Tech Hardware Supply Chain - Gazhoo

Tech Hardware Supply Chain 

An institutional investor’s handbook to the Global 

Technology Hardware Sector 

Asia Pacific Equity Research 

20 April 2009 

2009 

Sixth Annual Edition 

Global Technology Hardware 

Bhavin Shah AC 

(852) 2800-8538 

bhavin.a.shah@jpmorgan.com 

J.P. Morgan Securities (Asia Pacific) Limited 

The names and contact 

information for the 49 certifying 

analysts of the J.P. Morgan Global 

Technology Hardware Research 

Team can be found on page 716. 

A soft copy of the report can be 

found on the Morgan Markets 

website 

www.morganmarkets.com. After 

Login, click on ‘Research by”, and 

search by "Sector: Technology & 

Telecom – Technology 

Hardware.” Please look under the 

features section on right hand side 

of the page. 

See page 713 for analyst certification and important disclosures, including non-US analyst disclosures. 

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, 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.

Bhavin Shah 

(852) 2800-8538 


2 


20 April 2009 

Introduction 

We are pleased to publish the sixth edition of Tech Hardware Supply Chain, a 

hardware technology industry handbook. Similar to previous editions, the report is 

split into two parts: Part I includes industry and product analysis and Part II provides 

the supply-chain-related information for major technology companies. 

With this edition, we have divided Part I into five segments: three C’s -- i.e., 

Computing, Communications, and Consumer Electronics; a section on Energy 

Efficient Technologies; and, finally, a section on Semiconductors. Special emphasis 

is being placed on “convergence” with separate sub-sections for 3G/4G technologies 

(wireless radio technologies), VOIP, IPTV and video conferencing. With the 

increasing focus on technologies addressing the issue of climate change, we are 

introducing a new section, Energy Efficient Technologies. This section includes 

Epaper, Solar technology, Electric vehicles, Batteries and LED. One thing missing 

from the past edition was a section on foundries, and we have addressed that gap 

with this edition. Those familiar with past editions may find it handy to refer to the 

“What’s new?” page at the beginning of every sub-section. On this page, one can 

find details of key revisions to each of the sections versus the previous edition. 

Part II (available only in the online version) contains supply-chain-related 

information covering more than 300 major technology companies. Each company 

sheet includes information such as products and services mix, geographic 

breakdown, suppliers and customers. We have also expanded the financial 

information for each company. We include revenue, gross profit, operating profit, net 

profit, ROE, EPS, cash and equivalents, gross debt, shareholders equity, BPS, R&D 

and capital expenditure. 

We hope this report remains a valuable source of information for you. We 

acknowledge the contribution of Aniruddha Loya, Gourav Vijayvergiya and Udit 

Garg of J.P. Morgan Services India Private Ltd., Mumbai, to this report. 

Bhavin Shah 

Global Leader- Technology Sector Equity Research 

(852) 2800-8538 

bhavin.a.shah@jpmorgan.com

Bhavin Shah 

(852) 2800-8538 


Diversified Companies 

(Design, Manufacturing & End 

Product Capabilities) 

Advantech Oki Electric 

Fuji Electric Omron 

Fujitsu Samsung Elect 

Hitachi Siemens 

IBM Sun Micro 

Mitsubishi Toshiba 

National Instrument Xerox 

Semi equipment 

Advanced Energy Jusung 

Advantest KLA Tencor 

Agilent Tech LAM Research 

AIXTRON Mattson Tech 

Applied Materials MKS Instrument 

ASM International Novellus 

ASM Pacific Shimazdu 

ASML Teradyne 

ATMI Inc Tokyo Electron 

Brooks Automation Tokyo Seimitsu 

Cabot Micro Ulta Clean 

Cymer Ultratech 

Dainippon Ulvac 

Disco Ushio 

Entergis Varian Semi 

Yokogawa 

Semi materials 

Form Factor Photronic 

MEMC Electonics SOITEC 

Solar 

Ascent Solar Q-Cells 

Energy Conv Dev REC 

Evergreen Solar SolarWorld 

First Solar SunPower 

Motech Suntech 

PC OEM 

Acer Apple 

Dell Lenovo 

HewlettPackard ASUSTek 

Source: J.P. Morgan. 


20 April 2009 

The Big Picture 

IC IDM 

AMD Analog Devices 

Fairchild Infineon 

IDT Intersil Corp 

Intel Linear Tech 

LSI Logic MaximIntegrated 

Melexis Microchip Tech 

ON Semi Nanya Tech 

NEC National Semi 

Rohm Sandisk Corp 

Sanken Semtech Corp 

STMicro TI 

Winbond 

Memory 

Elpida Hynix 

Inotera Micron 

Powerchip ProMos 

Foundries 

TSMC CHRT 

UMC Vanguard 

IC Assembly & Test 

Amkor STATSChipPAC 

ASE Unisem 

Powertech Verigy 

SPIL 

IC and components 

EMS/ODM 

Divesified EMS: Ability Benchmark 

Celestia Flextronics Hi-P 

Jurong Hon Hai Jabil 

Sanmina-SCI Mitac Plexus 

VentureCorp Smart Modular USI 

PC ODM : CompalElect 

CompalElect GigaByte Tech Inventec 

Microstar QuantaComp Wistron 

HandsetODM/EMS : BYD CompalComm 

Elcoteq Foxconn Int’l 

IC Fabless 

Altera Cypress Semi Novatek Sierra 

Applied Microcircuit Elan Micro Novatel SiS 

Arm Holding Greatek NVIDIA Sunplus 

Atheros Himax OmniVision TriQuint 

Broadcom Lattice Semi PMC-Sierra VIA Tech 

Cavium Marvell Tech QUALCOMM Wolfson Micro 

Corning MediaTek RF Micro Devices Xilinx 

CSR Microsemi Richtek Tech Zoran 

Distribution 

Arrow Electronics 

Avnet Inc 

Ingram Micro 

Tech Data 

HCL Infosystems 

Synnex Corp 

Mellanox 

Opnext 

Voltaire 

Electronics 

Consumer: Casio Citizen 

Sharp LG Electronics Canon 

Sony Panasonic Philips 

Pioneer Sanyo Tandberg 

Automobile: Alpine Clarion 

Printer&Imaging: DaiNippon EastmanKodak 

FujiFilm KonicaMinolta Lexmark 

Nikon Olympus Ricoh 

Toppan SamsungTechwin SeikoEpson 

DisplayMonitor: Qisda Corp TPV Tech 

Applied Tech AVTech Cogent 

Garmin Photronics Trimble 

Nice Digital Theatre 

Components 

PC/Handset: AAC Avermedia Catcher 

Cheng Uei Ichia Ju Teng Logitech 

DFI LG Innotek BYD Synaptics 

Merry Electronics Silitech Shin Zu Shing 

Connectors: Amphenol Hirose Molex 

Optical: Largan Sunny Optical Hoya 

HDD: MinAikTek NHK Spring 

LED: Bright LED Epistar Everlight 

Seol Semi 

Diversified: Alps Mitsumi Foxconn 

Funai Huan Hsin Lite-On Nidec 

NOK TDK SEMCO Tyco 

Power 

Cosel Delta 

Dongyang InternationalRect 

PowerOne SPI 

PCB, Substrates 

AT&S Phoenix 

Compeq Shinko 

Daeduck Taiflex 

Ibiden Topoint 

Kinsus Tripod 

NanYa TTM 

NGK Spark Unimicron 

Display Panel 

AU Optronics Innolux 

Chi Mei LG Display 

CPT Samsung 

Digitech Sys SDI 

Hannstar Wintek 

AVX 

Passives 

TaiyoYuden 

Cyntec TXC 

EPCOS Vishay 

Murata Yageo 

Nichicon Nippon 

ChemiCon 

Storage 

Brocade EMC 

Emulex NetworkAppliance 

Qlogic Quantum 

HDD: 

Seagate WesternDigital 

Optical: 

Moser Baer Quanta Storage 

Telecom 

HandsetOEM: HTC Motorola Nokia 

Palm RIM 

Equipment: ADCT ADTRAN ADVA 

Alcatel Lucent ARRIS Aruba Centron 

CIENA Cicso CommScope D-Link 

Ericsson F5 Infinera JDSU 

Juniper Kyocera NEC Powerware 

ShoreTel Sonus Spirent Starent 

Tellabs TomTom ZTE 

3

Bhavin Shah 

(852) 2800-8538 


4 


20 April 2009 

Table of Contents 

Introduction ..............................................................................2 

Part 1: Industry and Product Analysis....................................6 

Computing ................................................................................7 

PC..........................................................................................................................82 

Broadband .............................................................................................................52 

Wireless networking..............................................................................................62 

Communications ....................................................................74 

Wireless Handsets .................................................................................................75 

Wireless handset radio technologies....................................................................122 

VOIP ...................................................................................................................132 

Video Conferencing ............................................................................................137 

Consumer Electronics .........................................................144 

Displays...............................................................................................................148 

IPTV....................................................................................................................172 

Game Consoles....................................................................................................187 

DVD ....................................................................................................................201 

Digital Still Camera.............................................................................................210 

Energy Efficient Technologies ............................................223 

Electronic Paper ..................................................................................................225 

Solar Cells ...........................................................................................................231 

Electric Vehicle and Battery................................................................................253 

Light Emitting Diode...........................................................................................269 

Semiconductors ...................................................................294 

Semi manufacturing Equipment ..........................................................................295 

Foundry ...............................................................................................................330 

IC packaging and Testing....................................................................................339 

Part 2: Company Information ..............................................346 

Semiconductors ...................................................................347 

IC IDM ................................................................................................................348 

Memory ...............................................................................................................372 

IC Fabless............................................................................................................379 

IC Foundry ..........................................................................................................412 

IC Assembly & Test............................................................................................417 

Semiconductor Equipment ..................................................................................425 

Semiconductors Materials ...................................................................................457 

Components .........................................................................462 

PC Handset Components.....................................................................................463 

Display Components ...........................................................................................478 

Passive Components............................................................................................485

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

HDD Components ...............................................................................................496 

Optical Components............................................................................................499 

Diversified Components......................................................................................503 

PCB Substracts....................................................................................................515 

Connectors...........................................................................................................530 

Power Supply ......................................................................................................534 

Display...................................................................................538 

Display Panels .....................................................................................................539 

LED .....................................................................................................................549 

Display Monitors.................................................................................................554 

EMS/ODM ..............................................................................557 

Handset EMS/ODM ............................................................................................558 

PC ODM..............................................................................................................563 

Diversified EMS..................................................................................................570 

Storage ..................................................................................584 

HDD ....................................................................................................................591 

Optical Disc.........................................................................................................594 

OEM .......................................................................................597 

Handset OEM......................................................................................................598 

PC OEM ..............................................................................................................604 

Consumer Electronics..........................................................................................611 

Diversified IT ......................................................................................................623 

Solar Chain ...........................................................................638 

Printers and Imaging............................................................649 

Applied Technologies ..........................................................661 

Automobiles Electronics .....................................................669 

Telecom Equipment .............................................................672 

Distribution ...........................................................................699 

The ratings, models, and investment conclusions in this Supply Chain book are 

accurate as of March 12, 2009 . J.P. Morgan clients should contact their sales 

representative or visit www.morganmarkets.com for updated information on the 

companies in this publication. 

5

Bhavin Shah 

(852) 2800-8538 


6 


20 April 2009 

Industry and Product Analysis 

P A R T1

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

The PC supply chain...................................................................... 8 

What’s new? .....................................................................................................................8 

Our global PC forecasts ....................................................................................................8 

Netbooks: Ultra-low-cost notebooks ..............................................................................12 

Outlook for PC brands....................................................................................................14 

Challenges for the netbook segment...............................................................................15 

How Apple could introduce a netbook-like device.........................................................15 

Ultra-slim laptop: MacBook Air .....................................................................................16 

All-in-one PCs ................................................................................................................17 

Notebook ODMs: Order reshuffling in unusual manner.................................................17 

Desktop virtualization: We expect upward pressure on servers .....................................18 

Server market............................................................................. 20 

Servers: A muted outlook ...............................................................................................20 

Analysis of market servers..............................................................................................20 

Key segment themes to follow in servers .......................................................................23 

Components and parts of a PC ................................................ 32 

PC and notebook bill of materials breakdown................................................................32 

Motherboard ...................................................................................................................33 

Central processing unit ...................................................................................................33 

Chipsets ..........................................................................................................................40 

Graphics cards ................................................................................................................41 

Memory ..........................................................................................................................42 

Printed circuit board .......................................................................................................42 

Display............................................................................................................................42 

Optical drives..................................................................................................................44 

Power supply/battery ......................................................................................................44 

Internal storage disks ............................................................... 45 

HDD components ...........................................................................................................46 

Storage technologies trends ............................................................................................47 

HDD: Industry overview ................................................................................................47 

NAND flash solid state disks will encroach on HDDs ...................................................49 

Secure digital (SD) cards ................................................................................................51 

Broadband access ....................................................................... 52 

What’s new? ...................................................................................................................52 

Broadband: Brief overview.............................................................................................52 

Broadband market outlook..............................................................................................55 

Digital subscriber line (xDSL)........................................................................................56 

Cable modem..................................................................................................................57 

Metro ethernet internet access (MEIA)...........................................................................57 

Passive Optical Networks (PON)....................................................................................58 

Fixed wireless broadband: WiMAX ...............................................................................58 

Wireless networking .................................................................... 62 

What’s new? ...................................................................................................................62 

What is wireless networking? .........................................................................................62 

Wireless personal area network (WPAN).......................................................................62 

Wireless local area network (WLAN) or Wi-Fi..............................................................67 

The WLAN equipment market .......................................................................................71 

Computing 

7

Bhavin Shah 

(852) 2800-8538 


Mark Moskowitz AC 

(1-415) 315-6704 

mark.a.moskowitz@jpmorgan.com 

J.P. Morgan Securities Inc 

Gokul Hariharan AC 

(886-2) 2725 9869 

gokul.hariharan@jpmorgan.com 

J.P. Morgan Securities (Taiwan) Limited 

Alvin Kwock AC 

(852) 2800 8533 

alvin.yl.kwock@jpmorgan.com 

J.P. Morgan Securities (Asia Pacific) 

Limited 

8 


20 April 2009 

The PC supply chain 

What’s new? 

PC OEMs have jumped onto the netbook bandwagon along with the early-leader 

ASUS due to strong penetration pickup in emerging markets. Migration to 10" 

appears to be happening rapidly and the competition in the netbook space is getting 

intense. Transition to 12" netbooks is a new trend in this space. Netbooks and all-inones 

are the most promising new product trends, in our view. They are cheaper than 

their alternatives and offer a significant upgrade in user experience. Although they 

should result in significant cannibalization over time, there is a risk that the netbook 

could cede to smartphones. Major order reshuffling has been taking place in terms of 

orders to notebook ODMs. We discuss the “key segment themes to follow” in servers 

and PC virtualization that could gain traction in the coming years. 

The processor space has seen major developments since the past year. Intel launched 

core i7 family processors, based on the new Nehalem microarchitecture. AMD is 

getting more competitive with Shanghai, which should narrow the performance gap. 

Several Ultramobile processors were introduced. Intel launched the Atom processor 

aimed at netbooks and MIDs, followed by VIA’s nano. In 2H08, Nvidia launched 

tegra targeted at MIDs. AMD introduced Neo athelon at the CES 2009. Qualcomm’s 

work on Snapdragon solution is aimed at reducing the power consumption and the 

cost to new lows. 

In the storage space, we believe demand and pricing conditions are not favorable, 

and the high level of manufacturing parity is adding to a volatile pricing 

environment. We prefer to see consolidation among HDD manufacturers. We expect 

little in the way of positive impact from any consolidation of the smaller market 

share players this year. HDD manufacturers, such as Hitachi and Toshiba, are 

working on new storage technologies such as patterned magnetic media and 

thermally assisted recording methods to circumvent the density limitations issues. 

NAND-based SDD is gaining market share but is still not competitive enough for 

HDD and will likely encroach upon HDDs over time. Netbooks are an emerging 

application for NAND demand, but incremental NAND demand from netbook 

should be limited due to low penetration rate in 2009. 

Our global PC forecasts 

For the PC market, we forecast that the total unit shipment will decline 13.5% in 

2009. We expect desktop and notebook PC units to decline 21.4% and 5.5%, 

respectively. Consensus estimate for 2009 appears to gravitate around a mid- to highsingle-digit 

decline in PC units. We believe the consensus view takes into account 

continued growth from netbooks, offset by a substantial fall-off in desktop and 

notebook PCs in developed regions. We do not think the consensus view, however, 

has fully contemplated that the PC replacement cycle in the enterprise could be 

meaningfully deferred to next year. Also, we expect the US to be the early cycle 

decliner, which points to declines in Asia-Pacific and other emerging markets this 

year, in stark contrast to the double-digit growth of recent years in those regions.

Bhavin Shah 

(852) 2800-8538 


Figure 1: PC and servers supply chain 

Enterprise (47%) 

IT Distributors 

Avnet, CDW Corp, Ingram Micro, 

Tech Data, Synnex, Redington, 

US: 

Celestica 

Jabil 

Sanmina-SCI 

Flextronics 

COMPONENTS 

CPU DRAM Motherboard Clock HDD LCD Graphics 

Intel-80% 

ICST Seagate-32% Samsung-24% 

AMD-19% 

VIA -1% 

CY 

Samsung 

Hynix 

Micron 

Powerchip 

Elpida 

ProMos 

Source: Company reports, Gartner, Mercury Research, J.P. Morgan. 


20 April 2009 

PC OEMs (60%) 

HP, Dell, Acer, Lenovo, ) Toshiba, Fujitsu-Siemens, 

NEC 

EMS and ODM 

Asia: 

Quanta 

Compal 

Inventec 

MITAC 

Wistron 

Hon Hai, 

ASUSTek 

Hon Hai 

Elitegroup 

Microstar 

Gigabyte 

Government and 

Education (13%) 

Retailers 

BBY, Dixons 

PC White Box (40%) 

Ati, Aris Computer, PC Direct 

Component distributors 

Arrow Electronics Avnet Inc, Future 

Electronics, Redington 

WD-27% 

HGST-17% 

Toshiba-9% 

Samsung-8% 

Fujitsu-7% 

Consumer (40%) 

LG Philips-22% 

AUO-17% 

CMO-15% 

Sharp-8% 

NVIDIA-30% 

AMD-19% 

Intel-47% 

SIS -2% 

9

Bhavin Shah 

(852) 2800-8538 


Table 1: J.P. Morgan worldwide PC unit shipment forecasts 

Units in ‘000s 

1Q08A 2Q08A 3Q08A 4Q08E 2008E 1Q09E 2Q09E 3Q09E 4Q09E 2009E 2010E 

PC shipments 71,844 71,780 80,568 77,869 302,061 63,524 59,297 68,317 70,270 261,407 275,027 

% of total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 

Y/Y % change 13.6% 15.9% 15.0% 0.9% 10.9% -11.6% -17.4% -15.2% -9.8% -13.5% 5.2% 

Q/Q % change -6.9% -0.1% 12.2% -3.3% -18.4% -6.7% 15.2% 2.9% 

Desktop PC 38,100 38,118 38,375 35,854 150,447 29,659 28,059 30,032 30,559 118,308 117,011 

% of segment 53.0% 53.1% 47.6% 46.0% 49.8% 46.7% 47.3% 44.0% 43.5% 45.3% 42.5% 

Y/Y % change 0.3% 3.1% -2.4% -15.2% -3.9% -22.2% -26.4% -21.7% -14.8% -21.4% -1.1% 

Q/Q % change -9.9% 0.0% 0.7% -6.6% -17.3% -5.4% 7.0% 1.8% 

Notebook PC 31,574 31,398 39,942 39,853 142,767 31,890 29,186 36,203 37,636 134,915 149,502 

% of segment 43.9% 43.7% 49.6% 51.2% 47.3% 50.2% 49.2% 53.0% 53.6% 51.6% 54.4% 

Y/Y % change 35.8% 36.5% 39.5% 22.2% 32.8% 1.0% -7.0% -9.4% -5.6% -5.5% 10.8% 

Q/Q % change -3.2% -0.6% 27.2% -0.2% -20.0% -8.5% 24.0% 4.0% 

Server 2,170 2,265 2,251 2,162 8,847 1,974 2,052 2,083 2,076 8,184 8,513 

% of segment 3.0% 3.2% 2.8% 2.8% 2.9% 3.1% 3.5% 3.0% 3.0% 3.1% 3.1% 

Y/Y % change 8.2% 15.0% 6.7% -6.0% 5.5% -9.0% -9.4% -7.5% -4.0% -7.5% 4.0% 

Q/Q % change -5.7% 4.4% -0.6% -3.9% -8.7% 3.9% 1.5% -0.3% 

Source: Gartner Personal Computer Quarterly Statistics Worldwide Database, 12/08; J.P. Morgan estimates for 2008-2010. 

Table 2: J.P. Morgan worldwide PC revenues forecasts 

US$ in millions 


PC Revenues 64,789 62,114 68,122 66,427 261,452 52,433 47,370 52,455 54,146 206,405 202,704 

% of total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 

Y/Y % change 12.4% 10.6% 7.9% -5.5% 5.7% -19.1% -23.7% -23.0% -18.5% -21.1% -1.8% 

Q/Q % change -7.8% -4.1% 9.7% -2.5% -21.1% -9.7% 10.7% 3.2% 

Desktop PC 26,226 25,207 24,566 23,112 99,110 18,677 17,045 17,760 18,264 71,745 67,163 

% of segment 40.5% 40.6% 36.1% 34.8% 37.9% 35.6% 36.0% 33.9% 33.7% 34.8% 33.1% 

Y/Y % change 1.0% 0.1% -8.6% -21.4% -7.8% -28.8% -32.4% -27.7% -21.0% -27.6% -6.4% 

Q/Q % change -10.9% -3.9% -2.5% -5.9% -19.2% -8.7% 4.2% 2.8% 

Notebook PC 31,243 29,584 35,965 36,205 132,997 27,408 23,936 27,938 29,343 108,625 109,412 

% of segment 48.2% 47.6% 52.8% 54.5% 50.9% 52.3% 50.5% 53.3% 54.2% 52.6% 54.0% 

Y/Y % change 27.1% 23.4% 24.9% 9.9% 20.6% -12.3% -19.1% -22.3% -19.0% -18.3% 0.7% 

Q/Q % change -5.1% -5.3% 21.6% 0.7% -24.3% -12.7% 16.7% 5.0% 

Server 7,320 7,323 7,591 7,110 29,345 6,349 6,389 6,758 6,539 26,035 26,130 

% of segment 11.3% 11.8% 11.1% 10.7% 11.2% 12.1% 13.5% 12.9% 12.1% 12.6% 12.9% 

Y/Y % change 3.3% 4.4% 1.7% -10.3% -0.5% -13.3% -12.7% -11.0% -8.0% -11.3% 0.4% 

Q/Q % change -7.7% 0.0% 3.7% -6.3% -10.7% 0.6% 5.8% -3.2% 


Table 3: J.P. Morgan worldwide PC ASP forecasts 

Average selling prices (US$) 


PC ASPs 902 865 846 853 866 825 799 768 771 790 737 

Y/Y % change -1.0% -4.6% -6.2% -6.3% -4.6% -8.5% -7.7% -9.2% -9.7% -8.8% -6.7% 

Q/Q % change -1.0% -4.0% -2.3% 0.9% -3.2% -3.2% -3.9% 0.4% 

Desktop PC 688 661 640 645 659 630 607 591 598 606 574 

Y/Y % change 0.7% -2.9% -6.4% -7.4% -4.0% -8.5% -8.1% -7.6% -7.3% -7.9% -5.3% 

Q/Q % change -1.1% -3.9% -3.2% 0.7% -2.3% -3.5% -2.7% 1.1% 

Notebook PC 990 942 900 908 932 859 820 772 780 805 732 

Y/Y % change -6.4% -9.6% -10.5% -10.0% -9.2% -13.1% -13.0% -14.3% -14.2% -13.6% -9.1% 

Q/Q % change -2.0% -4.8% -4.4% 0.9% -5.4% -4.6% -5.9% 1.0% 

Server 3,373 3,234 3,373 3,289 3,317 3,216 3,114 3,245 3,150 3,181 3,069 

Y/Y % change -4.6% -9.2% -4.7% -4.6% -5.7% -4.7% -3.7% -3.8% -4.2% -4.1% -3.5% 

Q/Q % change -2.1% -4.1% 4.3% -2.5% -2.2% -3.2% 4.2% -2.9% 


10 


20 April 2009

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 4: J.P. Morgan Asia tech team’s PC shipment forecasts by region and segment 

Units in ‘000s 

2007 2008E 2009E 2010E 2007 

Growth 

2008E 2009E 2010E 

Desktop PC APAC 50,177 50,004 38,247 34,424 10.2% -0.3% -23.5% -10.0% 

Japan 6,108 5,669 4,055 4,101 -4.1% -7.2% -28.5% 1.2% 

W.Europe 25,639 23,045 14,817 11,793 -3.3% -10.1% -35.7% -20.4% 

E. Europe, MEA 21,617 20,976 15,672 13,914 8.3% -3.0% -25.3% -11.2% 

North America 34,224 29,424 19,083 16,457 -6.3% -14.0% -35.1% -13.8% 

Latin America 18,827 19,510 17,884 17,558 22.1% 3.6% -8.3% -1.8% 

NB PC APAC 19,795 29,094 37,539 46,867 54.1% 47.0% 29.0% 24.8% 

Japan 7,364 8,761 8,968 9,082 1.4% 19.0% 2.4% 1.3% 

W.Europe 30,617 41,796 35,734 39,395 28.6% 36.5% -14.5% 10.2% 

E. Europe, MEA 11,777 19,394 22,108 27,008 53.5% 64.7% 14.0% 22.2% 

North America 33,081 38,264 31,682 34,431 23.4% 15.7% -17.2% 8.7% 

Latin America 4,837 7,637 8,708 12,038 73.8% 57.9% 14.0% 38.2% 

Server APAC 1,289 1,408 1,415 1,467 11.9% 9.2% 0.5% 3.7% 

Japan 568 541 455 451 -2.1% -4.7% -16.0% -0.8% 

W.Europe 1,935 1,951 1,412 1,326 9.1% 0.8% -27.6% -6.1% 

E. Europe, MEA 638 708 716 769 18.4% 11.0% 1.1% 7.4% 

North America 3,623 3,621 2,439 2,390 6.1% -0.1% -32.6% -2.0% 

Latin America 309 362 338 359 18.7% 17.1% -6.6% 6.3% 

Total PC APAC 71,262 80,506 77,200 82,757 19.7% 13.0% -4.1% 7.2% 

Japan 14,040 14,971 13,478 13,635 -1.2% 6.6% -10.0% 1.2% 

W.Europe 58,190 66,792 51,964 52,514 11.7% 14.8% -22.2% 1.1% 

E. Europe, MEA 34,032 41,078 38,496 41,691 20.8% 20.7% -6.3% 8.3% 

North America 70,928 71,309 53,203 53,277 6.2% 0.5% -25.4% 0.1% 

Latin America 23,973 27,508 26,929 29,955 29.8% 14.7% -2.1% 11.2% 

Worldwide Desktop PC 156,592 148,628 109,758 98,248 4.2% -5.1% -26.2% -10.5% 

NB PC 107,471 144,945 144,739 168,821 32.4% 34.9% -0.1% 16.6% 

Server 8,362 8,592 6,774 6,762 8.3% 2.7% -21.2% -0.2% 

Total 272,425 302,164 261,271 273,831 13.9% 10.9% -13.5% 4.8% 

Source: Gartner, J.P. Morgan estimates. Published on February 03, 2009. 

PC ASPs could be entering dire straits 

We expect significant ASP deterioration in 2009. Our ASP assumptions for desktop 

and notebook PCs underpin a total PC market revenue decline of 21.1%, versus 9.7% 

previously. A combination of weak demand, customer requests for heavy 

discounting, mix to lower-end SKUs, and competitive pressure could drive the ASP 

erosion. We expect notebook PCs to be the hardest hit as the continued migration 

from desktop PCs should force greater competitive face-offs in a compressing PC 

market. In addition, the netbook PC should continue to be a deflationary force as the 

sub-US$400 base price drives more adoption. 

Emergence of ultra-low-cost and ultra-portable notebooks 

The continuing shift towards mobility has given rise to light-weight ultra-portable 

notebooks. Tablet PCs were the first PCs in this category but could not become a 

major segment due to cost constraints. The initial adoption of ultra-portable Asus Eee 

PC and HP Mini-Note indicated that a certain percentage of users were willing to 

adopt these sub-notebooks due to higher mobility and lower weight offered. In 

addition, the lower price points of this segment are likely to attract a lot more users 

who may have been put off by high price tags for ultra-mobile tablet PCs to buy a 

sub-notebook. This results in a new segment of ultra-low-cost and ultra-portable PCs, 

which is often referred to as netbooks. Moreover, low-cost notebook has started to 

penetrate to the US$400 level, a territory previously only available to desktops. 

11

Bhavin Shah 

(852) 2800-8538 


12 


20 April 2009 

Netbooks: Ultra-low-cost notebooks 

There are two target segments for such a product. The first segment is a developed 

market buyer looking for a light-weight and cheap second PC. The second segment is 

focused on pushing these small form factor notebooks as the first PC in an emerging 

market household. We believe small form factor, low weight, and attractive design 

should drive netbook adoption as a second notebook in developed markets. Increase 

in feature set, support for Microsoft XP, and larger keyboards with 8.9" and 10" 

models help drive this trend. Also 12" netbooks have started coming to the market. 

Over the past year, multiple PC OEMs have jumped into the netbook bandwagon 

along with the early leader, ASUS due to a strong PC penetration pickup in emerging 

markets, and we believe the competition in this space is getting intense. 

Eee PCs: Easy, excellent and exciting 

Asus launched new generation of Eee PCs—the Eee PC 901 and 1000 series. First 

generations of Eee PCs were launched by ASUS (Taiwan) in October, 2007. (Please 

refer to the previous edition of the Supply Chain Guide for more information on firstgeneration 

Eee PCs and OLPCs) 

Table 5: Eee PC configuration 

Eee PC 901/ 904 HA/ 904 HD Eee PC 1000/ 1000HA/ 1002HD/ S101 

Display 8.9” LED Backlit 10"/10.2" 

Operating System Genuine Windows XP® Home GNU Linux 

Intel CPU Atom 270/ Atom 270/ Celeron M 353 Atom 270/ Atom 270/ Celeron M 353/ Atom 270 

HDD/SSD Storage SSD 12GB (XP),20GB (Linux)/ 160GB SSD 40GB/160GB HDD/ 160GB HDD/16GB(XP) 

HDD/ 160GB HDD 

& 32GB,64GB(Linux) 

Online Eee Storage 20GB/10GB/10GB 60GB/10GB/10GB/30GB 

Default Memory 1GB/1GB/1GB(XP) & 2GB(Linux) 1GB/1GB/1GB(XP) & 2GB(Linux)/1GB 

Wireless 802.11b,g,n / 802.11b,g /802.11b,g 802.11b,g,n / 802.11b,g,n / 802.11b,g 

/802.11b,g,n 

Bluetooth YES/No/No YES/ YES/ YES/ YES 

Webcam 

Source: www.asus.com. 

1.3M Pixel/1.3M Pixel/0.3M Pixel 1.3M Pixel/1.3M Pixel/ 1.3M Pixel/0.3M Pixel 

Remodeling for Asus’ Eee PC 

Currently, 10" models account for 70-80% of Asus’s Eee PC revenue and the 

company plans to launch two new 10" models in 2Q09 that will be the mainstream of 

its 10" models for 2H09. The ASP could stay stable in 1H09, but the blended ASP 

might be higher due to transition to the 10" model. 

HP Mini-Note 

The new HP 2140 Mini-Note (announced at CES 2009) uses 10" LED backlit display 

and 1.6GHz Atom processor. It has up to 2GB RAM, 80GB/160GB HDD, Wi-Fi and 

Bluetooth. In 2008, HP launched its first netbooks with 8.9" models (2133), 

primarily targeting the education market. The 2133 model had a high resolution 

display, full-sized keyboard and much better industrial design, but the CPU 

performance was an issue as it used VIA processors. Mini 1000 was an improvement 

in features but lacked in design. In this way, we believe 2140 is a blend of the best of 

both. HPQ substituted the Via CPU with Intel Atom in its new 2140 model. 

Currently, HP’s newest Mini uses Intel’s Atom and offers higher storage capacity 

HDD.

Bhavin Shah 

(852) 2800-8538 


Table 8: Inspiron Mini netbooks 


20 April 2009 

Table 6: HP Mini netbooks 

2140 2133 1000 

Operating system Windows/ Linux Linux Windows Vista Windows XP Home Linux 

Processor 1.6 GHz Atom 1.0GHz VIA 1.6GHz VIA 1.6 GHz Atom 1.6 GHz Atom 

Storage 80GB/160GB HDD 4GB Flash 120GB HDD 60GB HDD 60GB HDD 

DRAM 

Source: www.hp.com. 

Up to 2 GB 512 MB 2 GB Up to 1GB Up to 2GB 

Acer Aspire One 

Acer Aspire One was the highest selling netbook in 2008. Now, Acer appears to 

continue its aggressive push in netbooks with the launch of its 10" Aspire One model 

in 2009. 

Table 7: Inspiron Mini Netbooks 

8.9” 10.1” 

Processor 1.6GHz Intel Atom N270 1.6GHz Intel Atom N270 

Chipset Intel 945GSE Intel 945GSE 

DRAM Up to 1.5GB DDR2 SDRAM at 533 MHz Up to 2GB DDR2 SDRAM at 533MHz 

Operating system Windows XP Home Windows XP Home SP3 

Storage 120 GB Hard Drive (5400RPM) 160 GB Hard Drive (5400RPM) 

Display LED display WSVGA(1024X600) 10.1” LED display WSVGA(1024X600) 

Optical Drives None None 

Wireless 802.11b/g 802.11b/g 

Video Card Intel Graphics Media Accelerator (GMA) 950 Intel Graphics Media Accelerator (GMA) 950 

Battery Life 3 cell Lithium-Ion Battery 3/6 cell Lithium-Ion Battery 

Weight Starting at 2.2 pounds Starting at 2.9 pounds 

Price Starting at $270 Starting at $349 

Source: http://reviews.cnet.com/laptops/acer-aspire-one-aod150/4507-3121_7-33517218.html?tag=mncol;psum . 

Dell Inspiron Mini 

Dell recently entered the netbook bandwagon with Inspiron Mini 8.9" and 12.1", 

aiming at competing with Eee PC 901 and Macbook Air, respectively. Silverthrone is 

used in MIDs but Dell has used it in netbooks since it has smaller footprint and is 

more power efficient than Dimondville. Dell announced the launch of Mini 10 at the 

CES 2009. The Dell Mini 10 will have multi-touch capabilities, built-in broadband 

technology and built-in GPS. 

8.9” 12.1” 10.1” 

Processor 1.6GHz Intel Atom N270(Diamondville) 1.33GHz Intel Atom Z520/Z530(Silverthorne) 1.33GHz Intel Atom Z520(Silverthorne) 

Chipset Intel 965PM Intel US15W Intel US15W 

DRAM Up to 1GB DDR2 at 533 MHz 1GB DDR2 (Not expandable) 1GB2 DDR2 SDRAM at 533MHz 

Operating system Ubuntu/Windows XP Home Ubuntu/Windows XP Home Windows XP Home SP3 

Storage Up to 16GB SSD(Windows)/ 32 GB(Ubuntu) Up to 80 GB Hard Drive (4200 RPM) 120/160 GB Hard Drive (5400RPM) 

Display 8.9” LED display(1024X600) 12.1” widescreen (1280x800) 10.1" widescreen (1024x576) 

Optical Drives None None None 

Wireless 802.11g mini -card 802.11g mini -card 802.11g or a/g/n mini cards 

Bluetooth Internal (2.0) mini-card Internal (2.0) mini-card Internal (2.1) mini-card 

Camera Optional 0.3MP or 1.3 MP 1.3 MP 1.3 MP 

Video Card Intel Graphics Media Accelerator (GMA) 950 Intel®Graphics Media Accelerator 500 Intel®Graphics Media Accelerator 500 

Battery Life 32WHr Battery (4 cell) 24/48WHr Lithium-Ion Battery (3/6-cell) 24WHr Lithium-Ion Battery (3-cell) 

Weight Starting at 2.3 pounds(1.035 Kg) Starting at 2.72 pounds(1.035 Kg) Starting at 2.86 pounds(1.3 Kg) 

Price 

Source: www.dell.com. 

Starting at $249 Starting at $399 Starting at $399 

13

Bhavin Shah 

(852) 2800-8538 


Table 9: 12” ultra portable notebooks 

14 

Transition to larger-size ultra-portable notebooks is the new trend 

The current trend in the netbook space is the transition to 12" netbooks. Dell had 

launched Inspiron Mini 12 last year. Asus S121 (12" model) is a luxury product with 

the price starting at US$899. HP pavilion dv2 will soon likely debut AMD’s new 

ultra-thin notebook platform. 

Dell Inspiron Mini 12 Asus Eee PC S121 HP Pavilion dv2 

Processor Intel Atom Z520/Z530(Silverthorne) Intel Atom Z520 CPU(1.33GHz) 1.6-GHzAMD Athlon Neo (Yukon) 

DRAM 1GB DDR2 (Not expandable) DDR2 533MHz up to 2GB Upto 4GB DDR2 RAM 

Operating system Ubuntu/Windows XP Home Linux/Windows XP Home/Vista Home basic Windows Vista Home basic/Premium 

Storage Up to 80 GB Hard Drive (4200 RPM) - 1.8” SATA HDD up to 250GB / 5400RPM Upto 500GB HDD(5400 RPM) 

- Optional 512GB SSD (MLC) 

Display 12.1” widescreen (1280x800) 12” LED display, WXGA(1280X800) resolution 12” LED display, WXGA(1280X800) resolution 

Optical Drives None External drives supported External Blu-Ray disk support 

Wireless 802.11g 802.11n 802.11g/n 

Video Card Intel GMA 500 Intel GMA 950 ATI mobility Radeon HD 3410 

Battery Life 24/48WHr Lithium-Ion Battery (3/6-cell) 4 cell polymer battery 4/6 cell battery 

Weight Starting at 2.72 pounds(1.035 Kg) 3 pounds (1.45 Kg) Starting at 3.8 pounds 

Price Starting at $399 Starting at $899 Starting at $699 

Source: Dell, http://usa.asus.com/news_show.aspx?id=14001, http://www.ubergizmo.com/zoom.php?dir=2009/1/hp-dv2/&page=20. 

Figure 2: Netbook unit forecast 

30 

25 

20 

15 

10 

5 

- 

0% 

8% 

14% 

17% 

2007 2008E 2009E 2010E 

Netbook units (M) % of total notebook units 

Source: Gartner, J.P. Morgan estimates. 

20% 

16% 

12% 

8% 

4% 

0% 


20 April 2009 

Outlook for PC brands 

Given that the netbook is likely to be the fastest growing segment and cannibalize 

some of the mainstream notebook market, we believe individual brands’ strategies in 

this segment is quite an important determinant of market share. We have a mixed 

prognosis for the PC brands. 

Incremental for units but likely becoming a deflationary force 

The netbook category should continue to grow strongly in 2009 as 10" models with 

acceptable specs become the flagship models for most PC OEMs. However, we 

believe the cannibalization impact of netbooks (on mainstream consumer notebooks) 

should intensify as netbooks migrate to the 10" and above form factors. We expect 

the netbook market to grow from 11.5 million units in 2008 to 20+ million units in 

2009. The netbook PC, with a base price below US$400, continues to gain traction. 

The target customer is the consumer. With the low sticker price, we expect some 

users to be first-time notebook purchasers, whereas others could seek the smaller 

form factor for targeted mobility. In any event, we expect the netbook to drag down 

pricing of standard notebook PCs over time, and this is not likely to be good for 

anyone but the end-customer. 

Cannibalization widespread: Our mixed prognosis for brands 

We believe, over time, the line between netbooks and notebooks will blur and the 

low-end value notebook category will get eventually merged. We think the first sign 

of blurring lines between netbooks and notebooks is the 12-inch form factor, where 

the main difference is the price. 

We expect Acer to remain the leader in this segment, followed by ASUS and HPQ. 

Lenovo could enter this segment, but lack of established consumer channels may 

hamper its effort. Given its publicly stated focus on profitability and retreat from less 

profitable markets, Dell is not likely to be a big player in the netbook segment, in our 

view. In addition, Dell also lacks the channels to efficiently sell huge volumes. HP’s 

netbook strategy still looks quite uncertain, in our view. Our current understanding is 

that HP is likely to treat netbook as a very incremental market and will not likely be

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

very aggressive in taking market share. If this indeed plays out, then ASUS and Acer 

should benefit significantly in the netbook space. Japanese PC brands are likely to be 

the worst hit from this phenomenon. In 4Q08, we saw proliferation of netbooks 

starting to adversely affect the profitability of these brands. We expect incremental 

unit upside to benefit notebook ODMs and component vendors. 

Challenges for the netbook segment 

Low-priced models: Open price point schemes 

OEMs, such as HPQ and Acer, have dedicated product development teams (open 

price point teams), which design customized products for emerging markets. These 

teams often utilize low-priced components (in some cases, shifting to the Taiwan 

food chain), with limited warranty and no bundling of software or OS to reduce price 

points. Open price point schemes at several PC OEMs are more suited to address the 

emerging market need, in our view. Our checks suggest that HP is extending the 

offer of OPP (open price point) models from the emerging market to a global launch. 

Netbooks could be a temporary fad or a longer-term deflationary force 

We believe there will be interest for netbooks as the second-generation products start 

shipping, but we are not sure that this emerging segment has staying power. If 

anything, netbooks could pressure ASPs for more traditional notebooks, but even this 

risk could be minor, as we think netbooks could eventually lose to smartphones. Our 

current PC forecast incorporates a higher level of ASP erosion in notebook PCs due 

to the netbook. 

Netbooks could give way to the smartphones over time 

The biggest advantage of netbooks is that it is a mobility device with easy internet 

access but it may have to face some competition from iPhone and similar devices, 

which are simplifying internet access in mobile phones. A certain segment of 

consumers might prefer using a handset device, instead of a sub-notebook, as their 

mobility device. Acer’s and ASUS’s move to co-operate with operators and bundle 

3.5G data cards in low-cost PCs is an indication of this potential convergence. Over 

time, we think there is risk that the netbook could cede whatever market presence it 

captures to smartphones. The netbook is intended to be an ultra-portable device that 

provides the end-user some software applications with the focus more on email and 

internet browsing—and in our view, this is the problem. For now, the netbook does 

not pack enough processor and software capabilities to have the look and feel of a 

PC. Instead, it feels more like a smartphone, but with a more expensive price point 

and without the telephone calling capabilities. 

