

Process node 28nm 28nm 28nm 28nm 28nm 28nm

GPU Adreno 330Adreno 305,80M tri/s,

800M pix/sAdreno 306 Adreno 405 Adreno 405 Adreno 304

Screen 4Kx2K 720p 720p Quad HD Quad HD 720p

Video 4Kx2K 1080p 1080p Quad HD Quad HD 1080p

Air interface

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA,

EVDO

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA,

EVDO

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA,

EVDO

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA,

EVDO

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA,

EVDO

LTE TDD/FDD, DC-

HSPA+, TD-SCDMA,

EVDO

Connectivity 802.11ac

Digital integrated in

BB/AP SoC, Analog

added via

WCN3660/80

802.11ac 802.11ac 802.11ac1-stream 802.11n

integrated digital core

MP time 3Q13 3Q13/4Q13 3Q14 4Q14 4Q14 2Q15 Source: Deutsche Bank, company data

23 September 2014


MediaTek


Appendix1

ImportantDisclosures

Additionalinformationavailableuponrequest

Disclosure checklist

Company Ticker Recent price* Disclosure

MediaTek 2454.TW 494.00 (TWD) 22 Sep 14 NA *Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=2454.TW

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Jessica Chang

Historical recommendations and target price: MediaTek (2454.TW) (as of 9/22/2014)

1

234

5 678

910

1112

0.00

100.00

200.00

300.00

400.00

500.00

600.00

Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14

Secu

rity

Pri

ce

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 10/01/2013: Buy, Target Price Change TWD431.00 7. 15/01/2014: Buy, Target Price Change TWD520.00






http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=2454.TW

23 September 2014


MediaTek


Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

54 %

39 %

7 %22 % 24 %

8 %0

50

100

150

200

250

300

350

400

450

Buy Hold Sell

Asia-Pacific Universe

Companies Covered Cos. w/ Banking Relationship

23 September 2014


MediaTek


Regulatory Disclosures

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2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are

consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the

SOLAR link at http://gm.db.com.

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http://gm.db.com/

http://www.globalmarkets.db.com/riskdisclosures

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Member of the Group Executive Committee

Guy Ashton Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

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Deutsche Bank Research, Germany

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Americas Research

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2014 09-22 2454.tw (deutsche bank) media tek - facing stronger headwinds into 2015; downgrading to...

Engineering

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price target

eps growth

week range twd

db eps fdtwd

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