How Apple could introduce a netbook-like device 

The following section up to ‘All-in-one PCs’ has been excerpted from our US IT 

hardware and imaging analyst Mark Moskowitz's report, “Our Vision of How Apple 

Could Introduce a Netbooklike Device,” originally published on 13 March 2009. 

Please see MorganMarkets for the full report. 

We believe 2009 is the right time for Apple to enter the netbook PC market. 

Speculation about a netbook-like device from Apple has picked up in recent weeks. 

We think such an entry makes sense as the company could further cement its 

leadership in consumer electronics products. Here, we do not expect Apple to 

diminish its high-end stature, and we estimate a netbook-like device would be 

accretive to Apple’s gross margins. 

15

Bhavin Shah 

(852) 2800-8538 


The timing is right for Apple's 

entry into netbook-like devices 

Apple’s netbook-like product 

would be differentiated and not 

so cannibalistic 

Price points could be US$499 for 

32GB and US$599 for 64GB 

We think Apple’s “netbook” will 

be accretive 

Table 10: Comparison of 8GB iPod touch and 32GB and 64GB “Netbook-like” Devices 

16 

Given the momentum behind lower cost PCs, i.e. netbooks, and an increasingly price 

sensitive consumer, we believe it is important for Apple to introduce new CE 

products in the sub-$800 price range. Apple is more than a PC company, and with 

the introduction of a netbook-like device, the company would sustain its leading CE 

stature while addressing a new market having longer term growth potential. 

Apple, unlike other PC-related companies, has the platform to introduce a netbooklike 

device that is both differentiated and has limited cannibalization impact on its 

existing product offerings. In our view, a larger, enhanced iPod touch-like device 

could be a reasonable progression. The device could be a music player, netbook PC, 

gaming handheld, and a portable Internet device, all in one. We would expect the 

keyboard to be touch-screen, distinguishing from other netbook PCs. 

Our view on Apple’s potential netbook-like device includes all of the current iPod 

touch capabilities, plus a larger 10-inch touch screen, wireless (3G data and 

Bluetooth, in addition to Wi-Fi), and higher storage capacities. With any netbooklike 

device, we expect Apple to chose an elastic price band in the US$499-599 range 

(with the help of carrier subsidies) to keep enough separation from its entry 

Macbooks and iPhone/iPod touch lines. 

Given rapid component cost declines and a robust margin profile on the iPod touch, 

we believe that the addition of a new netbook-like device should be accretive to the 

model, at gross margins at or above 50%. Note that we assume that the 8GB iPod 

touch held close to 50% gross margins at its initial release. The 8GB product’s 

margins have improved over time due to supplier management, redesign, and steep 

declines in component pricing. 

8GB iPod touch 32GB Netbook-like device 64GB netbook-like device 

iPod touch components US$47 iPod touch components US$47 iPod touch components US$47 

Flash 8GB US$12 Flash 32GB US$44 Flash 64GB US$90 

Touch screen and LCD module US$35 Touch screen and LCD module US$106 Touch screen and LCD module US$106 

Additional BOM (3G, Bluetooth, camera, 

Additional BOM (3G, Bluetooth, camera, 

GPS, etc.) US$50 GPS, etc.) US$50 

Total iPod touch bill of materials US$94 Total 32GB “netbook” bill of materials US$247 Total 64GB “netbook” bill of materials US$293 

Manufacturing US$5 Manufacturing US$5 Manufacturing US$5 

Total cost of sales US$99 Total cost of sales US$252 Total cost of sales US$298 

Gross margin 57% Gross margin 50% Gross margin 50% 

Selling price 

Source: J.P. Morgan estimates. 

US$229 Selling price US$499 Selling price US$599 

Figure 3: MacBook Air 

Source: www.apple.com. 


20 April 2009 

Ultra-slim laptop: MacBook Air 

In January 2008, Apple launched an ultra-slim laptop—MacBook Air—which weighs 

40% less. It is also the first Apple notebook with Al casing, multi-touch touchpad 

and optional solid-state drive. The starting price point is US$1799. Macbook Air 

could set the trend for ultra-portable notebooks, which by our estimate have less than 

10% share of the overall notebook segment. At the CES 2009, Dell confirmed the 

launch of luxury laptop Dell Adamo. This much thinner notebook is likely to counter 

the Macbook Air, in our view.

Bhavin Shah 

(852) 2800-8538 


Table 11: Comparison of various Macbook models 

Macbook Air Macbook Macbook Pro 

Price Starting at US$1,799 Starting at US$1,099 Starting at US$1,999 

Weight 3.0 pounds (1.36 kg) 5.0 ponnds (2.27 kg) 5.4 pounds 

Height 0.16-0.76 inch (0.4 - 1.94 cm) 1.08 inches (2.75 cm) 1 inch 

Screen 13.3" LED backlight 13.3" TFT LCD 15"/17" TFT LCD 

Processor Intel Core 2 Duo processor 1.6 - 1.8 GHz Intel Core 2 Duo processor 2.0-2.2 GHz Intel Core 2 Duo processor 2.2-2.4 GHz 

Memory 2 GB 1 GB 2 GB 

Storage 80 GB parallel ATA hard disk drive (Optional 64 80 GB Serial ATA HDD 120 GB Serial ATA HDD 

GB solid state drive) 

Operating System Mac OSXv10.5 Leopard Mac OSXv10.5 Leopard Mac OSXv10.5 Leopard 

Casing Al casing in silver Plastic in white/black 

Wireless Built-in 11n WLAN + Bluetooth Built-in 11n WLAN + Bluetooth Built-in 11n WLAN + Bluetooth 

Battery Life 5 hours wireless, Lithium Polymer ~hours battery life, 55W Lithium Polymer ~hours battery life, Lithium Polymer 

Touchpad Solid state track pad with multi-touch gesture 

support for precise cursor control 

Source: Company, J.P. Morgan. 


20 April 2009 

Solid-state scrolling track pad for precise cursor 

control 

Solid-state scrolling track pad for precise 

cursor control 

All-in-one PCs 

A chance for NB ODMs to further cannibalize desktop vendors 

Netbook and all-in-ones are cheaper than their alternatives from a total cost 

perspective. Besides, they also offer significant upgrade in user experience, which 

makes them the most promising new product trends, in our view. 

Figure 4: Traditional PC set evolves into stylish all-in-one PC 

Source: http://www.pclaptop-review.com/. 

All-in-one used to be a niche segment. However, today if one goes to Dell or HP 

website, they have now put desktop and all-in-one PCs in the same category. Almost 

every brand is coming up with products on this front. We believe there are 15-20 

RFQ projects for 2009/10, tripled from 2008 level. An important catalyst for this 

take-off is the stabilization of LCD monitor size. When panel prices keep falling, 

people would like to replace the monitor separately. Now, with the monitor size 

likely to stabilize at 19"W or 22"W, it makes sense to combine the two systems; it is 

10%-15% cheaper than separate systems due to the elimination of mechanical parts, 

while importantly it saves some space as well. The touch function could also become 

an important enabler of this trend. Most of the models in the pipeline have some form 

of touch-screen functionality. Enabling touch-screen interface will necessitate an 

integrated design approach (notebook like), compared to the highly modular design 

approach which has been used in desktops so far. This could work in favor of all-inone 

configuration. Windows 7 could be quite important in this regard. 

Notebook ODMs: Order reshuffling in unusual manner 

Recently, brands have continued to reshuffle orders among ODMs in an attempt to 

induce more ODM price competition. HP will extend Wistron’s low-price consumer 

17

Bhavin Shah 

(852) 2800-8538 


18 


20 April 2009 

project (OPP) on the AMD platform until late 3Q, which is scheduled to end in April, 

thus cutting down Quanta’s share. Acer will debut its 10.2" Aspire One model with 

Compal in February, but now it will also launch another 10.2" slim-type model from 

Quanta in April, while increasing Inventec’s share in notebooks. Toshiba plans to cut 

Inventec’s share from 70% to

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

For the virtualized PC, the end-user would still have a keyboard, mouse and display, 

but there would not be a physical PC system at the desk. To point, Figure 5 illustrates 

the end user accessing a virtual desktop (no PC asset on desk), which receives a 

unique desktop profile, applications, and operating system from the thin-client 

environment. 

Figure 5: Diagram of desktop virtualization 

Source: Citrix. 

It is clear that the thrust of desktop PC virtualization is to lower operational costs. 

Toward that end, we could see large enterprises deploying desktop PCs in a 

virtualized, server-centric environment for certain front-office and back-office 

functions. For instance, in banking, we could see a greater level of branch tellers and 

loan managers move to virtualized PC platforms. In insurance, claims and billing 

agents could take advantage, or at hospitals, doctors could access patient records 

through virtual PC kiosks. The net effect of desktop PC virtualization could be a drag 

on PC unit sales, but on the back-end, there could be upward pressure on servers due 

to capacity requirements to manage and serve the desktop profiles. 

19

Bhavin Shah 

(852) 2800-8538 


20 


20 April 2009 

Server market 

Servers are the workhorses of corporate networks and the Internet. Their major 

applications include computing the staggering number of calculations needed to 

serve web pages, access databases, and run networked corporate applications. After a 

sharp post-bubble recovery, the server market’s revenue growth has decelerated to 

low- to mid-single digits since 2004. 

Servers: A muted outlook 

According to Gartner, the global server market was ~$53.1 billion in 2008. Last year, 

server revenue and units declined by 4.1% and 2.6%, respectively. We think that a 

combination of macro pressure and the effects of virtualization could dampen this 

already meager growth profile in the long run. Looking to 2009, we expect the server 

industry’s total revenue and units to decline by 18.1% and 11.3%, respectively. 

In the near- to mid-term, all bands within servers could be impacted in case of a 

prolonged economic slowdown. In past downturns, the higher-end systems or “big 

iron” typically were most impacted. Also, we note that general ASP trends could 

come under pressure if the macroeconomic environment worsens and server vendors 

look to protect market positions with pricing actions. 

Figure 6: Macro environment and virtualization could dampen revenue growth prospects 

US$ in billions, units in millions 

$58 

$56 

$54 

$52 

$50 

$48 

$46 

$44 

$42 

$40 

2004 2005 2006 2007 2008 2009E 2010E 

Revenue($ billions) Units(million) 

Source: Gartner Servers Quarterly Statistics Worldwide Database, March 2009; J.P. Morgan estimates for 2009-2010. 

Analysis of market servers 

We analyze the server systems market in two tiers—Back-end and Front-end 

systems. Back-end systems are “heavy lifters” in the enterprise IT center, managing 

transaction-intensive software such as Enterprise Resource Planning (ERP) and 

database systems. Front-end systems reside on the edge of the network and tend to 

handle file-intensive applications such as file, print, and web serving, and other 

applications such as e-mail and collaborative business software. In this section, we 

also discuss blade servers, which are helping blur the line between commodity and 

proprietary systems. Finally, we discuss the impact of virtualization on the server 

market. 

10 

9 

8 

7 

6 

5 

4 

3 

2 

1 

0

Bhavin Shah 

(852) 2800-8538 


Traditional Mainframe and UNIX 

servers are the back-end of the 

datacenter; industry standard 

servers are more front-end 

Within industry standard 

servers, there are non-blade and 

blade architectures 


20 April 2009 

Back-end servers are the “big iron” within the datacenter. Big iron systems typically 

have a more proprietary look in terms of vendor-specific components (i.e., 

microprocessors), operating systems, and firmware. Typically, these servers are 

Mainframe or UNIX platforms that perform the heavy-lifting of critical applications 

such as ERP, finance, database management, etc. The growth days of these system 

platforms have passed, in our view. 

In contrast, we define industry standard servers as sitting more on the front-end of 

the datacenter, running web, e-mail, and file applications. Industry standard servers 

utilize standard components, specifically, x86 microprocessors, and mostly run 

distributed operating systems such as Windows or Linux. Looking ahead, the growth 

of industry standard servers should far exceed that of big iron, but it could ease due 

to server virtualization. 

Within the industry standard server category, there are non-blade and blade server 

architectures. Blade servers have some proprietary features, while non-bladed servers 

do not. Both form factors typically utilize x86 microprocessors and run Windows or 

Linux workloads, which underpin the industry standard server category as we define 

it. 

With blade servers, the proprietary features are the chassis and firmware being 

vendor-specific. Despite these two proprietary features, blade servers possess better 

performance, power/cooling, cabling, and management metrics than non-bladed 

industry standard servers. We expect blade servers to exhibit increasing wallet share 

within the industry standard server category, and in general, the broader server 

market over the long run. We believe that incremental technology improvements in 

blade servers could eventually push the systems into more critical applications, 

historically a focus of back-end servers. (Please refer to the previous edition of our 

Supply Chain Guide for a detailed description of market servers.) 

Table 13: Worldwide total server vendor revenue and unit market share analysis 

Based on total worldwide server sales, US$ 

2006 2007 2008 

Dell 

revenue share 10.5% 11.3% 11.6% 

unit share 

H-P 

21.7% 21.4% 22.7% 

revenue share 27.0% 29.1% 29.5% 

unit share 

IBM 

27.5% 29.8% 30.9% 

revenue share 32.0% 30.8% 31.0% 

unit share 

Sun Microsystems 

15.7% 14.5% 13.3% 

revenue share 10.8% 10.6% 10.1% 

unit share 4.5% 3.8% 3.8% 

Total Market $52,803,081,741 $55,387,729,664 $53,119,958,036 

Y/Y % change 2.3% 4.9% -4.1% 

units 8,233,964 8,840,812 9,069,410 

Y/Y % change 8.9% 7.4% 2.6% 

Source: Gartner Servers Quarterly Statistics Worldwide Database, 03/09. 

21

Bhavin Shah 

(852) 2800-8538 


22 


20 April 2009 

Table 14: J.P. Morgan’s global server forecasts 

US$ in millions, units in 000s 

2007 1Q08A 2Q08A 3Q08A 4Q08 2008 1Q09E 2Q09E 3Q09E 4Q09E 2009E 2010E 

Total server revenue 55,388 13,483 13,808 12,717 13,110 53,120 10,558 10,624 10,399 11,944 43,525 44,159 

Windows 21,192 5,255 5,115 4,994 4,714 20,078 4,043 3,969 4,008 4,330 16,350 16,701 

UNIX 16,876 4,074 4,322 3,650 4,074 16,120 3,292 3,367 3,034 3,669 13,362 13,391 

Linux 8,426 2,076 2,028 2,102 1,880 8,087 1,661 1,608 1,680 1,718 6,667 6,815 

Other 8,894 2,079 2,344 1,971 2,442 8,835 1,562 1,679 1,678 2,227 7,146 7,253 

% of total revenue 

Windows 38.3 39.0 37.0 39.3 36.0 37.8 38.3 37.4 38.5 36.3 37.6 37.8 

UNIX 30.5% 30.2 31.3 28.7 31.1 30.3 31.2 31.7 29.2 30.7 30.7 30.3 

Linux 15.2% 15.4 14.7 16.5 14.3 15.2 15.7 15.1 16.2 14.4 15.3 15.4 

Other 16.1% 15.4 17.0 15.5 18.6 16.6 14.8 15.8 16.1 18.6 16.4 16.4 

Y/Y % change 

Total server revenues 4.9 2.0 3.9 -5.4 -15.1 -4.1 -21.7 -23.1 -18.2 -8.9 -18.1 1.5 

Windows 12.9 2.3 1.3 -6.0 -17.2 -5.3 -23.1 -22.4 -19.8 -8.1 -18.6 2.1 

UNIX 2.1 3.1 4.4 -10.1 -13.7 -4.5 -19.2 -22.1 -16.9 -9.9 -17.1 0.2 

Linux 10.2 3.1 0.2 -1.8 -16.4 -4.0 -20.0 -20.7 -20.1 -8.6 -17.6 2.2 

Other -9.7 -1.7 12.9 2.2 -12.0 -0.7 -24.9 -28.3 -14.9 -8.8 -19.1 1.5 

Total server units 8,841 2,271 2,341 2,318 2,140 9,069 1,940 1,987 2,032 2,082 8,041 8,359 

Windows 5,906 1,523 1,574 1,561 1,443 6,100 1,299 1,338 1,368 1,403 5,408 5,620 

UNIX 632 152 157 149 148 605 130 130 132 139 531 548 

Linux 2,095 551 563 568 509 2,192 477 485 497 502 1,961 2,045 

Other 208 45 47 40 40 172 34 35 35 38 142 145 

% of total units 

Windows 66.8 67.1 67.2 67.3 67.5 67.3 67.0 67.3 67.3 67.4 67.3 67.2 

UNIX 7.1 6.7 6.7 6.4 6.9 6.7 6.7 6.5 6.5 6.7 6.6 6.6 

Linux 23.7 24.3 24.0 24.5 23.8 24.2 24.6 24.4 24.4 24.1 24.4 24.5 

Other 2.4 2.0 2.0 1.7 1.9 1.9 1.8 1.7 1.7 1.8 1.8 1.7 

Y/Y % change 

Total server units 7.4 7.5 12.2 4.4 -11.7 2.6 -14.6 -15.1 -12.4 -2.7 -11.3 4.0 

Windows 9.0 8.2 12.6 5.2 -10.8 3.3 -14.7 -15.0 -12.3 -2.8 -11.3 3.9 

UNIX -5.8 -0.3 -1.0 -4.7 -10.5 -4.2 -14.5 -17.2 -11.5 -5.7 -12.3 3.3 

Linux 9.6 11.3 17.5 6.6 -13.4 4.6 -13.5 -13.9 -12.7 -1.2 -10.5 4.3 

Other -11.4 -20.8 -7.3 -17.1 -23.7 -17.3 -24.1 -26.5 -12.5 -5.5 -17.7 2.7 

Source: Gartner Servers Quarterly Statistics Worldwide Database, March 2009; estimates for 2009/2010 are from J.P. Morgan.

Bhavin Shah 

(852) 2800-8538 


Based on inputs from primary 

research contacts, servers 

possess utilization rates below 

20%, versus 40-50% for storage 

systems 


20 April 2009 

Key segment themes to follow in servers 

We expect to hear a lot about server virtualization, blade servers, and how the 

Mainframe would remain vibrant in the next 12-18 months. There could be 

increasing adoption of server virtualization software, but its lasting impact on server 

units and revenues could be deflationary, in our view. The performance benefits of 

blade servers could blunt the sales velocity of non-bladed industry standard servers. 

At the same time, there could be increased focus on developing tools or standards to 

work around the proprietary backplane and software of blade servers. We expect the 

proprietary lock to persist, as vendors appreciate the renewed switching costs for 

customers. In UNIX, there could be an increasing level of pitched battles if the 

macroeconomic environment cools, as this market can be more vulnerable to tighter 

spending conditions. 

Table 15: Key segment themes to follow in servers 

1. Virtualization – early positive, long-term negative for servers 

2. Blade server momentum could partially counter macro 

3. Proprietary lock not likely to go into extinction yet 

4. UNIX could turn into a battleground if the macro cools 

5. Mainframe cycle could provide IBM a partial macro buffer 


Server Theme #1: Virtualization—Early positive, long-term negative 

We think the disruptive technology of server virtualization will continue to grab the 

attention of investors. There is an argument that virtualization could be a boon for 

hardware and related software and services sales. In early stages, virtualization could 

drive greater systems management complexity, requiring more hardware and postsales 

support. 

While debatable, we think that server virtualization will ultimately be a deflationary 

force in the long-run. We do not subscribe to the argument that virtualization will 

drive more hardware and post-sales revenue in the very long run. Our view would 

not bode well for server units or revenue. 

Server virtualization defined 

The server virtualization software enables IT managers to run multiple applications, 

or virtual servers, on a single physical server. Key benefits include: (1) consolidation 

of server assets, particularly x86 platforms; and (2) the ability to move and share 

applications throughout the data center. In other words, server virtualization enables 

IT managers to share applications and related data in one server with other servers, 

but previously, one server ran one application on one operating system. Server 

virtualization could increase the availability of applications by using multiple access 

points. 

Based on inputs from primary research contacts, servers possess utilization rates 

below 20%. In contrast, storage utilization levels could be in the 40-50% range. 

Given this disparity, we expect server virtualization to be a disruptive force in 

servers, but we do not expect storage virtualization to be such in storage given the 

fairly high utilization levels already achieved. 

The primary force behind the low utilization levels in servers can be traced to the 

advent of the industry standard server. Over the past decade, the growth in the 

industry standard server (x86-based) contributed to a wave of under-managed and 

23

Bhavin Shah 

(852) 2800-8538 


Networked storage-based server 

virtualization provides for higher 

availability and reliability than 

direct attached storage. 

24 


20 April 2009 

under-utilized servers. As a result, we can understand the increasing adoption of 

server virtualization in recent years, which has been targeting x86-based devices. We 

illustrate the pre and post server virtualizations in Figure 7 and Figure 8. 

Figure 7: Pre server virtualization 

L 

A 

N 

Application 1 

Application 2 

Application 3 

Application 4 

Application 5 


S 

A 

N 

Disk Arrays 

Figure 8: Post server virtualization 

L 

A 

N 


Applications 1, 2, 3 

Applications 4, 5 

In these figures, we illustrate what server virtualization can accomplish in the 

datacenter. Figure 7 portrays a datacenter not employing server virtualization 

software. Here, we present five servers, each running one application. The first three 

servers are attached to a storage area network (SAN), and the last two servers are 

attached to their own direct attached storage configurations. The applications and 

related data reside on or are accessed through the five separate servers and their 

respective storage installations. 

Extending this simplistic example, if the IT manager deploys server virtualization 

software, more than one application could be run on a single physical server. As a 

result, there could be a consolidation event, where the five applications could be run 

on two servers, as depicted in Figure 8, or in some cases, even on one physical 

server. In addition, the direct attached storage systems shown in the first figure could 

be retired as the server consolidation results in less equipment being required. 

Obviously, the asset consolidation potential appears compelling. 

It is also important to note that in virtualized server environments the IT manager 

targets high availability of the data associated with the shared virtual applications. In 

such a case, the storage of the data on the SAN (see Figure 8) supports this push for 

higher availability and reliability. Reason being, if a server connected to only direct 

attached storage installation failed, then the virtualized servers would not be able to 

access the data stored on the disk array. In contrast, the SAN still makes the data 

available to all servers connected to the storage network. 

What have been the effects of server virtualization on the market? 

There is no hard and fast way to quantify the level of virtualized servers within the 

broader server installed base. Trying to back into the effects of sever virtualization, 

we have attempted to track the ASP changes in servers. With server virtualization, it 

has been argued by various industry contacts that a server box requires more 

processors, controllers, memory, and firmware, which should boost the overall ASP. 

S 

A 

N

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

If such a case, then we would expect to see general ASP trends to exhibit less 

downward pressure over the last two years – the period in which server virtualization 

software has accelerated. As the Figure 9 illustrates, server virtualization may have 

contributed to the solid ASP performance in 2H 2006 and all of 2007. 

Figure 9: Until Recently, Server Virtualization Effect May Have Been Helping ASPs 

Y/Y % change in units and ASPs 

20.0% 

15.0% 

10.0% 

5.0% 

0.0% 

-5.0% 

-10.0% 

-15.0% 

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 

Source: Gartner Servers Quarterly Statistics Worldwide Database, March 2009. 

Server Units Server ASP 

ASPs were better than expected, but we are concerned about sustainability 

In 4Q08, there was not as commensurate a delta to our revenue growth assumptions 

and the actual figure as there was on units. The reason is that ASPs were better than 

expected. We are surprised by the sturdy profile of ASPs in 4Q08. Total server ASPs 

of US$6,127 declined by 3.9% Y/Y, but improved 11.7% sequentially. While 

typically, there is a sequential ASP improvement at the year-end, the magnitude was 

greater than the mid-single digits average historically. 

In our view, part of the sequential ASP improvement could stem from a mix shift as 

industry standard servers (i.e., Windows and Linux-based servers) declined more 

than the total market. We think that bigger iron systems received higher priority in 

the December quarter as customers worried about the budget availability in 2009. 

Server virtualization might have had an impact as well, as virtualization can drive a 

denser box, which pushes up ASPs. We will monitor this trend-line in coming 

quarters. Looking ahead, we are concerned about the sustainability of the relatively 

sturdy ASP profile for the server industry. While the mix appears to have been a 

factor in 4Q08, we believe that deteriorating demand conditions could contribute to a 

more aggressive pricing environment in 2009. In such a case, we think that the 4Q08 

ASP performance could be rendered an anomaly. 

Overall, we do not have a strong view on the driver(s) of what appears to be the 

recent easing, if at all, in virtualization growth. Perhaps, it is just a function of our 

simple calibration not being an accurate approach. On the other hand, the sudden 

change in ASP trends could be a combination of competitive and macro pressures. 

On the former, we think any impact would be temporary. Additionally, there could 

be customer review periods underway at the recent adopters to determine how the 

roll-outs have fared, or IT managers could have been waiting to see how Microsoft’s 

first generation software products demo. At this point, we think that the jury is still 

out. 

25

Bhavin Shah 

(852) 2800-8538 


Industry standard server growth 

could moderate as server 

virtualization adoption continues 

Blade servers offer better 

compute, power, and real estate 

metrics than non-bladed 

industry standard servers 

26 


20 April 2009 

Figure 10: Industry standard servers could slow due to virtualization 

Worldwide industry standard server revenues; US$ in billions 

$35.0 

$30.0 

$25.0 

$20.0 

$15.0 

$10.0 

$5.0 

$0.0 

5.8% CAGR 

2004 2005 2006 2007 2008 

Industry Standard(x-86 based) revenues ($ billion) 


We are cautious about the long-term effects of server virtualization, but we believe 

the industry standard server market is not going to disappear. The market’s size alone 

has too much staying power (Figure 10), and it comprises more than half of the total 

server market. Even so, the growth of x86-based, or industry standard, servers could 

moderate in coming years due to server virtualization, in our view. 

Based on input from primary research contacts, industry standard servers are high on 

the radar for server virtualization. These systems often have the lowest utilization 

rates due to the datacenter sprawl of x86 platforms in the past decade. The servers 

were low-cost and easy to deploy, but the cost and utilization hurdles have not been 

as easy. We note that both non-bladed and bladed industry standard servers are being 

virtualized today. 

Server theme # 2: Blade server momentum could partially counter the macro 

slowdown 

Blade servers grabbed attention in 2001, but it was not until the later offerings of the 

past few years that a sizable market materialized. Based on input from primary 

research contacts, blade servers earn high marks versus non-bladed industry standard 

servers. Blade servers offer higher compute power and more integrated cabling and 

power supplies. As a result, blade servers are easier to scale and configure without 

gobbling up real estate as non-bladed industry standard servers do. We expect this 

performance differentiation to lend to increasing wallet share for blade servers, even 

in the face of a potential slowdown within the industry standard server category due 

to virtualization.

Bhavin Shah 

(852) 2800-8538 


Blade servers have some 

proprietary features, which 

could increase switching costs 


20 April 2009 

Figure 11: Blade server market momentum could lend to a doubling of size in two years 

Worldwide blade server revenues, US$ in billions 

$6.0 

$5.0 

$4.0 

$3.0 

$2.0 

$1.0 

$0.0 

48.1% CAGR 

2004 2005 2006 2007 2008 

Blade server revenues ($ billion) 


Blades could benefit from a macro slowdown 

In the near to mid-term, the prevailing macroeconomic weakness could weigh on the 

server market, as we noted earlier, but we think such weakness actually could benefit 

blade servers. There could be a push by IT managers to lower operating costs and 

overhead; hence, blades could represent a suitable alternative. Key factors include 

blades’ attractive compute power, real estate, cabling, and power specifications 

versus non-bladed industry standard servers. As a result, server vendors such as 

Hewlett-Packard, IBM, and even Dell offering strong blade server portfolios could 

fare better than peers. 

Blades have a proprietary dimension 

An interesting dynamic with blade servers is that the chassis creates a proprietary 

element. While the past decade exhibited an increasing push to industry standard 

servers, we note that the blade server category within industry standard servers could 

revive switching costs for customers. The unique chassis and integrated cabling of 

each vendor’s blade server offering constructs a lock in that the blades do not work 

with other vendors’ blade hardware. 

Table 16: Worldwide rack-blade vendor revenue and unit market share analysis 

Based on rack-blade server sales, US$ 

2006 2007 2008 

Dell 

revenue share 10.1% 7.7% 6.2% 

unit share 

H-P 

10.1% 8.5% 9.1% 

revenue share 32.5% 46.8% 53.3% 

unit share 

IBM 

29.1% 41.7% 47.3% 

revenue share 41.0% 31.4% 25.4% 

unit share 


35.0% 30.9% 26.2% 

revenue share 0.2% 3.3% 4.5% 

unit share 0.0% 2.0% 3.7% 

Total Market $2,814,016,952 $4,167,519,763 $5,443,825,279 

Y/Y % change 36.6% 48.1% 30.6% 

units 746,052 894,543 1,162,762 

Y/Y % change 33.0% 19.9% 30.0% 


27

Bhavin Shah 

(852) 2800-8538 


Today, there remains a 

significant level of proprietary 

features in both blade servers 

and back-end servers 

28 


20 April 2009 

In blade servers, so far, it has been all about Hewlett-Packard and then IBM. Dell and 

Sun have been refocusing, but they have substantial ground to make up, and both 

companies must contend with the added hurdle of the proprietary lock. As noted 

earlier, there is a proprietary wrap with the blade server chassis, which increases the 

switching costs to move to another blade server vendor. The chassis only works with 

the blades of the same vendor. In addition, the backplane, which controls the server, 

and related software typically are proprietary. So, it appears that the blade server 

market has become the equivalent of a razor-blade model. 

Figure 12: Blade server market by region 

% share of worldwide blade server market revenues 

ROW 

30% 

Western Europe 

32% 


United States 

38% 

For vendors looking to gain market share in blades, one way around the proprietary 

lock could be to pursue share in the emerging markets where the blade adoption rate 

has trailed the U.S. and Western Europe (Figure 12). Here, outside of Hewlett- 

Packard and IBM, we think Dell could be in better position than Sun. Dell has been 

boosting its focus on the emerging markets, and it has the added benefit of its 

existing relationship with enterprise customers on the client side, i.e., personal 

computers, whereas Sun does not. Moreover, Sun has been on-again, off-again about 

pursuing the blade market in recent years, which could present another hurdle with 

customer penetration. Nevertheless, we note that Sun appears increasingly focused 

about its re-entry this time. 

Server theme # 3: Proprietary lock is not likely to go into extinction yet 

While the server industry exhibited a major push toward commoditization with nonbladed 

industry standard servers over the past decade, there remains a significant 

level of proprietary features in both blade servers and back-end servers. This 

proprietary lock can increase the switching costs for the end customer, as often blade 

and back-end (“big iron”) servers are not fully interoperable with other vendor 

systems. 

As the figure below shows, the industry standard shift has resulted in slightly more 

than 50% of the market running on more widely available standard operating 

systems, i.e., Windows and Linux. Note: Mainframes can run Linux, but for 

simplicity, we assume that the preponderance of Linux is utilized in more of an open, 

distributed platform.

Bhavin Shah 

(852) 2800-8538 


We have a rather dim view on 

the UNIX growth prospects for 

the long term 


20 April 2009 

Figure 13: Windows and Linux combined have ridden x86 platforms to the top 

% share of worldwide server revenues 

Linux 

15% 

Other 

17% 

UNIX 

30% 


Windows 

38% 

Typically, the proprietary lock is the system’s dependence on an operating system or 

microprocessor specific to the server OEM. Here, we think of IBM’s Mainframe 

operating system or the three versions of UNIX in Hewlett-Packard’s HP-UX, IBM’s 

AIX, and Sun’s Solaris. On the chip side, there is IBM’s POWER chip or Sun’s 

SPARC. In contrast, industry standard server operating systems use mainly Windows 

or Linux operating systems running on x86 microprocessors. 

Blades: Reviving the proprietary lock 

As mentioned earlier, in contrast to non-bladed industry standard servers, blade 

servers have proprietary features that could lock in the customer. The chassis, 

backplane and management software are proprietary to the server OEM. For now, 

this proprietary lock could prevent customers from easily switching to other vendor 

solutions. Indeed, the blades of one vendor cannot be used in another vendor’s blade 

chassis. 

Based on conversations with industry contacts, we do not expect this proprietary 

element to diminish in the near future, but we expect increasing focus on building 

interoperability or more standards-based blade servers over time. In any event, we 

think the proprietary lock within pockets of the server market is likely to persist. 

Server Theme # 4: UNIX could turn into battleground if the macro condition 

cools 

UNIX servers are known for system reliability and robust computing power. While 

there has been a greater push to open standards, UNIX operating systems still can be 

found in vendor-specific versions in HP-UX, IBM-AIX, and Sun-Solaris. These 

higher-end systems are well suited for heavy lifting applications in the datacenter, 

but they can be more vulnerable to tightening IT spending environments. In slower 

times, IT managers scrutinize larger ticket items and also look for lower-cost 

alternatives. Hence, we believe a prolonged macroeconomic slowdown could 

disproportionately hurt UNIX server sales versus other server classes. 

29

Bhavin Shah 

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30 


20 April 2009 

For the long term, we think the risk of an increasing shift to non-proprietary servers 

could hurt UNIX vendors. In addition, there could be the introduction of industry 

standard components within the UNIX environment, which could weaken the margin 

structure. In our view, common components in UNIX could weaken the switching 

costs of customers, and thereby, result in potential for greater pricing pressures to 

keep customers. We maintain a dim view on the growth prospects within UNIX. 

Figure 14: UNIX revenue growth could remain elusive as macro clouds gather 

Worldwide UNIX server revenues, US$ in billions 

$20 

$15 

$10 

$5 

$0 

-3.9% CAGR 

2004 2005 2006 2007 2008 2009E 2010E 

Unix Server Revenue($ billion) 

Source: Gartner Servers Quarterly Statistics Worldwide Database, March 2009; Estimates for 2009-2010 are J.P. Morgan estimates. 

The market composition of the UNIX platform is concentrated in three main vendors: 

Sun Microsystems, Hewlett-Packard, and IBM (Table 17). Sun enjoyed a temporary 

boost from its high-end UNIX cycle in the second half of 2007, but we think that that 

the coming year could be more painful. Already, the macro environment has hurt 

Sun’s operations in the March and June 2008 quarters relative to investor 

expectations. The company’s outlook also appears increasingly cautious. Also, 

IBM’s refreshed System-p line could pose some problems for Sun in the coming 

quarters, making matters more difficult. Therefore, for the UNIX market, we could 

see ASP pressure stemming from: 1) demand generation activities to counter 

macroeconomic softening; or 2) efforts to preserve share from potential competitive 

onslaught. 

Table 17: Worldwide UNIX vendor revenue and unit market share analysis 

Based on UNIX-based server sales, US$ 

2006 2007 2008 

H-P 

market share 27.1% 26.0% 26.6% 

units market share 

IBM 

14.0% 15.4% 15.1% 

market share 29.8% 31.9% 32.8% 

units market share 


22.0% 20.8% 20.1% 

market share 32.2% 32.6% 30.6% 

units market share 44.6% 42.5% 43.6% 

Total Market $16,532,558,077 $16,875,813,197 $16,120,494,465 

Y/Y % change 1.2% 2.1% -4.5% 

units 670,458 631,813 605,165 

Y/Y % change 16.4% -5.8% -4.2% 

Source: Gartner Servers Quarterly Statistics Worldwide Database, March 2009.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Server Theme # 5: Mainframe cycle could provide IBM a partial macro buffer 

As stated earlier, the Mainframe is alive and well. Introduced in 1965, the Mainframe 

system offers massive computing power and high reliability, and in recent years, 

IBM has lightened up on the proprietary lock by including applications support for 

Linux and Java. 

Figure 15: Despite slow growth, Mainframe market has not faded away 

Worldwide Mainframe server revenues; US$ in billions 

$8.0 

$7.0 

$6.0 

$5.0 

$4.0 

$3.0 

$2.0 

$1.0 

$0.0 

2004 2005 2006 2007 2008 

Mainframe revenues ($ billion) 


-2.2% CAGR 

While we do not expect this US$6.6 billion market segment to be a high-flier, we 

note that Mainframe servers are a great building block for other IBM-related sales, 

particularly in software and services. Although it is difficult to quantify in explicit 

terms, we note that input from primary research contacts suggest that a meaningful 

portion of IBM’s software revenues are derived from sales into Mainframe 

environments. 

We note that IBM’s dominance of the Mainframe market with more than 80% 

market share could become even stronger following the launch its z10 in year 2008. 

In our view, the company’s latest offering could provide a partial buffer to the 

macroeconomic pressure as the Mainframe cycle typically has legs of six to eight 

quarters. In addition, the company’s increasing exposure to newer users of the 

Mainframe in emerging countries could help. 

31

Bhavin Shah 

(852) 2800-8538 


32 


20 April 2009 

Components and parts of a PC 

Many components go into a PC. We have included a brief description of these major 

components. 

Figure 16: Components and parts of a PC 

PC 

Monitor 


DVD/CD-RW drive 

Hard disk drives 

Barebones 

PC and notebook bill of materials breakdown 

Table 18: Cost breakdown of mainstream desktop PC and notebook 

A/V cards 

Motherboards 

Power Supply 

Mainstream Desktop PC Mainstream NB PC 

ASP (US$) 2008E ASP (US$) 2008E 

CPU 85 CPU 109 

Motherboard 40-45 Motherboard 92 

Chipset + graphics unit 20-25 Chipset + graphics unit 26 

PCB 6 PCB 10 

Connectors 3 Connectors 8 

Thermal stuff 4 Thermal stuff 5 

Passive components 4 Passive components 3 

Other IC ~7-88 Other IC 38 

Others 2 Others 2 

DRAM 20 DRAM (average 2GB per box) 16 

CD-RW / DVD-ROM Combo 25-30 CD-RW / DVD-ROM Combo 47 

Hard disk drive 40-45 Hard disk drive 40 

Keyboard / mouse ~10-15 Keyboard / pointing device 5 

Casing 10- Battery 27 

Power supply 10 Power adapter 7 

- - Magnesium casing (2 pieces) 21 

- - Hinge (set) 3 

OS 47 OS 47 

Others 15-20 Others 26 

LCD Monitor 170 LCD Panel (mainstream: 15.1'') 50 

Total 


472 – 497 Total 493 

CPU & Chipsets

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Motherboard 

The PC motherboard houses the computer’s most important parts and its function is 

to provide an effective working place for all components of the PC to interface. 

Central Processing Unit or the CPU is the most important component on the 

motherboard. Other components of the motherboard include a logic chipset, 

controllers, memory, flash/BIOS and interface slots. 

Figure 17: Components of a mother board 

PCB 


PC motherboard 

Memory Chipset 

Central processing unit 

The CPU is a chip that acts as the engine and brain of the whole system. Intel and 

AMD have been the most prominent names in PC CPU production, but, Motorola, 

Sun Microsystems and IBM are also dominant CPU players in the non-PC segment. 

Over the years, processor technology has changed a lot. 64-bit processor technology 

and multiprocessing have revolutionized the world of computing. 64-bit technology 

exponentially increases both physical and virtual memory address space, the resultant 

increase in addressable memory significantly benefits computer-intensive workloads 

such as large databases and complex financial modeling. The architecture of multicore 

processors is different from that of single-core chips and is designed to deliver 

higher performance by putting the burden on the operating system and application 

software to extract the parallelism in processing tasks. 

Intel’s new Nehalem microarchitecture 

Intel core i7 is the first family using the Intel Nehalem microarchitecture. It 

constitutes three desktop quad core processors. Server and mobile Nehalem-based 

processors will follow in 2009 onwards. Intel plans to launch 32nm process 

technology based processors in a year or so. Nehalem is the first generation of 

products from Intel that offers an integrated memory controller along with a new 

interconnects technology known as Quick Path Interconnect. 

Connectors 

Discretes 

33

Bhavin Shah 

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20 April 2009 

Table 19: Intel CPU roadmap 

Code name Pentium D Core 2 Xeon PENRYN NEHALEM WESTMERE SANDY BRIDGE 

Introduced CY2005 CY2006 CY2007 CY2008 CY2009E CY2010E 

Architecture Derivative New Derivative New Derivative New 

Design Process 65nm 65nm 45nm 45nm 32nm 32nm 

Source: Intel, J.P. Morgan. 

32-nm is Intel’s first manufacturing process to incorporate immersion lithography. 

Intel’s 32-nm manufacturing process is composed of 9-layers with copper+low-k 

dielectric. Intel says, 32-nm provides around 70% dimension scaling from their 45nm 

generation. 

AMD is getting more competitive with official launch of its new microprocessor 

code named Shanghai. Although the company showed the Shanghai outperforming 

an Intel chip, we note the Intel chip was a year old and we expect Intel’s new 

Nehalem architecture to outperform Shanghai, although Shanghai should close the 

performance gap. However, Intel appears to be moving to 32nm very fast; AMD is 

not likely to introduce 32nm chips until 2011. 

AMD’s direct connect architecture 

The architecture, used in the dual-core processors, is called Direct Connect 

Architecture (DCA). AMD’s DCA directly connects the CPU to the memory 

controller, I/O and other CPUs, removing bottlenecks and reducing latency. The 

AMD64 Core technology enables simultaneous 32- and 64-bit computing and 

eliminates the 4GB memory barrier imposed by 32-bit computing. 

The main difference between AMD64 architecture and the design of other CPUs— 

including previous CPUs from AMD such as Athlon XP and the original Athlon—is 

that the memory controller is embedded in the CPU, and not on the north bridge chip 

(the main chip on the motherboard chipset). So, on motherboards targeted to CPUs, 

based on AMD64 architecture, the ‘north bridge’ chip is just a bridge between the 

CPU and the graphics bus of choice (AGP or PCI Express) and the south bridge chip. 

Since this ‘north bridge’ is simpler to manufacture, some manufacturers have singlechip 

chipset models for AMD64 CPUs. Since the memory controller is embedded in 

the CPU, the memory capacity—including supported memory types and support for 

dual channel—is defined by the CPU and not by the north bridge (i.e., by the 

motherboard), as in the case of CPUs, based on other architectures. The memory 

control embedded in the AMD64 processors can drive up to four memory modules 

per channel. So, on a dual-channel system, it can drive eight memory modules. The 

number of sockets available on the motherboard is limited by the motherboard 

design. 

Table 20: AMD CPU roadmap 

Code name Barcelona Shanghai Istanbul Sao Paolo Magny-Cours 

Introduced CY2007 CY2008 CY2009E CY2010E CY2010E 

Design Process 65nm 45nm 45nm 45nm 45nm 

Core 4 Core 4 Core 6 Core 6-Core 12 Core 

Source: AMD, infoworld.com. 

BY 2H09, AMD is planning to integrate its GPU into the CPU in the Falcon line of 

processors. AMD also plans to launch Radeon HD 2000 with a low cost Universal 

Video Decoder (UVD).

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 18: AMD CPU and GPU integration in “Falcon” 

Source: AMD. 

Figure 19: AMD Athlon 64 FX processor architecture 

Source: www.amd.com. 

35

Bhavin Shah 

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20 April 2009 

Figure 20: AMD’s direct connect architecture 

Core 1 

512 KB 

L2 Cache 

DDR2 

72 bit 

10.7 GB/s @ 

DDR2-667 

Source: www.amd.com. 

Core 2 

512 KB 

L2 Cache 

2 MB L3 Cache 

System request interface 

72 bit 

Core 3 

512 KB 

L2 Cache 

Crossbar Switch 

Hyper transport 

technology 

Link 1 

Link 2 

Core 4 

512 KB 

L2 Cache 

Link 3 

Hyper transport technology 

provide 24 GB/s peak bandwidth 

per processor 

Cell processor 

A discussion of multi-core processors warrants a mention of the ‘Cell’ processor, 

which is based on the cell concept originally thought up by Sony for the PlayStation 

3. The architecture as it exists today is the work of three companies: Sony, Toshiba 

and IBM (STI). Sony plans to sell its 300mm Nagasaki fab (produces cell processor) 

to Toshiba and declared that it would no longer be participating in further 

development programs in cell processor and would focus on its semiconductor 

business on CCD/CMOS sensors. NEC and Toshiba are planning to develop the 

32nm cell processor without Sony. (Please refer to the previous edition of our Supply 

Chain Guide for a discussion on cell architecture.) 

IBM’s PowerXCell 8i is aimed at becoming the world’s first supercomputer to 

deliver sustained petaflops performance. The new chip uses 65nm process 

technology to reduce the power consumption of the previous 90nm chip while 

maintaining the same 3.2 GHz frequency. This is the next-generation version of its 

Cell processor, the first of its kind to be geared for computer 

Cell processor’s applications 

The primary initial cell application will be the Sony PS3, where it in conjunction 

with a new NVIDIA GPU provides a tremendous boost in graphics performance, 

compared with the current gaming consoles. The PS3 competes with Microsoft’s 

Xbox 360 (3 cores) and Nintendo’s Wii as part of the seventh generation of video 

game consoles, featuring new multi-core processors. All of the processors are 

developed by IBM, although they each use different chip architectures. The Xenon 

processor (based on a multi-core PowerPC) that IBM designed for the Xbox 360 has 

a number of specialized 3D image processing enhancements of its own where 

rendering horsepower is concerned. The Nintendo Wii focuses more on the user 

interface, form factor and gaming experience than raw graphical horsepower. 

Toshiba Corporation will use its Cell processor chip for its next-generation flat-panel 

TV (Cell TV), to be launched in 2009.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Intel’s Atom 

In March 2008, Intel announced the Atom line of ultra mobile processors. Atom is 

based on, entirely new CPU architecture, designed specifically to address the 

computing and power consumption requirements of Mobile internet devices (MID) 

and Ultra Mobile PCs. It supports core 2 instruction set. Processor die for Atom 

measures 25mm 2 comprised of 47 million transistors vs. 410 million for core 2 duo. 

Built on Intel’s 45nm hafnium infused hi-K silicon process, these processors have a 

thermal design power (TDP) specifications in the range of 0.6-2.5 watts and clock 

speed of up to 1.8GHz. Atom processor can issue 2 instructions per clock cycle and 

support two threads. Processor has 32K I cache and 24KB D cache and independent 

floating point and integer execution unit. 

Figure 21: Atom block diagram 

Source: www.hothardware.com 

Intel’s Atom family of processors is aimed at four key end markets: consumer 

electronics, mobile internet devices, low cost PCs, and embedded markets. The Atom 

brand includes two processors. Intel Silverthrone processor is small and power 

efficient and is targeted for small handheld devices. Intel Diamondville is optimized 

for use in low cost notebooks and netbooks. Although Atom achieves the dual goal of 

being low cost and low power, it is low on performance. 

VIA’s Nano versus Intel’s Atom 

VIA Nano is the first 64-bit, superscalar, speculative out of order processor in VIA’s 

x86 product line-up. It was launched in May 2008. Nano processors will be used to 

power a broad range of thin and light notebooks, but they will also appear in ultramobile, 

mini note type devices. Atom is facing competition from VIA’s Nano, which 

targets the same applications. 

37

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38 


20 April 2009 

Figure 22: VIA Nano block diagram 

Source: www.via.com. 

Table 21: Platform for basic NB (7"~10") VIA’s Nano versus Intel’s Atom 

Atom: Basic Notebook VIA Nano ULV 

Foundry Intel Fujitsu 

Manufacturing Technology 45nm 65nm 

No. of die per 12" wafer 2.5K units 1.4K units 

Processor Speed 1.6GHz 1.6GHz 

FSB 533MHz 800MHz 

Thermal design power (TDP) 7W-9.9W 6.3W-12.5W 

Memory DDR2 553/ 2GB DDR2 667/ 4GB 

L1 cache 32KB 64KB 

L2 cache 512KB 1MB 

ASP: CPU+GPU+Chipset ~$40 ~$30 

Resolution 1024 * 768 1600 * 1200 

Exapnsion Bus 3 USB/ 1 PCI 6 USB/ 4PCI 

Vista Support 

Source: Intel, VIA, J.P. Morgan estimates. 

No Yes 

Foundry—Intel has the advantage: We estimate that Intel has 75%+ higher number 

of die per 12" wafers. VIA stated that although Fujitsu’s node technology is behind 

Intel, the “made in Japan” idea is helpful to gain Japanese OEMs’ confidence on 

quality. 

Software and panel size—VIA has better support, in our view: Intel’s Atom can only 

support Windows XP/Linux and XGA (1024*768) resolution as Intel seems to be 

concerned about low-cost notebooks cannibalizing its standard PC market. Intel 

intentionally controls the supply of Atom CPU and tries to segment sub-notebooks to 

avoid cannibalization of mainstream CPU, which is sold at a much higher price 

point. According to VIA’s management, the company has no such concerns. The 

company has launched Nano that supports Windows Vista and UXGA (1600*1200). 

We believe VIA has been more flexible in supporting OS and panel sizes and the 

company could be considered as an alternative to Intel, if it could fend off 

competition from AMD Puma and potential ARM-based new CPU entrants.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Limited success outside PCs for Atom 

Although we believe Atom will be successful in the PC end-market in both desktop 

and notebook end-markets, most of the demand should be due to cannibalization 

from existing Celeron customers. We do not believe Atom will gain much traction in 

mobile internet devices, consumer electronics, or embedded applications due to its 

shortcomings in cost and power consumption versus ARM chips and ASICs. 

Cannibalization 

Our checks in the PC and retail channels indicate Atom is beginning to cannibalize 

Intel’s Celeron sales. Although the cannibalization should have little impact on 

Intel’s model in the near term due to the low number of Atom’s sales relative to other 

processors, we are concerned that Atom could eventually cannibalize Pentium 

revenue if its performance improves. 

Qualcomm’s Snapdragon solution 

Intel’s Atom processor has been successful due to its much lower price point (US$30 

for Diamondville, US$50-60 for Silverthorne) and low power consumption (2.5W for 

Diamondville, 2W for Silverthorne for CPU + chipset), in our view. Now, 

Qualcomm (QCOM) is coming up with a similar processor (1.5GHz), but with a 

cheaper price (likely below US$20) and lower power (

Bhavin Shah 

(852) 2800-8538 


40 


20 April 2009 

(optional). HP’s ultra-slim Pavillion dv2 is the first to use it. The single-core Athlon 

Neo chip runs at 1.6GHz and sports a 512KB L2 cache. 

NVIDIA Tegra 

In June 2008 NVIDIA introduced a line of ARM11-based media processors aimed at 

bringing 3D graphics capabilities to a variety of handhelds, from smartphones to 

mobile internet devices (MIDs). Tegra is single-chip computer capable of the rich 

high definition and internet experiences on small pocket type devices. NVIDIA 

Tegra features a GPU, media processor, system memory, peripherals and a CPU all 

in one ultra-low power chip. It combines an 800 MHz ARM CPU, GeForce CPU, 

image processor, HD video processor. 

Processor market 

According to Mercury Research estimates, PC processor unit shipments were 324.7 

million units in 2008, up 13% from 2007. An analysis of market share of the 

processor manufacturers shows a fall in Intel’s market share and a simultaneous 

increase in AMD’s market share over 2-3 years until 2006. But Intel regained its 

market in 2007 and maintained its leadership position with 80.4% market share in 

2008, well above the competition. 

Table 23: x86 microprocessor shipments and market shares (2005-2008) 

‘000s 

2005 2006 2007 2008 

Company Units Market Units Market Units Market Units Market 

share 

share 

share 

share 

Intel 190,294 80.2% 188,664 74.5% 220,964 77.1% 261,202 80.4% 

AMD 43,145 18.2% 58,078 22.9% 63,232 22.1% 60,010 18.5% 

Via 3,380 1.4% 6,644 2.6% 2,250 0.8% 3,469 1.1% 

Others 423 0.2% 23 0.0% 0 0.0% 0 0.0% 

Total 237,242 100.0% 253,409 100.0% 286,446 100.0% 324,681 100.0% 

Source: Mercury Research, 1Q09 update. 

Chipsets 

The chipset is a collection of chips (hence, its name) on the motherboard that 

controls the flow of data between the CPU and other important devices such as the 

memory. On the first PCs, the motherboard used discrete integrated circuits. So, a lot 

of chips were needed to create all the necessary circuitry to make the computer work. 

After some time, the chip manufacturers started to integrate several chips into larger 

chips. So, instead of requiring dozens of small chips, a motherboard could now be 

built using only half a dozen big chips. The integration continued and around the 

mid-1990s, motherboards using only two or even one big chip could be built. 

Usually, motherboards have two big chips—north bridge and south bridge. 

North bridge 

The north bridge chip, also called memory controller hub (MCH), is connected 

directly to the CPU and functions as memory controller, AGP bus controller and PCI 

express controller and also ensures an interface for data transfer with south bridge. 

South bridge 

The south bridge chip, also called ICH (I/O controller hub) is connected to the north 

bridge and mainly controls I/O devices and on-board devices such as hard disk drive 

ports (parallel and serial ATA ports), USB ports, on-board audio, on-board LAN, 

PCI bus, PCI express lanes, real time clock (RTC), CMOS memory.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Inter-bridge communication 

When the bridge concept came into use, communication between the north bridge 

and the south bridge was done through a PCI bus. As bandwidth was a problem with 

the PCI bus (132MB/s), a new bus, called accelerated graphics port (AGP), was 

connected directly to the north bridge. 

Then came a new architecture—using a dedicated high-speed bus between the north 

and south bridges and connecting the PCI bus devices to the south bridge. When Intel 

started using this architecture, it started calling the bridges as ‘hubs’; the north 

bridge became the memory controller hub (MCH) and the south bridge became the 

I/O Controller Hub (ICH). 

Using this new architecture, which is the architecture that motherboards use 

nowadays, when the CPU reads data from a hard drive, the data is transferred from 

the hard drive to the south bridge, then to the north bridge (using the dedicated bus) 

and then to the CPU (or directly to memory, if the bus mastering i.e. DMA-method 

is being used). The speed of this dedicated bus depends on the chipset model. For 

example, on Intel 925X chipset, this bus has a maximum transfer speed of 2GB/s. 

Also, the manufacturers call this bus by different names as DMI (direct media 

interface) or Intel Hub Architecture (Intel), HyperTransport (ULi/AL, NVIDIA), V- 

Link (VIA), MuTIOL (SiS) and A-Link or PCI Express (ATI). 

Chipset manufacturers 

Chipsets must be compatible with the CPU and, therefore, many CPU makers make 

their own chipsets for ‘optimal configuration’. Major chipset manufacturers are: 

Intel, NVIDIA, AMD, VIA and SiS. Via has announced that it would exit the thirdparty 

chipset market and focus on processors and chipsets for motherboards that uses 

its own Nano CPU. 

Graphics cards 

Graphics card is discrete as apposed to the integrated components in the chipset for 

the same function. This is used to enhance the user experience. Current GPU 

manufacturers include AMD (ATI Radeon) and NVIDIA (GeForce), which compete 

in the high-end market while Intel manufactures low-end integrated graphics 

processors. 

ATI Mobility Radeon HD 4000 Series graphics processors introduced 

These are based on the same core architecture as AMD’s 4000 series of desktop 

graphics cards and the company claims them to be twice as fast as their 3000 series 

predecessors. These processors has AMD’s TeraScale graphics engine and are based 

on the 55nm process. The company claims they should deliver substantial gaming 

horsepower with minimal power draw, eliminating the need for additional power 

connectors and making installation a cinch. 

NVIDIA launched Ion platform for Atom 

NVIDIA launched a very small platform called Ion, aimed at netbooks, and all-inone 

PCs. The Ion platform consist of a GeForce 9400 GPU with an Intel Atom 

processor, for better gaming and HD performance in Netbooks. 

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20 April 2009 

Memory 

The main memory, random access memory (RAM), is used to store data temporarily. 

It saves the computer having to search the hard disk for information it needs to use. 

These memory chips are volatile, meaning once the power is shut down, the data 

stored in these devices will disappear. Various types of memory have been used in 

computers. Currently, most computers are shipped with synchronous dynamic 

random access memory (SDRAM) or double data rate (DDR). 

Static RAM (SRAM) is fast-access memory. However, it is more expensive than 

DRAM. SRAM is typically used as cache memory in PCs. 

Non-volatile memories are used to store BIOS (basic input/output system) 

information. BIOS holds the code that boots up the computer, loading the initial 

operating system (OS), e.g., Windows and device controllers. The code in the BIOS 

need not be reloaded every time since information remains in the non-volatile 

memory after shutdown. 

Flash memory 

Flash memory is a solid-state, non-volatile, rewritable memory that functions as a 

combination of RAM and a hard disk drive. Flash memory stores bits of electronic 

data in memory cells, just like DRAM, but it also works like a hard disk drive, in 

that, when the power is turned off, data remains in the memory. Because of its high 

speed, durability, and low voltage requirements, flash memory is ideal for use in 

many applications such as digital cameras, cell phones, printers, handheld computers, 

pagers and audio recorders. 

Flash memory is available in many different form factors, including: CompactFlash, 

Secure Digital, SmartMedia, MultiMedia and USB memory. 

Printed circuit board 

The printed circuit board is the board upon which all the circuit component parts are 

set and, thereafter, connected to each other. Many companies outsource their PCB 

manufacturing to EMS companies. The top PCB makers are: Kingboard, WUS, 

Ibiden, Kyoden and Teradyne. 

Display 

The monitors used in desktops and display screens used in notebooks differ 

significantly in terms of technology. Both the technologies are briefly explained 

below: 

Monitors 

The monitor is the principal output device used in a desktop PC and it can have 

displays of any of the two major categories—cathode ray tube (CRT) or the flat panel 

displays (FPD). The make-up of each monitor type is very different because each one 

employs different technologies in the manufacturing process. Color picture tube 

(CPT) and color display tube (CDT) are the two types of CRTs. The FPDs, which are 

lighter and thinner; and depending on whether or not they emit light, they can be 

classified as emissive or non-emissive. The liquid crystal display (LCD) is a nonemissive 

type and the plasma display panel (PDP) is an emissive type of FPD.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

There is a considerable demand for sleek, thin LCD monitors worldwide, due to a 

continued decline in prices. PC buyers are now opting for an LCD instead of the 

bulky CRT-based monitors. Even existing PC owners are replacing their old CRTs 

with LCDs. As a result, the worldwide LCD market, driven by a huge supply of lowcost 

LCD panels, is growing even faster than expected, while the CRT monitor is 

rapidly approaching the end of its life. With regard to size, PC vendors offer larger 

sizes and due to strong enterprise demand, the 17" and 19" categories have particular 

strength around the world. The popularity of wide display increases with growing 

penetration. Smaller sizes, on the other hand, are showing signs of fading. 

Eventually, we expect strong growth in 20" and larger sizes, and we believe most of 

that growth will be in widescreen (16:9) models. 

Table 24: Leading display manufacturers by device 

CRTs TFT-LCDs PDPs CPTs 

Samsung SDI Samsung Fujitsu/Hitachi LG Philips 

LG Philips Dell NEC Samsung SDI 

Dell HP Pioneer Matsushita 

HP LG Matsushita Sony 

Philips Acer Samsung SDI, LG Thomson 

Source: DisplaySearch, MIC, CPT, J.P. Morgan. 

Notebook display screens 

Notebook computers come with built-in displays, of which the majority is of the 

‘active matrix’ (TFT) type. Notebook displays range mainly from 12"-17" in size, 

and can also be connected to larger desktop monitors for easier viewing. Some less 

expensive notebooks offer ‘dual-scan’ (also known as HPA) displays. Although these 

are less expensive, they do not offer as clear an image as an active matrix display and 

it may be more difficult to read in bright light or sunlight. An emerging trend is the 

wide-screen display. Several notebook models are offering a superior display 

technology: light-emitting-diode (LED) backlighting. Compared with traditional 

cold-cathode fluorescent lighting (CCFL) displays, LED-backlit alternatives provide 

up to 30 percent greater brightness, lower power consumption, and greater 

uniformity of the image throughout the screen. The technology lets manufacturers 

build thinner laptop lids as well. 

(Please refer to the display sub-section under consumer electronics and LED for a 

detailed discussion on technology.) 

Multi-touch screens displays 

HP has launched a new convertible notebook with multi-touch technology, which 

was popularized by Apple’s iPhone. According to the company, the HP TouchSmart 

tx2 notebook PC’s convertible design allows three modes—PC, display and tablet. It 

comes with a rechargeable digital ink pen with which users can draw and take notes 

on the screen. The notebook includes an enhanced HP MediaSmart digital 

entertainment software suite, which supports the familiar touch computing gestures 

such as pinch, flick, tap and drag with two fingers that can be used to interact with 

photos, video and other multimedia on the computer. Earlier, HP launched the 

TouchSmart touchscreen desktop. 

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20 April 2009 

Optical drives 

Major optic drive manufacturers are: Hitachi-LG Data Storage, Samsung Electronics, 

Lite-On IT and Panasonic. Most optical drive manufacturers purchase chipsets from 

IC design houses such as VIA, Mediatek and Zoran. 

Power supply/battery 

A desktop PC has a power supply that converts AC power from the wall plug to 5V 

and 12V DC power to be used by all the components in the computer. The market is 

fragmented, with many small and regional players. One of the leading power supply 

manufacturers is Delta Electronics. 

Notebooks are powered through rechargeable batteries. These can be charged using a 

charger and can then feed power to the notebook. Most notebooks are made of 

lithium-ion (Li-ion) batteries that are lighter and last longer than nickel metal hydride 

(NiMH). A fresh Li-on battery pack has between two to five hours of battery life, 

depending on the tasks being done on the computer. Major manufacturers of 

notebook batteries are Sanyo Electronics, Sony, Matsushita Battery Industrial, and 

Samsung SDI. We estimate that total shares for three Japanese companies are around 

80%. Lithium-ion batteries also require sophisticated chargers that can carefully 

monitor the charge process. Further, because of their different shapes and sizes, each 

type of Li-ion battery requires a charger designed to accommodate its particular size. 

This means lithium-ion battery chargers are more expensive and more difficult to 

find than NiMH battery chargers. 

A giant leap for batteries 

Mac book uses an embedded (non replaceable) lithium polymer battery which runs 

for up to 8 hours on a single charge. Its innovative adaptive charging method reduces 

wear and tear on a battery and it can be charged up to 1000 times as the company 

says. The embedded feature allows for 40% larger battery in the same space. It uses 

an intelligent chip to control current for each cell and maximize battery life (Please 

refer to the Battery section in this edition of Supply Chain Guide for more discussion 

on lithium polymer battery technology).

Bhavin Shah 

(852) 2800-8538 


Mark Moskowitz AC 

(1-415) 315-6704 


J.P. Morgan Securities Inc 


20 April 2009 

Internal storage disks 

Hard disk drives are the critical repository of mass storage for PCs and enterprise 

systems. HDDs store all the data and file systems that run on the computer, and the 

actual disk drive consists of both mechanical and electrical components. HDDs store, 

read and write data through very sophisticated magnetic recording processes. Data is 

stored on discs, called ‘platters’, which are made from special magnetic coating on 

glass or aluminum substrates. Platters are stacked on top of each other with the help 

of a spindle motor, which rotates the platters at high speeds. Seagate, Western 

Digital, Hitachi GST, Fujitsu, Samsung, and Toshiba are the major participants in the 

HDD market. 

Figure 23: HDD supply chain 

Hard disk drives OEMs 

Desktop Mobile Enterprise 

Seagate (43%) Western Digital (27%) Seagate (62%) 

Western Digital (33%) Hitachi GST (22%) Fujitsu (20%) 

Hitachi GST (13%) Seagate (16%) Hitachi GST (18%) 

Samsung (10%) Fujitsu (15%) 

Excelstor (1%) Toshiba (14%) 

Samsung (6%) 

HDD component suppliers 

Media Suspension Spindle motors Heads 

Seagate (27.4%) Hutchinson (39.5%) Nidec (72.8%) SAE/TDK (30.4%) 

SDK (22.3%) NHK Spring (37.0%) Minebea(8.9%) Seagate (32.4%) 

WD ( Komag ) (15%) SAE/TDK (21%) 

(Magnecomp) 

Panasonic(7.8%) Hitachi GST (15.2%) 

Hitachi GST (15.5%) 

Alphana Tech(10%) Western Digital (21.9%) 

Fuji Elec. (10.8%) System on chip Motor ICs 

Hoya Glass (6.2%) Marvell TI 

Agere STMicro 

STMicro Agere 

Renesas 

Marvell 

Controller ICs Read channel ICs Pre-amp ICs 

Marvell Infineon Marvell TI 

STMicro LSI IBM Marvell 

IBM LSI LSI 

Renesas TI ST Micro 

Source: Gartner Dataquest, Techno Systems Research, J.P. Morgan estimates. Note: HDD OEM, Spindle motors and Heads data for 

2008. Media Data is as of 3Q CY08. Suspension Data is 2008 J.P. Morgan estimates. 

45

Bhavin Shah 

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Table 25: HDD—Industry unit shipments forecast 

46 


20 April 2009 

2005 2006 2007 2008 2009E 2010E 

Desktop drives 214,494 229,907 250,220 236,830 183,328 188,146 

Y/Y growth % 14.4% 7.2% 8.8% -5.4% -22.6% 2.6% 

Q/Q growth % 

Notebook drives 77,530 101,356 143,580 186,934 174,849 196,517 

Y/Y growth % 44.2% 30.7% 41.7% 30.2% -6.5% 12.4% 

Q/Q growth % 

Enterprise drives 26,200 27,706 29,870 31,962 25,675 26,924 

Y/Y growth % 10.8% 5.7% 7.8% 7.0% -19.7% 4.9% 

Q/Q growth % 

CE drives 61,611 76,469 78,210 81,760 69,773 78,196 

Y/Y growth % 53.3% 24.1% 2.3% 4.5% -14.7% 12.1% 

Q/Q growth % 

3.5-inch CE drives 25,136 30,312 35,620 37,620 32,023 35,062 

Y/Y growth % 22.4% 20.6% 17.5% 5.6% -14.9% 9.5% 

Q/Q growth % 

2.5-inch CE drives 6,535 18,680 22,150 25,050 21,537 23,410 

Y/Y growth % 97.3% 185.8% 18.6% 13.1% -14.0% 8.7% 

Q/Q growth % 

1.8-inch CE drives 15,354 23,000 20,440 19,090 16,213 19,724 

Y/Y growth % 88.4% 49.8% -11.1% -6.6% -15.1% 21.7% 

Q/Q growth % 

Total hard disk drives 379,835 435,438 501,880 537,486 453,625 489,783 

Y/Y growth % 24.5% 14.6% 15.3% 7.1% -15.6% 8.0% 

Q/Q growth % 

Source: TrendFocus through C2007, company data, and J.P. Morgan estimates. Note: Starting with March 2007 quarter, 1.0-inch HDD units are included in 1.8-inch category. 

HDD components 

Disk media: The leading merchant manufacturers of aluminum magnetic disks are 

Fuji Electric and Showa Denko. The major merchant suppliers of glass disks include 

Hoya Glass, Nippon Glass, Showa Denko, and Toyo Kohan. Depending on the type 

of substrate used in the HDD, there are 3.5-inch aluminum magnetic disks serving 

desktop PCs, PVR/DVRs, and enterprise sub-systems. Notebook HDDs utilize 2.5inch 

glass magnetic disks, but some non-mobile applications employ aluminumbased 

2.5-inch disks. The 1.8-inch disk drives used in iPod Classic and other devices 

employ glass-based disks. Glass-based disks are utilized in mobile and handheld 

applications owing to their properties of less vibration and greater shock tolerance. 

Recording heads: The hard disk drive enclosure also includes read/write recording 

heads, attached to suspension assemblies. These heads record and read data on the 

magnetic fields in the platters. TDK is the only remaining merchant supplier of 

recording heads. Hutchinson Technology, NHK Spring, and SAE/TDK 

(Magnecomp) are the key suppliers of suspension assemblies, which hold the 

recording head above the spinning disk. 

Other components that go into hard disk drives include controller ICs, pre-amp ICs, 

read/write channel ICs, spindle motors, base plates (Beyonics and Nidec-Brilliant), 

covers (Seksun, Nidec-Brilliant, Amtek) and screws (Unisteel).

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Storage technologies trends 

Technology transition from LMR to PMR 

LMR had been the backbone of the hard disk drive industry since the inception of 

HDDs more than 50 years ago but the latest technology trend in hard disks is 

perpendicular magnetic recording (PMR). In simple terms, PMR technology involves 

the vertical alignment of data on the plane of the disk, and therefore, augments the 

available real estate on the platter in comparison with the horizontal orientation of 

longitudinal magnetic recording (LMR). First shipped in late 2005 by Toshiba for 

disk drives inserted in MP3 players, PMR-based disk drives are now offered by most 

major HDD manufacturers for desktop, notebook, and enterprise disk drives. 

Currently, PMR allows for densities up to 250GB/square inch versus 133GB about 

two year ago, but this metric is sure to expand. 

Patterned magnetic media technology by Hitachi 

The superparamagnetic effect poses a serious challenge for continuing to increase the 

areal density and storage capacity of disk drives. One of the most promising methods 

to circumvent the density limitations imposed by this effect is the use of patterned 

media. In conventional media, the magnetic recording layer is a thin film of a 

magnetic alloy, which naturally forms a random mosaic of nanometer-scale grains 

which behave as independent magnetic elements. Each recorded bit is made up of 

many of these random grains. In patterned media, the magnetic layer is created as an 

ordered array of highly uniform islands, each island capable of storing an individual 

bit. 

Thermal-assisted recording 

Hitachi researchers are also exploring another extension to perpendicular magnetic 

recording. In thermally-assisted recording, magnetic grains can be made smaller 

while still resisting thermal fluctuations at room temperature. As the name suggests, 

thermally-assisted recording uses a laser to heat up the media while the magnetic 

head is writing the smaller bits of data. This enables the use of media that is 

magnetically stable at room temperature with the very small magnetic grains required 

for high-density storage. 

HDD: Industry overview 

Global recession could hurt HDD demand and pricing conditions for some time 

HDD unit demand and pricing conditions continue to slide across all form factors. 

We expect the early read on 2009 to be dour. We are concerned about deteriorating 

PC-related unit trends and the potential for consumer-led weakness in the areas of 

PVR/DVRs and external back up (retail) disk drives. Moreover, the enterprise HDD 

segment appears to be exhibiting significant contraction in order velocity. 

Adding to the troubles, there has been no pullback in manufacturing parity 

Our caution on HDDs also stems from the high level of manufacturing parity. All 

major HDD manufacturers are not encountering any execution or quality issues. In 

the past few years, there have been one if not two HDD manufacturers limited in 

producing at high capacity utilization rates at the same time for various reasons. 

Examples have varied from supply constraints, design flaws, poor manufacturing 

execution, or being in the penalty box with an OEM over prior volume commitment 

shortfalls. Unfortunately, at the current moment, all HDD manufacturers are at par, 

47

Bhavin Shah 

(852) 2800-8538 


48 


20 April 2009 

which means there is less regulation to keep pricing intact or supply-demand in 

balance. 

Prolonged weakness in HDD sales could accelerate sector realignment 

In the past 18 months, there has been industry consolidation at the component level. 

We still prefer to see HDD manufacturers consolidate, too. We think that prolonged 

weakness in industry sales could accelerate sector realignment at the HDD 

manufacturer level. Given that the HDD market’s growth potential could be waning, 

we think it is conceivable that the present six players in the industry could decrease 

in number in 2009. 

HDD consolidation benefits seldom come easy 

We caution that historically HDD consolidation events do not bring immediate 

benefits to industry participants, and often, the associated benefits of improved 

profits can be fleeting, given the vagaries of the ultra-commodity business of hard 

disk drives. The last major HDD manufacturer consolidation event was Seagate’s 

acquisition of Maxtor. The deal closed in May 2006. While the EBITDA margin 

highs and lows of Seagate and Western Digital have improved since the Maxtor deal, 

there still have been severe shocks along the way as slowing demand or competitive 

pressures have overcome prior consolidation effects. 

NAND Flash will encroach on HDDs over time 

While some bears make a fuss over the NAND flash threat to HDDs, we continue to 

believe the bigger risks are: 1) the increasing level of manufacturing parity in HDDs; 

and 2) the decelerating growth prospects after a solid first half of the decade. We are 

bearish on HDDs due to fundamentals not NAND flash. 

In the next section, though, we discuss the flash threat (SDD), which we think could 

be increasing. While we expect lower NAND Flash pricing to accelerate the arrival 

of SSD in certain applications in the next 12 months, we do not expect broad-based 

tussles for a few more years. 

During tough macroeconomic conditions, it is not easy as a component supplier in 

the PC food chain. While hard disk drives serve far more applications outside of 

traditional compute environments today versus the 2001-02 downturn, we still expect 

tough sledding in the near to mid-term. Demand and pricing conditions are not 

favorable, and the high level of manufacturing parity is adding to a volatile pricing 

environment. 

On February 17, Fujitsu announced plans to divest its HDD manufacturing 

operations to Toshiba. The proposed deal is expected to close by the end of June. We 

do not expect the latest wave of consolidation to provide major benefits in the near to 

medium term. There continues to be a high level of manufacturing parity in the 

industry, in our view. Also, there is a major problem with demand. Thus, we expect 

little in the way of positive impact from any consolidation of the smaller market 

share players this year. 

Any potential consolidation effects of Fujitsu/Toshiba should be a 2010 or 2011 

event, in our view. Even then, we caution that HDD consolidation events do not 

bring immediate benefits to industry participants, and often, the associated benefits 

of improved profits can be fleeting given the vagaries of the ultra-commodity 

business of hard disk drives.

Bhavin Shah 

(852) 2800-8538 


JJ Park AC 

(82-2) 758-5717 

jj.park@jpmorgan.com 

J.P. Morgan Securities (Far East) Ltd, 

Seoul Branch 

Contrary to our previous view, 

we now take a slightly positive 

stance on the take-off of the SSD 

market due to faster-thanexpected 

ASP drop for SSD 


20 April 2009 

NAND flash solid state disks will encroach on HDDs 

A solid state disk is a memory device, which uses solid state to store data. NAND 

Flash makers, HDD makers, and major PC OEMs are showing interest increasingly 

in the SSD market. 

SSD market to display relatively robust growth from 2H09E 

Contrary to our previous view, we are turning positive on the take-off of the SSD 

market, and forecast that SSD will show meaningful growth from 2H09, mainly due 

to a faster-than-expected ASP drop in SSDs. 

According to our channel checks, BOM for SSD is declining rapidly, mostly led by 

sharp falls in NAND pricing. Our revised BOM analysis in November 2008 suggests 

that BOM for 64GB SSD has declined to US$299, down by 25% from our previous 

analysis in June 2008. We estimate total operating costs in manufacturing 64GB SSD 

to have decreased to US$245 with the NAND ASP falling by 19%. We also believe 

that some SSD makers are willing to sacrifice profitability to promote sales growth, 

thus expanding their market share in the SSD market more rapidly in its early stages. 

Table 26: BOM trend of 64GB SSD (SLC-based) 

US$ 

Jun-08 Nov-08 %-change 

ODM price 399 299 -25% 

OP margin 25% 18% 

Total operating cost 299 245 -18% 

16Gb SLC NAND price 16.2 13.1 -19% 

Discount to NAND price for bulk purchase (%) 50% 50% 

NAND cost for 64GB 260 210 -19% 

as % of total cost 87% 85% 

Controller cost 10 9 -10% 

as % of total cost 3% 4% 

Other cost including PCB and casing 29 27 -10% 

as % of total cost 

Source: MTRON, J.P. Morgan estimates. 

10% 9% 

Figure 24: SSD’s price premium versus HDD for 64GB SDD and 80GB HDD 

x 

14 

12 

10 

8 

6 

4 

2 

0 

12.6 

8.9 

2007 2008E 2009E 2010E 

Source: Company data, J.P. Morgan estimates. 

4.9 

64GB SSD ASP / 80GB HDD ASP 

2.7 

49

Bhavin Shah 

(852) 2800-8538 


Netbooks are emerging as 

another application for NAND 

demand, but upside potential for 

NAND demand from Netbook will 

be capped due to low 

penetration rate, in our view. 

Despite impressive growth, 

NAND for PC will only account 

for approximately 13.9% in 

2009E due to its low-base effect 

50 


20 April 2009 

Table 27: SSD v/s HDD features comparison 

2.5º SATA 3.0Gbps SSD 2.5º SATA 3.0Gbps HDD 

mechanism type Solid NAND Flash-based Magnetic rotating platters 

density 64GB 80GB 

weight 73g 365g 

performance 

(SLC) Read: 100MB/s, Write: 80MB/s 

(MLC) Read : 90MB/s, Write : 70MB/s 

Read: 59MB/s, Write: 60MB/s 

active power consumption 0.4W 3.86W 

operating vibration 20G (10~2000Hz) 0.5G (22~350Hz) 

shock resistance 1,500G for 0.5ms 170G for 0.5ms 

operating temperature 0ºC to 70ºC 5ºC to 55ºC 

acoustic noise None 0.dB 

endurance (SLC) MTBF > 2M hrs. 

(MLC) MTBF > 1M hrs. 

MTBF < 700k hrs 

Source: http://www.samsung.com/global/business/semiconductor/products/flash/ssd/2008/product/chart.jsp. 

NAND flash versus HDD 

As highlighted in our previous Global Memory Market report, the price gap between 

SSD and HDD is one of the key swing factors in determining the timing of the fullfledged 

launch for SSD. Due to meaningful pricing gap between HDD and SSD, the 

encroachment of SSD would be limited for a while. However, if MLC-based SSD 

emerges as mainstream, the speed of narrowing the pricing gap could accelerate, 

pulling in the SSD adoption in the PC space, in our view. 

Table 28: BOM trend of 64GB SSD (SLC-based) 

US$ 

2007 2008E 2009E 2010E 

80GB HDD price trend 

80GB HDD (2.5'') price (US$) 53 45 37 33 

Y/Y change (%) 

64GB SSD price (SLC-based) 

-18% -15% -18% -11% 

64GB SSD price (US$) 1,125 399 180 90 

Y/Y change (%) -65% -55% -50% 

64GB SSD ASP/80GB HDD ASP 


8.9 4.9 2.7 

Incremental NAND demand from netbook to be limited 

With some netbook models adopting SSD instead of HDD, netbooks are emerging as 

another application for NAND demand. We, however, expect the upside potential for 

NAND demand from netbooks to be capped due to low penetration rates. As of 3Q08, 

it is estimated that roughly 30% of total netbooks adopted SSD instead of HDD. 

Despite the substantial advantages of SSDs including lower power consumption, 

faster processing speed, and less weight, we believe that netbook makers will not 

increasingly adopt the low-density SSD given its limited storage space. We estimate 

the penetration rate of SSD in netbooks will likely stay at the current level and, hence, 

SSD-adopted netbooks will account for 1.5% of total NAND demand. 

We expect solid growth but a meaningful take-off in 2010 

In light of the above consideration, we expect that NAND application in PCs will 

record robust growth of 361% Y/Y in 2009. Despite this impressive growth, however, 

the use of NAND in PCs will only account for approximately 13.9% in 2009E due to 

its low-base effect. We thus believe that the meaningful launch of SSD will only 

occur in 2010 at the earliest. Toshiba is the most aggressive in promoting the SSD 

business. SSD multi-level NAND development has been a multi-team effort, 

encompassing not only the semiconductors segment, but also R&D engineers and 

technological experts in the PC and HDD segments.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Adoption of SSD in netbooks 

SSD is getting mainstream popularity as alternative to HDDs with adoption in 

netbooks and notebook since 2007. SDDs come in standard disk driver form factors 

(1.8, 2.5 or 3.5-inch etc.) and manufacturers have been offering 64GB and 128GB 

SSDs for quite some time. Samsung has already begun producing a 256 GB solid 

state drives. Toshiba plans to introduce 512GB SDD in 2009. Sandisk launched new 

SSDs called pSDD at CES 2009 aimed at netbooks with sequential read/write speed 

of 140MB/sec. Acer Aspire One, Asus Eee PC, Dell Inspiron Mini, HP Mini are 

some of the netbooks that come with SSD storage. 

Secure digital (SD) cards 

Most netbooks and notebooks come with built-in memory card readers. Instead of 

using USB SSD or HDD as secondary storage drives one can use SD cards. SD is 

quite cheap compared to SDDs. It is a good option for netbooks which come with 

small storage capacity. It’s a very cost effective option but it is much slower 

compared to SDDs. Sometime even high speed SDs can perform poorly due to slow 

built-in card readers. 

Figure 25: Pros and cons of SD cards as internal storage device 

Pros Cons 

very cost effective Slower built in readers 

can use for internal storage much slower than SDDs 

high reliability slower by HDD standards 

no mechanical parts 

can use as primary boot disk 


51

Bhavin Shah 

(852) 2800-8538 



(852) 2800-8538 



Limited 

Shawn Webster 

(1-415) 315-6723 

shawn.r.webster@jpmorgan.com 

J.P. Morgan Securities Inc. 

52 


20 April 2009 

Broadband access 

What’s new? 

As the xDSL market continues to shrink due to stiff competition and weak economic 

environment, the vendor fallout appears to have begun, with TI and Centillium 

selling off their xDSL businesses to Infineon and Ikanos respectively. Also, WiMAX 

as a technology has come to the deployable stage—a number of networks are being 

deployed in emerging markets. 

Given that fixed WiMAX is being promoted as a wireless broadband technology, we 

have discussed this technology in this section. However, as WiMAX evolves towards 

mobile WiMAX and 4G, it is facing competition from new technologies such as LTE 

(for details, please refer to the Mobile Handset Radio Technologies section). We 

have also included a discussion on Passive Optical Networks (PON); we believe 

PON is emerging as a major challenger to existing broadband technologies as it 

enables point-to-multipoint optical communications. 

Despite advantages of DOSCIS 3.0, CMTS continues to be limited to certain 

geographies as it faces stiff competition from optical network technologies. Metro 

Ethernet continues to face resistance as high initial costs limit its acceptance. 

Broadband: Brief overview 

Broadband refers to telecommunication, in which a wide band of frequencies are 

available to transmit information. Due to a wide band of frequencies, information can 

be multiplexed and sent on many different frequencies or channels within the band 

concurrently, allowing transmission of more information in a given amount of time. 

Hence, broadband is a high-bandwidth internet connection, which allows one to view 

web pages quicker, download files faster, and send and receive emails without much 

delay. In general, any connection to the customer of 256 kbit/s or more is considered 

broadband internet. 

We discuss five different broadband technologies in this section—DSL, Cable 

Modem, Metro Ethernet, PON and WiMAX. Compared with traditional dial-up 

access, these technologies open up homes and small businesses to a new realm of 

possibilities for network connectivity and applications. Video-on-demand, 

multimedia conferencing and online gaming are just a few examples of services on 

the internet that do not work as effectively at 56kbps as they work at broadband data 

transmission rates. 

While DSL is a dominant technology in the market, Metro Ethernet and PON are 

emerging as strong competitors. WiMAX is a fixed wireless broadband technology, 

while others are wireline technologies. Because of its cheaper costs, wider coverage 

reach and ease of set-up, WiMAX is becoming a preferred choice in developing 

countries. Besides, broadband is likely to face stiff competition from 3G/4G 

technologies, such as LTE and mobile WiMAX, as they evolve to the speeds of fixed 

broadband.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 26: Broadband—DSL and cable modem network diagram 

DSL 

Modem 

Corporate 

Corporate 

LAN 

LAN 

DSLAM 

Optic 

Optic 

Fiber Fiber Line 

Line 

Router 

Router 

TV/Video Cable 

TV/Video 

Modem 

CMTS 

Cable 

Modem 

CMTS 

Source: Alcatel (Lucent), J.P. Morgan. 

Service Service Provider 

Provider 

IP IP Network 

Network 

ISP ISP ISP 

ISP 

IP IP Router 

Router 

Internet 

Internet 

ISP 

ISP 

Dial-up Dial-up Modem 

Modem 

ISP 

ISP 

53

Bhavin Shah 

(852) 2800-8538 


Figure 27: Broadband supply chain 

CMTS 

Company 2008 MS (%) 

Cisco 56 

Arris 34 

Motorola NA 

Others NA 

Source: IDC, Gartner Dataquest., J.P. Morgan. 

54 


20 April 2009 

Cable operators 

US Asia-Pacific Europe 

Adelphia Japan J-Com NTL 

Cablevision Korea Thrunet, Hanaro, Onse UPC 

Charter Hong Kong i-Cable Telia Stofa 

Comcast China SARFT Telenet 

Cox Taiwan EBT/APOL, Gigamedia Cabovisao 

Insight Cablecom 

Mediacom Noos 

Time Warner 

DSLAM 

Company 2007 market share (%) 

Alcatel Lucent 31.6 

Huawei 22.5 

ZTE 13.4 

Nokia Siemens 6.4 

Ericsson 5.8 

EMS 

Sanmina SCI 

Flextronics 

Jabil Circuit 

Broadband service providers and telecoms 

carriers 

ODM 

Castlenet Technology 

Askey Computer 

Well Communications 

Component suppliers 

Integrated cable modem chips and silicon tuners 

Company Company 

Broadcom NXP 

Texas Instruments Toshiba 

Microtune ALPS 

Terayon Sharp 

DSL operators 

US Asia-Pacific Europe 

BellSouth Japan Yahoo-BB, NTT East, NTT West, T-online 

Qwest eAccess, Acca Networks British Telecom 

Sprint Korea KT, Hanaro, Dacom, Thrunet United Internet 

Verizon Hong Kong PCCW, NWT, HGC, New T&T, Icare Telia 

Taiwan CHT/HiNet, Seednet, TFN, FT 

EBT/APOL, TTN/PCCW, So-Net Telecom Italia 

Singapore SingNet, StarHub, PacNet Belgacom 

AOL 

Cable modem OEMs 


Arris Cisco (Scientific-Atlanta) 

Foxconn/Ambit Terayon 

Motorola Toshiba 

Samsung Thomson 

EMS 

Sanmina SCI 

Flextronics 

Jabil Circuit 

xDSL modem OEMs 


Askey Siemens/Efficient 

D-Link Sumitomo 

Foxconn/Ambit Thomson 

Sagem Westell 

ODM 

Accton Technology, Alpha Networks 

Cyber Tan, Gemtek 

Amigo Technology, Billion Electronic 

Global Sun Technology, Kinpo, Sercomm 

Turbomm Tech, Zyxel, 

Well Communications 


Integrated DSL modem chips 


Conexant (w/ Globespan Virata) Ikanos 

Infineon Broadcom 

STMicroelectronics Analog Devices

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Broadband market outlook 

By March 2008, 352 million households worldwide were online via broadband 

subscription, representing worldwide penetration of only 5.3%. DSL is still the most 

dominant of the broadband technologies, despite the fact that it is increasingly losing 

share to cable modem and optical fibre technologies. However, according to IDC, 

DSL will continue to be the dominant technology at least until 2011. Other 

broadband technologies, such as fixed wireless and satellite broadband, should 

remain be niche technologies. 

The industry continues to face an increasing threat from mobile broadband services 

such as WiMAX and LTE. As mobile broadband evolves to the speed of fixed 

broadband and provides the added function of mobility, it remains to be seen who 

emerges as the winner once the macro environment clears out. Low penetration 

levels and higher growth in EM, in our view, are going to make the emerging 

markets the key driver of the broadband market when the macro picture improves. 

Figure 28: Worldwide broadband services subscriptions by technology (June 2008) 

DSL 

60% 

Source: OECD. 

Cable Modem 

29% 

Other 

2% 

Fibre + LAN 

9% 

Figure 29: Worldwide broadband subscribers by geographies (June 2008) 

Number of BB subs in m 

80 

70 

60 

50 

40 

30 

20 

10 

0 

Source: OECD. 

Czech Republic 

Austria 

Denmark 

Switzerland 

Belgium 

Sweden 

Poland 

Mexico 

Australia 

Turkey 

Netherlands 

Spain 

Canada 

Italy 

Korea 

France 

United Kingdom 

Germany 

Japan 

United States 

55

Bhavin Shah 

(852) 2800-8538 


56 


20 April 2009 

Digital subscriber line (xDSL) 

‘xDSL’ is the generic name for the family of digital services that include asymmetric 

(ADSL), ISDN DSL (IDSL), symmetric (SDSL and G.SHDSL) and very-high-bitrate 

DSL (VDSL). DSL delivers simultaneous high-speed data and voice services 

over the same telephone line. It uses existing copper wires from the telephony 

company to the customer’s premises, and the service involves electronic equipment 

in the form of DSL modems at both ends to send high-speed digital signals up and 

down the copper wires. 

Most major telcos have embraced DSL, making it the most prevalent broadband 

technology deployed today. This is largely because the costs associated with 

deploying DSL have declined dramatically in recent years, further enabling 

broadband service providers (BSPs) to cost-effectively build their networks and offer 

competitively priced DSL services. This ability, coupled with the near ubiquity of 

copper networks in most countries, means that a majority of end-users worldwide are 

able to get broadband services via DSL technology. 

xDSL technology is the leading broadband last/first-mile technology used in many 

European and Asia-Pacific markets. However, the xDSL market continues to shrink 

and according to IDC the semi revenues are expected to show a CAGR of -13.5% 

during 2008-2013. As the market shrinks, the number of players is also reducing as it 

is evident from the withdrawal of Texas Instruments and Centillium from the xDSL 

market. Speaking by standards, VDSL is the only segment which is likely to show 

growth but ADSL2/2+ will continue to be the dominant technology and the key 

driver. The xDSL market is not only hampered by the weak macro environment but 

also due to delays in network deployment, market share gains by competing 

technologies such as cable and passive optical networking (PON) technologies. 

Table 29: Worldwide xDSL semiconductor revenue by standard, 2008-2013 


2008 2009 2010 2011 2012 2013 

2008-2013 

CAGR (%) 

ADSL 703.6 552.2 411.7 313.5 260.5 216.6 -21 

VDSL 157.9 207 222.2 212.8 205.2 198.1 4.6 

SDSL 32.5 32.7 30.4 26.3 22.3 18.5 -10.6 

Total 894 791.9 664.4 552.7 488 433.2 -13.5 

Source: IDC, Dec 2008. 

Table 30: Worldwide xDSL and cable modem semiconductor revenue, 2007-2013 


2007 2008 2009 2010 2011 2012 2013 

2008-2013 

CAGR (%) 

DSL CO NA 361.2 337.3 292.6 253.2 222.7 196.6 -11.5 

DSL CPE NA 532.8 454.6 371.8 299.5 265.3 236.6 -15 

xDSL subtotal 980 894 791.9 664.4 552.7 488 433.2 -13.5 

Cable modem CPE 578.5 589.2 641 683.8 716.5 742.1 749.2 4.9 

Total 1,558.50 1,483.10 1,432.90 1,348.20 1,269.10 1,230.20 1,182.40 -4.4 

Source: IDC, Dec 2008. There was insufficient feedback to break out the DSL CO and DSL CPE revenue in 2007. Thus, only the 

subtotal is supplied.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Cable modem 

Cable modem service, or data-over-cable internet access, is the transfer of data at 

high speeds across hybrid fiber coaxial networks, historically used for cable TV 

services. A cable modem typically has three connections: one to the coaxial cable 

wall outlet coming in from the cable operator, and the other two, connecting to a PC 

and a TV. 

Cable modem internet access services remain a niche broadband technology in most 

parts of the world, with the exception of North America and select countries in 

Western Europe and Asia-Pacific, where cable modems dominate the broadband 

market. The Cable Modem Termination System (CMTS) now is dominated by three 

players—Cisco, Arris and Motorola—after Bigband Networks withdrew in 2007. 

Leading chipset providers are TI and Broadcom. Conexant sold their CMTS business 

to NXP, which now makes them as the third competitor. 

CMTS saw a flurry of activity in 2007 as vendors made a strong push for the 

adoption of DOCSIS 3.0 based solutions. These DOCSIS 3.0-based solutions 

allowed the cable multiple system operators to offer faster downlink and uplink 

speeds than xDSL. Despite this we believe xDSL will continue to be the dominant 

technology in this space, as aggressive pricing by the incumbent operators is going to 

play a major role. Also, there is stiff competition from optical PON technology, 

especially in Asia Pacific where it is being heavily promoted. As a result North 

America will likely be the key driver for this technology once the macro environment 

clears out. 

Table 31: CMTS company ranking by revenue (2005-08) 

Company 2005 2006 2007 2008 

Cisco 401 530 446 642 

Arris 151 239 294 387 

Others 196 221 163 113 

Total 

Market Share 

748 990 903 1142 

Cisco 54% 54% 49% 56% 

Arris 20% 24% 33% 34% 

Others 26% 22% 18% 10% 

Source: Company Data, J.P. Morgan estimates. 

Metro ethernet internet access (MEIA) 

Metro ethernet services provide internet access over optical ethernet access circuits. 

Optical ethernet is the use of ethernet LAN packets running over optical fiber within 

or as access to a broadband service provider’s network. The underlying connection 

can run at any standard ethernet speed: 10Mbps, 100Mbps (fast ethernet), 1Gbps 

(gigabit ethernet) or 10Gbps. Applications include high-speed internet access, 

transparent LAN services and high-speed data transfer services. Metro ethernet 

internet access (MEIA) is attractive because of the high levels of bandwidth it can 

offer, especially given the ever-increasing demand for greater and faster internet 

connectivity from consumers and business users. 

MEIA comes in at the third position of the three dominant broadband technologies 

forming only 11.3% of the broadband services market in 2007. MEIA poses major 

challenge to DSL only in select Asian economies like China, Japan and to some 

extent in Korea. 

57

Bhavin Shah 

(852) 2800-8538 


Fixed WiMAX is discussed here 

as it is more likely to be adopted 

for broadband services. 

However WiMAX as a 4G 

technology and more 

specifically mobile WiMAX is 

discussed in more detail along 

with the other 3G and 4G 

technologies in the Mobile 

Handset radio Technologies 

section of this supply chain 

guide. 

58 


20 April 2009 

MEIA faces a severe limitation, the lack of fiber in many areas. Even though the cost 

of fiber has declined dramatically in recent years, the relatively high cost of laying 

fiber remains the single greatest barrier to widespread deployment of MEIA services. 

DSL and cable modems are well established as broadband technologies, however, 

and will inhibit metro ethernet growth in several regions, including Europe and the 

United States. Consequently, the deployment of MEIA will largely remain confined 

to areas where new development is taking place, effectively taking advantage of 

roads that are already dug up or green field-type deployments in new buildings or 

housing developments. 

Passive Optical Networks (PON) 

A PON is a point to multipoint technology for providing the last mile connectivity 

using unpowered optical splitters. The network consists of an Optical Line Terminal 

(OLT) at the service provider’s central office (which connects the PON to the 

backbone network) and a number of Optical Network Units (ONUs) near end-users 

which present the standard interfaces at the user end. Besides these there are a 

number of passive splitters which split the signal, but don’t have any switching 

capabilities as they are not active. As a result the signals end up in broadcast mode 

enabling point to multipoint communication. However software implementation at 

the ONUs can enable specific communication the user end. Because of the presence 

of passive splitters PONs can enable Fiber to the premises (FTTP) or Fiber to the 

home (FTTH). 

There are several standards for PON which include the ITU-T G.983, ITU-T G.984 

and IEEE’s 802.3ah and P802.3av. China is setting up PON networks based on the 

IEEE 802.3ah or popularly known as the Ethernet PON (EPON). 10G-EPON or 

IEEE P802.3av is the newer advanced version that is capable of providing 

10Gbits/sec of downlink throughput. The standard is likely to be approved by end of 

2009. The ITU-T G.984 is a family of protocols that defines the Gigabit PON 

(GPON). Verizon, British Telecom and AT&T are in advanced stage of deploying 

networks on this technology. 

PON is coming up as a major challenger to the existing technologies, especially in 

Japan, South Korea and China. In Japan, NTT is setting up PON’s with equipment 

from Alcatel Lucent. Key equipment providers are Alcatel Lucent, Motorola, Cisco 

and Centillium. 

Fixed wireless broadband: WiMAX 

A WiMAX system consists of two parts: 

• A WiMAX tower, similar in concept to a cellphone tower that can provide 

coverage to a very large area—as big as 3,000 square miles (~8,000 square km). 

• A WiMAX receiver—the receiver and antenna could be a small box or PCMCIA 

card, or they could be built into a laptop the way WiFi access is today.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 30: How WiMAX works 

Source: WiMAXForum. 

A WiMAX tower station can connect directly to the internet using a high-bandwidth, 

wired connection (for example, a T3 line). It can also connect to another WiMAX 

tower using a line-of-sight microwave link. This connection to a second tower, along 

with the ability of a single tower to cover up to 3,000 square miles, will give 

WiMAX access to remote rural areas. 

IEEE 802.16 specifications 

• Range: 2 km to 50 km radius from base station, depending on sub specifications. 

• Speed: 72 megabits per second. 

• Line-of-sight: not needed between user and base station. 

• Frequency bands: Mobile WiMAX, based on IEEE 802.16e-2005, initially 

operates in the 2.3 GHz, 2.5 GHz, 3.3 GHz, 3.4-3.8 GHz spectrum bands. 

Support for additional bands should be added on the basis of market demand and 

new spectrum allocations. 

Benefits of WiMAX 

• Higher bandwidth and greater range compared to WiFi: WiFi range is limited to 

50 meters, while WiMAX can reach 50 kms. 

• Cost-effective solution for reaching rural areas: One area of agreement amongst 

market participants is the ability of WiMAX to help increase penetration in areas 

where laying of copper/fiber is costlier and/or a difficult proposition owing to the 

terrain. We believe WiMAX will be an effective solution for being operational as 

a non-line of sight technology and with a reach of 50 kms. 

• CPE costs could fall with movement from outdoor to indoors: Market participants 

expect indoor Customer Premises Equipment (CPE) to cost less than outdoor 

CPE, which is being deployed. This scaling down could be as much as four times 

less than the price of an outdoor CPE—about US$200-300. 

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• Bundled play possibilities for DTH operators: Direct to home pay-TV operators 

could provide broadband on WMAX and TV through satellite over the same 

CPE. This opens up the possibility of bundled voice, video and broadband play 

for DTH players, an avenue, otherwise restricted to them. 

Limitations of WiMAX 

• Restrictions on mobility: The 3.4-3.7 GHz bands are limited to fixed telephony 

in many countries and could require regulatory intervention for permitting 

services perfectly substitutable for mobile. Even so, seamless handovers between 

base stations will not likely be permitted, as in Sweden, and thus could constrain 

the Voice over IP service. Hence, technologies such as WiMAX operating in 

frequency bands, where mobility restrictions exist, will serve as competition 

more to DSL and cable than mobile. These restrictions could range from 

stationary (0Km/Hr) to pedestrian (up to 10 km/hr) to vehicular (up to 100 

km/hr) to high speed vehicular (up to 500 km/hr) in different countries. 

• Not quite as good as mobile voice, nor as fast as WiFi broadband: 3G 

technologies will likely remain much more efficient in the use of bandwidth for 

voice transport, while WiFi should remain significantly faster than WiMAX for 

broadband access. It, therefore, risks being relegated to the middle ground. 

• Higher number of radio towers required: The higher frequency bands of 

operation of WiMAX (2.5 GHz, 3.4- 3.7 GHz, >5 GHz) compared with mobile 

technologies (0.8 GHz, 1.8-2.1 GHz) mean that to attain comparable reach, 

much higher number of base stations would be required in WiMAX than 

mobile–simply owing to greater frequency of operation (penetration/reach being 

inversely proportional to Frequency). 

• Mobile broadband is catching up fast: Where mobile broadband lacks compared 

to WiFi and WiMAX is in the connection speed of its internet access. But faster 

download speeds of the order of 3.6 Mbps are being reported by SmarTone in 

Hong Kong on HSDPA/3G. 

Key developments 

WiMAX can be implemented as a hub used to connect hundreds of customers to an 

always-on, fixed, high-speed wireless internet connection. WiMAX could also serves 

as a wireless alternative to costly T1 leased lines at the back-end of wireless LAN 

hotspots. At the hotspot site, there would be a WiMAX module that could ultimately 

even be integrated into a wireless LAN access point. 

However, WiMAX makes more sense in emerging or rural markets beyond the reach 

of existing services, or where there is no wired broadband infrastructure at all. 

Despite heavy initial costs for back-end equipment, WiMAX could be cost-effective 

since it is a point-to-multipoint technology and would not require laying down new 

wires. China, India and Latin America could be particularly big markets for fixed 

wireless broadband. 

India has recently launched the process for adoption of this technology as a 

broadband service providing option. Besides India, a number of African and Latin 

American countries are adopting WiMAX and mobile WiMAX as a cheaper option 

for providing broadband access. Similarly, Wateen Telecom in Pakistan has recently 

placed one of the world’s largest WiMAX device orders with Motorola. The process

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20 April 2009 

has been also started in the Middle East as service providers like QTel and etisalat 

signaling support for WiMAX and starting deployment already. 

Sprint along with Clearwire is making a big push for implementation of WiMAX in 

North America and has already brought the technology to the end used in certain 

geographies. However limited handset availability has hampered swift adoption by 

users, the company is providing USB dongles for laptops as a cheaper and quicker 

solution. 

Israel-based Alvarion is a dominant player in the WiMAX market and is setting up 

networks in Africa and other EMs. Besides Alvarion other dominant players include 

ZTE, Huawei, Soma Networks, Smart Link Communication, Galaxia Telecom, 

Redline Communications and Airspan Networks. For more developments and mobile 

WiMAX, please refer to Mobile Handset Radio Technologies section of this report. 

61

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Ehud Gelblum AC 

(1-212) 622-6457 

ehud.gelblum@jpmorgan.com 

Kimberly Watkins 

(1-415) 315-6724 

kimberly.a.watkins@jpmorgan.com 


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20 April 2009 

Wireless networking 

What’s new? 

In Wi-Fi, both the new standards—802.11n and the mesh standard 802.11s—are still 

in their draft stages and have not yet become full standards. However, vendors are 

already coming out with products based on the draft standard. 

As data and voice converge over one wireless channel, wireless networking is no 

longer independent beyond the Wi-Fi-based LAN networks; hence, 3G and 4G 

wireless technologies are discussed in the Wireless handset radio technologies 

section of this report. 

Bluetooth is already a dominant technology for short range and low power 

communications; its costs have come down and an increasingly large number of 

handset vendors are incorporating Bluetooth into their phones. It is likely that its 

penetration will increase further. 

What is wireless networking? 

Wireless networking refers to the technology that enables data transfer between two 

devices over the air. In this section, we discuss wireless LAN (802.11n and wireless 

mesh) and other technologies used in wireless communications, based on the reach of 

the networks, such as wireless PAN (Bluetooth, UWB and Zigbee). 

While Bluetooth has already seen mainstream adoption in mobile devices, ultra wide 

band (UWB) standards are in the process of being finalized and Zigbee is being 

positioned as a technology for varied applications outside the IT space. Moreover, 

the merger of Wibree Forum with Bluetooth SIG will likely enable a larger number 

of devices to be connected using Bluetooth. 

The industry constantly tries to adapt to the co-existing technologies with industry 

players promoting their respective versions to capture market share. In each part 

below, we present an introduction to the technology, the important drivers and the 

key players—vendors to semiconductor companies—in the wireless technologies 

supply chain. 

Wireless personal area network (WPAN) 

This is a short-distance wireless network, specifically designed to support portable 

and mobile computing devices such as PCs, PDAs, wireless printers, storage devices, 

cell phones, pagers, set-top boxes and a variety of consumer electronics equipment. 

The technologies in this space are covered by the IEEE (Institute of Electrical and 

Electronics Engineers) 802.15 standards. 

Technologies available 

Bluetooth 

This is a wireless radio standard, primarily designed for low power consumption, 

with a short range (up to 10 meters or 100 meters, depending on the Bluetooth device 

class) and with a low-cost transceiver microchip in each device. Bluetooth allows 

connectivity and information exchange between devices like PDAs, mobile phones, 

headsets, laptops, digital cameras, PCs and peripherals via a secure, low-cost,

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globally available short-range radio frequency (2.4 GHz) and attains data rates of 

around 1Mbps (basic rate) or 2-3Mbps (Enhanced Data Rate). 

Standardization has given technology the momentum; most notably, wireless 

headsets are used in conjunction with music players and cellphones. Bluetooth 

adoption has continued to grow in all regions except Japan, which is lagging behind 

mainly due to use of Infrared Data Association (iRDA) enabled phones for data 

transfer. Bluetooth penetration in mobile handsets continues its rising trend as a 

majority of handset vendors have incorporated Bluetooth in their mid-to-high end 

models. According to Gartner research, sales of bluetooth enabled mobile phones is 

expected to grow to 82.5% of total mobile terminal sales by 2011. 

Bluetooth implementation costs in mobile phones have fallen as volumes increase 

and manufacturers learn more efficient methods of implementation. A Bluetooth 

module in a mobile phone currently costs less than US$2 and we expect this cost to 

fall further in the next few years. Consumer awareneness and preference for lighter 

devices and headsets is dirving the take-up of Bluetooth-enabled phones, in our view. 

In addition, prices for Bluetooth headsets—the main driver of Bluetooth adoption in 

the mobile phone market—have begun to fall as the cost of silicon components have 

dropped. Prices for Bluetooth dongles have also been declining. 

Bluetooth technology plays a part in the rising Voice over IP (VoIP) space, with 

Bluetooth headsets being used as wireless extensions of the PC audio system. As 

VoIP becomes more popular and more suitable for general home or office use, 

Bluetooth should be used in cordless handsets—with a base station connected to the 

internet link. With the merging of Wibree forum and SIG in June 2007, Wibree’s 

Ultra Low Power (ULP) has become the low power solution of Bluetooth. This came 

after the 2006, SIG announcement to work with WiMedia Alliance to develop a nextgeneration 

Bluetooth technology, using UWB technology and delivering UWB 

speeds. 

Table 32: Worldwide sales of Bluetooth-enabled phones as a percentage of total mobile terminal sales (2006-2011) 

2006 2007 2008 2009 2010 2011 

Africa 20.1% 27.2% 35.3% 46.3% 62.4% 75.4% 

Asia/Pacific 22.7% 30.2% 39.3% 51.5% 63.6% 75.3% 

Eastern Europe 32.3% 43.0% 53.5% 65.1% 79.5% 89.9% 

Japan 17.3% 22.1% 26.2% 30.2% 33.3% 36.0% 

Latin America 28.9% 39.9% 51.7% 63.4% 76.6% 86.4% 

Middle East 35.0% 43.0% 53.9% 66.7% 77.8% 87.5% 

North America 36.1% 54.1% 68.9% 78.7% 86.1% 97.2% 

Western Europe 68.2% 82.9% 89.0% 95.2% 98.4% 99.4% 

Worldwide 34.6% 44.3% 53.3% 63.1% 73.1% 82.5% 

Source: Gartner Dataquest (December, 2007). 

Ultra wideband (UWB) 

UWB systems combine transmission across wide frequency spectrums and low 

power consumption. UWB provides dramatically increased channel capacity at a 

short range, making it the leading contender for sharing high-bandwidth multimedia 

data. Within a range of less than 20 meters, UWB can be optimized to achieve data 

rates of 110/220/480 Mbps, sufficient bandwidth to enable applications such as 

wireless USB 2.0 and FireWire. This could help eliminate the maze of wires 

connecting electronic products such as large-screen displays, set-top boxes, speakers, 

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televisions, digital video recorders, PCs/laptops, digital cameras. Through UWB, a 

person could: 

• Build a home theater environment without cables 

• Instantly connect a mobile PC with a printer, scanner and VoIP headset. 

There are concerns over UWB as its unlicensed frequency band could interfere with 

some WLAN equipment, certain defense systems and UMTS systems for 3G—all of 

which use this frequency. For UWB there are two primary alternative physical layer 

technologies—WiMedia Alliance’s MB-OFDM (also known as MBOA) and 

Freescale’s direct sequence UWB. In March 2006, Bluetooth SIG had chosen the 

WiMedia Alliance, promoted by more than 130 players, including HP, Intel, 

Microsoft, Nokia, and TI, as their version of UWB for its high data rate Bluetooth 

technology. In Oct 2007, WiMedia Alliance announced the first silicon products 

certified on its UWB common radio platform. There is now a clear path to 

developing a high-speed Bluetooth technology for mobile phones and other handheld 

devices, where a common software stack and appropriate profiles can be shared by 

two physical layers. IEEE finalized the UWB standards in December 2007. 

Zigbee 

This technology supports data rates of 250Kbps and has a range of about 20 to 30 

meters. Zigbee’s key advantage is its ultra-low power consumption, since the slave 

device only consumes power when it is called upon. Therefore, Zigbee is ideally 

suited for devices that require long battery life (i.e. two to three years) and are not 

time-critical or complex in routing. The Zigbee Alliance, which is promoted by 

Samsung, Motorola, Philips, Honeywell, Mitsubishi, Chipcon, Ember and Freescale 

Semiconductor, and supported by other industry leaders like Analog Devices, Cisco, 

Texas Instruments and STMicroelectronics, will likely test devices to achieve interoperability 

with Bluetooth and UWB. 

Table 33: Summary of wireless PAN technologies 

Bluetooth UWB Zigbee 

IEEE standard 802.15.1 802.15.3a 802.15.4 

Frequency used 2.4GHz 3.1-10GHz 2.4GHz, 915MHz, 868MHz 

Data rates 1 to 3 Mbps 110/220/480 Mbps – MBOA 

110Mbps – DS-CDMA 

250Kbps 

Range 100 meters 20 meters 20 to 30 meters 

Primary applications Mobile phones, headsets, 

handhelds, automotive and 

PCs 


Consumer devices and PCs Industrial control and home 

and building automation 

Vendor profiles 

As of now WiMedia Alliance certified 19 platforms, which include platforms from 

Artimi Inc, Lucid Port Technology, NEC Electronics and NXP Semiconductors. The 

Intel wireless UWB link 1480 Media Access Control (MAC) is based on the 

Wimedia MAC V1.0 standard. It can connect to any Wimedia PHY V1.1-compliant 

UWB Transceiver. According to Intel, this UWB solution connects to a mobile or 

desktop platform through the ubiquitous USB 2.0 port, providing an easy upgrade 

path from wired to wireless for end users. 

Staccato Communications and South Korea’s SK Telecom have unveiled their 

plans for the delivery of Ultra Wideband (UWB) wireless personal area network

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20 April 2009 

(WPAN) mobile phone services. In September 2008, Staccato Communications came 

out with their Wireless USB chip named Ripcord2. Ripcord 2 is a 65nm CMOS ICs 

based upon the WiMedia and Certified Wireless USB specifications. It supports 

PCIe, USB 2.0 Host, USB 2.0 Device, and SDIO 2.0 Device. 

NXP Semiconductor (formerly known as Philips Semiconductors) plays a key role 

in all three 802.15 technologies. The company is a leader in the Bluetooth market, 

shipping a baseband ASIC to Sony Ericsson mobile phones as well as Sony Ericsson, 

Nokia and Plantronics headsets. 

For UWB, NXP aligns itself in the MBOA camp and is developing UWB chipsets in 

partnership with General Atomics. In March 2007, NXP announced BGM220 as a 

full WLAN solution including baseband, MAC and RF functions, enabling both 

Bluetooth and WLAN connectivity. 

In June 2008 CSR came out with BlueCore7 which is one of the first chips to include 

the low-energy version of Bluetooth formerly known as WiBree. Texas Instruments 

(TI) is a growing supplier of Bluetooth silicon. The company, which has designs with 

Logitech and Taiyo Yuden, offers a single-chip 0.13-micron CMOS solution, which 

touts low power consumption. TI launched BL6450, a single chip solution for FM 

and Bluetooth. 

There are many other vendors such as Chipcon, Infineon, STMicroelectronics, 

Ember, Broadcom, which offer products based on one or more of these technologies. 

Table 34: Semiconductor suppliers for WPAN connectivity standards 

Bluetooth ZigBee UWB 

Cambridge Silicon Radio AMI Semiconductor Artimi 

NXP Semiconductors Atmel Alereon 

Broadcom BlueChip Infineon Technologies 

Infineon Chipcon Intel 

GCT Semiconductor Cypress Semiconductor Motorola/XtremeSpectrum 

Intel (Mobilian) Melexis Philips 

Microtune (Transilica) Micro Linear Staccato Communications 

National Semiconductor Motorola STMicroelectronics 

RF Micro Devices (Silicon Wave) Nanotron Technologies Texas Instruments 

Semtech Oki Electric Time Domain 

STMicroelectronics Philips Tzero Technologies 

Texas Instruments Renesas Technology WiQuest 

Terax Comm. Technologies 

Toshiba 

Zarlink 

Zeevo 

Source: Gartner Dataquest. 

Texas Instruments Wisair 

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Figure 31: Wireless networks based on coverage area 


66 

NFC 

and 

RFID 

Bluetooth, 

UWB, Zigbee 

(802.15) 

250 Kbps- 

480 Mbps 

WiFi 

(802.11) 

11-54 Mbps 

WiMAX 

(802.16) 

Broadband 

Max. 70 Mbps 

3G, WCDMA, 

GPRS, EDGE 

10s of Kbps- 

2 Mbps 

PAN LAN MAN WAN

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Wireless local area network (WLAN) or Wi-Fi 

In early 2003, amidst widespread gloom about the future of the tech sector, and 

prevailing opinion about the dearth of killer applications, we viewed WLAN as the 

next killer application to drive growth in the PC market. The sustained 13%-14% per 

annum growth of the PC market since then has surprised everyone, including us. 

Also known as Wi-Fi, the WLAN (802.11) standards are set by IEEE and the Wi-Fi 

Alliance, an industry group responsible for inter-operability testing. This technology 

has emerged as the dominant WLAN technology in homes and offices today. So far, 

three standards—802.11a, 802.11b and 802.11g—have been finalized and approved. 

802.11n is a proposed specification that will become a Wi-Fi standard once it is 

finalized by the IEEE, and the Wi-Fi Alliance completes its testing. 

Table 35: Wi-Fi standards 

Release 

Max link Backward 

Standard 

date Radio band rate/channel ) compatibility Peak range (ft) 

802.11 legacy 1997 2.4 GHz 2 Mbit/s None NA 

802.11a 1999 5 GHz 54 Mbit/s None 150 

802.11 legacy 

The first WLAN standard (802.11) only supported a maximum bandwidth of 2 

Mbps—too slow for most applications because of which ordinary 802.11 wireless 

products are no longer being manufactured. 

802.11a 

802.11a supports bandwidth up to 54 Mbps and signals in a regulated 5 GHz range. 

Compared with 802.11b, this higher frequency limits the range of 802.11a. The 

higher frequency also means 802.11a signals have more difficulty penetrating walls 

and other obstructions. Due to its higher cost, 802.11a predominately serves the 

business market rather than the home market. Because 802.11a and 802.11b utilize 

different frequencies, the two technologies are incompatible with each other. Some 

vendors offer hybrid 802.11a/b or 802.11a/g network gear, but these products simply 

implement the two standards, side by side. 

• Pros: Fast at maximum speed and supports more simultaneous users. Regulated 

frequencies prevent signal interference from other devices. 

• Cons: Shorter range signal that is more easily obstructed. 

802.11b 

The most popular implementation standard of WLAN, 802.11b operates in a 

frequency band of 2.4GHz and supports bandwidth up to 11 Mbps, comparable to 

traditional Ethernet. As it operates in an unregulated frequency range, 802.11b gear 

can incur interference from microwave ovens, cordless phones, and other appliances 

using the same range. Vendors often prefer using unregulated frequencies to lower 

their production costs. 

• Pros: Signal range is best and is not easily obstructed. 

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• Cons: Slow speed; supports fewer simultaneous users; appliances may interfere 

on the unregulated frequency band. 

802.11g 

802.11g attempts to combine the best of both 802.11a and 802.11b by supporting 

bandwidth up to 54 Mbps, and using the 2.4 GHz frequency for greater range. 

802.11g is backwards compatible with 802.11b, meaning that 802.11g access points 

will work with 802.11b wireless network adapters and vice versa. 

• Pros: Fast at maximum speed, supports more simultaneous users and signal range 

is the best and is not easily obstructed. 

• Cons: Appliances may interfere on the unregulated frequency. 

Wireless network adapters cost approximately the same for 802.11b and 802.11g. 

Dual-band adapters that work for 802.11 a/b/g are also available but at an 

appreciably higher cost. 

802.11n 

In January 2004, IEEE formed a new 802.11 Task Group to develop a new 

amendment to the 802.11 standard for local-area wireless networks. The real data 

throughput will be at least 100 Mbps and should be up to four to five times faster 

than 802.11a or 802.11g, and perhaps 20 times faster than 802.11b. It is projected 

that 802.11n will also offer a better operating distance than current networks. 

802.11n builds upon previous 802.11 standards by adding MIMO (multiple-input 

multiple-output). The additional transmitter and receiver antennas allow for increased 

data throughput through spatial multiplexing and increased range by exploiting the 

spatial diversity. 

There were two competing variants of the 802.11n standard: WWiSE (backed by 

companies including Broadcom, HP, Motorola, Nokia and TI) and TGn Sync 

(backed by Intel and Philips). In May 2005, TGn Sync, WWiSE and MITMOT (a 

third group promoted by Mitsubishi and Motorola, whose proposal had been rejected 

by IEEE in January 2005) merged to form a Joint Proposal Group. In September 

2005, the group presented two status reports regarding progress toward developing a 

merged proposal. In Jan 2009, the 7th draft of the standard was re-approved; 

however, the standard still is not finalized. 

Despite the standard not being finalized, we are seeing some products on the draft 

versions being sold in the market already. Apple Computers announced the release of 

its 802.11n products, Apple TV and Apple’s new AirPort Extreme base station in 

early 2007. Computers shipped to date with Intel Core 2 Duo chips could also be 

upgraded to support the new wireless standard through a firmware patch and an 

updated base station. 

802.11s (wireless mesh networks) 

Mesh networking is a way of routing of data, voice and instructions between nodes 

(devices that are part of a computer network). These mesh networks reduce the need 

for wired connections in wireless LANs by letting multiple access points carry each 

others’ traffic. A conventional WLAN access point needs its own wired link to a 

backbone network, whereas a wireless mesh can have just one wire for many access 

points. Traffic destined for the internet can hop from one access point to another until 

it reaches the wired connection. A newly added access point can be automatically

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configured for characteristics such as security and quality of service. Data routing 

decisions can take into consideration congestion and other factors and route around 

busy access points. 

The 802.11s task group was formed in July 2004 to define a standard, according to 

which wireless devices could form a dynamic wireless-mesh network. A wirelessmesh 

network could then be used to connect all the wireless devices within the 

network to provide data-transport services. 

There were two major industry groups with proposals for 802.11s. One was called 

the WiMesh Alliance (WiMA), composed of Accton, Nortel, NextHop, InterDigital, 

Mitre, Thomson, Philips and more. Another group, SEEMesh (Simple, Efficient and 

Extensible mesh) included Intel, Firetide, Nokia, Motorola, NTT DoCoMo and 

Texas Instruments. In March 2006, the two groups resolved their differences and 

moved forward with a joint proposal that should be voted in as the draft standard for 

802.11s, the IEEE mesh networking standard. 

802.11s is still in its early days. In June 2008 the 802.11s draft 2.0 had failed 

clearance as it received only 61% approval (75% approval required for clearance). 

Although a final standard is not yet out, three major functions have been defined: 

• Mesh point—capable of detecting neighboring nodes, establishing links and 

relaying traffic; 

• Mesh access point (AP)—the capability to receive and process local station 

traffic; and 

• Mesh portal—a mesh point that sits between a wireless-mesh network and an 

outside network, with some defined border functionality. 

The 802.11s, which will be entering a mesh market, has already been developed. 

Hence, companies have begun positioning themselves for the upgrade. Motorola is 

using MeshConnex networking technology in products such as MR 6300 mesh 

wireless router, Intelligent Access Point IAP 6300, Portable Wireless Router PWR 

6300 etc. 

As the mesh network uses the same standard as Wi-Fi, laptop computers or other 

handheld devices do not require new hardware or software to access the network. 

Also the network can be deployed in a wide area to provide mobile broadband as 

users can hop from one AP to another. Whether mesh connected or using wired 

backhaul, Wi-Fi networks provide a complimentary network to the wider area 3G 

and WiMAX networks already deployed–allowing carriers to offload data traffic in 

higher density areas while providing a better user experience. 

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Figure 32: Wireless LAN supply chain 

Source: Gartner Dataquest, J.P. Morgan. 

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IT distributors 

Ingram Micro, Tech Data, Compu Shack 

EMS 

Foxconn 

Flextronics 

Celestica 

Jabil 

Enterprise and consumer 

Retailers 

CompUSA, Best Buy, Dixons 

WLAN equipment 

Enterprise Vendor Consumer Vendor 

Cisco Systems D-Link Systems 

Aruba Networks Cisco (Linksys) 

Motorola Buffalo Technology 

3Com Netgear 

Nortel Networks SMC Networks 

Meru Networks Others 

Trapeze Networks 

HP ProCurve 

Alcatel 

Bluesocket 

Others 

ODMs 

Gemtek Technology 

Cyber Tan Technology 

Global Sun Technology 

Sercomm 

Z-Com 

HonHai 

USI 

Ausutek Computer 

Chipsets 

Primary vendors of wireless communications ASICs/ASSPs, 

Wireless LAN equipment 

Broadcom Marvell 

Atheros Agere Systems 

Intel TI 

Conexant RF Micro Devices 

Airgo Ralink

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The WLAN equipment market 

We estimate that the Enterprise WLAN—WLAN equipment sold to businesses, 

governments, universities, etc. as opposed to carriers (e.g., T-Mobile hot spots) or 

consumers (e.g., home Linksys routers)—industry revenue will be about US$1.4 

billion by 2009, a Y/Y decline of 12% mainly due to the weak macro environment, 

as we believe enterprise WLAN purchasing is highly dependent on a robust economy. 

However, in the longer term, we believe the enterprise WLAN market should remain 

relatively strong. 

Table 36: Enterprise WLAN market 


2002A 

Market size 

2003A 2004A 2005A 2006A 2007A 2008 2009E 

Dependent 0.0 31.0 132.2 300.0 796.7 1,087.1 1,309.6 1,258.8 

Independent 365.9 411.1 648.9 616.9 458.0 372.8 314.4 168.8 

Total 

Y/Y growth 

366 442 781 917 1255 1,460 1,624 1,428 

Dependent NA 326.9% 126.9% 165.6% 36.4% 20.5% -3.9% 

Independent 12.4% 57.8% -4.9% -25.8% -18.6% -15.7% -46.3% 

Total 

Market share 

20.8% 76.7% 17.4% 36.9% 16.4% 11.2% -12.1% 

Cisco 48.6% 56.1% 60.6% 60.9% 63.6% 62.7% 59.5% 55.6% 

Aruba NA NA 2.6% 4.9% 5.7% 9.8% 10.5% 10.8% 

Motorola * 8.2% 19.0% 14.4% 10.5% 7.9% 7.6% NA NA 

Others 43.2% 24.9% 23.4% 23.7% 22.8% 19.9% NA NA 

Source: Dell'Oro Group, J.P. Morgan. Note: * Motorola acquired Symbol Technologies. 

The wireless small office/home office (SOHO) market grew 8% in 2008 to US$ 2.6 

billion. We expect that due to the poor macro environment this segment will be hit 

harder than the enterprise segment and will fall 21% to nearly US$2.0 billion in 2009. 

Key companies in this market are D Link, Linksys (Cisco) and Buffalo Technology. 

Figure 33: SOHO WLAN market 

(mn US$) 

3,000 

2,500 

2,000 

1,500 

1,000 

500 

0 

Source: Dell'Oro Group, J.P. Morgan. 

2004A 2005A 2006A 2007A 2008A 2009E 

WLAN SOHO Market Size 

The following section is an excerpt from Ehud Gelblum's initiation of Aruba 

Networks, published on August 13, 2007. 

Dependent versus independent WLAN architectures 

There are two main classifications or architectural approaches to WLAN solutions: 

those that use: 1) independent access points; and 2) dependent access points. 

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• Independent access points: This approach uses “intelligent” or “fat” 

(because they cram a lot of functionality into a small access point) access 

points that do not require a separate controller switch, and are “smart” 

enough to operate independently of other access points. This approach 

limits the degree of centralized control an IT manager has as each access 

point needs to be configured and managed at its own physical location. This 

architecture can also be more expensive for large deployments as each 

access point is more complex and expensive than dependent access points. 

The independent approach is older than the dependent approach and is 

largely used only for small-to-medium businesses and other small-scale 

rollouts, and is a declining market segment. 

• Dependent access points: The newer of the two approaches uses “thin” 

access points that are “dependent” on a separate controller for most of their 

intelligence. The controller switch, which sits in a central location elsewhere 

in the network, is wired directly to each access point and allows for 

centralized and integrated control of the entire network while limiting the 

cost of large scale deployments as each access point is relatively low in 

price. 

How a dependent WLAN works 

A dependent WLAN network consists of both hardware—access points and 

controllers—and software—an operating system, amManagement system, and 

software modules. (Figure 34). 

Access points: These devices are placed throughout the office or campus and are 

akin to base stations in a cellular network or to the residential Wi-Fi access point that 

you might have in your home. The devices communicate wirelessly with end-users’ 

laptops, handhelds or other devices such as medical equipment or RFID tags, and are 

connected by wired means back to a controller or switch. An access point typically 

serves 5-15 users. 

Controllers/switches: These devices are connected via wires to both access points 

and to the enterprises “regular” wired network. They are thus the intermediaries 

between the wired and wireless networks and take users’ traffic back from the access 

points, while distributing data from the enterprise’s wired network to access points 

and thus to the end-user. 

Operating system: Similar to Microsoft Windows for PCs, this is the base software 

system that makes everything work. 

Management system: A centralized software program that allows an IT manager to 

control and configure the entire network down to each individual user. 

Software modules: These additional software modules may be added to provide e.g., 

enhanced security or VoIP capabilities.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 34: Dependent enterprise WLAN architecture 

Source: Aruba Networks. 

73

Bhavin Shah 

(852) 2800-8538 


Wireless Handsets ....................................................................... 75 

What’s new? ...................................................................................................................75 

Segment analysis ............................................................................................................77 

3G to be a big thing in 2009 ...........................................................................................82 

Handset technology trends ...................................................... 83 

GPS.................................................................................................................................83 

Mobile TV ......................................................................................................................85 

E-mail on mobile phones ................................................................................................86 

Smartphones.............................................................................. 89 

Mobile Internet: The next killer app? .............................................................................89 

Smartphone OS: The battle intensifies ...........................................................................91 

Apple 3G iPhone (Mac OS)............................................................................................92 

HTC G1-Google Phone/G2-Magic (Android) ................................................................95 

HTC Touch Diamond2 (Windows Mobile) .....................................................................97 

Nokia E-series (Symbian)...............................................................................................99 

Palm Pre (WebOS).......................................................................................................100 

Handset outsourcing............................................................... 101 

EMS/ODM/components ...............................................................................................101 

Factors affecting the supply chain ................................................................................103 

Handset supply chain.............................................................. 106 

Semiconductor bill of materials....................................................................................107 

Semiconductor components..........................................................................................107 

Semiconductor market size...........................................................................................111 

Non-semiconductor components ..................................................................................115 

Mobile handset radio technologies .......................................... 122 

What’s new? .................................................................................................................122 

Mobile radio technologies: An introduction .................................................................122 

HSPA (3G) ...................................................................................................................123 

3G to continue to grow as 4G is still some time away..................................................125 

Evolution of 4G ............................................................................................................125 

LTE (4G) ......................................................................................................................127 

WiMAX (4G) ...............................................................................................................128 

Voice over IP (VoIP) ................................................................... 132 

Consumer broadband, voice and video bundling tactics...............................................132 

VoIP for mobile telephony ...........................................................................................132 

VoIP Semiconductor market.........................................................................................134 

VoIP carrier equipment market.....................................................................................134 

Video conferencing.................................................................... 137 

Video conferencing system components ......................................................................137 

Types of video conferencing systems ...........................................................................138 

Telepresence .................................................................................................................139 

74 


20 April 2009 

Communications

Bhavin Shah 

(852) 2800-8538 


Charles Guo AC 

(852) 2800-8532 

charles.x.guo@jpmorgan.com 

Bhavin Shah 

(852) 2800-8538 


Alvin Kwock 

(852) 2800-8533 



Limited 


20 April 2009 

Wireless Handsets 

What’s new? 

Industry unit shipments to decline in 2009E, market share to be reshuffled 

We expect global handset shipments to decline by 15% in 2009 with developed and 

emerging markets seeing a 24% and 11% decline, respectively. We expect all 

geographies to experience a decline in 2009, even those such as Latin America, 

EEMEA, and India, which saw strong growth in 2008. Among vendors, Nokia 

should maintain its leadership position, but it could likely lose market share. 

Samsung and LG should gain market share, and Sony-Ericsson and Motorola should 

lose share, potentially becoming #4 and #5, respectively. Segment-wise, we believe 

smartphones will continue to grow amid the aggressive push by operators in data 

ARPU. 

Further acceleration in component sourcing from non-Japanese suppliers 

On the non-IC components side, Nokia continues to migrate its supply chain to 

Taiwanese/China vendors to achieve better cost structure and logistical convenience. 

On baseband, handset makers have been changing their sourcing strategy in recent 

years to become more flexible and yet avoid excessive supplier power. Mediatek has 

now penetrated Japanese vendors and is expanding its share within LG. 

Smartphones become the front stage of competition 

With the launch of 3G services, mobile Internet could be the new killer application 

that could drive the uptake of smartphones. Also, the battle in the 3G smartphones 

market is intensifying with the coming of Google phones based on the Android 

platform, launch of 3G iPhones, new Windows Mobile 6.5, and a new offering from 

Palm—the Palm Pre based on Web OS. 

New technology adoption slowing down in down-cycle, except for touchscreens 

Hardware components, industrial design, and form factor are no longer the center 

stage for competition, and the more cautious investment also appears to be slowing 

down technology innovation. Touchscreens remain the bright spot due to strong 

growth in smartphones. We expect a strong take-off in capacitive-type touchscreens 

versus the traditional resistive style. Haptic technology also continues to evolve and 

find an increasing attach rate in the newer touch-based smartphones. 

75

Bhavin Shah 

(852) 2800-8538 


76 


20 April 2009 

Table 37: Handset shipments by geography and Y/Y growth 

Global handset market 

We expect global handset shipments to decline by 15% in 2009 with developed and 

emerging markets seeing a 24% and 11% decline, respectively. We expect all 

geographies to experience a decline in 2009, even those such as Latin America, 

EEMEA, and India, which saw strong growth in 2008. In EM, new subscriber 

handset and replacement handset shipments will decline in 2009, in our view, due to 

the slowing of new subscriber adds and the impact of the global macro situation. 

China might be the only region that could see some respite due to the aggressive 3G 

push by operators and the rural subsidy program launched by the government, which 

would lead to a slight up-tick in our estimates. In developed countries, the sharp fall 

in the replacement rate should lead to an even weaker 2009E. 

Handset shipments grew at 10.2% in 2008, while known handset OEM revenue saw 

a growth of -4% in euro terms. Although 2008 started off at a good pace in the first 

half, the second half was materially below seasonality. 4Q08 shipments saw a 3% 

Q/Q decline versus a median growth of 16.5% (2001-2008) 

Millions of units 2006 2007 2008 2009E 2010E 

Units Y/Y Units Y/Y Units Y/Y Units Y/Y Units Y/Y 

North America 164 12% 176 7% 182 3% 146 -20% 151 4% 

Rest of APAC 85 24% 134 58% 150 12% 140 -7% 155 11% 

China 170 62% 226 33% 240 6% 223 -7% 252 13% 

Japan 47 11% 52 11% 41 -21% 32 -22% 31 -4% 

Korea 15 7% 16 6% 16 -3% 14 -13% 13 -4% 

India 68 82% 103 52% 158 53% 155 -2% 186 20% 

Total Asia Pac 386 44% 532 38% 605 14% 563 -7% 637 13% 

Western Europe 175 7% 191 9% 163 -15% 113 -31% 110 -2% 

Latin America 117 15% 126 8% 162 29% 135 -17% 144 7% 

E. Europe, Middle East, Africa 184 20% 216 17% 256 19% 210 -18% 246 17% 

Total 1027 23.00% 1241 20.90% 1368 10.20% 1167 -14.66% 1328 10.49% 

Total developed markets 401 9% 435 8% 402 -8% 305 -24% 306 0.4% 

Total developing markets 626 34% 806 29% 966 20% 862 -11% 984 14.1% 

Source: Company reports and J.P. Morgan estimates. 

Seasonality: When will it return? 

4Q08 was way below seasonal, as shown in Figure 35. Generally, the fourth quarter 

is typically the strongest quarter with nearly 19% average Q/Q growth. In 4Q08, 

however, shipments experienced a 3% decline. Given the prolonged weak macro 

environment, we forecast sub-seasonal 1H09 and take into account a marginal 

recovery by assuming normal seasonality (driven by a much lower base) in 2H09. 

While inventory has reduced to low levels, demand has weakened further and thus 

we do not expect a sharp recovery in the near term. The handset supply chain should 

be under significant pressure with declining unit shipments and ASP/margin pressure 

from handset OEMs.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 35: Q/Q shipment growth seasonality 

Shipment Growth (%) 

35% 

25% 

15% 

5% 

-5% 

-15% 

-25% 

Sub seasonal 1H09 

Normal recov ery in 

2H09 

1Q 2Q 3Q 4Q 

2003 2004 2005 2006 2007 2008 2009 2010 

Source: Company data, J.P. Morgan estimates (2009 and 2010). 

Segment analysis 

Top five handset OEMs to continue to lose share 

The aggregate market share of the top five global OEMs was 75.8% in 2007; it fell to 

70.4% in 2008, and this trend should continue in 2009 as white-box continues to 

erode market share. 

• Nokia: Nokia should maintain its dominant market position, especially in the 

low-end segment. The model refresh in late-2008 should lead to a strengthened 

market position for Nokia in 2009. 

• Motorola: We estimate that Motorola’s unit shipments will continue to shrink in 

2009 to nearly 60 million units, from 100 million units in 2008, 159 million 

units in 2007 and 217 million in 2006. Motorola plans to cut the number of 

model offerings and retreat from certain unprofitable geographies. This should 

place Motorola as the weakest (#5) among the major handset OEMs. 

• Sony-Ericsson: SEMC also experienced difficulties in 2008, and it should 

decline further in 2009 upon retreating from the entry-level segment. The 

potential break-up between Sony and Ericsson in this money-losing JV could 

bring further uncertainties. 

• Samsung and LG: These two Korean vendors showed respectable growth in 

2008 despite the difficult environment. Samsung also gained significant share in 

the challenging low-end segment. With the help of a weak Won, we expect 

Samsung and LG to be more resilient to soft demand and outperform the 

industry. 

77

Bhavin Shah 

(852) 2800-8538 


Figure 36: Tale of two segments—Smartphone vendors vs. top five OEMs 

mn € 

30,000 

78 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 

Top 5 vendors revenue (Euros) Smartphone vendors revenue (Euros) 

Smartphone vendors as %age of total revenue 

Source: Company reports, J.P. Morgan estimates. 

Figure 37: Blended top five vendors’ operating margins 

16.0% 

12.0% 

8.0% 

4.0% 

0.0% 

13.6% 

Q1-05A 

10.4% 

Q2-05A 

12.2% 

11.4% 12.1% 11.4% 11.9% 

Q3-05A 

Source: Company data. 

Q4-05A 

Q1-06A 

Q2-06A 

Q3-06A 

10.5% 9.9% 

Q4-06A 

1Q07A 

12.0% 

2Q07A 


20 April 2009 

13.5% 

3Q07A 

15.2% 

4Q07A 

13.3% 

1Q08A 

10.7% 10.7% 

2Q08A 

3Q08A 

20% 

18% 

16% 

14% 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

2.6% 

4Q08A 

mn € 

100,000 

90,000 

80,000 

70,000 

60,000 

50,000 

2004 2005 2006 2007 2008E 2009E 

Total handset revenues (Euros) Smartphone vendors as %age of total revenue 

Figure 38: Blended top five vendors’ ASPs 

$170 

$160 

$150 

$140 

$130 

$120 

$110 

158 

Q1-05A 

146 

Q2-05A 

142 

Q3-05A 


138 137 

Q4-05A 

141 

136 

128 130 129 

122 

126 126 125 124 

Smartphones’ healthy growth likely to continue 

The smartphones space is a more defensive segment due to the “killer application” in 

mobile broadband and a hefty subsidy by operators. Yet, operator subsidy budgets 

might be hurt amid the deceleration in data revenue growth. Moreover, consumers 

still need to pay some US$600 extra on a two-year total cost of ownership (TCO) 

basis, which could quickly become rather discretionary when confidence is hit hard, 

as is the case now. 

Smartphones have been growing at 40%+; yet, we believe the global recession will 

dampen consumers’ appetite and thus we forecast a slower 15%/40% unit growth for 

2009/2010. Back in 1999/2000, voice handset unit growth was 58%/51%, and over 

the past few years, data has been lagging voice trends for 10 years, so our estimates 

represent a very substantial discount to the trend growth of data. 

White-box to also see a decline, but should still outperform the industry 

We estimate white-box handsets have grown rapidly in the past three years, from 40 

million units in 2006 to 200 million in 2008. Growth drivers have been the emerging 

markets including China, Southeast Asia, India, the Middle East, and Africa. While 

white-box is not immune to the global slowdown, we expect the slowdown to be 

more moderate, as: (1) white-box is largely exposed to emerging markets, which 

should fare better than developed countries; (2) white-box offers more compelling 

cost/performance and differentiation vs. the top five vendors; and (3) white-box is 

Q1-06A 

Q2-06A 

Q3-06A 

Q4-06A 

1Q07A 

2Q07A 

3Q07A 

4Q07A 

1Q08A 

2Q08A 

3Q08A 

25% 

20% 

15% 

10% 

5% 

0% 

116 

4Q08A

Bhavin Shah 

(852) 2800-8538 


Figure 39: Vodafone own-brand 

phones 

Source: Vodafone. 


20 April 2009 

still penetrating the new emerging markets and gaining share. White-box has 

significantly outgrown the emerging markets in the past three years. 

Operator own-brands should also outperform 

Operator own-brand handsets have also been growing rapidly, as seen from the sharp 

rise in shipments by ZTE and Huawei. We expect growth to slow in 2009 yet still 

outpace the overall industry. Key growth drivers, in our view, are: 

1) Ultra low-end phones for emerging markets: This is a fast-growing segment 

that has not been addressed by top brands due to very thin margins and not 

enough volumes to justify the higher operating expenses involved. This 

provides an opportunity to ZTE and Huawei, which have leaner operating 

structures in handsets (no marketing expenses and cross-selling with 

equipment sales). 

2) Phones with tailored features: Recently, Hutchison formed a handset design 

company, INQ that launched the INQ1 model, which has dedicated 

Facebook and Skype features built in. Providing such highly specialized 

features should help Hutchison retain customers and increase data usage. 

Recent operator-branded phone launches 

Vodafone announced seven models (including three 3G models, two low-end GSM 

models, and two GSM “Catwalk” models with many color variations) during the 

MWC 2009. In particular, the Vodafone 835 is its first consumer 3G mobile phone 

with built-in GPS. The other two 3G phones and two models in the “Catwalk 

Collection” target the European market, not just the emerging markets. T-Mobile 

plans to launch its own-brand with Windows-based MDA device having similar 

capabilities. It announced a strategic partnership with ZTE, covering handsets and 

data cards for all its European markets. It also chose Huawei as the Android partner. 

The more aggressive own-brand plans by Vodafone and T-Mobile should benefit 

operator-brand ODMs such as ZTE, Huawei, and TCL-Alcatel. ZTE and Huawei are 

already big players in this area and have indicated big growth plans for 2009—ZTE 

and Huawei are looking for 30%-40% and 35% growth, respectively. The growing 

global market share and penetration into the 3G and low-end smartphones space 

should put pressure on the top global handset OEMs, especially the ones with high 

European operator exposure, i.e., Nokia, Sony-Ericsson, and Samsung. 

Figure 40: ZTE/Huawei/Alcatel handset shipments to operators (assuming 25% growth in 2009) 

Shipments in mn 

120 

100 

80 

60 

40 

20 

0 

1.9% 

6.2 


3.3% 

12.0 

4.6% 

27.6 

6.3% 

38.0 

9.2% 

2005 2006 2007 2008 2009E 

Alcatel ov erseas Huaw ei ZTE Operator combined Market share 

47.5 

10% 

8% 

6% 

4% 

2% 

0% 

Combined market share (%) 

79

Bhavin Shah 

(852) 2800-8538 


80 


20 April 2009 

The low and ultra-low cost segment 

The low-cost handset market has been the fastest growing in the past two years. The 

low affordability of the emerging markets coupled with the high economic growth 

seen in these markets has made this a major growth segment. 

The massive growth in this market has made Nokia and Samsung, which are exposed 

to this market, focus on new sourcing strategies for this market given that cost is a 

major consideration and not leading edge communication protocol capabilities 

implemented in the smallest silicon area. 

Cost reduction in the handset market 

Handset cost reduction is achieved through: (1) higher level of integration; (2) IC die 

size shrink; and (3) large scale and outsourcing. 

• Higher level of integration in IC and other components: GSM handset, which 

required six chips in the baseband in 1999, now can be implemented with three 

chips (Motofone and the Nokia 1110). TI’s Locosto and Infineon’s E-Gold are 

moving towards the single-chip solution. In acoustic components, multifunctional 

devices (which integrate the speaker, receiver, and even the vibrator) 

are increasingly being adopted. 

• IC die size shrink: Due to the Moore’s Law, Communications IC die size is 

shrinking fast (45nm process), leading to lower cost and power consumption. 

• Large scale and outsourcing: Nokia has aggressively adopted Asia-based 

suppliers to take advantage of the lower cost structure, for instance, utilizing 

BYD/FIH/Silitech for mechanical components, AAC for acoustic, and Largan 

for camera lens. 

Handset vendor market position and outsourcing strategy within ULC 

Scale is critical in the ULC segment, and thus vendors such as LG and Sony-Ericsson 

have not been able to penetrate this segment. 

Nokia has been the dominant player in ULC since 2006, leveraging its scale 

advantage. Its 1-series phones are well received among consumers for reliability and 

availability. BYD is the main EMS in this segment. 

Motorola engaged in a ULC market share war with Nokia in 2006 by using ODMs 

(Compal Comm). Motofone was an innovative product, yet it was not successful due 

to poor reception to E-Paper display. As Motorola fell fast in 2007 and 2008, it no 

longer has the necessary scale to compete effectively in this segment. 

Samsung is growing fast in this segment; it gained market share in 2008 with 

appealing phone style and willingness to customize for operators. We expect 

Samsung’s upward trend to continue in 2009. Samsung now sources mechanical 

components from FIH and BYD, but has kept assembly in-house. 

Besides the top-tier vendors, ZTE and Huawei also have ODMed mobile phones for 

operators, and many such models are in the ULC segment. 

Designer phones 

Designer phones are a new niche segment in the handset space, where “IT meets 

fashion”. Several leading fashion houses are teaming up with handset OEMs to

Bhavin Shah 

(852) 2800-8538 


Figure 41: Fashion handset industry model 

introduce designer handsets. While LG Prada and Samsung Armani phones are big 

hits, Acer’s teaming up with Ferrari and BMW’s and ASUS’ partnership with 

Lamborghini in recent years has made a good impact on branding. 

There are two different business models in this category: 

1. Fashion branded: The fashion house directly contacts a chipset 

manufacturer with its own design. The chipset vendor is typically a China 

design house such as Mediatek, which provides the key components, and 

the assembly is passed on to a manufacturing company. The phone, in the 

end, is branded and marketed by the fashion house itself. 

2. Co-branded: The fashion house contacts a handset vendor for 

manufacturing and assembly of handsets. 

In our view, it is logical for fashion brands to step into mature tech segments, where 

features become standardized and differentiation stems from industrial design and 

user interface. The volume of each of these models might not be big, but the 

proliferation effect should further expand the market share of white box brands at the 

expense of traditional brands. 

Christian Dior has announced its new “Fashion” phone. We believe it is using 

Mediatek’s baseband and circuit design, while a French phone maker, ModeLabs, is 

in charge of manufacturing. Unlike Samsung, Armani or LG Prada, Christian Dior is 

not using a co-brand business model and is rather on its own. We believe Levis, TAG 

Heuer, and Disney will also adopt a similar business model. 

Operator/fashion-branded phones are a secular trend. We think the business model 

makes sense as operation/fashion brands need limited investment. They can rely on 

Mediatek for silicon board design and EMS for manufacturing, and focus on their 

expertise—industrial design and distribution. Figure 41 shows the supply chain 

dynamics in tier-1 brand vs. operator/fashion-branded phones. Our view is that the 

latter actually comes with an even shorter supply chain, but with more focus on what 

each player is good at. 

Phone design Chipset provider System integration Manufacturing Brand Distribution 

Tier 1 brands Nokia, Motorola, etc (5) TI, BRCM, QCOM (5-10) Compal Comm, FIH, Flextronics, etc (10) Nokia, Motorola, etc (5) Operator, Distributor (10+) 

Fashion brand Christian Dior, Levis, TAG Heuer, etc Mediatek (1) 

ModeLabs (1) 

Co-brand 



20 April 2009 

Christian Dior, Levis, TAG Heuer, etc 

Armani, Prada, D&G etc TI, BRCM, QCOM (5-10) Compal Comm, FIH, Flextronics, etc (10) Co-brand (e.g., LG Prada) Operator, Distributor (10+) 

81

Bhavin Shah 

(852) 2800-8538 


Figure 42: Fashion phones—Christian Dior, Samsung Armani, Tag Heuer, and LG Prada 

Source: endgadget.com, GSMArena.com, company websites. 

82 


20 April 2009 

3G to be a big thing in 2009 

We think that the 3G market will continue to grow at a fast pace in 2009. According 

to Gartner, 3G handset sales will grow 36% in 2009, much higher than our estimate 

of a 15% decline in the total handset market. We base this argument on three key 

points: 

• Emerging economies: With emerging economies finally putting in place their 

3G policy, we expect 3G to get a big boost in 2009. While China has already 

started its 3G network roll-out, India should soon follow suit. 

• 3G handsets are becoming cheaper: 3G handsets are becoming cheaper as 

costs are coming down (technology matures and sales increase) and operators 

are increasing their subsidy budget for 3G handsets. 

• Higher handset penetration: Increasingly more number of handsets that 

support 3G is being launched. Now, a majority of smartphones have 3G built 

into them. 

Please refer to the Wireless Handset Radio Technologies section for a detailed 

discussion on 3G/4G technologies.

Bhavin Shah 

(852) 2800-8538 


Figure 43: Garmin Nuvifone 

Source: www.garminasus.com. 


20 April 2009 

Handset technology trends 

Of the two much-touted technologies, GPS and Mobile TV, GPS continues to be 

driven by government regulations (E911 mandate), while Mobile TV has failed to 

take off as expected. We think that with the launch of 3G services, mobile Internet 

could be the new killer application that could drive the uptake of smartphones. The 

battle in 3G smartphones is intensifying with the coming of Google phones based on 

the Android platform, new Windows Mobile, a new offering from Palm, and Nokia 

finally stepping into the smartphones market seriously. 

GPS 

Assisted-GPS 

Hybrid systems known as Assisted-GPS (A-GPS), comprising both cellular networks 

and GPS, were developed to overcome the limitations of each individual system and 

provide the most effective solution for location determination. A-GPS handsets can 

either consist of a simplified and less expensive GPS receiver or a full 

implementation of GPS, which work in conjunction with cellular network servers to 

provide location information. Through A-GPS systems, the TTFF is brought down to 

seconds. 

The two types of A-GPS systems are: 

• Mobile station assisted: In these systems, the position is determined by the 

mobile operator’s location server. This data is provided to the network for 

emergency or tracking services. 

• Mobile station based: In these systems, the mobile device calculates its position 

after it receives the satellite data from the location server. This result is provided 

to the mobile user for services such as turn-by-turn directions or local search. 

GPS market 

The GPS market is dominated by standalone portable navigation devices from small 

vendors such as TomTom, Garmin, Mio, Magellan and Lowrance. The high growth 

market has attracted consumer electronics and automotive players such as Sony, 

Philips, Delphi, Panasonic, and Pioneer. 

The Personal Navigation Device (PND) vendors are likely to face increasing pressure 

as more mobile phones offer GPS functionality. However, a few vendors have 

established partnerships to adapt to the changing market. Garmin, which also 

develops its own navigation application, has entered into a partnership with Sprint 

Nextel, through which its application, Garmin Mobile 4.0, is available on GPSenabled 

handsets. Garmin, through its partnership with Acer, is also trying to enter 

the handset space with the Nuvifone. 

Given the government mandates, there is likely to be an accelerated uptake of this 

technology in mobile handsets. The E911 (Enhanced 911) regulation mandates that 

every phone must be geographically locatable so that the most appropriate public 

safety point can be contacted. A similar advisory has come up in the EU, namely 

E112, which is, however, not a mandatory regulation. 

83

Bhavin Shah 

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84 


20 April 2009 

GPS market ecosystem 

The emerging handset GPS market comprises chip vendors, providers of maps and 

location information, geospatial platform providers, handset vendors, and mobile 

operators. (Please refer to the 5th Edition of our Supply Chain Guide for a more 

detailed discussion.) 

Figure 44: GPS ecosystem for mobiles 

Mobile Operators 

Sprint Nextel 

Verizon 

AT&T 

GPS Mobile phone vendors 

Motorola 

Nokia 

RIM 

HTC 

Garmin (Nuvifone) 

Pharos 

Chipset Providers Digital Map Providers Platform Providers 

CSR Nokia (Navteq) Network in Motion 

Broadcom Tom Tom (TeleAtlas) TeleNav 

NemeriX Google Trimble Outdoors 

Qualcomm Microsoft 

SiRF 

Texas Instruments 

u-blox 

Mediatek 


Chipset vendors 

Semiconductor solutions for GPS technology come as complete solutions in the form 

of a chipset with one, two or three chips. Successful solutions are the ones that offer 

low chipset prices, a small footprint in circuit boards, low power consumption and 

good signal connectivity. The semiconductor cost of integrating GPS or A-GPS 

modules to a handset was about US$2 in 2008. According to Gartner, this cost is 

expected to fall to US$1.45 by 2010. 

Digital map providers 

The demand for digital map information has been growing with the increased 

adoption of PNDs and the emerging GPS-enabled handset market. The competitive 

landscape continues to change as TomTom announced the acquisition of Tele Atlas 

in November 2007 and Nokia announced the acquisition of Navteq in October 2007. 

With the launch of Google’s GeoEye1 satellite in September 2008, which provides 

high quality color satellite images, Google might start getting its own mapping data, 

thus leading to the possibility of a new competitor in this space. 

Google’s mobile mapping service 

Google has introduced a mapping service called “My Location”. My Location 

software uses Google maps and cell phone towers to provide this service. Users 

simply type the number “0” on their phone to move the map to their approximate

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

location. Google is offering the service for free, and is expected to eventually 

introduce local advertising that takes advantage of the location-aware service. The 

“My Location” service is independent of carriers. 

Future outlook 

Although GPS has secured a firm hold in the standalone and embedded market for 

the automotive segment, this functionality is expected to become a major trend in the 

mobile handset market. 

Falling cost of semiconductors in GPS systems and government regulations should 

continue to drive GPS adoption in mobile phones. With the launch of these phones 

with larger screen size and cleaner displays, GPS might become a welcome 

application. However, although the semiconductor integration cost of these modules 

is falling, the cost of implementation is a problem. The navigation technology has an 

adverse effect on the battery life, and with the current trend towards ultra-thin 

handsets, space is a major constraint. The high tariffs charged for location-based 

services by the operators might also slow down the market. Gartner predicts that 

GPS penetration in mobile phones was 18.2% in 2008 and it should reach 43.3% in 

2011. 

Figure 45: Penetration of GPS or A-GPS-enabled mobile phones in mobile handsets (2005-2011) 

50% 

40% 

30% 

20% 

10% 

0% 

11% 11% 


Mobile TV 

14% 

19% 

2005 2006 2007 2008 2009 2010 2011 

26% 

Penetration of GPS and A-GPS in mobile handsets 

Mobile television services—delivered over cellular networks to handheld wireless 

terminals—offer great potential as revenue generators for players across the value 

chain (e.g., network operators, broadcasters/content providers, and equipment 

manufacturers). The big drivers of mobile TV services are major sports events such 

as the World Cup or Olympics, together with other services such as updates on news, 

weather, etc. The TV is one of the biggest media and perhaps the last one to be 

missing from mobiles. Mobile digital TV (DTV) appears to be in position to be a 

significant demand driver for the next generation of wireless handsets as consumers 

look for convergence in communications and entertainment on a single device. 

There are three primary open standards developed by industry associations (DVB-H, 

ISDB-T and DMB), and some proprietary standards such as Qualcomm’s 

MediaFLO (developed in the US). Others such as China’s homegrown standards 

like China Mobile Multimedia Broadcasting (CMMB) are still in nascent stages. As 

of January 20 2009, CMMB signals were available in 150 cities in China. However, 

the service had been commercially launched by China Telecom in only Changsha 

34% 

43% 

85

Bhavin Shah 

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Table 38: DTV handset standards 

86 


20 April 2009 

city. Siano, Mediatek, Innofidei and Spreadtrum are some of the leading 

semiconductor providers for CMMB. 

Mobile TV has seen some success in Japan and Korea, which have fast mobile 

connections and dense population, yet it has failed to take off in other regions due to 

high cost, poor bandwidth, and limited content. With Europe now proposing tax on 

mobile phones with TV features, we believe this feature will further be suppressed in 

the near term. However, with the coming of LTE and 4G technologies, we might see 

better uptake of this technology as better bandwidth and content could be provided. 

Please refer to the 5th edition of our supply chain guide for a more detailed 

discussion. 

DVB-H MediaFLO ISDB-T DMBX 3G/ HSDPA 

Standard Open Proprietary Open Open Open 

Regions US, Europe, parts of US Japan Korea; expanding to Worldwide 

Asia 

other countries 

Frequency/ 

Max channel bps 

8 MHz/31 Mbps 6 MHz/23 Mbps 6 MHz/9.2 Mbps Max 14 Mbps. 

Air interface OFDM OFDM OFDM (sub-banded) OFDM 

Codec video/audio MPEG4 / H.264 / 

MPEG-2 (H.264)/ H.264/ 

MPEG-2 (BC) 

MPEG-2 (AAC) 

MPEG4 (BASC) 

Service availability Mid-2005, open 

2006 (locally through Early 2006 Available Available; expanding 

spectrum available in US analog TV channels) 

roll-out 

Handset availability Available from several 2006 2006 Available from several Available from several 

OEMs 

OEMs 

vendors 

Optimized power reduction 

for handset 

Time slicing Mobiles use 1 seg. only None 

Source: Texas Instruments, J.P. Morgan. 

E-mail on mobile phones 

People worldwide are using mobile phones to access their e-mails. Currently, Ezome, 

Consilient, Ericsson Mobile organizer (EMO), and Outlook Web Access (if the 

server allows) are some of the available push e-mail service providers. BlackBerry, 

the wireless handheld introduced by ‘Research in Motion’ (RIM), is another option. 

Introduced in 1999, it supports push e-mail, mobile telephony, text messaging, web 

browsing and other wireless information services. The BlackBerry primarily sends 

and receives e-mail anywhere as it has access to an appropriate wireless network. 

Push e-mail 

There are two ways to transfer the data—client-pull and server-push via handsets or 

computers. In client-pull, the server transfers data after receiving signals sent out 

from the client side. In server-push, however, the servers are the initiators. Once the 

settings are specified, the server will ‘push’ data to the client automatically. The 

major service providers include BlackBerry and Microsoft. 

BlackBerry (RIM) 

BlackBerry is a wireless solution, enabling users to stay online for e-mails, Internet, 

corporate data, organizer features, etc. A BlackBerry device, BlackBerry technology 

built-in device, or BlackBerry Connect Device is necessary for the application. A 

back-end server passes on data received from application servers and databases to 

wireless network providers, which then deliver the information to end users’ 

BlackBerry devices. RIM’s revenue comes from the back-end server, e.g.,

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Figure 46: Architecture of BlackBerry 

Blackberry back-end 

server” cost + 

licensing fee per 

subscriber 

Source: Blackberry, J.P. Morgan. 


20 April 2009 

BlackBerry Enterprise Server (BES), and the licensing fee per subscriber from the 

wireless network operators. It does not charge any software license fees to handset 

manufacturers, such as Nokia, Motorola, Samsung, HTC, etc. In Figure 46, the red 

circle highlights BlackBerry’s back-end server, BES. The existence of BES is the 

reason for RIM charging more than a licensing fee. 

Operators pay RIM 

on a monthly basis 

for each subscriber 

Apple iPhones 

iPhones retrieve e-mails from service providers at regular intervals and hence can be 

classified as a client-pull system. The application can pull e-mails from most of the 

standard POP3 and IMAP e-mail systems including popular ones such as Yahoo! 

Mail, Gmail, AOL and MAC Mail. iPhones can also be configured to synchronize 

with e-mail accounts stored in Mail on a Mac or Outlook on a PC. 

Microsoft Direct Push 

In a bid to compete with the ubiquitous BlackBerry, Microsoft rolled out its first true 

push e-mail service with announcements at the 3GSM wireless trade show in 

February 2006. The Direct Push runs on Windows Mobile 5.0 and 6.0 devices for 

customers with Microsoft Exchange 2003 SP2 servers. The Direct Push technology 

means that Exchange Server sends Outlook messaging directly to the mobile device 

over the air (OTA) through a wireless account. Like a desktop computer or laptop, 

smartphones can offer quick e-mail flow and easy access to the calendar and tasks. 

AT&T, T-Mobile, and Palm are some of the providers offering e-mail services using 

Microsoft Direct Push. 

Table 39: Differences between requirements for BlackBerry and Microsoft 

BlackBerry Microsoft 

Back-end server � 

Operating system � � 

Wireless internet connection � � 

Exclusive devices 


� 

87

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88 


20 April 2009 

Push Gmail 

Gmail has introduced its Push Gmail service, which is free of cost. The service 

comes on Android-based phones by default. The application supports many 

functionalities of the web-based Gmail, such as threading, search and Google Talk 

Presence. However, the push Gmail that is available for other OS-based handsets is 

still IMAP-based and is not true Push Email. 

Figure 47: Flow diagram of Microsoft Direct Push 


Handheld issues HTTP request to 

Exchange Server specifying folders to be 

monitored (e.g. email, calendar, contacts, 

tasks) 

Echange monitors folders until time limit 

expires or a change occurs 

Echange notifies in which folders with 

changes occurred (empty response if 

there are no changes) 

Changes occurred? 

Yes 

Hanheld issues synchronization request 

against the folders in the notification 

from Exchange 

Progress tracker 

E-mail on mobile has been a huge hit among the business class population. Also, 

with 3G technologies allowing for higher speed, penetration of mobile e-mail 

services should continue to rise. This trend can also be seen from the sharp growth in 

the smartphone segment, which, we believe, will be the only segment to see growth, 

even in this downturn. 

According to Gartner, mobile e-mail users will rise to 584 million in 2012, from 320 

million in 2008, showing a CAGR of 16%. 

Table 40: Mobile e-mail users by region 

Millions 

2007 2008 2009 2010 2011 2012 

CAGR, 

2008-2012 

Asia/Pacific 122.2 143.6 166.0 192.1 219.7 249.6 14.8% 

Europe 88.0 99.6 110.1 121.2 133.4 150.4 10.8% 

Americas 42.9 66.7 88.9 111.4 133.3 155.0 23.5% 

Middle East and Africa 7.8 10.1 13.3 18.1 23.2 28.7 29.8% 

Total 

Source: Gartner (October 2008). 

260.9 320.1 378.4 442.7 509.6 583.7 16.2% 

No

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20 April 2009 

Smartphones 

Mobile Internet: The next killer app? 

Mobile broadband ecosystem coming together 

We view mobile internet as a “killer application” that could drive mass popularity of 

smartphones, which have only penetrated

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90 


20 April 2009 

Mobile Internet adoption should accelerate with the introduction of better phones 

and technologies 

3G networks perform up to 6x faster than prior mobile Internet networks, which we 

think will greatly improve the user experience and make it more comparable to that 

on a PC. Additionally, new phones such as iPhones have improved the size and 

resolution of the screens. As a result, we think mobile Internet users will grow at a 

37% CAGR over the next three years. 

Figure 49: Mobile Internet user projections in the US 

300 

250 

200 

150 

100 

50 

0 

2005 2006 2007 2008E 2009E 2010E 

Source: CTIA, Nielsen, J.P. Morgan estimates. 

Subscriber Activ e Mobile Internet Users

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Figure 50: Shifting operating system strategies by brand 

Shifting Strategies 

Entrenched 

Sony Ericsson 

LG 

HTC 

Samsung 

Palm 

Nokia 

RIM 

Apple 


Palm WebOS 


20 April 2009 

Smartphone OS: The battle intensifies 

The Smartphone OS market is dominated by proprietary OS such as BlackBerry, 

Mac OS and, more recently, Palm’s Web OS, which are made by the handset vendors 

themselves and third-party OS such as Android, Symbian, and Windows Mobile and 

Linux-based OSes. 

The theme of the GSMA Mobile World Congress-2009 was a battle of operating 

systems, setting the stage for 2009 as the year of platform wars. With the launch of 

Google’s Android and anticipation of the launch of Palm Pre, the competition was 

clearly on the defensive. Microsoft and Nokia, in particular, were awash with new 

products and alliances as they attempted to steal some thunder from Android and 

WebOS. Driven by Apple’s app store success, Microsoft and Nokia launched their 

own version of app store, following RIM’s app store announcement in October 2008. 

Even LiMo appears to be getting into the fray with handset makers and operators, 

reaffirming commitments to the platform. 

Windows 

Mobile 6.5 

Android Symbian LiMo Blackberry 

Apple iPhone 

MacOS 

The competitive landscape for smartphones is beginning to get crowded, with new 

entrants flooding the market with a range of options. While commoditization of 

smartphones might not be happening yet, intense competition in 2009 should lead to 

some interesting trends. 

91

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Figure 51: Comparison of leading smartphone OS 

92 

Evaluation criteria 

Windows 

Mobile 6.5 

Android 

Symbian 

Foundation 

Apple Blackberry Palm WebOS 

Launch date Sep 2009 Oct 2008 1H 2009 Jun 2007 1999 1H 2009 

Open source No Yes Yes No No No 

Cost $15 for Pro Free Free n/a n/a n/a 

Baseband 

support 

Touch screen 

Finger friendly capactive vs. 

pressure sensitive resisitive 

~5 1 ~10 n/a n/a n/a 

Primarily 

resistive 

Primarily 

capacitive 

Primarily 

resistive 

Capacitive 

Capacitive 

(Storm) 

Multitouch No Hackable No Yes Limited (Storm) Yes 

Web 

experience 

Email 

Instant 

Messaging 

Number of 3rd 

party apps 

Developer 

friendliness 

Full-page rendering, Flash, touch-friendly Mediocre Best Good Better Mediocre Best 

Enterprise support, bandwidth efficiency, security, 

advanced search/filtering, on-device email storage 

Support for background IM process, multiple IM 

platforms 

Capacitive 

Good Better Good Better Best Better 

Good Good Good Mediocre Good Good 

Average # apps for top selling current models ~5,000 ~1,000 ~2,000 ~15,000 ~2,000 ~3,000* 

Programming learning curve, app store, developer 

fee structure, community support, platform flexibility 

Good Best Mediocre Better Good Best 

Desktop sync Ability to sync not over-the-air Yes ? Yes Yes Yes Yes 

User segment � Enterprise - SME - Consumer � 


20 April 2009 

Best practice 

*Apps available for Palm Centro used as proxy for webOS. 

Source: Wikipedia, Apple, Google. Handango used to gauge typical # apps for top models for WinMo, Symbian, RIM, and Palm. 

OS available to third parties OS not for sale 

Apple 3G iPhone (Mac OS) 

Apple launched the much-expected 3G iPhone at its Worldwide Developer 

Conference (WWDC) in San Francisco in June 2008. Subsequently, in March 2008, 

it announced the iPhone OS 3.0, in which it has added several widely-anticipated 

capabilities to its software such as easy-to-use cut, copy and paste, messaging, and 

enhanced search. These enhancements are important, particularly as Apple prepares 

to battle with increasing competition in smartphones from the likes of Palm Pre and 

the BlackBerry family. 

The Apple iPhone’s first coming had clearly surpassed expectations in terms of 

design and functionality. With innovative user interface and I/O, strong OS and 

iTunes support, we believe that Apple has been able to make significant inroads into 

the smartphone market with this innovative product. 

The iPhone’s second coming is a much improved phone, which builds on its 

predecessors strengths and does away with its major weaknesses. The increased data 

transfer rates of 3G and use of quad-band GSM and tri-band HSDPA have led to a

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Figure 52: Apple continues to 

innovate on iPhone design 

Source: Apple. 

Table 43: Apple iPhone’s tech 

specs 

Screen Size 3.5 inches 

Resolution 480 x 320 at 163 pixel 

per inch 

Input Method Multi-touch touch 

screen 

Operating System Os X 

Storage 8GB/16GB 

Wireless standard GSM Quad Band 

(MHz: 850, 900, 1800, 

1900) 

Wireless data HSDPA, Wi-Fi (802.11 

b/g), EDGE, Bluetooth 

Camera 2 Megapixel 

Battery 5 hr talk time/ 7hr 

video/ 24 hr audio 

Dimensions 115 x 62 x 12 mm 

Weight 133 gm 

Source: Apple. 


20 April 2009 

much larger target audience. The new phone also includes GPS location 

functionality, and the new app store facilitates increasing use of end-user applications 

and web services beyond calls and e-mail on phone, which we think could increase 

Apple’s stickiness over time. Apple has come out with an improved SDK, allowing 

programmers to make fuller and better use of the hardware capability. Using the new 

SDK and the accelerometer iPhone could pose a threat to the handheld gaming 

consoles (please refer to the game consoles section for more discussion). 

Wider international presence 

Previously, the first generation iPhone was available in just six countries, including 

the US and parts of Western Europe. However, the 3G launch has increased Apple’s 

reach to 80 countries. The far-reaching scope of the new iPhone brings the 

company’s handset business more in line with competition. 

Table 42: Company exposure to Apple’s iPhone 

Company Component or Service Sales exposure 

Unimicron PCB

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Table 45: Apple vs. HTC operator penetration 

94 


20 April 2009 

one device/operating system and making sure it works for other models and so on. 

This simplicity of the business model is quite powerful. 

Lack of flexibility on hardware specifications 

Glancing through the product reviews, we note a few common critiques on Apple’s 

iPhone: (1) no physical QWERTY keypad; (2) lack of stereo Bluetooth and video 

recording; (3) poor camera quality; and (4) poor 3G signal reception in certain 

countries. 

While we still view Apple’s iPhone as one of the best phones in the market, these 

issues might prompt some mobile users to go for other phones. Can Apple fix all 

these hardware specifications? Theoretically, it could, but based on its track record in 

iPod and Macbook, we note that it usually makes major hardware changes only once 

a year at best. Apple is also scrupulous about sticking with certain concepts 

for e.g., “button-less” has been one usual controversy for earlier products such as PC 

mouse, but Apple was still stuck to this concept until 2003. Refusal to offer a keypad 

option like other handset brands might prompt some users to go for other brands. 

Table 44: Apple—iPod family launch dates 

Model 1G launch Refresh model launch 

Classic Oct 2001 Jul 2002, Apr 2003, Jul 2004, Oct 2004, Oct 2005, Sep 2007, Sep 2008 

Mini/ Nano Jan 2004 Feb 2005, Sep 2005, Sep 2006, Sep 2007, Sep 2008 

Shuffle Jan 2005 Sep 2006 

Touch Sep 2007 Sep 2008 

Source: Company reports. 

We like iPhones, but several issues leave plenty of market share on the table 

Still single-operator strategy for many key countries for high-end phones 

Among the six countries with the largest subscriber base in the US and Western 

Europe, Apple is still adopting a single strategy among five of them, with Italy the 

only exception. Apple signed an exclusive revenue sharing scheme with operators in 

the US, the UK, France and Germany in 2007, which might have impeded it from 

rolling out a multi-operator strategy to these countries in the medium term. 

In Table 45, we outline the four leading developed North American and European 

countries, where 3G iPhone is still available with a single operator. Despite the fact 

that the operator is the leading one in the country, iPhone ends up targeting only a 

smaller portion of the customer base. 

US Mkt share iPhone HTC France Mkt share iPhone HTC 

AT&T Wireless 28% √ √ Orange 46% √ √ 

Verizon Wireless 26% √ SFR 36% √ 

Sprint 19% √ Bouygues Telecom 17% √ 

T-Mobile 11% √ Digicel 1% 

Alltel 5% Outremer Telecom 0% 

Others 10% 

UK Mkt share iPhone HTC Germany Mkt share iPhone HTC 

O2 25% √ √ T-Mobile 37% √ √ 

Vodafone 25% √ Vodafone 35% √ 

T-Mobile 23% √ E-Plus 15% √ 

Orange 21% √ O2 13% √ 

3 UK 

Source: Company data, J.P. Morgan. 

5%

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Figure 53: G1 

Source: HTC. 

Table 46: G1 vs. iPhone 

HTC G1-Google Phone/G2-Magic (Android) 

G1-Google Phone 

G1 is the first phone powered by Google Android OS, also known as “HTC Dream”. 

The phone is branded by Google, manufactured by HTC and is sold by T-Mobile, but 

the exclusivity contract will end soon. 

Following the hype surrounding iPhone, almost every handset company has been 

trying to come up with an iPhone look-alike. However, Apple appears to have a clear 

lead in multi-touch technology, and with the limitations of other operating systems, 

we think no other phone has been able to recreate the “magic” of multi-touch, not 

even HTC’s Diamond. The presence of a physical keyboard makes the device bulkier 

than iPhone. However, Google and HTC must think that serious mobile Internet 

users may be willing to accept a not-so-sleek device if they can get the mobile 

Internet experience in exchange. In fact, Google described this device as “Geek’s 

Dream” because of the flexibility of programming. 

G2-Magic 

Vodafone and HTC announced the Android-based Magic in February 2009 at the 

MWC. Specs-wise, the Magic is mostly the same as T-Mobile’s G1 with main 

differences being the lack of a physical keyboard and a more stylish design. A more 

detailed comparison with HTC’s new offering is shown Figure 54. The Magic will be 

exclusive to Vodafone in the UK, Spain, Germany, and France; on a non-exclusive 

basis in Italy; and will be launched around 2Q09. It will also be available for 

distributors; which is not the case with the HTC Dream. 

G1 vs. iPhone 

Pros Cons 

Navigation G1's spacious keyboard makes typing quicker and more accurate Lack of multi-touch feature makes it less natural to operate 

Dedicated keys such as a Google search button make accessing G1 is bulkier and heavier than iPhone 

frequently used applications easier 

Copy and paste functionality (e.g. URLs) unlike iPhone 

Trackball helps to pinpoint to links much more easily 

Operating System Open platform - Android's source code in public domain 

Battery Removable 

Storage Memory is swappable via microSD Only 1GB is included with the phone; additional microSD card must be 

purchased for more storage. Will not accept larger than 8GB cards, less 

capacity than the highest iPhone model (16GB) 

Syncing Syncing conducted over the air, no need for desktop sync like iTunes 

(except for downloaded music) 

Messaging Push Gmail No native Exchange server connectivity, but potentially introduced as a 

3rd party app 

MMS built in 

Location services Google Maps include StreetView (real first-person perspective view of 

location) and Compass Mode (live updating like Garmin or TomTom, but 

using real images from StreetView) 

Multimedia Music purchases from Amazon cheaper than iTunes ($0.89/track vs. 

$0.99/track) 



20 April 2009 

iTunes more extensive (8 million songs vs. 6 million on Amazon) and 

expansive (podcasts, movies, videos, TV shows), with a large 

entrenched user base. However, G1 supports iTunes AAC format 

Android: Google’s mobile platform 

In November 2007, Google announced its mobile phone platform, “Android”. The 

company originally worked with 34 companies including T-Mobile, HTC, 

Qualcomm, Motorola, and NVIDIA on the development of Android through the 

Open Handset Alliance (OHA), a multinational alliance of technology and mobile 

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Table 47: Open Handset Alliance members 

96 

industry leaders. However, in December 2008, 14 new members joined the alliance 

and signalled their support for the platform. New members include Arm, Asustek, 

Ericsson, Toshiba and Vodafone. Some of the leading handset vendors such as 

Nokia, Apple, and RIMM, and network providers, Verizon Wireless and AT&T 

Wireless, are still not part of the alliance. 

User interface/software customization for operators 

Google has decided to address distribution difficulties head on with the creation of 

the Open Handset Alliance, composed of leading technology and wireless companies 

committed to the development of an open platform for mobile devices. The Android 

platform is a fully integrated mobile “software stack” comprising an operating 

system, middleware, user-friendly interface, and applications. With its open source 

code, Google Android encourages mobile carriers on Open Handset Alliance (OHA) 

to customize their own applications and features. T-Mobile and Telefonica are setting 

up their own application stores, while AT&T (which is the sole carrier for iPhone in 

the US) indicated that it is considering using a customized build of Android on some 

phones. 

Operators China Mobile, KDDI, NTT DoCoMo, Sprint Nextel, Softbank Mobile, T-Mobile, 

Teleca, Telecom Italia, Telefonica, Vodafone 

Semiconductor AKM Semiconductor, Arm, Atheros Communication, Audience, Broadcom, 

Ericsson, Intel, Marvell, nVIDIA, Qualcomm, SiRF, Synaptics, TI, Toshiba 

Handset manufacturers Asustek, Garmin, HTC, Huawei, Samsung, Sony Ericsson, LG, Motorola 

Software Ascender, Borqs, eBay, Esmertec, Google, LivingImage, LiverWire Mobile, Nuance 

Communications, Omron Software, PacketVideo, SkyPop, SoniVOX 

Commercialization cos Aplix, Noser, TAT, Wind River 

Source: Google. 

Table 48: Features of the Platform 


20 April 2009 

Features Comments 

Application framework enables reuse and replacement of components 

Dalvik virtual machine optimized for mobile devices 

Integrated browser based on the open source WebKit engine 

Optimized graphics powered by a custom 2D graphics library; 3D graphics based on the OpenGL ES 1.0 specification (hardware acceleration optional) 

SQLite for structured data storage 

Media support for common audio, video, and still image formats (MPEG4, H.264, MP3, AAC, AMR, JPG, PNG, GIF) 

GSM Telephony hardware dependent 

Bluetooth, EDGE, 3G, and Wi-Fi hardware dependent 

Camera, GPS, compass, and 

accelerometer 

hardware dependent 

Rich development environment 

Source: http://code.google.com/android. 

Includes a device emulator, tools for debugging, memory and performance profiling, and a plug-in for the Eclipse IDE 

Android’s arrival should mark the era of mobile Internet 

Google has come up with a web browser based on Chrome, which we believe can 

rival iPhone Safari and is much better than any other mobile web browsers. The 

browser is flash ready, allows full page rendering, and is easy to use with the 

trackball provided on the G1. The speed of the browser is also much faster than 

Internet Explorer/Opera Windows Mobile. 

Interesting applications have evolved to take advantage of mobile Internet: 

(1) ShopSavvy—designed to help people do comparative shopping; and (2) Google 

Maps Street View—syncs with the built-in compass on the phone to allow users to 

view locations and navigate 360 degrees by simply moving the phone with their hand.

Bhavin Shah 

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20 April 2009 

HTC remains the only vendor with Android offering 

While we expect the overall smartphone market to become bigger, driven by 

Google’s effort, we believe Windows could face significant market share pressure if 

it fails to provide more support to its clients. Comparing some simple statistics of G1 

with Diamond, G1 sold 1 million within its first quarter of launch with one operator 

in two countries, while Diamond sold 3 million within the first two quarters of its 

launch with 30 operators and 50 countries. While the roll-out of the Google phone to 

more operators will most likely cannibalize some Diamond demand, the Google 

phone’s market impact should be significantly higher than Diamond’s. Thus, we 

expect HTC to gain plenty market share in the smartphone space in the next two 

quarters. 

However, there is no new news from the Android camp besides the G2. HTC 

stands to gain as it remains the only vendor with a production Android handset, 

with lack of Android announcements from major handset makers, particularly 

Samsung, LG, and Sony Ericsson. Chinese handset makers have big plans for the 

platform, with China Mobile planning to launch nearly a dozen Android-based 

phones this year, although there was a lack of real products during the MWC. 

HTC Touch Diamond2 (Windows Mobile) 

Microsoft’s attempt to catch up with competition 

Microsoft announced its Windows Mobile 6.5 platform, adding new features such as 

Windows Marketplace (app store) and UI improvements (gestures, larger buttons) for 

touchscreen friendliness. We view this as an incremental upgrade to add features that 

are already available on the iPhone and Android platforms. New devices preinstalled 

with 6.5 will not likely be available until 4Q09, although the upcoming 6.1based 

phones could be upgradeable; older phones are not, as 6.5 requires a new 

physical “Start” key. New features in 6.5 are highlighted in Table 49. 

HTC remains a leader in Windows Mobile 

With Windows Mobile 6.5 not likely to come out until the year-end or at least the 

next two quarters, HTC should continue to reap the investments it has made in its 

TouchFLO 3D interface, which runs on top of Windows Mobile 6.1. In our view, 

HTC’s solution is one of the most impressive interface enhancements for the 

platform. HTC announced two new Windows Mobile 6.1 phones, the Touch 

Diamond2 and Touch Pro2, which will be upgradeable to 6.5. Please refer to Figure 

54 for a comparison of Touch Diamond2 and Touch Pro2 with their predecessors. 

Microsoft drummed up support for its Windows Mobile platform with LG agreeing 

for an alliance with Microsoft. LG has agreed to adopt Windows Mobile as the main 

platform for its smartphones; the company is planning for 50 new Windows Mobile 

phones in the future, 26 of which are likely in 2012. 

According to Appleinsider.com, two interesting numbers emerged from the MWC 

that suggest HTC’s leadership in Windows Mobile. Andy Lees, senior vice president 

of Microsoft’s mobile communications business, states that the company has already 

sold 50 million devices with Windows Mobile. HTC’s CEO, Peter Chou, says that 

HTC has sold more than 40 million own-brand or ODM phones on the Windows 

Mobile platform. This suggests that HTC has sold 80% of all Windows Mobile 

phones. 

97

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Figure 54: New HTC offerings 

Magic G1 Touch Touch Touch Touch 

Dream Pro2 Pro Diamond2 Diamond 

� � � � 

New 

version 

vs. 

prior 

version 

98 

� No keyboard 

� Larger battery - 1340mAh vs. 1100mAh 

� Thinner at 13.7mm vs. 17mm 

� More memory at 512MB vs. 256MB 


20 April 2009 

� Upgradeable to WM 6.5 

� OS tweaks: 

- Improved TouchFLO 3D 

- Pre-fetching frequent web pages 

- Improved contacts, start menu, in-call 

screen 

� 3.6" 480x800 screen vs. 2.8" 480x640 

� Zoom bar 

� Video capabilities 

� Battery 1500mAh vs. 1340mAh(talk time 

similar) 

� Upgradeable to WM 6.5 

� OS tweaks: 

- Improved TouchFLO 3D 

- Pre-fetching frequent web pages 

- Improved contacts, start menu, in-call 

screen 

� 3.2" 480x800 screen vs. 2.8" 480x640 

� 5 MP camera w/ video vs. 3mp 

� Battery 1100mAh vs. 900mAh(talk time 

similar) 

� Zoom bar 

� microSD added 

� 288MB RAM, 512MB ROM vs. 192MB RAM, 

256MB ROM 

� Thicker at 13.7mm vs. 11.5mm 

Announced 2009, February 2008, Sept. 23 2009, February 2008, Jun 2009, February 2008, May 

Launch 2009, by April 4Q08 US/UK, 1Q09 EU, Global rollout summer 2008, Aug EU and Asia early Q209 2008, Jun 

date 

Australia, Singapore, 

2Q09 Japan 

2009 

Country/ Vodafone exclusive in T-Mobile (US, EU), T-Mobile EU to launch Widely available T-Mobile EU to launch Widely available 

operator UK, Spain, German, SingTel, Optus, NTT June, possibly others 

April, and other 

availability France. Italy nonexclusive 

(will launch 

with Telecom Italia) 

DoCoMo 

operators 

Keyboard No, trackball Yes, trackball Yes Yes No No 

OS Google Android Google Android WM 6.1 Pro 

WM 6.1 Pro WM 6.1 Pro 

WM 6.1 Pro 

(upgradeable to 6.5) 

(upgradeable to 6.5) 

Display 3.2", 480x320 3.2", 480x320 3.6", 480x800 2.8", 480x640 3.2", 480x800 2.8", 480x640 

Camera 3.2 MP AF 3.2 MP AF 3.2 MP AF, video 3.2 MP AF 5MP AF, video 3.2 MP AF 

GPS Yes Yes Yes Yes Yes Yes 

WIFI Yes Yes Yes Yes Yes Yes 

Bluetooth Yes (no A2DP) Yes (no A2DP) Yes (A2DP) Yes (A2DP) Yes (A2DP) Yes (A2DP) 

USB Yes Yes Yes Yes Yes Yes 

TV No No No No No No 

Bandwidth HSDPA, 7.2 Mbps HSDPA, 7.2 Mbps HSDPA, 7.2 Mbps HSDPA, 7.2 Mbps HSDPA, 7.2 Mbps HSDPA, 7.2 Mbps 

Color White, black Black, white, brown Black/Grey Black Black Black 

Dimensions 117.7 x 55 x 13.7 mm 117.7 x 55.7 x 17.1 mm 116 x 59.2 x 17.3 mm 102 x 51 x 18.1 mm 107.9 x 53.1 x 13.7 mm 102 x 51 x 11.5 mm 

Weight 118.5 g 158 g 175 g 165 g 117.5 g 110 g 

Cardslot microSD microSD microSD microSD microSD No 

Processor Qualcomm MSM7201A Qualcomm MSM7201A Qualcomm MSM7200A Qualcomm MSM7201A Qualcomm MSM7200A Qualcomm MSM7201A 

528 MHz 

528 MHz 

528 MHz 

528 MHz 

528 MHz 

528 MHz 

Battery 1340 mAh 1150 mAh 1500 mAh 1340 mAh 1100 mAh 900 mAh 

Other Accelerometer, Digital Accelerometer, Digital Accelerometer, TV-out, Accelerometer, TV-out, Accelerometer, FM Accelerometer, FM 

compass 

compass 

FM radio, zoom bar, FM radio, 2nd VGA radio, zoom bar, 2nd radio, 2nd VGA camera 

2nd VGA camera, 

Straight Talk 

speakerphone, multiangle 

hinged screen 

camera 

VGA camera 

Source: HTC, GSMArena.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 49: Windows Mobile 6.5 highlights 

Windows Mobile 6.5—what is new vs. 6.1 

� UI enhancements - more touch screen friendly 

- Start screen - honeycomb pattern for larger buttons 

- Smooth finger scrolling throughout 

- 3D graphics, reminiscent of Vista 

-Gestures for unlocking, answering calls 

� IE Mobile 6.5 - more desktop like browsing experience 

- Flash support 

- Javascript support 

� My Phone - Backup and management of personal information through a web-based service 

� Windows Marketplace for Mobile (aka SkyMarket) - Microsoft's app store 

( Microsoft Recite - voice based search 

( Requires new “Start” hard key - older devices will not be eligible for upgrade 

Key issues still to be addressed 

Windows Media Player - inconsistent with rest of UI, needs to be updated 

Lack of support for capacitive touchscreens 

Lack of multi-touch 

Not innovating, playing catch-up to new platforms 

Not free, unlike Android, Symbian, and LiMo 

Source: Microsoft. 

Nokia E-series (Symbian) 

Nokia Messaging: E55 and E75 are the first devices with support for global email 

systems 

Nokia’s E55 and E75 are the first devices that support Nokia Messaging, a service 

that enables access to the world’s leading consumer e-mail systems, including 

Yahoo! Mail, Gmail and Hotmail. Also, direct access to over 90% of the corporate email 

systems is possible as Nokia Messaging supports Mail for Exchange and IBM 

Lotus Notes Traveler. 

Nokia announced the launch of Ovi app store—compatible with Symbian S60 

and S40 devices 

Nokia announced the launch of Ovi app store, which is compatible with Symbian S60 

and S40 devices. We could see several app stores with support for the Symbian 

devices next year, as Nokia’s Ovi Store will likely work across multiple operators, 

while the Symbian Foundation may allow operators to launch their own app stores in 

its 2010 release. Liquid Air Labs, with an independent third party, plans to launch an 

ad-supported app store in the summer of 2009 with about 1,500 apps. In our view, 

this highlights some of the potential fragmentation issues, with Symbian moving 

from a controlled to an open-source platform. We believe a single point of entry to 

download apps should offer better economies of scale, less end-user confusion and 

greater developer support. 

Just as with Apple’s and Android’s app stores, Ovi Store developers would be able to 

keep 70% of gross sales, and like Apple, the remaining 30% would go to Nokia, 

which will host the apps on its servers. This differs, however, from Android, where 

Google gets no fees and 30% goes to the operator, which hosts the apps. The Ovi 

Store will not be limited to Nokia devices, so other handset makers using S60 and 

S40 platforms can also leverage the platform. It remains to be seen whether other 

Symbian handset makers will adopt Nokia’s Ovi Store. 

99

Bhavin Shah 

(852) 2800-8538 


100 

Palm Pre (WebOS) 

Palm Pre draws positive reviews 

The Palm Pre seems to have impressed the press and bloggers alike. Paul Coster, our 

US analyst who covers Palm, had a chance to test the Palm Pre device (please refer 

to our note, Pre Stands Up to Closer Scrutiny, published on January 29, 2009). In his 

view, the device’s response is very fast over Sprint’s 3G network; also, it has a new 

and impressive UI. We believe the WebOS has addressed many of the shortcomings 

of the iPhone, and if it lives up to the expectations it could be the next phone to beat. 

Palm Pre WCDMA at the MWC 

The Palm Pre WCDMA version was on display at the MWC—contrary to the 

popular belief that the WCDMA version will not be available until end-2009; it was 

using a Vodafone SIM card. This suggests that Palm Pre would be an active player 

in the 2H09 platform war. 

Palm Centro to adopt webOS 

According to our US analyst, Paul Coster, Palm’s CFO, Douglas Jeffries, confirmed 

that the next-generation Centro would incorporate the new WebOS. 

Figure 55: Palm Pre and webOS screenshots 

Handset Launcher Web browser Calendar, daily layered view Notification dashboard 

Source: www.palm.com. 


20 April 2009

Bhavin Shah 

(852) 2800-8538 


Figure 56: Nokia's “Kiwi-bird-shaped” supplier portfolio 

Source: Nokia. 


20 April 2009 

Handset outsourcing 

EMS/ODM/components 

The top five OEMs do not have the same weight in the Asian handset components 

supply chain because of different outsourcing levels utilized by various OEMs. 

Motorola outsources about 50% of its volume to ODMs; 30%-40% to EMS 

companies; and the rest is manufactured in-house. Nokia outsources around 30% of 

its PCBA and about 100% of its module assembly, but does most of the final 

assembly in-house. Sony Ericsson is one of the early adopters of handset EMS/ODM 

outsourcing, and has fairly high outsourcing percentage to Flextronics, Arima 

Communications and FIH. 

Nokia continues to outsource more components from AP ex-Japan 

Nokia continues to migrate its supply chain to Taiwanese/China vendors to achieve a 

better cost structure and logistical convenience. Nokia disclosed its supplier strategy 

at its Capital Markets day in December 2008. Highlights: 

“Kiwi-bird-shaped” supplier portfolio 

1. Sharp peak of innovative companies for picking new technologies: One 

or two Japanese vendors could be retained to develop future advanced 

technology. 

2. Weight on a few large suppliers: Reliability and scalability are key; the 

strategy favors Greater China vendors after their catching up with 

technology with low cost. 

3. No long tail of legacy suppliers: The strategy favors no more relationship 

business and a smaller vendor list for 2009. 

Figure 57: Nokia’s selection criteria—Working only with the “best” 

suppliers 

Source: Nokia. 

Nokia defined the best suppliers based on five criteria 

1. Lowest total cost: Strength of Taiwan vendors, especially as the ¥ appreciates. 

2. Time to market: Japanese lead shrinks as hardware innovation slows. 

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102 


20 April 2009 

Table 50: Nokia components still dominated by Japanese suppliers 

3. Product performance: Japan still leads, but faster growth in emerging markets 

could confine Japanese suppliers to high-end markets. 

4. Investment capability: If Japanese suppliers absorb the currency risk to bring 

the price at par with Taiwanese suppliers, they could face weak profitability and 

thus weak financials for future investments. 

5. Treat Nokia as the # 1 customer: This caps the South Korean share, despite 

Won depreciation. 

Implications: Look for large share gainers to outperform 

We believe a number of non-Japanese suppliers will benefit from the allocation shift, 

as shown in Table 50. Companies that manage to gain significant market share could 

offset weak global demand and thus be better protected from the downturn. 

Component Technology Japanese suppliers Japan mkt share Non-Japanese suppliers 

Keypad SunArrrow, Polymatech, Shin Etsu 50% Silitech, Ichia, BYD, FIH 

Battery Li Ion Sanyo, Sony, MEI 60% BYD, Samsung SDI, LG Chemical 

Display STN/TFT-LCD Sharp, Seiko-Epson, Hitachi, TMD 35% AUO, SDI, Innolux, Wintek 

Driver IC Oki, Seiko-Epson, NEC, Rohm 60% Novatek, Sitronix, SEC, Orise 

Touchscreen Resistive sensor Nissha printing 80% Wintek, TPK(Balda) 

Camera Lens supplier Enplas, Konica Minolta, Fujinon, Kantatsu 20% Largan, Asia Optical, Hon Hai (Premier) 

Camera Module Toshiba, Flextronics 20% Lite-On, Altus, Chicony, SEMCO 

PCB Rigid Ibiden 40% Unimicron, Compeq, AT&S 

Acoustics Hosiden, Pioneer, Panasonic 30% NXP, AAC, Merry, BSE, and Knowles 

Crystal Oscillator Nihon Dempo Kogyo, Tokyo Epson 90% TXC 

MLCC Murata, TDK, Taiyo Yuden, Kyocera 85% SEMCO 

Source: Company, J.P. Morgan. 

• Acoustics: AAC has proved its technical and production capability in speakers 

and receivers since its penetration into Nokia in 2007. We expect more 

penetration, especially in new platforms such as multi-functional devices 

(AAC’s expertise) and new digital microphones. 

• Keypad: Nokia is also migrating keypads from Japanese vendors (such as 

Shinetsu and SunArrow) to Taiwanese/China vendors such as Silitech. Nokia 

now accounts for 20% of Silitech’s revenue; we expect Silitech to gain further 

share in 2009. 

• MLCC: SEMCO has started to ship MLCC to Nokia from 2008, and Nokia’s 

proportion at SEMCO’s MLCC was around 1%-2% in 2008. SEMCO’s MLCC 

market share at Nokia was marginal in 2008. However, SEMCO indicates that it 

could increase its shares substantially in 2009 at the expense of Japanese makers. 

• Driver ICs: Our survey suggests that Nokia will reduce its mobile driver IC 

vendors by roughly half (from 12 in the past); we estimate Novatek’s share at 

Nokia to increase from 6% in FY08 to 14%/20% in FY09/10. An important 

precursor is market share of mobile panel makers, where the Japanese share 

declined from 55% in FY06 to 35% in FY08, while the Taiwanese share 

increased from 18% to 40% in the same period—we believe component 

localization is the next to follow. 

Assembly outsourcing from Samsung and LG could reduce 

Samsung and LG have internal production capacity, which they expanded even in 

2008. We believe Samsung and LG have been reluctant to outsource to Taiwan and

Bhavin Shah 

(852) 2800-8538 


China, and so far, it is limited to a few components for Samsung and ODM for LG. 

We expect these two companies to scale back their original manufacturing 

outsourcing plans in 2009 as: (1) the significantly weak Won appears to be offsetting 

cost advantages in outsourcing; and (2) fulfilling their own production capacity 

should be a priority in view of a weak unit shipment outlook. 

Table 51: EMS/mechanical component outsourcing opportunities from major handset players 

Vendor EMS/mechanical component outsourcing potential 

Nokia PCBA: Limited opportunity as Nokia is expanding own PCBA capacity. 

Module assembly: All module assembly has been outsourced. 

System assembly: Final system assembly will remain in-house in the near future, but could open up in the future. 

Overall opportunity comes from allocation reshuffle from less efficient clusters to more efficient ones. ODM opportunity mostly in CDMA. 

Motorola The outsourcing ratio is already high for EMS and ODM 

Sony Ericsson Limited room for outsourcing growth. Flextronics, Arima Comm, and FIH are already the key EMS partners. 

Samsung Started outsourcing casing / keypad from FIH / BYD / Silitech. No immediate plans for assembly outsourcing. 

LG Only outsources selected low-end models to ODMs, limited EMS opportunity. 

ZTE/Huawei ZTE: Limited EMS opportunity due to in-house assembly capacity, but components are largely outsourced. 

Huawei: Both component and assembly are outsourced from three vendors—FIH, BYD, and Flextronics. 


Table 52: ODM partnerships 


20 April 2009 

Pure ODMs could find it difficult to sustain due to competition from EMS 

Pure ODM companies, such as Compal Communications and Arima 

Communications, are facing competition from FIH and BYD, which also provide 

ODM services. The weakness of Motorola and Sony Ericsson further accelerates the 

fall-out of these two companies. 

Vendor ODM partner Comments 

Nokia FIH, BYD Electronic FIH does CDMA ODM and BYD is starting to ramp up. Compal Comm may 

also get some CDMA orders. 

Motorola FIH, Compal Communications Compal Comm remains the key ODM. FIH (Chi-Mei Comm) also has good 

shares. 

Samsung No ODM in the near future 

LG Arima Comm Unlikely to add another ODM partner in the near future 

Sony Ericsson 


FlH, Arima Communication Could give more ODM orders to FIH 

Factors affecting the supply chain 

The dynamics at top handset makers tend to affect the Asian supply chain 

significantly. Most of the Taiwan supply chain is heavily exposed to Nokia, 

Motorola and Sony Ericsson. As a result, any handset vendor gaining market share 

could result in a “make-or-break” situation for the suppliers. Of late, huge currency 

swings have also affected the profitability of these companies, as most of their sales 

are foreign currency denominated. 

Taiwan supply chain: Mostly exposed to a struggling customer base 

The Taiwan handset supply chain is largely exposed to Nokia/Motorola/Sony 

Ericsson (Table 53), and has relatively little exposure to smartphone brands or the 

whitebox market. As the former group is under pressure and we expect the top five 

OEMs to show a revenue decline, the Taiwan supply chain may come under severe 

pressure. 

103

Bhavin Shah 

(852) 2800-8538 


Table 53: FY08E sales exposure of handset component suppliers to various handset makers 

Component Supplier Components Nokia Motorola Sony Ericsson Korean Brands Chinese Whitebox Smartphones 

Largan Lens 30-35% 20-25% Less than 5% 2-3% 2-3% 5% 

Catcher Light metal casing 7% 7% Less than 5% 10% 0% 0% 

Foxconn Tech Light metal casing 20% 10% Less than 1% 7% 0% 3-4% 

Silitech Keypad 25-30% 10-15% 10% 18% 0% 16% 

AAC Acoustic Acoustic 25% 25% 12% Less than 5% 18% 10-15% 

BYD (Parent excl. Auto) Battery pack / components 28% Less than 5% Less than 1% 10% 5-10% 0% 

BYD Electronic Components 60% 20% 0% 5% 5-10% 0% 

Unimicron PCB 20-25% 10-15% 5-10% NA NA NA 

Compeq PCB 30% NA NA NA NA NA 

Wintek Display module 25-30% 25-30% 0% 10% 10-15% 25% 

FIH EMS / casing 40% 30% 15-20% Less than 5% 4% 4% 

Compal Comm ODM 5-10% 85% 0% 2-3% 2-3% 2-3% 

Source: Company data and J.P. Morgan estimates. 

Note: Revenue exposure to an OEM also includes shipment to its ODM. For example, Silitech’s exposure to Motorola includes Motorola’s ODM model at CCI and Chi-Mei Comm. 

104 


20 April 2009 

Currency a swing factor for supply chain profitability in the near term 

Unlike most other IT products, where components are priced in US$, Nokia uses 

euro as the underlying currency for those models that have final assembly in Europe, 

which include many mainstream models and almost all high-end N-series and Eseries 

models. 

As a result of the recent sharp euro depreciation, we believe handset component 

companies with such euro exposure will be hurt in the near term. In the Greater 

China handset components space, FIH should have moderate exposure to such Eurodenominated 

sales. Similarly, the Taiwan supply chain is also linked to currency 

swings with US$. Table 54 and Table 55 show the effect of currency on component 

suppliers. 

Table 54: Euro-depreciation impact on the Nokia supply chain 

Revenue exposure (%) Gross margin impact from 10% depreciation in Euro 

AAC 15% 100bp decline 

BYD Electronic 3% 20bp decline 

FIH 15-20% 30bp decline 


Table 55: NT$ impact on Taiwan component makers 

Revenue denomination in COGS denomination in Gross margin impact from NT$1 

US$ (%) 

US$ (%) 

appreciation in US$:NT$ FX 

Largan 90% 30% 230bp decline 

Silitech 60% 40% 90bp decline 


Technology barrier/competition in Greater China critical to profitability 

AAC has been able to maintain a high gross margin of 40%+ despite profitability 

pressure in the overall handset components space. We believe high technology entry 

barriers and the lack of serious Greater China competitors is a key reason for the high 

margin. A similar phenomenon can also be seen in Largan Precision, which competes 

mainly with Japanese peers. As there are few competitors in Greater China that can 

deliver camera phone lens with 2MP and above, Largan is able to maintain a 50%+ 

gross margin.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 56: Handset component suppliers of major players—Nokia, Motorola, and Samsung 

Nokia Motorola Samsung 

Semiconductor Component Semiconductor Component Semiconductor Component 

Texas Instrument Baseband chips Texas Instrument baseband (low end 

GSM) 

NXP, LSI, TI baseband (GSM) 

application processor application processor application processor 

Freescale baseband chips (mid-hi Qualcomm baseband+apps 

end GSM, 3G) 

processor (CDMA) 

Infineon RF Transceiver application processor Silicon Labs RF Transceiver 

RFMD Power Amplifier Qualcomm baseband+apps 

processor (CDMA) 

RF Micro Devices Power Amplifiers 

TriQuint Power Amplifier (CDMA) Intel application processor TriQuint Power Amplifiers 

Micron CMOS sensor ATI/Nvidia multimedia processor Anadigics Power Amplifiers 

Omnivision CMOS sensor Freescale RF Transceiver Skyworks Power Amplifiers 

ST Micro CMOS sensor RF Micro Devices Power Amplifiers Samsung/INTC NOR Flash Memory 

AMD/INTC NOR Flash Memory TriQuint Power Amplifiers 

(CDMA) 

ATI/Nvidia multimedia processor 

Skyworks Power Amplifiers Mtek Vision multimedia processor 

Micron CMOS sensor Corelogics multimedia processor 

Omnivision CMOS sensor Samsung LDI 

AMD/INTC NOR Flash Memory 

Non-semi Non-semi Non-semi 

Hirose Connector Silitech Keypad SEMCO Antenna 

Ichia Keypad Sinco Keypad Ace Technology Antenna 

Silitech Keypad Largan Lens KH Vatec Antenna Bracket, EMI 

shield, Hinge 

Polymatech Keypad Genius Lens Erantech Battery Pack 

Sunarrow Keypad Kantatsu Lens Samsung SDI Battery Pack 

Shingetsu Keypad Konica Minolta Lens Samjin LND Battery Pack 

BYD Keypad Fujinon Lens BYD Battery 

Ta-Yang Keypad 

Largan Lens Catcher Light metal casing Sekonix Camera Lens 

Konica Minolta Lens Foxconn Tech Light metal casing SEMCO Camera Module, Keypad 

panel, LED, MLCC, 

PCB, Saw filter, TCXO, 

VCO, Vibration motor 

Fujinon Lens Taiwan Green Point Plastic casing Samsung Techwin Camera Module, Image 

sensor 

Strawberry Hinge HI-P Plastic casing Hansung Elcomtec Camera Module, Image 

sensor, LCD BLU 

Catcher Light metal casing MFS Flexible PCB Intops Casing 

Foxconn Tech Light metal casing Compeq PCB P&Tel Casing 

BYD Light metal casing Unimicron PCB Murata Ceramic Condenser 

NXP Acoustic Unitech PCB TDK Ceramic Condenser 

Pioneers Acoustic Wus PCB Taiyo-Yuden Ceramic Condenser 

Hosiden Acoustic MFLX FPC 

AAC Acoustic AAC Acoustic Amotech Chip Varistor 

Unimicron PCB Hosiden Acoustic Uju Electronics Connector 

Compeq PCB Pioneers Acoustic Hirose Electric Connector 

BYD Battery Unisteel Fastener Hicel Image sensor 

Cheng Uei Battery pack BYD Battery Unisem Image sensor 

ST Micro Camera module Cheng Uei Battery pack DK UIL Keypad 

Flextronics Camera module Lite-On Tech Camera module E-Litecom LCD BLU 

Toshiba Camera module Altus Camera module Kumho Electic LCD BLU 

Perlos Plastic casing Flextronics Camera module Samjin LND LCD BLU 

ODM/EMS Chicony Camera module Korea Tronics LCD Module Parts 

FIH Semco Camera module Displaytech LCD Module Parts 

Elcoteq Seoul Semiconductor LED 

Jabil ODM/EMS Lasemtech LED 

BYD Compal Comm Daeduck Electronics PCB 

FIH Interflex PCB 

Jurong Tech Powerlogics PCM 

BYD Elentech PCM 


Jahwa Electronics Vibration Motor 

105

Bhavin Shah 

(852) 2800-8538 


Figure 58: Handset supply chain 

106 

Handset EMS 

FIH 

Flextronics 

BYD 

Jabil 

Elcoteq 

Celestica 


20 April 2009 

Handset supply chain 

This supply chain illustrates the value flow from handset semiconductor components 

to electronic manufacturing service (EMS) providers, own design manufacturers 

(ODM), distributors, retailers and network operators 

We begin by breaking the handset into components and identifying their supply 

chains and key trends. 

Network operators and wireless service providers 

(Vodafone, T-Mobile, Verizon Wireless, AT&T, China Mobile, China 

Unicom, NTT DoCoMo, Telcel, Telecom Italia, Sprint) 

Distributors 

Brightpoint 

Dangaard 

Brightstar 

Carphone 

Handset OEMs (2008 market share) 

Nokia 34.3% 

Samsung 14.4% 

Motorola 7.3% 

LG 7.4% 

Sony Ericsson 7.1% 

RIM 1.7% 

Apple 1.0% 

Retailers 

RSH 

BBY 

Handset ODM 

Arima Comm Pantech 

FIH / CMCS Sagem 

Inventec Appli. Longcheer 

HTC SimTech 

Compal Comm 


Keypad/Casing Battery Baseband Displays Bluetooth Power Amplifiers 

You Eal Intops Sanyo / Panasonic Texas Instruments Samsung SDI Cambridge Silicon Radio RF Micro Devices 

Silitech P&Tel Sony Freescale Sanyo Infineon Renesas 

Ichia Catcher Samsung SDI Qualcomm Wintek NXP Skyworks 

Sunarrow KH Vatec LG Chem Mediatek Picvue Broadcom Anadigics 

Santech Foxconn Tech BYD EMP / STMicro Seiko Epson Agilent 

Polymatech BYD Infineon Philips NXP 

Shin Etsu FIH BYD Motorola 

Sunningdale TMD TriQuint 

Passives SRAMs Transceivers Receivers Flash 

Amotech Murata Samsung Infineon Triquint NAND: NOR: 

SEMCO Taiyo Yuden Renesas Qualcomm Motorola Samsung Intel 

Epcos Rohm Cypress STMicroelectronics M/A Com Toshiba Spansion 

AVX TDK Toshiba Motorola Hynix STMicroelectronics 

Vishay Intertech Kyocera Switches Fujitsu SanDisk Samsung 

KEMET Yageo Triquint NEC Micron Renesas 

CTS Corp 


SWKS Renesas 

NXP 

Sharp

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 57: 3.5G, 3G and 2.5G handsets semiconductor bill of materials, 2009E-2010E 

Semiconductor bill of materials 

Table 57 shows the semiconductor bill of materials (BoM) for typical 2.5G, 3G and 

3.5G handsets. Wireless IC component prices vary based on air interface standards. 

For example, CDMA designs tend to have a higher bill of materials, due to the higher 

cost of Qualcomm digital baseband processors. In addition, display types, plastic 

housing design and size also affect the cost of the handset. 

US$ 2009E 2010E 

3.5G 3G 2.5G 3.5G 3G 2.5G 

Baseband processor 11.78 9.80 5.49 9.95 7.84 4.75 

Baseband analog 4.87 4.43 2.04 4.87 3.89 1.79 

Applications/multimedia 9.71 9.01 3.14 9.31 9.26 2.92 

Memory 10.01 8.97 7.34 9.86 8.81 7.20 

Transceiver chipset 9.11 7.34 4.42 9.07 7.51 4.26 

Power amplifier 2.25 2.24 1.31 2.03 2.04 1.18 

Other ICs & discretes 1.23 1.06 1.01 1.21 1.04 0.86 

Total (Weighted average) 

Source: IDC. 

48.96 42.86 24.75 45.82 40.39 22.96 

Note: BOMs represent weighted-average of phones and converged devices of all features. Some baseband processor content shifts to applications/multimedia are due to integrated applications 

processors. 

The average semiconductor BOM costs for all air interface standards have been 

declining. In 2009, IDC expects semiconductor BOM costs for 3G handsets to fall to 

around US$43 and costs for 2/2.5G phones to fall at a slower pace. BOM costs 

would undergo further pricing and integration pressure as the ultra-low-cost market 

grows. 

Figure 59: Worldwide weighted-average mobile phone semiconductor BOM cost by air interface 

generation, 2007-2012E 

($) 

65 

45 

25 

5 

2007 2008 2009 2010 2011 2012 

3.5G 3G 2.5G 2G All mobile phones 

Source: IDC, 2008. 

Note: BOMs represent weighted-average of phones and converged devices of all features. 

Semiconductor components 

Wireless semiconductors are divided into two groups—radio frequency (RF) and 

baseband. The RF front-end portion of a cell phone contains analog semiconductors 

for transmitting, receiving, and conditioning radio frequency signals. The RF signals 

received are transferred to the digital back-end, where analog signals are converted to 

digital signals and processed by the digital signal processors. The major components 

of an RF front-end are a power amplifier, receiver, saw filter, transceiver and switch. 

107

Bhavin Shah 

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Figure 60: Simple handset electronic components diagram 

Receiver 

Power Amplifier 

Bluetooth RF 

Power Management 


Table 58: Various handset semiconductor players 


20 April 2009 

SRAM 

Mixers 

VCO 

Saw Filters 

Base Band 

ADC Mux/ DeMux 

DSP DAC 

Integrated Codecs 

CPU 

RF Front End 

Flash Memory LCD Driver 

Audio IP/OP 

Camera Module 

Key Pad 

LCD Panel 

Baseband NAND Bluetooth Application Graphic SRAM NOR 

2G 3G processor processor 

Qualcomm Qualcomm Samsung (40% Market Share) CSR ARM Nvidia Samsung Spansion 

Mediatek Infineon Toshiba + SanDisk (38%) NXP Intel ATi Cypress STM 

TI EMP / STM-NXP Hynix (11%) Broadcom IBM Samsung 

Freescale Micron (10%) Infineon Renesas 

Infineon 

ST Micro 

Sharp 


Baseband 

In a baseband sub-system, the major components are the digital baseband processor, 

analog baseband processor and memory such as flash and SRAM. A digital signal 

processor (DSP) is used to decode and process received raw data in wireless 

handsets. It can also help perform multimedia functions in some design. A DSP is 

either a standalone component or often embedded in the baseband processor. 

Passive components such as capacitors and resistors are found in both the RF frontend 

and the digital back-end. Depending on the design of a particular handset, not all

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

but most of these components are used. Texas Instruments, Qualcomm, Infineon, RF 

Micro, Philips and Samsung are the major manufacturers of wireless semiconductors. 

Shifts in the baseband sourcing strategy 

• Nokia has unloaded its baseband division to STMicroelectronic, and now 

sources baseband from Texas Instruments for 2G; Infineon for the ultra low cost 

(ULC) segment of GSM; Texas Instruments, Broadcom, Infineon and 

STMicroelectronic for 3G. 

• Motorola has streamlined its hardware semiconductor suppliers to reduce costs 

and increase operational efficiency. The company has chosen Texas Instruments 

and Qualcomm for 3G and Freescale and Texas Instruments for GSM 

technologies. 

• STMicro and Ericsson announced an agreement in August 2008 to merge 

Ericsson Mobile platforms (EMP) with ST-NXP in a 50/50 JV. We believe this 

deal is significant for the handset market, as it creates a credible #3 player in the 

wireless market. 

• Mediatek: Recently Mediatek saw design wins with Sharp’s new phone for 

China. This design win could result in major brands shifting their semiconductor 

sourcing to Mediatek. We believe that a number of Japanese brands will look 

towards Mediatek’s solutions in the near future to enter the Chinese market. 

Also, Mediatek launched its first EDGE-based Smartphone solution (MT6516), 

which drives the bill-of-material below US$100. It has formed a strategic 

partnership with Microsoft to source Windows Mobile OS for its customers, at a 

“few dollars discount to standard price”. As its 3G-based smartphone solution is 

expected in 2010, this will be a key part of its WCDMA strategy. Mediatek will 

likely settle a WCDMA licensing agreement with Qualcomm in late 2Q09. It has 

been working with multiple China handset vendors that ship to global operators. 

Tier-1 brands are turning from captive to merchant vendors, partly because: (1) there 

is a shift in focus from hardware to software/services—Nokia/Sony Ericsson; 

(2) captive vendors are not able to keep up with the technology trend—Motorola; 

and (3) playing chipmakers against each other to the handset brand’s advantage is 

resulting in lower scale at chipmakers and thus their profit potential—Nokia. 

As a result of the involvement of baseband vendors with tier-1 brands: (1) some 

baseband vendors are forced to look for a potential buyer due to shrinking future 

projects—TI and Freescale; and (2) some have to deal with an uncertain outlook and 

insufficient scale—STMicro and Infineon. There may be some companies, which 

could benefit from this trend—Qualcomm, and to a certain extent, Broadcom—but, 

in general, we think there are more losers than winners. 

Handset memory 

Volatile (static) and non-volatile memory is a vital component in a digital mobile 

terminal. Digital phones have become more complex, which means they need more 

memory. 

Volatile memory is used for code execution or working space. High-speed SRAM is 

typically used as the main volatile memory. However, given the higher memory 

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20 April 2009 

requirement in multimedia handsets, DRAM, as well as mobile DRAM, is used in 

new phones. 

The non-volatile memory is used for code storage and, is increasingly being used for 

large amounts of data storage. Non-volatile memory such as flash can store 

information even when the power is shut down. Program and data storage for 

increasingly sophisticated applications also demand more memory. Flash memory is 

of two types—NOR flash and NAND flash. NOR flash is used for software programs 

because of its relatively higher speed and NAND flash is used for multimedia data 

storage, due to its relatively high density. 

NAND Memory in mobiles 

The increased memory requirements for multimedia applications should change the 

memory content drastically through 2011. There is an increase in demand for higher 

densities of NAND flash and Multibank DRAM (MDRAM). NOR flash, which has 

been the mainstay for code storage in handsets, is slowly being replaced by NAND 

and hybrid flash, especially in the high-end smartphone market segment. Handsets 

may have 7.8MB-16GB of embedded flash memory, depending on the price range, 

and many new handsets support external microSD or miniSD memory card. 

Handsets should be the biggest swing factor for NAND demand in the next two 

years, given an increasing proliferation of embedded NAND in music phones. We 

estimate NAND demand from mobile phones will see a 100% Y/Y growth in 2009, 

representing 33% of the total NAND demand in 2009. The key drivers are: 

• Smartphones: The demand for NAND will likely accelerate due to smartphones 

and promotion of MP3-enabled phones. We believe phones with high memory 

capability, such as the new Apple iPhone 3G and Samsung Omnia (with 8GB 

and 16GB memory) and HTC touch Diamond (with 4GB memory), will be 

increasingly launched and should drive the market. 

• Music Phones: Nokia came out with an iTunes-type content service called 

Comes with Music for its 5310 XpressMusic phone (which comes with a 2GB 

memory card). While the existing typical music phones (excluding iPhone) 

adopt 2GB memory, new products will likely adopt 4-8GB memory. We 

estimate more than 87 million units of music phones will be shipped in 2009 

from 11 million units in 2007. Hence, music phones as a percentage of the total 

NAND demand should increase to 13.4% in 2009 from 4.3% in 2007.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 59: NAND demand—Music phones as a percentage of total NAND demand 

Units in millions 

1Q08 2Q08 3Q08 4Q08E 1Q09E 2Q09E 3Q09E 4Q09E 2007 2008E 2009E 

Low density music phones 

% of handsets with ASP > $350 11% 12% 13% 14% 15% 17% 18% 20% 8% 12% 17% 

% Handsets with embedded Flash 20% 23% 25% 26% 27% 28% 29% 30% 6% 24% 29% 

Handsets with onboard NAND (MM) 6.7 8.8 10.8 12.3 11.4 13.1 16.6 21.5 5.8 38.6 62.6 

Average density (MB) 5,846 6,717 6,793 7,468 8,104 8,682 9,216 9,347 4,592 6,706 8,837 

Bit shipped (MM) 308 461 574 716 720 890 1,194 1,572 213 2,059 4,376 

% of total NAND demand 

Apple iPhone and high density phones 

6.5% 7.4% 7.0% 7.1% 7.6% 7.6% 8.2% 8.8% 1.7% 7.0% 8.2% 

Handsets with onboard NAND (MM) 1.1 0.6 6.9 7.6 4.4 4.7 7.2 8 5.7 16.2 24.3 

Average density (MB) 9,140 10,503 11,285 12,407 13,463 14,424 15,311 15,529 7,333 10,834 14,681 

Shipped (MM) 79 50 608 736 463 531 867 967 332 1,473 2,827 

% of total NAND demand 1.7% 0.8% 7.4% 7.3% 4.9% 4.5% 6.0% 5.4% 2.6% 5.0% 5.3% 

Music phones as % of total NAND demand 


8.2% 8.2% 14.4% 14.4% 12.4% 12.2% 14.2% 14.1% 4.2% 12.1% 13.4% 

Bluetooth 

Bluetooth can be used in a wireless headset to pass data between handsets, and 

between a handset and a PC. A Bluetooth module consists of an RF and a baseband 

section. It is a less complex system than the cellular air interface, but with the same 

basic structure. 

Most phones have a separate Bluetooth module that connects to the applications 

processor through a data interface. However, the Bluetooth baseband could be 

included as part of the main cellular ASIC or ASSP. Full Bluetooth functionality can 

then be achieved by adding an RF section. The combination of an embedded 

Bluetooth baseband and a separate RF section costs less than a separate module, but 

it decreases the flexibility of the ASIC if Bluetooth is not required. The cost of 

implementing Bluetooth in a mobile phone has fallen as volumes increase and 

manufacturers learn how to implement the technology more efficiently. 

Bluetooth is expected to have the highest attach rate vs. other emerging technologies 

such as GPS, FM radio, WiMAX, UWB, NFC, WLAN, and Mobile TV. Gartner 

forecasts that by 2009, 63% of mobile handsets will have Bluetooth. For a more 

detailed discussion on Bluetooth, please refer to the Wireless section. 

Semiconductor market size 

According to IDC, the worldwide mobile phone semiconductor market revenue will 

fall to US$37.4 billion in 2009, from US$39.6 billion in 2008, a 6% decline Y/Y. 

IDC forecasts that semiconductor revenue will show a 2008-2012 CAGR of only 

2.1%, growing to US$43 billion in 2012; the main drivers of this growth would be 

the integration of connectivity access and multimedia processing. 

According to IDC, as several emerging technologies, such as GPS, Bluetooth, FM 

radio, WLAN, mobile TV, WiMAX, UWB, and NFC, gain a foothold in the handset 

market, connectivity will be the fastest growing semiconductor segment. 

Semiconductor vendors continue to integrate radio subsystems into combo chip 

solutions as mobile phones come with more connectivity features. 

111

Bhavin Shah 

(852) 2800-8538 


112 


20 April 2009 

Figure 61: Worldwide mobile semiconductor revenue by region (2008 and 2012) 

Bn USD 

18 

16 

14 

12 

10 

8 

6 

4 

2 

0 


United States Western Europe Japan Asia Pac (Ex 

2008 2012 

Japan) 

Although 2.5G handsets accounted for 51% of the handset semiconductor revenue in 

2008, IDC expects this to decrease to 45% in 2009 when the 3/3.5G market should 

surpass it, accounting for an estimated 48% of total revenue. In 3G technology, 

CDMA2000 1X EV-DO and WCDMA networks are being introduced in major 

geographies. 3.5G technology is also gaining foothold in the industry with more than 

100 HSDPA networks launched, most of which are extensions of current WCDMA 

networks. 

Table 60: Worldwide mobile phone semiconductor revenue by air interface standards, 2007-2011 

US$ in billions 

2007 2008 2009 2010 2011 2012 CAGR (%) 

3.5G 2.4 7.3 9.0 11.6 13.7 14.9 19.3 

HSDPA/HSUPA 2.4 7.3 9.0 11.6 13.7 14.9 19.3 

3G 10.7 8.9 8.8 10.4 11.2 11.7 7.1 

CDMA2000 1X EV-DO 3.2 3.3 3.3 3.7 4.0 4.2 6.0 

WCDMA 7.5 5.6 5.4 6.2 6.8 6.9 5.6 

TD-SCDMA 0.0 0.1 0.5 0.5 0.6 124.6 

2.5G 22.3 20.3 16.9 15.4 14.9 14.2 -8.5 

CDMA2000 1XRTT 3.5 2.7 2.3 1.9 1.7 1.5 -13.7 

GSM/GPRS 9.4 6.4 5.1 4.4 4.1 3.8 -12.5 

EDGE 9.4 11.1 9.5 9.2 9.1 8.9 -5.4 

2G 3.1 3.0 2.6 2.6 2.5 2.3 -7.0 

GSM 2.8 2.8 2.5 2.4 2.4 2.1 -6.8 

CDMA/TDMA/PDC/iDEN/PHS 0.3 0.2 0.1 0.1 0.1 0.1 -9.8 

Total 


38.5 39.5 37.3 39.9 42.3 43.0 2.1 

ROW 

Increase in sales of mobile phones should directly affect semiconductor sales in a 

positive way. So, the growth in high-end mobile phones (N95, iPhone, BlackBerry, 

O2) should have a higher impact, as semiconductor content is much higher in these 

mobiles.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 61: Semiconductor content in smartphones 

Component 

3G iPhone 

Supplier Foundry Back end 

GSM RF and EDGE baseband Infineon UMC Stats CHiPPAC 

ARM processor Samsung In house In house 

Power amplifier module SKYWORK In house In house 

Power amplifier TriQuint In house In house 

NAND 8 GB Toshiba In house In house 

16MB NOR and 8MB pseudo SRAM Numonyx In house In house 

Power management NXP In house In house 

802.11b/g Marvel TSMC ASE,SPIL 

Bluetooth CSR TSMC ASE 

Touch screen control Broadcom TSMC ASI,SPIL 

Accelerometer STM In house In house 

GPS Infineon In house In house 

Audio codec 

G1 

Wolfson ASMC Amkor 

Baseband processor Qualcomm TSMC ASE 

CPLD Xilinx UMC SPIL 

RF transciever Qualcomm TSMC ASE 

Power amplifier (GSM) TriQuint Semiconductor In house In house 

Power amplifier (UMTS) Avago In house In house 

Bluetooth Texas Instruments In house In house 

Memory Samsung In house In house 

3.2 MP image sensor Aptina Imaging Micron Micron 

Capacitive sensor IC Synaptics TSMC ASE 

Wifi Texas Instruments In house In house 

LCD controller 


Sharp In house In house 

113

Bhavin Shah 

(852) 2800-8538 


Figure 62: Components and parts of a wireless handset 

PCB (Rigid: US$2-5; Flex: up to US$4) 

Rigid: Unimicron, Compeq, Unitech, Tripod, SEMCO, 

Ibiden, Shinco 

FPC: NOK, MFS, Flexium, Career Tech, BYD, Nitto 

Denko 

Key trends: (1) More cautious on HDI capex; 

(2) no improvement in industry environment in FPC 

space; (3) weaker handset PCB makers are losing 

market share and might be forced out of the market; 

(4) Taiwan PCB makers continue to get more 

allocation from Korean clients and put pressure on 

Korean PCB makers. 

Application processor 

(US$15-30)/ASIC 

Application processor suppliers: Renesas, 

SEC. Global players: TI, Marvel. ASIC 

suppliers: Corelogic, Mtekvision. 

Key trend: Integration of multimedia/PDA 

features in cell phones drives demand. 


114 


20 April 2009 

Baseband (US$4 for GSM to US$20 for 3.5G) 

Suppliers: Mediatek. Still dominated by US/Europe 

tech companies: TI, Qualcomm, ST Micro, Infineon, 

Freescale, 

Key trends: (1) Rising silicon content due to 

multimedia feature integration; and (2) Mediatek 

taking share from second-tier players such as ADI, 

Skyworks and Broadcom. 

Memory (US$5-25 depending on product specs) 

NAND suppliers: SEC, Toshiba, Hynix. NOR suppliers: Fujitsu, Toshiba 

Key trends: (1) Increasing need for on-board storage and availability of removable 

card slot drives NAND demand; and (2) increased adoption of NAND+DRAM 

(Mobile DRAM/PseudoSRAM) in an MCP made by flash suppliers. DRAM/SRAM 

cache combined with some algorithms on NAND helps offset the weakness of 

NAND read speeds relative to NOR. 

LCD module (US$1.7 for mono-STN to 

Acoustics (US$0.3-0.5/speaker, US$0.3 for ECM, US$1-3 for 

US$7 for high resolution 2.2” TFT-LCD) 

handsfree) 

Panel (TFT, STN, OLED) suppliers: SEC, AU Optronics, Innolux, 

Suppliers: NXP, Hosiden, MEI, Pioneer, Merry, AAC, BSE. 

Samsung SDI, Wintek, BYD, Sharp, Seiko-Epson, Hitachi. 

Key trends: (1) Increasing outsourcing from China/Taiwan players; 

Driver IC suppliers: Solomon Systech, Novatek, Himax, Sitronix, 

(2) stereo speakers demand driven by MP3 phones; (3) rising adoption 

SEC, Oki, Seiko-Epson, NEC, Rohm. 

of headsets due to: (i) MP3 in wired headsets; and (ii) lower Bluetooth 

Key trends: (1) rising TFT-LCD adoption; (2) shift of low-end 

chip prices; and (4).increase adoption of multiple microphone among 

display sourcing (e.g., mono STN) to Taiwan and China; and 

mid-to-high end phones for noise cancellation; (5) potential adoption of 

(3) severe competition in driver ICs. 

multi-functional devices to save board space and manufacturing costs 

Connectors (US$2-4) 

Suppliers: Hirose, Hosiden, JAE, Hon Hai, Cheng Uei UJU 

Electronics. Key trends: (1) Multimedia feature integration drives 

connector content; and (2) high-end connectors market still 

dominated by Japanese players, Taiwan players catching up via 

reverse engineering/gaining share in low-end connectors. 

Camera module (US$4 for VGA, US$7 for 

1.3MPx, US$10 for 2MPx) 

Lens suppliers: Enplas, Konica-Minota, Largan, Asia 

Optical, Genius, Sekonix, Samsung Techwin. Module 

makers: Lite-On Tech, Altus, Flextronics, Chicony, 

SEMCO, Powerlogics, Hansung Elcomtec. 

Key trends: (1) Rapid migration from VGA to megapixels; 

(2) increase in penetration of camera phones; (3) vertical 

integration by EMS providers, e.g., Altus under Hon Hai 

and Agilent module business acquisition by Flextronics; 

and (4) lens manufacturing remains a highly profitable 

business. 

Keypad (US$1-3) 

Suppliers: Silitech, Ichia, You Eal, SunArrrow, Polymatech, Shin Etsu, 

BYD, Memtech, Sunningdale. 

Key trends: (1) Gradual shift of sourcing from Japan/Korea to 

Taiwan/China due to OEM margin pressure; (2) adoption of 

gapless/metallic keypad; and (3) threat of vertical integration by BYD. 

Casing (US$2-6) 

Plastic: FIH, TGP, Hi-P, FuYu, BYD, Sunningdale, P&Tel, 

Intops. Light metal casings/structure parts: Catcher, Foxconn 

Tech, Waffer, Landsfair, Silitech, KH Vatec. Key trends: 

(1) Rising competition in plastic casings due to vertical 

integration by FIH/BYD and new entrants. 

Battery (US$2-3) 

Suppliers: Sanyo, BYD, Samsung SDI, LG Chemical, Sony, MEI. 

Key trends: (1) Demand for longer battery life on the back of 

multimedia feature integration and therefore higher battery 

capacity; and (2) severe price competition between top two 

players—Sanyo and BYD—despite industry consolidation in Japan 

in the past three years.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Non-semiconductor components 

Battery 

Batteries for mobile handsets require long lives, high-energy capacities, and must be 

rechargeable, light and durable. Over time, Lithium ion (Li-ion) has emerged as the 

preferred battery type replacing Nickel Metal Hydride (NiMH) completely. 

Li-ion is a high energy density battery that is ideal for portable devices. It has the 

ability to sustain a power output of 3.6V, which means that fewer batteries are 

required; therefore, the overall weight-to-energy-density ratio gets reduced. Li-ion 

batteries are more expensive than NiMHs but have longer lives, and are used 

extensively in devices that require high power output, such as laptops and digital 

cameras. 

Lithium ion Polymer is an advanced type of Li-ion battery and uses polymer instead 

of liquid as electrolyte. Advantages include improved safety, even higher energy 

density, and flexibility shaping. It is now getting into high-end mobile phones such 

as iPhone and other high-end Smartphones. 

Samsung SDI, Sanyo, BYD, Sony, LG Chemical and Matsushita Electric Industrial 

are the leading handset battery manufacturers. 

Displays 

LCD module 

Some of the major small-size LCD panel manufacturers are Samsung, AU Optronics, 

Chi Mei Optronics, Innolux, Wintek, Sharp and Hitachi. Solomon Systech, Novatek, 

Himax, Sitronix, SEC, Oki, Seiko-Epson, NEC and Rohm figure among the major 

display driver players. 

A new trend is the emergence of OLED screens in handsets. So far, the technology 

has been used in a few high-end feature phones, but we believe that as the technology 

matures, OLED screens will be adopted in mobiles in the next two-three years. For 

more on small size OLED screens, please refer to the LED section. 

Touchscreen 

Touchscreen has been around for several years and is widely used in PDAs and 

Smartphones. Earlier touchscreens usually require a stylus-like pen, but Apple’s 

iPhone multi-touch has revolutionized the user interface, and now finger-touching 

touchscreen appears to be a norm for Smartphones. 

There are several touchscreen technologies—resistive, capacitive, surface acoustic 

wave and optical imaging, to name a few. Resistive touchscreen is a relatively 

mature technology widely used in the earlier PDA/Smartphones and requires a 

stylus-like pen. Capacitive touchscreens, used in Apple iPhone and Google G1, allow 

human finger as the touching device and thus make Smartphones much easier to 

operate. However, capacitive type is still relatively new and expensive. 

Synaptics and Elan Microelectronics are two major providers of touchscreens. Balda, 

Wintek and TPK Holdings supply touchscreen panels. Besides these, Cypress, 

Qualcomm, TI, STMicro, Infineon, MediaTek and MSI also provide solutions for 

touchscreens. According to Digitimes, Cypress supplies touchscreens for Palm Pre. 

Currently, Synaptics provides multi touchscreens for Samsung, LG, HTC and RIM, 

115

Bhavin Shah 

(852) 2800-8538 


Analogue touch 

Small amount of voltage is 

applied to corner (X). A finger 

presses screen and draws a 

minute of current to the point of 

contact (Y) 

Light touch 

A change in capacitance occurs 

when a user places a finger near 

the capacitive couple node, which 

then creates a signal. No more 

pressing hard on the screen 

Digital sensing 

The sensing circuitry monitors 

changes in capacitance that occurs 

at each node. The ITO gridlines are 

to build the capacitance in each 

node 

116 


20 April 2009 

making it the most dominant player in the market. Elan Micro caters to the local 

Chinese and Japanese players. 

Now, touchscreens come with features of their own. While Apple revolutionized 

multi touch, Samsung brought in the haptic touchscreens. 

Gestures and multi-touch 

These screens allow users a highly intuitive input interface with the mobile device. 

They are able to detect multiple touches on the screen at the same time and can 

recognize gestures such as flicks, scrolls, pinches and chiral motions. 

Apple was the first dominant smartphone to include a multi-touch panel in its 

iPhone. The apple touchscreen is able to recognize multiple touches made on its 

screen as against the usual limitation of a single touch on the screen. More recently, 

Palm introduced a multi-touch phone, Palm Pre. However, Apple has patents for 

multi-touch technology and hence, there is possibility of a legal tussle between them. 

Figure 63: Traditional analogue-sensing touch panel 

x 

Source: www.3m.com. 

Figure 64: Apple’s multi-touch panel architecture 

Source: www.wipo.org. 

Y 

The controller identifies the point 

of contact after calculating the 

magnitude of change

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Haptic touchscreens 

Haptic touchscreen, first used in Samsung’s Instinct model, provides response upon 

touch, mimicking the touch feeling of a real keypad. We expect this technology to be 

adopted in the next two-three years. Adding tactile feedback, besides visual and 

auditory feedback, Haptic technology also provides handset users with greater 

realism. We believe the Haptic system will offer various options in developing 

software with greater realism, especially in mobile games. 

How does it work? Haptic systems can create various feedback by implementing 

diverse movements of actuators. Haptic systems comprise four major segments: 

(1) driver IC (microprocessor, power amplifiers, and sensor integration); (2) interface 

device (stick, wheel, and touch panel); (3) actuator (motor and break); and 

(4) software. Haptic technology works in the following manner—when user interface 

devices detect signals, the information is transferred to sensors, which activate the 

software and the driver IC; with the given information, software and driver IC 

command relevant feedback to actuators, making active user interface devices. 

Haptic systems can create various feedback by implementing diverse movements of 

actuators. 

Figure 65: Haptic technology control structure 

Device driver 

Source: Immersion Corporation, J.P. Morgan. 

Software 

Microcontroller 

Sensors Actuators 

User Interface Devices 

Transmission 

Implications for the industry 

Immersion Corporation (IMMR US, Non-rated) is one of the leading companies in 

the field of Haptic technology. The company has developed Haptic solutions for 

handsets, called VibeTonz, which is currently licensed to SEC, LGE, and Nokia. The 

first VibeTonz-enhanced phones (SCH-N330 and SCH-G100) were introduced by 

SEC in April 2005. Since then, VibeTonz has been incrementally adopted by SEC 

(Armani phone, and SOUL phone) and LGE (Viewty phone, Voyager phone, and 

Prada phone), but the Haptic function has not been standing out. However, SEC’s 

Haptic phone with 22-vibration types focuses on the Haptic function, combining a 

wide range of interests in Haptic technology. 

117

Bhavin Shah 

(852) 2800-8538 


118 

Figure 66: Samsung’s F490 

(Haptic) 

Source: www. samsung.com. 


20 April 2009 

Imagis, a fabless IC design house in Korea, provides driver ICs for the VibeTonz 

system of SEC’s Haptic phone. Given the relatively low-entry barrier of driver IC 

coupled with high dependence on IMMR, we expect that benefits from the emerging 

Haptic trend to driver IC design companies could be limited. 

We also project Haptic-enhanced handsets to drive the demand for LRA (Linear 

Resonant Actuator), as LRA motors enable handsets to realize more dedicated 

movement of vibrations, compared to the ERM (Eccentric Rotating Mass) actuator 

type. We believe SEMCO is currently supplying LRAs for SEC’s Haptic phone. 

Jahwa Electronics (033240 KS, Not Rated) also claims that it is a potential 

beneficiary of the Haptic handset trends as it will likely provide LRA motors to 

SEC’s Haptic-enhanced handsets. 

SEC’s F490 (Haptic) 

SEC has come out with a new range of touchscreen phones which include the haptic 

feedback. The prominent ones are F480, F490 and Omnia. SECF490 has a 3.2-inch 

260,000 color touchscreen, 5MP camera and supports HSDPA. It has Haptic 

feedback, 16:9 wide screen, internet browsing. 

Acoustic components 

Acoustic components for the mobile handset can be categorized into built-in 

components and accessories. Built-in components include miniature receiver, 

microphone, polyphonic speaker and vibrator. Accessories refer to headset. 

Major handset acoustic component makers include Hosiden (Japan–receiver); 

Pioneer (Japan–speaker); Philips (Europe–speaker); AAC (China– 

receiver/speaker/microphone); Merry (Taiwan–headset); BSE (Korea–microphone); 

and Knowles (US–MEMS microphone). 

Acoustic components carry the critical task of receiving and producing sounds in 

mobile phones. Key trends for the technology development include: 

• Noise cancellation microphone: This has been adopted by Motorola in its 

ClearTalk technology, which uses 2 or 4 microphones to achieve the noisecancellation 

effect. 

• MEMS microphone: While more expensive, we believe MEMS microphone is 

more consistent and small in size. 

• Multi-functional device: Motorola first tried receiver/speaker/vibrator 3-in-1 

device in MOTOFONE in late 2006, and now Nokia is adopting this strategy to 

cut costs without sacrificing the acoustics performance. 

Camera module 

There are two key components within the phone camera module: (1) sensor; and 

(2) lens, which account for ~50% and ~20% module BOM cost, respectively. 

Packaging is another critical technology for making a good camera module. 

Sensors 

Due to cost concerns, most sensors used are complementary metal-oxide 

semiconductor (CMOS). CMOS sensor has come a long way from having low 

resolution a few years ago to now accommodating 8-10 mega-pixels in digital

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

cameras. As CMOS sensor is based on semiconductor technology, cost has been 

coming down fast due to improving yield. Some of the major CMOS sensor 

manufacturers are Micron, Omnivision, Toshiba, STMicro and Magnachip. 

Lens 

Phone camera lens is dominated by Taiwan and Japanese companies, including 

Largan, Genius Optical, Konica Minolta, Fujinon, Kantatsu and Enplas. There are 

small companies only capable of producing low resolution lens (VGA, 1.3MP, and 

2MP) and suffer from intense competition and low margins. On the other hand, 

leading companies such as Largan enjoy 50%+ gross margin, given the high entry 

barrier in the high-resolution lens space. 

A new technology that is now starting production is wafer-level lenses. In this 

process, thousands of lenses are manufactured on a semiconductor wafer 

simultaneously. These lenses are then diced into individual lens modules and 

mounted on top of an image sensor. This can result in ~30% cost reduction (higher 

yields and production efficiencies) and ~40% size reduction (module height of 

2.5mm). Key players in the wafer-level lens space are: Tessera, which licenses out 

the technology but does not do its own production; and Micron’s Aptina Imaging 

unit, which currently manufactures a VGA model. As this technology matures, it 

could be scalable to higher megapixel counts, but currently production efficiencies 

are best suited for VGA, in our view. 

Figure 67: Wafer-level lens 

Source: Tessera. 

Module 

Packaging is critical for camera module, given the size constraint. Depth is one of the 

key obstacles (the other being cost) for the adoption of high resolution camera 

module. 

The phone camera module market is more fragmented than the lens market. 

Flextronics and STMicro are the two largest players, and other viable players are 

Toshiba, Altus, SEMCO, Samsung Techwin, Chicony, Lite-on Tech, and Asia 

Optical. Gross margin for the phone camera module is around 10%-15%, but it could 

be higher for those manufacturers with in-house sensor supply, such as STMicro and 

Toshiba. 

Market 

Digital cameras in handsets are increasingly becoming a more staple feature. We 

believe the camera feature currently ranks behind only brand, pricing and design in 

119

Bhavin Shah 

(852) 2800-8538 


Table 62: Shipments of camera phones 

120 


20 April 2009 

terms of purchasing criteria for handsets. According to Gartner, digital camera 

handsets represented 56.4% of total handset sales in 2007, which is expected to rise 

to 91.5% by 2012. 

Millions of units 

2005 2006 2007 2008 2009E 2010E 2011E 2012E 

CAGR 

2008-12 

8 Megapixel 83.5 264.8 3,738.3 22,416.0 53,194.5 100,884.2 163,633.3 157.2% 

Total 


320,305.5 467,546.8 650,407.2 877,269.1 1,058,230.8 1,255,931.5 1,451,202.3 1,646,685.7 17.0% 

Resolution migration is slowing down for the mainstream 

After a fast migration from VGA to 1.3MP, upgrade to 2MP took more than a year, 

and further upgrade to 3MP took even longer (2MP is still the mainstream now). 

3MP appears to be gaining momentum, after a drastic ASP decline in 3MP camera 

module. We believe migration to above-3MP will be even slower. 

• 3MP to 5MP offers no obvious quality improvement on screen: Most people 

only use their mobile phones to take casual photos and would only view them on 

phone screen, which is too small to show details for 5MP resolution. 

• Resolution alone won’t be the key focus, in our view: We expect features, such 

as zoom, to become more important, which requires more complex packaging 

design and significant cost premium.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 68: Parts of a digital camera handset 

Digital camera module 

Japan Taiwan 

Flextronics Asia Optical 

Toshiba Chicony 

Altus 

Europe Lite-on tech 

STMicro Premier 

Korea Altek 

SEMCO Aiptek 

Samsung Techwin Largan 

Primax 

Shutter in camera model 

Nidec Copal 

Source: J.P. Morgan. Note: Image of the SGH-E700 is from the Samsung website. 

CMOS Sensor 

US Korea 

OmniVision Magnachip 

Micron Hynix 

STMicro 

Agilent 

Japan Taiwan 

Toshiba Pix Art 

Sony IC Media 

Matsushita TASC 

Sharp 

Lens/lens module 

Japan 

Enplas 

HOYA 

Matsushita 

Konica Minolta 

Canon 

Pentax 

Tamron 

Fuji 

Kantatsu 

Taiwan 

Largan 

Asia Optical 

Kinko Optical 

Genius Optical 

E-pin Optical 

Premier 

Korea 

Sekonix 

US 

Eastman Kodak 

Germany 

AGFA, Carl Zeiss 

121

Bhavin Shah 

(852) 2800-8538 


122 

Rod Hall AC 

(44-20) 7325 7437 

rod.b.hall@jpmorgan.com 

J.P. Morgan Securities Ltd. 

Charles Guo 

(852) 2800-8532 



Limited 


20 April 2009 

Mobile handset radio technologies 

What’s new? 

LTE is making some headway but potentially delayed by the slowdown 

The jury is no longer out on which 4G technology will end up winning the standards 

battle. LTE, in our opinion, has definitively won with even the CDMA camp 

announcing that it will converge into LTE for 4G. WiMAX, having no backward 

compatibility and no scale to speak of, can now only hope for a small niche role, 

covering rural areas for broadband services. 

Unfortunately, the deployment of any new technology, and particularly unproven 

ones like LTE, is expensive and time consuming for operators. In the current 

economic climate, we would expect operators to delay upgrade spending as they 

become more concerned about cash flow this year which could push the deployment 

of LTE further than anticipated earlier—potentially to 2012-2013 as opposed to 

2011, which is generally believed to be the time when large rollouts will begin. 

Mobile radio technologies: An introduction 

Current standards like GSM and CDMA focus on voice, while WLAN focuses on 

data transmission. 3G technologies, which currently include CDMA 2000 EV DO, 

WCDMA and TD-SCDMA, serve to combine both these tasks efficiently. As we 

move to 4G, all the 3G standards will converge into the LTE technology track, 

making that standard nearly ubiquitous globally and increasing cross network 

interoperability. WiMAX is an alternative 4G technology that is currently available 

and being deployed by a few new networks including, most notably, Clearwire in the 

US. 

Figure 69: 4G multi-standards system 

Source: IDC.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 63: Broadband wireless technology roadmap 

Technology Standard Throughput (shared) Frequency 

Edge 2.75G Up to 348 kbps 900, 1800, 1900 Mhz 

1X EV-DO 3G Up to 2.4 Mbps 400, 800, 900, 1700, 1800, 1900, 2100 Mhz 

WCDMA 3G Up to 14.4 Mbps w/HSDPA 900, 1800, 1900, 2100 Mhz 

TD-SCDMA 3G Up to 2Mbps 1900, 2000 Mhz 

HSPA + 3.5G Up to 42Mb/s downlink 900, 1800, 1900, 2100 Mhz 

Wi-Fi 802.11g Up to 54 Mbps 2.4 Ghz 

WiMAX 802.16d (fixed) Similar to HSPA Sub 11 Ghz 

WiMAX 802.16e (mobile) Similar to HSPA 2-6 Ghz 

LTE 3GPP release 8 


Figure 70: Evolution of wireless technologies 

Source: www.rysavy.com. 

Up to 100Mbps(D/L) 

Up to 50Mbps(U/L) 700, 900, 1800, 1900, 2100, 2600MHz 

HSPA (3G) 

The much higher data rate of 3G enables many new applications in communication, 

entertainment and real life. Video conferencing, email and internet access, music and 

video downloads, location-based services, mobile payment and electronic money are 

among the major applications. 

HSPA is the short form for high-speed packet access, also known as 3.5G. It is a 

broader term that encompasses HSDPA (high-speed downlink packet access), 

HSUPA (high-speed uplink packet access) and HSPA evolved. As 3G gets more 

popular, HSPA is expected to grow and offer speed similar to that of fixed-line 

ADSL. Currently, HSDPA is the more dominant technology among the three; 

however, HSUPA is also catching up fast. 

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20 April 2009 

HSDPA: Salient features 

It is a packet-based technology for W-CDMA and TD-SCDMA, providing up to 

14.4Mbps downlink connection speed for data transmission. 

• High-speed downlink share channel: It introduces an additional high-speed 

downlink share channel, and up to 15 channels can operate in W-CDMA to allow 

multiple users to share the downlink. The additional channel is to multiplex data 

to users, like a DSL model. 

• Adaptive modulation and coding (AMC): This is a fundamental feature of 

HSDPA, compensating variations in radio conditions. A network node first 

matches a user’s priority and estimates the operating environment with 

appropriate coding and modulation scheme, and then schedules the transmission 

of data packets. This practice could increase the throughput under favorable 

conditions. 

• Quicker error correction: Handsets usually confirm when they receive data and 

communicate key information back to the network. When this process is handled 

by the radio network control (RNC) system in R99 networks, HSDPA makes it 

quicker by processing directly in the base station. 

Advantage of HSDPA 

We believe that downloads of large attachments through mobile email is a major 

application that HSPA could potentially deliver, especially with rising competition in 

the push email market and the proliferation of mobile messaging devices. 

HSDPA considerably improves the downlink performance. It substantially reduces 

the time it takes for a mobile phone to download media formats; so the foreseeable 

purpose for this technology is mobile TV transmission. 

Handset models supporting HSDPA 

There are over 350 handset models that support HSPA networks. Almost all major 

handset OEMs have come out with HSDPA-enabled models, including Nokia with 

its 6110 Navigator and E90 Communicator, Motorola with Moto Q 9h, Sony 

Ericsson with Z750i, Samsung with SGH-i780, LG KS20, and many more. Even 

smart phone manufacturers such as HTC (TyTn II), RIM (BlackBerry Bold) and 

Palm (Treo 750) have brought out phones with HSDPA support. HSDPA-enabled 

handsets deliver data speed of up to 14.4Mbps. 

HSUPA 

HSUPA provides up to 5.7Mbps of uplink connection speed. It uses essentially 

similar error correction and modulation techniques as HSDPA to uplink transmission 

on a dedicated high-speed uplink channel. A few differences are in the way the 

scheduling works. In normal scheduling cases, devices ask permission from the node 

base station to upload data and the node station determines how many devices and 

what speeds are to be granted. However, for applications where the overhead on the 

base station is too large—e.g., VOIP—the power level is set by the device itself and 

is kept constant. Although HSUPA is not as widespread as HSDPA, it is catching up 

fast, with over 40 HSDPA networks already supporting HSUPA.

Bhavin Shah 

(852) 2800-8538 


Table 65: Handset sales forecast for 3G technologies 


20 April 2009 

Table 64: Current and future WCDMA + platform suppliers for the handset market 

Handset OEM Current 3G 

suppliers 

Future 3G suppliers 

Nokia Texas Instruments 

(TI) STMicroelectronics Broadcom, Qualcomm 

Motorola TI, Qualcomm 

Samsung Qualcomm, ST/EMP has a number of design wins over the next year. In the longer term, 

Infineon 

STM/EMP could be a major supplier with Broadcom maintaining a very 

small market share. 

Sony Ericsson STM-Eric EMP/STM-Eric 

LG Electronics Qualcomm major, Qualcomm remains but EMP is going to have a larger share of LG 


EMP minor shipments 

More to come: 3G services in EMs and HSPA in developed countries 

Hutchison Telecommunications also announced its X-Series launch, which is a suite 

of new services on its new HSDPA-enabled 3G networks in Australia, the UK, 

Denmark, Sweden and Hong Kong. Almost all developed countries have launched 

networks based on 3G technologies. In Japan, NTT DoCoMo and Softbank, in 

Europe (to name a few) Vodafone, T Mobile, Orange, etc., and in the US, AT&T and 

Stelera, are some of the companies which provide services on HSPA networks. 

Emerging markets are also catching up with this trend and similar services have been 

launched by America Movil in Latin America. Even more recently China has 

completed its 3G licensing policy and India has started 3G licensing. There are now 

over 200 HSPA-based networks in over 100 countries. 

3G to continue to grow as 4G is still some time away 

The delay in the finalization of 4G standards, which is expected to take another 1-2 

years, will leave scope for 3G to settle in. Handsets with 3G technology continue to 

grow as a proportion of the base of total handsets. As more and more emerging 

markets seem to get their 3G policy in place, we feel that the 3G penetration will 

continue to rise. 

We believe that 3G devices for both WCDMA and CDMA technology tracks grew as 

a proportion of total handsets in 2008 and are likely to expand again in 2009, driven 

by falling component costs, and operators in developed countries wishing to 

streamline the subscriber management processes. According to Gartner, 3G handset 

sales are going to rise to 935 million in 2012, from 324 million in 2008, representing 

a CAGR of 30%. 

Million units 2007 2008E 2009E 2010E 2011E 2012E 

HSDPA 23.9 79.9 123.3 176.2 219.7 252.6 

HSUPA 0.5 8.4 32.6 70.4 100.7 

WCDMA 139.5 157.7 210.5 266.9 322.8 408.5 

CDMA 1x EV-DO Revision A 1.0 10.2 30.4 62.3 89.2 103.9 

CDMA2000 1x EV-DO 50.1 75.4 67.3 67.3 63.1 60.1 

TD-SCDMA 0.1 1.8 3.4 6.1 9.0 

Total 

Source: Gartner. 

214.5 323.8 441.7 608.7 771.2 934.8 

Evolution of 4G 

4G will be a technology unifier, bringing all “generations” together. Whether they 

are complementary or competing, 4G will allow numerous existing and future 

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126 

developed heterogeneous communication technologies to inter-work in order to 

provide effective solutions for each, given the location and usage circumstance. That 

is why the competition between WiMAX (OFDMA) and LTE (OFDMA and 

CDMA) is expected to be the basis of 4G/IMT-2000 advanced technology. IDC 

believes that both TDD and FDD implementations will be developed to suit the 

different needs of different markets around the globe. 

4G networks are expected to provide broadband and P2P wireless access at speeds in 

the range of 100Mbps. Intel is working on programmable or reconfigurable devices 

and base stations through software-defined radios (SDR). According to IDC, 

universal mobile phones in the future will have an SDR which will enable them to 

connect to WLAN, 2G, 3G, 4G radio, and many other types of short-range interfaces 

such as UWB (ultrawide band) and Bluetooth. Also, 4G networks will access the 

internet via IPv6 which will drive network equipment makers to build routers and 

switches to support both IPv4 and IPv6 simultaneously in the mid-term. 

Figure 71: 4G / IMT-2000 will use the best of mobile cellular/broadband wireless characteristics 

IPv6, IP-Core, IP BTS, 

Multirate, >5Bps/Hertz, 

4G 4G Convergence 

Convergence > 120Kph 

2009–2010 

2007–2008 

HSPA Ev., LTE Rel 8 

HSUPA, EV-DO Rev A 

2005–2006 

HSDPA, CDMA2000 EV-DO 

Source: IDC. 

3G W-CDMA, CDMA 1X 


20 April 2009 

IMT-2000 IMT-2000 Advanced 

Advanced 

Dual mode 

basestations 

and end-user 

terminals 

WiMax+MIMO Wave 2 

Mobile WiMax 802.16e 

Fixed WiMax 802.16-2004d 

WiFi 802.11a,b,g 

Mobile cellular Broadband wireless access 

2008–2010 

2007–2008 

2006–2007 

4G market developments 

Qualcomm has relied heavily on intellectual property licensing and the rights 

associated with CDMA and UMTS technologies. The company has made a strategy 

towards 4G by acquiring Flarion and its OFDM patent for US$600 million. Flarion 

was one of the early OFDMA mobile wireless broadband technology companies. 

In 2008, Verizon announced that it is targeting a 2010 time frame to launch its LTEbased 

network. Recently, at the MWC-2009, the company announced its 4G 

equipment providers as Ericsson and Alcatel Lucent. Similarly, AT&T has indicated 

that it will deploy LTE on its newly acquired bands in 700MHz.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

China is building its own 4G system by learning from the TD-SCDMA experience. 

The standard is called TD-LTE and is funded by the Ministry of Science & 

Technology, and it is planning to submit a proposal for 4G to ITU in 2009. 

According to IDC, North Asia is set to become an industrial cluster for 4G devices 

and equipment. We believe, with the wealth of consumer electronics companies in 

the region, the convergence of consumer electronics and 4G is just a matter of time. 

LTE (4G) 

Long term evolution, or LTE, is the mainstream solution for 4G wireless and will, in 

our opinion, be the prevalent technology. However, we do not expect LTE to be 

widely deployed until 2012/13 as existing WCDMA and CDMA-based networks are 

still in the process of being upgraded. While the hype is significant around both LTE 

and WiMAX, and both utilize OFDMA coding techniques, the reality is that neither 

technology offers major efficiency gains over existing WCDMA or CDMA EVDO 

technologies, in our view. Both offer flatter network architectures as well as some 

improvements in user experience—mainly in the form of lower latency. LTE has a 

major added benefit over WiMAX of being backward compatible with pre-existing 

mobile technologies—probably including the less dominant but still important 

CDMA technology track. 

Because of this backward compatibility point, we expect LTE to be adopted by a vast 

majority of wireless operators. In addition, as the only spectrum available for 

WiMAX is the much higher frequency 2.3Ghz+ band, the deployability of that 

technology is far less than that of technologies such as LTE which will have the 

luxury of operating on existing lower-frequency bands, currently reserved for 

WCDMA and CDMA EVDO systems. 

We summarize LTE performance requirements in the table below but note that the 

standard is still very much under development and is, therefore, likely to materially 

change prior to the full-scale deployment. Early trial networks, however, are slated 

for 2009 but we believe this could now be delayed as carriers look for ways to trim 

back capital spending in the face of the global recession and credit crunch. 

Table 66: LTE performance requirement 

DL: 100Mbps 

UL: 50 Mbps 

Peak data rate (for 20 MHz spectrum) 

Upto 500Kmph 

Mobility support Optimized for low speeds (0 - 15 Kmph) 

Control plane capacity >200 users per cell (for 5MHz spectrum) 

Coverage (cell sizes) 5-100 Km with slight degradation after 30Km 

Frequency bands 

Source: Motorola. 

To operate in re-farmed GSM bands, viz 900 MHz and 1800MHz, besides 

these other possibilities include 700 MHz and 2.1 GHz 

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Bhavin Shah 

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Mobile WIMAX is 1-2 years 

behind HSPDA 

128 


20 April 2009 

Table 67: Evolution of 3GPP technologies 

Generation 

Family 

3GPP 3GPP2 

2G GSM 

EDGE 

GPRS 

CDMA one 

3G UMTS/ WCDMA CDMA 2000 

HSDPA 

TD-SCDMA 

EV-DO 

4G 

Source: J. P. Morgan. 

E-UTRA 

LTE 

Support for LTE 

LTE has the support of almost all the members of 3GPP including Ericsson, Alcatel 

Lucent, Nokia, Motorola, Broadcom, Agilent Technologies, Vodafone and Verizon. 

Infineon has introduced the world’s first single chip 2G/3G/LTE RF transceiver in 

Jan-09, for LTE-based handsets. 

WiMAX (4G) 

WiMAX is an umbrella term referring to certified equipment that meets certain 

conformity and interoperability tests for the IEEE 802.16 family of standards. There 

is a wireline standard, 802.16-2004, and a mobile standard, 802.16e, which was 

approved in December 2005. An 802.16m true mobility standard is also under 

consideration as the practical mobility of the 802.16e standard is not thought to be 

sufficient for vehicular mobility. Our discussion focuses on mobile standards. For 

discussion on fixed WiMAX, refer to the broadband section of this supply chain 

guide. 

‘WiFi’ is a contention-based protocol—i.e., all subscriber stations wishing to pass 

data through an AP are constantly competing for its attention. By contrast, WiMAX 

uses scheduling at the media access control layer, which means that the terminal only 

has to compete once for the initial entry into the network. 

Mobile WiMAX 

Mobile WiMAX is a ‘greenfield design’, based on latest state-of-the-art technology. 

Compared to cellular technologies such as GSM, GPRS or UMTS, mobile WiMAX 

is already fully IP-based and has QoS ‘built in’. It already uses (scalable) OFDMA, a 

standard that protects against interference and enhances spectral efficiency. 

Mobile WiMAX equipment is initially designed for three main frequency ranges, 2.5, 

3.5, and 5 GHz. Depending on the modulation, the downlink/uplink (UL/DL) ratio 

and the channel width, the theoretical system capacity (peak rate per shared sector) is 

high. For the 3:1 DL/UL ratio, the sector peak bandwidth is 46/8 Mbps, and for the 

1:1 DL/UL ratio, it is 32/14 Mbps. The goal is to provide support for vehicular 

speeds in excess of 120km/h. However, initial 802.16e versions (release-1) are likely 

not to exploit all the benefits of scalable OFDMA, and offer only restricted mobility 

(up to 60km/h). 

Expected timing 

As always with wireless technologies, one should expect a gap of many years 

between the standard specification and mass-market product, in our view. 

Clearwire/Sprint have made major advances in developing WiMAX standards to a

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

deployable state and are now actively rolling out their network in the US. However, 

terminal availability is still extremely limited with just a handful of handsets 

available. We believe that WiMAX services will continue to focus on the provision 

of mobile broadband, as providing USB dongles for laptops is a much less 

challenging problem than convincing handset vendors to produce devices for what is 

a very limited market—particularly when the global handset market is under 

significant pressure from a demand point of view. 

Table 68: Worldwide sales of WiMAX-enabled phones by region (2008E-2011E) 

(‘000) 

2008E 2009E 2010E 2011E 

Africa 1.7 10.5 35.8 86.0 

Asia/Pacific 226.1 1,274.9 3,612.8 7,751.6 

Eastern Europe 4.2 22.9 78.0 172.9 

Japan 0.0 0.0 425.5 1,543.3 

Latin America 101.9 405.7 945.9 1,529.8 

Middle East 1.9 14.5 43.8 97.0 

North America 246.8 1,022.8 2,732.2 4,643.4 

Western Europe 149.3 906.8 2,044.7 3,807.5 

Total 

Source: Gartner, Dataquest. 

731.9 3,658.1 9,918.7 19,631.5 

WiMAX supporters 

Intel is the leading proponent for WiMAX, positioning it for the next phase of its 

Centrino mobile platform. Sprint Nextel and Clearwire reached an agreement in 2007 

whereby they teamed up to provide 4G connectivity based on the WiMax platform. 

Leading cellular infrastructure vendors, including Alcatel, Siemens, Nokia, Samsung 

and Nortel, as well as Chinese vendors such as ZTE and Huawei, have also signaled 

support for the technology by joining the WiMAX forum. Samsung is making an 

aggressive push in 4G, investing more than US$300 million in WiMAX and 

WiBRO, and winning a major contract with Sprint Nextel to supply 10MHz channel 

mobile WiMAX network infrastructure and handsets. Samsung has also developed a 

dual-mode WiBro/CDMA2000 handset for the Korean market. However, the absence 

of a strong ecosystem and the lack of interest from key handset industry players 

might restrict WiMAX from becoming a niche technology, in our view. 

Industry watchers believe that WiMAX is more suited for the deployment in 

developing countries. The lack of wire-line infrastructure, businesses’ need for 

broadband internet service, and the increased availability of low-cost PCs have 

created an unfulfilled demand for broadband wireless access in developing countries. 

As a result, we believe that a number of African and Latin American companies are 

adopting WiMAX-based solutions for mobile broadband. 

In Aug-08, ZTE won a bid to set up a WiMAX network for Colombia’s Emcali. 

Similarly, in December 2008, Costa Rica’s leading telecom operator ICE awarded a 

$6 million contract to Israel-based Alvarion Ltd. to set up a mobile WiMAX network 

in the 2.5GHz band. According to an estimate by Alvarion, there are over 100 

WiMAX networks in Africa in the 2-4 GHz range. 

According to Dell Oro, the mobile WiMAX equipment market has quadrupled from 

the third quarter of 2007 to the third quarter of 2008. Leading players are Alcatel- 

Lucent, Samsung, Motorola and Alvarion, which represent nearly 90% of the total 

market. 

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20 April 2009 

Silicon content 

The WiMAX Forum launched its certification program in 2005, detailing its 

certification process and timeline. Products compliant with the WiMAX certification 

were released in January 2006. Certified products for fixed access are now available 

and the momentum for mobility enhancements continues to grow with the increasing 

involvement of mobile operators and equipment manufacturers. The WiMAX Forum 

has more than 420 members comprising majority of operators, and component and 

equipment companies in the communications ecosystem. 

Intel 

Intel’s Centrino platform is currently driven by wireless LAN. Intel had a marketleading 

share in wireless LAN shipments within notebook PCs, and will use its 

marketing muscle to promote WiMAX, in our view. Significantly, the company also 

has OEM relationships with service providers like Alvarion, Aperto, Proxim, Redline 

and Siemens Mobile for fixed wireless broadband. It delivered the fixed SoC 

WiMAX solution, Intel WiMAX connection 2250, which enables WiMAX modems 

for use in fixed or mobile networks. 

Fujitsu Microelectronics is one of the principal WiMAX promoters. Fujitsu in 

October 2007 announced the integration of Agilent’s WiMAX test solutions into 

Fujitsu’s chipset solution for mobile WiMAX. In February 2009, the company 

launched the MB86K23 mobile WiMAX baseband IC. 

Several single-chip solutions were introduced in 2008 for WiMAX by companies 

such as Maxim, Sequans and GCT semiconductors. In addition, the WiMAX Forum 

includes various other chip and component makers. Hellosoft, Analog Devices, 

Texas Instruments, Wavesat, Picochip, and STM-NXP Wireless are other 

semiconductor providers that are providing chips that support WiMAX.

Bhavin Shah 

(852) 2800-8538 


Figure 72: Radio frequency standards 

DAB 

1452MHz 

L Band; 

174MHz 

Band 3 

Source: IDC. 

M-FLO DMB 

WiMAX 

2.3GHz, 2.5GHz, 

3.5GHz, 5.8Ghz 

LTE 

800Mhz, 

2.5GHZ 

700MHz 

802.11g 

2.4GHz 


20 April 2009 

Broadcast 

2.0GHz 

HSDPA 

Bluetooth 

2.45GHz 

LAN 

GPS 

GSM 

Cellular 

Mobile 

800/900MHz, 

1800/1900MHz 

802.11n 

2.4GHz 

1575MHz 

L1 Band 

Personal 

access 

WCDMA 

DVB-H 

UWB CDMA2000 

3–6GHz 

Satellite: UHF 2.6GHz 

Terrestrial: VHF Band 3 

200MHz 

2.0GHz 

1.9GHz 

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(852) 2800-8538 



Limited 

Table 69: Operators’ bundling and pricing strategies 

132 


20 April 2009 

Voice over IP (VoIP) 

VoIP permits the movement of voice traffic over an internet protocol-based network 

where in voice is digitized and broken into a series of packets at the transmitting end 

and then reassembled and decoded at the receiving device. 

VoIP is often confused with internet telephony (voice packets are sent over the 

internet) and IP telephony (voice packets are sent over private IP LANs and WANs). 

IP telephony includes the call processing functionality inherent with voice 

conversation, along with support for a range of newer, end-user applications, such as 

personal desktop productivity, multimedia, collaboration and mobility. VoIP relates 

to the network infrastructure, whereas IP telephony is a larger, more encompassing 

term used to describe telephony applications in an IP environment (including VoIP). 

For a complete discussion differentiating traditional packet switched telephone 

network (PSTN) from VoIP networks and detailing Enterprise IP telephony systems 

and key drives, refer to Supply Chain Guide, 5th Edition. 

Consumer broadband, voice and video bundling tactics 

Bundling is used to sell new services to existing customers and acquire new ones. It 

is a key strategy for winning back customers, offsetting technology substitution. It 

helps the incumbent to defend themselves against competition and new revenue 

generation. 

Declining revenue from fixed-voice services in most markets across the world, 

increasing technological “convergence” of voice, video and data services has 

intensified competition. Competing platforms provide a broad range of similar 

functionalities, making it difficult for the carriers to grow vertically or horizontally. 

Competitive pressure and changing consumption habits are encouraging carriers to 

market triple-play and quadruple-play services that include telephony, internet access 

and television. 

Strategy Likely adopter Objectives Operators 

Flat-Rate Discount Incumbent To exploit forms of complementarity between components 

To deter entry and/or to harm entrants' profitability 

SingTel 

Flat-Rate Discount Competitor To make quick inroads into the value chain StarHub 

Discount on the new service Incumbent To leverage its market power to reduce rivals' profits and drive them out of the market 

To reduce entrants' potential profits 

To mitigate the impact of an effective entry on the incumbent 

AT&T, Telstra 

Discount on the core Competitor To achieve better price discrimination Maxis, Airtel, Optus 

No discount 

Source: Gartner (January 2008). 

Incumbent/competitor To credibly commit to aggressive, innovative investment and cost cutting R&D 

To save production and transaction costs 

To extract the full consumer surplus 

France Telecom 

VoIP for mobile telephony 

Skype 

At CES 2009, Skype’s COO Scott Durchslag talked about offering Skype clients for 

mobile platforms. With the launch of Skype on iPhone in the first week of April 

2009, the original PC-based VoIP client is now available in its mobile version for 

Nokia, Windows Mobile, Apple iPhone, and Google Android phones, while its 

Blackberry version is expected to be available by May.

Bhavin Shah 

(852) 2800-8538 


Figure 73: Skype on iPhone 

Source: www.pcworld.com 


20 April 2009 

Skype iPhone app works only over Wi-Fi, i.e. the calls can be made only using Wi-Fi 

networks and not over the cellular data network. iPod Touch users can also use this 

application; however, they will require a headphone with built in mic. The app uses 

the phone numbers from phone’s address book and even displays contact photo. 

Conference call feature is available, but it requires iPhone users to be invited. SMS, 

video & proper conference call, voicemail, file transfer are some features missing in 

this version. Despite the limitations, Skype registered more than a million downloads 

on the first two days of its launch. 

Google Voice 

Google Voice, Google’s revamped version on GrandCentral Communication 

(acquired in 2007), was unveiled on March 12, 2009. This VoIP service for 

PC/mobile phones gives users one phone number for all calls and messages wherever 

the user might be. It provides free local (US) calls and comparative call rates with 

other VoIP service for international calls. Other features include call screening, call 

blocks & forwards, listen before taking a call, conference calls, call record, call 

transcript, switch phones during a call, and voicemails. 

Although the service was only recently launched and is currently available only for 

GrandCentral users, much hype is being built across its integration with Android. We 

believe this integration would be a major driver in the upcoming mobile-VoIP 

market. 

Figure 74: Google Voice 

Source: http://googlevoiceblog.blogspot.com 

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20 April 2009 

VoIP Semiconductor market 

According to IDC, the VoIP semiconductor market is expected to grow from $544 

million in 2008 to $583 million in 2013 at a modest CAGR of 3.5%. VoIP is yet to 

prove its case as a cost-efficient standalone technology and, with the worsening 

global economy, its mass adoption is further hampered by both enterprises as well as 

service providers cutting their capex budgets. 

In general, VoIP adoption as a standalone technology continues, but on a relatively 

small scale. VoIP services are primarily consumed as part of a service package (e.g., 

triple-play or quad-play services) sold by the telcos and the cable MSOs of which 

consumers give more value to the video and broadband Internet access parts than 

support for VoIP services. Companies have realized the growing significance and 

demand of video services and have started developing video support into their 

solutions to increase the value proposition of VoIP. However, whether this video 

offering over VoIP connection translates into increase in demand remains to be seen. 

Table 70: Worldwide VoIP semiconductor revenue by application segment, 2007–2013 

$ in millions 

2007 2008 2009 2010 2011 2012 2013 2009–13 CAGR (%) 

IP PBX 128.6 138.9 133.4 135.4 137.4 146.3 154.9 3.8 

Media gateway 229.7 245.1 225.8 228.1 237.1 253.5 272.4 4.8 

IP phones 140.2 159.6 148.5 147 151.1 153.6 156.1 1.3 

Total 

Source: IDC, 2009 

498.5 543.6 507.8 510.4 525.6 553.3 583.5 3.5 

VoIP carrier equipment market 

The following section has been excerpted from our US Communications Equipment 

& Data Networking analyst Steven O'Brien's Sonus Networks initiation report, 

originally published on 15 July 2008. Please see MorganMarkets for the full report. 

We expect the VoIP carrier equipment market to maintain double-digit growth 

We are forecasting the VoIP carrier infrastructure equipment market—i.e. media 

gateways and softswitches sold to carriers—to grow at a 12% CAGR from 2007- 

2010, resulting in a total industry revenue opportunity of nearly US$3.0 billion in 

2010, almost 50% greater than our 2007 market size estimate of US$2.1 billion. 

While not staggering compared to the 21% CAGR we forecast for the carrier 

Ethernet infrastructure equipment market over the same time period, we forecast 

carrier VoIP market growth to fall near the middle of comparable communications 

infrastructure markets in the coming years.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 75: Carrier VoIP infrastructure market 


3,500 

3,000 

2,500 

2,000 

1,500 

1,000 

500 

0 

1,570 

616 

953 

1,900 

623 

1,277 

2,129 

740 

1,389 

11.8% CAGR 

2,425 

825 

1,600 

2,720 

900 

1,820 

975 

2,000 

2005A 2006A 2007A 2008E 2009E 2010E 

Source: Synergy Research Group and J.P. Morgan estimates. 

Media gatew ay rev enue Softsw itch rev enue 

Competition 

Several large diversified equipment vendors are incumbent suppliers to the biggest 

global wireline and wireless carriers and hold substantial share in the VoIP 

equipment market. Among those vendors, we believe Nokia Siemens Networks, 

Nortel Networks and Cisco Systems are major players, given their large share in 

overall communications equipment spending and relative strength in media gateways 

and softswitches. Other large integrated vendors competing in the relatively 

fragmented VoIP equipment market include: Alcatel-Lucent, Ericsson, Huawei, and 

NEC. 

Figure 76: Estimated FY07 market share 

Others 

34% 

Huaw ei 

5% 

ALU 

7% 

Cisco 

11% 

Nortel 

19% 

Sonus 

11% 

Source: Synergy Research Group and J.P. Morgan estimates. 

NSN 

13% 

We believe Sonus is the strongest vendor among pure-play providers 

Historically, as next-generation technology, the carrier VoIP infrastructure market 

has supported a number of upstart vendors. Among this group which includes public 

companies AudioCodes and Veraz Networks we believe Sonus has emerged as the 

2,975 

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20 April 2009 

strongest pure-play vendor to the VoIP infrastructure market in terms of product 

breadth, and the ability to meet the needs of Tier-1 services providers. Sonus 2007 

revenue of US$320 million exceeded the combined US$284 million total for 

AudioCodes and Veraz. 

For further discussion on VoIP OEM and semiconductor market refer to Supply 

Chain Guide, 5th Edition.

Bhavin Shah 

(852) 2800-8538 



(852) 2800-8538 



Limited 


20 April 2009 

Video conferencing 

A videoconference or a video teleconference (VTC) is a set of interactive 

telecommunication technologies that enables simultaneous audio-visual multi-way 

communication between multiple locations. Communication can take place over the 

publicly switched telephone network (PSTN), or over the internet (via IP). 

Videoconferencing has been in existence for over a decade, but had limited use 

because of high initial set-up cost and complexity. However, with recent 

advancements in carrier bandwidths, high-speed broadband technologies, digital 

equipment, better encoding-decoding technologies and advanced hardware and 

software support, the popularity of internet video conferencing has increased. With 

the current financial crisis leading to corporate cost cuts, we think demand for 

VTC is slated to increase as in many cases VTC is a cheaper alternative to 

business travel. 

Several standards for video conferencing have been developed. The three most 

popular standards are: 

• H.320—Used for ISDN (integrated switched digital networks) or digital 

telephone lines. 

• H.323—Used for IP (internet protocol) conferences; it enables video 

conferences over the internet. 

• SIP (session initiation protocol)—A signaling protocol used in areas such as 

telephony, presence, video, instant messaging, online games and events 

notification in general. 

Video conferencing system components 

The main components of a basic video conferencing system are: 

1. Video input—Video camera or webcam, preferably a pan, tilt and zoom (PTZ) 

camera. 

2. Video display—Monitor, projector and television. 

3. Audio components—Microphone, speakers, headset (for personal use), with 

echo cancellation. 

4. Codec (compressor/de-compressor)—The primary requirement for translating 

audio/visual input into digital output (compression), and for translating that input 

back into audio/visual output. It also enables efficient data transfers and is 

available both in software and hardware. 

5. Data transfer—Analog phone network, LAN, or internet protocol. 

6. User interface—Allows interoperability in the case of fully H.323-complaint 

systems. 

137

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Figure 77: Videoconference system diagram 

Source: Texas Instruments. 

138 


20 April 2009 

Types of video conferencing systems 

Videoconferencing systems can be classified primarily into four categories: 

Software-only desktop clients; hardware-assisted PC clients; integrated USB desktop 

units; and standalone set-up units. Besides software-only desktop clients, the 

remaining three categories require some hardware (besides the camera) to enable 

VTC—thus, the software-only solution has made VTC more accessible to the general 

population. We describe all four solutions in Table 71 below.

Bhavin Shah 

(852) 2800-8538 


Table 71: Types of video conferencing systems 

• Compression/decompression is done in software. 

Software-only desktop 

clients 

• 

• 

• 

Requirements: Video camera, microphone and speakers. 

Very inexpensive solution. 

Additional features like application sharing capabilities are bundled with some of the software. 

• Examples: Microsoft NetMeeting and Office LiveMeeting, CuSeeMe Networks’ CuSeeMe Pro, WebEx. 

• Also known as personal desktop videoconferencing systems 

• Setup includes: An onboard card for video capture and codec hardware, an analog video camera, some software, a 

Hardware-assisted PC 

microphone and a headset. 

clients 

• Pros: Relatively inexpensive (US$700 to US$2000), good video quality, adequate for a group of 3-5 people in front of PC. 

Cons: Installation is not always straight forward. 

• Being replaced by integrated USB desktop units. 

• Latest in the market, easy to install and simple to use. 

Integrated USB desktop • Consists of a self-contained video camera, a mic and a codec, which connects to PC via a USB port. 

units 

• Supports 30fps and suited to a small group seated in front of camera. 

• Examples: VCON HD 7000pro, VCON ViGO. 

• Requires only a network connection and an NTSC (TV) monitor. PC hookup not needed. High quality video. 

Stand-alone set-top units 

• System includes: High quality PTZ cameras, hardware codecs, microphones and addition I/O support for additional 

cameras, projectors, VCRs, etc. 

• Examples: Polycom VSX series and media center. 

• Advanced form of standalone units having special built-in studios/ rooms, designed primarily for big business. 

Telepresence 

• Highly advanced systems with multiple high definition large-size displays and cameras. 

• Examples: Cisco TelePresence, HP Halo, etc. 

Source: http://www.uic.edu/depts/accc/itl/pubs/ipvc/index.html and J.P. Morgan. 

Figure 78: Cisco TelePresence 

Source: www.cisco.com. 


20 April 2009 

Telepresence 

Telepresence can be described as videoconferencing with a feel of the physical 

presence of conferencing partners. With high-definition single or multiple largescreen 

displays, advanced codecs, technologies for synchronized display, echo 

cancellation, high-definition cameras and specially designed rooms/studios, 

conferencing people on opposite ends of the world feel as if they are in the same 

room. In the following section, we discuss two major products: Cisco TelePresence 

and HP Halo. 

Cisco TelePresence 

Cisco Systems launched Cisco TelePresence in October 2006 to provide in-person 

meeting experience by combining high-definition video, high-quality spatial audio 

and an interactive environment under a setup that makes two remote locations appear 

in a single conference room. In TelePresence, Cisco uses standard technologies with 

specialized hardware and supporting applications. 

Cisco TelePresence: Features 

(The description of product features in this section has been reproduced from 

cisco.com) 

Audio/visual technology 

Cisco TelePresence incorporates some of the latest standards and technologies: 

• H.264 video codecs offer quality images and low bit rate. 

• SIP, low-latency architecture and low bandwidth utilization. 

• Native 720p and 1080p high-definition cameras and encoding/decoding. 

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20 April 2009 

• Wideband advanced audio coding with low delay (AAC LD). 

• Multi-channel spatial audio with echo cancellation and interference filters to 

eliminate feedback from mobile devices. 

• Environmental conditioning to improve audio and video quality and the 

overall user experience. 

Network 

Cisco TelePresence uses IP technology and runs on an integrated voice, video and 

data network. The system supports real-time voice and video communications 

between various offices of an organization through broadband internet connection. It 

supports high-bandwidth applications such as high-definition video, which requires 1 

Mbps to 5 Mbps, depending on the resolution. 

Hardware-optimized environment 

It includes purpose-built office furniture, which incorporates cameras and displays, 

lighting, speakers, microphones, and projection capability into a specially-designed 

table for larger rooms, or, in smaller configurations, into existing office furniture. 

Software applications 

Cisco TelePresence applications have various new and existing standard-based 

software to provide converged voice and video transmissions, including: 

IP telephony: Cisco TelePresence works with IP-based phones and call-processing 

systems of major networking and telecommunications vendors. It uses a telephone 

instead of a remote control to simplify launching of calls. 

Groupware: Integration with enterprise groupware solutions (such as Microsoft 

Outlook and Lotus Notes) enables easy scheduling of meetings and access to 

corporate information. 

Services: Cisco TelePresence enables easy scheduling, management, reporting, 

billing, and metrics applications for tracking and bill-back of activity on the system, 

as well as real-time support services.

Bhavin Shah 

(852) 2800-8538 


Cisco TelePresence Solution overview 

Table 72: Cisco TelePresence solutions overview 

Source: www.cisco.com. 


20 April 2009 

CTS-3000 (US$300,00) 

• For business meetings with up to six participants per room 

• Three 65" high definition plasma displays 

• Three high definition cameras 

• Three wide band microphones and speakers 

• A lighting shroud integrated around a purpose-built meeting room table 

• A Cisco 7975G IP phone is used to launch, control, and end the meeting 

• Participants are displayed life-size with two participants per screen/table segment 

• An optional WolfVision® document camera may be installed in the ceiling so that objects and documents 

placed on the table surface may be viewed as well 

CTS-3200 (US$340,000) 

• For large group and cross-functional team meetings of up to 18 participants per room 

• Three 65" high definition plasma displays 

• Three high definition cameras 

• Nine wide band microphones and three speakers 

• A lighting shroud integrated around a purpose built meeting room table 

• A Cisco 7975G IP phone is used to launch, control, and end the meeting 

• Provides an option for supporting up to three additional graphics displays for convenient viewing of PC 

graphics via an HDMI splitter. 

CTS-1000 (US$80,000) 

• For small group meetings and one-on-one conversations, seating up to two participants per room 

• One 65" high definition plasma display 

• One high definition camera 

• One wide band microphone and speaker 

• A lighting shroud integrated over the display 

• A Cisco IP phone is used to launch, control, and end the meeting 

• An optional WolfVision® document camera may be installed on the table so that objects and documents 

placed on the table surface may be viewed as well 

CTS-500 (US$33,900) 

• Designed with a smaller form factor and streamlined footprint to fit easily into private offices or public locations 

• Consists of an integrated 37" display, camera, microphone, speakers, and lighting 

• Available in three configurations: 

o Free-standing pedestal 

o Wall mount 

o Table top 

Cisco TelePresence codec 

• The codec is the engine which drives the entire Cisco TelePresence solution 

• All displays, cameras, microphones, and speakers connect to it and it communicates with the network and 

handles all audio and video processing 

• Runs a highly-integrated version of the Linux operating system on an embedded compact flash module and is 

managed via SSH and HTTPs protocols 

• CTS-3000 and CTS-3200 consist of one primary and two secondary codecs 

• CTS-1000 and CTS-500 consist of a single primary codec 

Cisco Unified 7975G IP phone 

• Used to launch, control, and conclude meetings 

• Allows user to place the call on hold or conference in an audio-only participant 

• When used in conjunction with Cisco TelePresence Manager, the schedule of meetings for the day is 

displayed on the phone and the user simply touches the appropriate location on the screen to launch that 

scheduled meeting 

Cisco TelePresence multipoint solutions 

• Required to enable CTS meeting between more than two rooms 

• Linux-based appliance running on a Cisco 7800 Series Media Convergence Server platform 

• Provides high-capacity, low-latency multipoint switching for Cisco TelePresence only 

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20 April 2009 

HP Halo 

HP Halo is another telepresence product, launched by Hewlett-Packard in December 

2005, to provide videoconferencing solutions to businesses. HP Halo telepresence 

solutions are fully managed by HP; it provides a private dedicated network (HVEN), 

high resolution displays and specially-designed rooms and studios (by DreamWorks 

Animation in partnership with HP) across the world. HP checks and calibrates Halo 

device’s individual IP address and monitors routers, servers and network 

components. It provides three configurations: 

• HP Halo Collaboration Studio; 

• HP Halo Collaboration Meeting Room; and 

• HP Halo Collaboration Center. 

For more details on these configurations, please refer to Table 73. 

HP Halo: Features overview 

(The description of product features in this section has been reproduced from 

www.hp.com/halo) 

• Halo, with its multi-point capabilities, enables collaboration with up to 16 

different participants located around the world with superior eye contact and 

geometric consistency. 

• Its dedicated collaboration channel includes a high-definition collaboration 

screen and a software that allows sharing of presentations, video or computeraided 

design (CAD) images from computers or viewing of hard copy documents 

or handheld objects via a high-definition document camera. 

• Halo studios use HP proprietary graphical user interface and software that 

establishes connection with a few mouse clicks. 

• The studios are designed for optimal collaboration with sound-absorbing wall 

coverings, fully-duplexed sound, a graphic eye lighting control system and 

executive furnishing. 

• HP provides assistance to users by providing advice and recommendations from 

studio construction to final delivery of ready-to-use studio and its maintenance. 

• The Halo equipment rack can be integrated into the front wall of a studio to 

reduce studio site preparation costs by eliminating the need for a separate 

equipment room, while providing ease of access to the studio equipment.

Bhavin Shah 

(852) 2800-8538 


HP Halo Telepresence solutions overview 

Table 73: HP Halo telepresence solutions overview 

Source: www.hp.com/halo. 

Table 74: Telepresence ecosystem 


20 April 2009 

HP Halo Collaboration Studio 

• Actual telepresence studio installed in a designated space 

• Includes specially-designed sound-absorbing wall coverings, fully-duplexed spatial audio with echo cancellation, a 

graphic-eye lighting control system and an executive table with chairs 

• Price: US$349,000 + US$18,000 monthly service 

HP Halo Collaboration Meeting Room 

• Can easily seat six people 

• Flexible design for installation in an existing, larger conference room space 

• Price: US$249,000 + US$18,000 monthly service 

HP Halo Collaboration Center 

• Smallest and most adaptable 

• Available as 2-seat/4-seat models 

• Flexibility of locations including executive’s office and conference room 

• Optimal for an executive or small group 

• Price: US$135,000 (for four-seater) and US$ 120,000 (for two-seater) + US$9,900 monthly service 

Market adoption 

HP Halo’s customers and network have been growing since its launch. Its current 

customer base includes companies such as ABN AMRO, AIG Financial Products 

Corp., AMD, AstraZeneca, BHP Billiton, Canon, Dow Chemical, DreamWorks 

Animation, General Electric Commercial Finance, Novartis, and Toshiba. 

According to hp.com, HP’s official website, as of August 2008, HP Halo 

Telepresence Solutions were present in 22 countries in five continents—they were 

either in operation or in the process of being installed. These countries include 

Australia, Brazil, Canada, Chile, China, Denmark, Finland, France, Germany, Hong 

Kong, India, Ireland, Israel, Japan, the Netherlands, Singapore, Spain, Sweden, 

Switzerland, Taiwan, the United Kingdom and the United States. 

Telepresence managed service providers Iformata, Nortel, IVCi, BCS Global, York Telecom, and Avaya 

Carriers, IP network providers, and inter-connection MASERGY, Hibernia Atlantic, BT and BT Conferencing, AT&T, Verizon Business, SprintNextel, Savvis, 

providers 

WireOne, Glowpoint, telx, and others 

Telepresence sub-system and peripheral vendors HaiVision, Tandberg, Polycom, LifeSize, Electrosonic, Polyvison, WolfVision, SMART Technologies, 

Codian, Sony, and others 

Telepresence systems integrators Dimension Data, Presidio, The Whitlock Group, ATK Services, and others 

Networking equipment vendors Cisco Systems, Juniper, and others. 

Publicly available telepresence providers 

Source: www.hp.com, J.P. Morgan. 

PangeAir, Regus, etc. 

143

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Televisions ................................................................................. 148 

What’s new? .................................................................................................................148 

TV market snapshot......................................................................................................149 

Flat-screen TVs: LCD versus PDP ...............................................................................152 

LCD-PDP competition..................................................................................................155 

Full HD (1080p) ...........................................................................................................156 

Global TV makers’ strategies .......................................................................................156 

Technology discussion: Flat panel displays..................................................................162 

OLED: Technology for future ......................................................................................170 

Internet-protocol television (IPTV) ........................................... 172 

What’s new? .................................................................................................................172 

Market overview...........................................................................................................173 

Why is IPTV important?...............................................................................................174 

IPTV architectural demands .........................................................................................175 

Main pieces in an IPTV delivery system ......................................................................175 

Microsoft Mediaroom...................................................................................................178 

Video-on-Demand systems...........................................................................................179 

Movies-on-Demand: Netflix ready devices ..................................................................180 

IPTV alternative plays ..................................................................................................183 

Digital home concept: Apple TV..................................................................................186 

Game consoles .......................................................................... 187 

What’s new? .................................................................................................................187 

Game consoles: Brief overview....................................................................................187 

Game consoles: Cyclical industry.................................................................................188 

Sony PlayStation3.........................................................................................................191 

Nintendo Wii.................................................................................................................192 

Consoles supply chain ..................................................................................................193 

Handheld game consoles ..............................................................................................195 

It’s a console, it’s a phone! No, it’s the iPhone!...........................................................198 

DVD and other optical drives .................................................... 201 

What’s new? .................................................................................................................201 

DVD supply chain ........................................................................................................202 

Optical drives market: Blu-ray holds the key ...............................................................203 

DVD format war: Blu-ray’s victory over HD DVD .....................................................205 

Format war is over, what’s next?..................................................................................206 

BD Live: Adding interactivity to Blu-ray.....................................................................207 

HD VMD ......................................................................................................................208 

Digital still cameras ................................................................... 210 

What’s new? .................................................................................................................210 

Digital camera market: Growth falls sharply into the red.............................................211 

Market growth drivers ..................................................................................................212 

Future drivers................................................................................................................212 

Camera phone vs. digital camera..................................................................................213 

DSC vendor outsourcing...............................................................................................214 

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20 April 2009 

Consumer Electronics

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20 April 2009 

Digital SLR camera .................................................................... 215 

Differences between compact cameras and SLRs ........................................................215 

DSLR market overview ................................................................................................215 

Digital camera: Components ........................................................................................218 

What goes inside a digital camera?...............................................................................220 

Primary components in the DSC supply chain .............................................................221 

Full frame sensors: CMOS appears to be the clear choice............................................221 

145

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20 April 2009 

Consumer electronics 

Consumer electronics covers a broad range of products, from calculators to the latest 

plasma TVs—thousands of electronic goods are available today. The value chain for 

each electronic product varies significantly. In this section, we discuss five common 

and significant consumer electronic products: TFT/LCD, VoIP, digital still cameras, 

DVD players/recorders and game consoles. 

In Figure 79 (flow chart), we separate the supply chain for various consumer 

electronic products into four segments: component makers, ODM/EMS providers, 

OEM/own brand manufacturers and retailers/distributors. The flow chart is a 

simplified description of the consumer electronics supply chain. 

Let us take a closer look at different segments of the videogame console supply chain. 

In the component maker segment, we have only listed processors and major chipset 

suppliers to game consoles. Other suppliers of PCB, optical drives, hard disk drives, 

memory, audio and casing are not included. In the ODM/EMS segment, we have 

listed the contract manufacturers (EMS) for game consoles.

Bhavin Shah 

(852) 2800-8538 


Figure 79: Consumer electronics supply chain 

Components makers ODM/EMS OEM/own brand manufacturers Retailers/distributors 

Videogame 

console 

Nintendo 

Sony 

Microsoft 

EMS 

PS3: 

Hon Hai 

ASUSTek 

Xbox 360: 

Wistron 

Flextronics 

Celestica 

Nintendo 

Wii: 

Semi 

PS3: 

IBM 

NVIDIA 

Xbox 360: 

IBM 

ATI, SiS 

Wii: 

IBM 

ATI 

Source: Company reports, J.P. Morgan. 

Set-top box 

Motorola 

Cisco 

(Scientific- 

Atlanta) 

Sony 

Pioneer 

Matsushita 

Pace Micro 

Hughes 

Samsung 

Philips (TiVo) 

Thomson 

EMS 

Flextronics 

Wistron 

Sanmina 

Solectron 

Semi 

STMicro 

LSI Logic 

Philips 

Broadcom 

Motorola 

National Semi 


20 April 2009 

Retailers 

US: Wal-Mart, Sears, Good Guys, Best Buy 

Distributors 

US: Major retailers order directly from manufacturers 

Other countries: Diverse distributor base 

DVD player 

Hitachi-LG 

Toshiba- 

Samsung 

Panasonic 

Pioneer 

Sony- NEC 

Philips- 

BenQ 

Lite-On 

ODM/E 

MS 

Hon Hai 

Lite-On 

BenQ 

ASUSTek 

Solectron 

Jabil 

Celestica 

Semi 

Philips 

Media Tek 

STMicro 

Sony 

ESS Tech 

Zoran 

Ali 

OPU 

Hitachi 

Sanyo 

Ricoh 

Pioneer 

Sony 

Philips 

Digital still 

camera 

Canon 

Sony 

Kodak 

Olympus 

Nikon 

FujiFilm 

HP 

Casio 

Panasonic 

Pentax 

Samsung- 

Techwin 

ODM/EMS 

Sanyo 

Premier 

Asia Optical 

Ability 

Chicony 

Altek 

Primax 

Hon Hai 

CCD 

Sony 

Matsushita 

Sharp 

Sanyo 

Fuji Photo Film 

Matsushita 

CMOS 

OmniVision 

Agilent 

STMicro 

Micron 

Sony 

Canon 

PixArt 

Hynix 

TASC 

IC Media 

TV 

Sony 

Sharp 

Pioneer 

Sanyo 

Philips 

Samsung 

LG Electronics 

Siemens AG 

Vizio 

MEI 

Funai 

EMS/ODM 

Jabil 

Funai 

Innolux 

HannStar 

Quanta Display 

AU 

Chi Mei 

Semi 

NEC-SVA 

Matsushita 

Hitachi 

Mitsubishi 

Cirrus Logic 

Toshiba 

Himax 

Hynix 

TI 

Novatek 

Sunplus 

Digital 

camcorders 

Panasonic 

Sony 

Sharp 

JVC 

Canon 

Semi 

Mitsubishi 

Matsushita 

Sony 

MP3 player 

Apple 

Sony 

Samsung 

Irivera 

Aiqo 

BenQ 

Creative 

Philips 

LG 

Toshiba 

Lenovo 

ODM/EMS 

ASUSTek 

Hon Hai 

Quanta 

Foxconn 

A-max 

Inventec 

Semi 

Rock chip 

ALi 

Anyka 

Actions - 

Semiconductor 

Cheng Uei 

TXC 

SigmaTel 

Nvidia 

147

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JJ Park AC 

(822) 758-5717 


J.P. Morgan Securities (Far East) 

Limited 

Liang Lin 

(886-2) 2725-9863 

liang.c.lin@jpmorgan.com 

J.P. Morgan Securities (Taiwan) 

Limited 

Yoshiharu Izumi 

(81-3) 6736-8637 

yoshiharu.izumi@jpmorgan.com 

J.P. Morgan Securities Japan Co., 

Limited 

148 


20 April 2009 

Televisions 

What’s new? 

We expect the TV market to grow marginally, primarily driven by LCD TVs. In our 

analysis of TV market growth, we highlight the importance of emerging markets, 

both in terms of revenue and shipments. We have also included highlights of major 

TV makers’ strategies. 

Flat-screen TVs is one of the fastest growing consumer electronics segments. TVs 

should continue to constitute a substantial portion of TFT-LCD demand—growing 

both in revenue and unit terms. We estimate that in 2008, LCD TVs accounted for 

50% of total TFT/LCD revenue and their diffusion rate in the overall TV market was 

about 12%. For 2009, we estimate that the biggest proportion of LCD TV demand 

will come from 40/42-inch TVs. We expect China to be the key downside catalyst 

for the 2009 TV demand. 

Having suffered substantial losses due to a sharp decline in large-size LCD TVs, 

PDP makers regained momentum in 2008 due to tight supply of LCD TVs and the 

differentiation of SD-type PDP. We estimate that in 2008 PDP makers’ revenue 

increased 15% Y/Y, driven by strong shipment growth and stable ASP. PDP module 

ASP decline slowed and revenues increased 23% Y/Y in 2008, by our estimates. 

In the Technology Overview section, we discuss backlight units, polarizers and other 

components. We have added a new section on OLED, an upcoming flat panel 

technology. This section provides a comparison of OLED with TFT/LCD and PDP 

and OLED major players’ development plans. A detailed discussion on OLED is, 

however, included in the LED section.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

TV market snapshot 

The TV market can be classified into two major categories, based on internal 

mechanisms and display characteristics: CRT TVs and flat panel TVs. LCD TVs, 

plasma TVs (PDP) and rear-projection TVs (RPTV) come under flat panel TVs. 

We estimate that the global market for TV sets grew 3.4% to 200 million units in 

2008. We believe the growth was driven by flat panel TVs at the expense of CRT 

and rear-projection TVs. In 2008, shipments of LCD TVs surpassed CRT TVs, by 

our estimates. 

Table 75: Global TV market by units 

Millions units, % 

2003 2004 2005 2006 2007 2008E 

CRT TV 141.7 148.1 135.5 119.2 99.4 79.6 

Projection 5.3 5.7 5.4 4.8 2.7 0.9 

CRT PJTV 4.3 4.0 2.6 1.4 0.5 0.4 

MD PJTV 1.0 1.7 2.8 3.4 2.2 0.5 

PDP 1.5 3.2 6.4 9.2 10.6 13.8 

LCD TV 5.0 12.2 26.9 52.0 80.5 105.4 

Total 154 169 174 185 193 200 

Growth rate 6.1 10.2 3.0 6.3 4.3 3.4 

% of total shipment 

CRT 92.3 87.5 77.8 64.4 51.5 39.9 

Projection 3.5 3.4 3.1 2.6 1.4 0.4 

PDP 1.0 1.9 3.7 5.0 5.5 6.9 

LCD 3.3 7.2 15.4 28.1 41.7 52.8 

Total 100 100 100 100 100 100 

Growth rate, Y/Y % 

CRT 2 5 -9 -12 -17 -20 

Projection 40 8 -5 -12 -44 -67 

PDP 109 108 101 43 15 31 

LCD 187 143 121 93 55 31 

Total 6.1 10.2 3.0 6.3 4.3 3.4 


Despite strong unit growth in flat panel TVs, the overall market revenue from TVs 

had marginal growth in 2008, by our estimates. With regard to revenue contribution, 

we estimate that in 2008 Flat panel TVs accounted for 88% of the total TV market 

revenue; up only from 10% in 2003. 

It is very clear that consumers are willing to pay more for flat panel TVs. In the chart 

below, we compare CRT TV shipment in 2003 for different sizes at different ASPs 

with flat panel TV shipment in 2008. We choose 2003 for CRT, because that was the 

last year after which flat panel TV revenues started to become meaningful. While the 

volume for a CRT TVs at price points of around $500 was ~30 million, similar 

volume was achieved for 40-42 inch flat panel TVs being sold at almost twice that 

price point. Volume for 30-32" flat panel TVs with price point of around $600 was 

much larger at 40mn. Due to consumers’ willingness to spend more money on flat 

panel TVs, the TV industry enjoyed CAGR revenue growth of 11.2% between 2002 

and 2008, which we believe is greater compared to CAGR revenue growth TV 

industry enjoyed in 1990s. 

149

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20 April 2009 

Figure 80: CRT (2003) Vs Flat Panel TVs (LCD + PDP, 2008) volume/ASP 

Volume, 000s 

50,000 

40,000 

30,000 

20,000 

10,000 

0 

21" 

25"-26" 

27"-29" 

25"-29" 

30"-34" 

30"-34" 

40"-44" 

35"-39" 

50"-54" 

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 

ASP (in $) 

Source: Display Search, J.P. Morgan. 

Table 76: Global TV market by revenue 

US$ in billions, % 

Flat Panel TVs 2008 CRT TVs 2003 

2003 2004 2005 2006 2007 2008E 

CRT 35.9 34.6 30.1 23.7 17.5 12.4 

Projection 15.7 14.1 9.8 7.2 3.6 1.1 

PDP 5.1 10.0 11.7 14.7 14.0 14.9 

LCD TV 5.3 15.7 29.9 48.9 66.1 86.1 

Total 62.0 74.4 81.5 94.5 101.1 114.5 

% of total Revenue 

CRT 58.0 46.5 36.9 25.1 17.3 10.9 

Projection 25.3 19.0 12.0 7.7 3.5 0.9 

PDP 8.2 13.4 14.4 15.6 13.8 13.0 

LCD 8.5 21.1 36.7 51.7 65.4 75.2 

Total 100 100 100 100 100 100 

Growth Rate, Y/Y % 

CRT -1.0 -3.8 -13.0 -21.2 -26.4 -28.8 

Projection 18.4 -10.0 -30.6 -26.2 -50.7 -69.8 

PDP 96.2 96.3 17.6 25.4 -4.9 6.4 

LCD TV 114.3 197.4 90.5 63.4 35.4 30.2 

Total 13.5 20.0 9.6 15.9 7.0 13.2 


TV market/growth analysis 

The importance of emerging markets in TV sales is increasing; however, the US 

market still dominates in large-size TV sales growth. 

Figure 81: TV sets—Shipment breakdown by region 

100% 

80% 

60% 

40% 

20% 

0% 

Source: DisplaySearch, J.P. Morgan estimates. 

23% 28% 35% 

2007 2008 2009 

Japan North America Europe China ROW

Bhavin Shah 

(852) 2800-8538 


For 2009, we expect the 

market size of emerging 

markets, in dollar terms, 

to be similar to the US 

market 

Figure 82: TV sets—Revenue breakdown by region 

100% 

80% 

60% 

40% 

20% 

0% 

2007 2008 2009 

Japan North America Europe Eastern Europe China ROW 


Figure 83: TV sets—Total unit growth breakdown by region 

100% 

80% 

60% 

40% 

20% 

0% 

2008E 2009E 

Japan North America Europe China ROW 


2008E/2009E 40-inch and above TV market growth analysis by units 

Figure 84: TV sets—Unit growth breakdown by size 

Figure 85: TV sets—40"+ growth breakdown by region 

100% 

80% 

60% 

40% 

20% 

0% 

2008E 2009E 

Below 21" 22"-29" 30"-39" 40" + 



20 April 2009 

40''+ accounts for major unit growth in both 2008E & 2009E 

25% 30% 35% 

46%/61% of LCD TV shipment growth in 2008E/2009E is from China and 

emerging markets 

100% 

80% 

60% 

40% 

20% 

0% 

2008E 2009E 

Japan North America Europe China ROW 

China and North America are the major market drivers 

for 40''+ segments 

151

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152 


20 April 2009 

Flat-screen TVs: LCD versus PDP 

We believe growth in the consumer electronics market is being driven by the 

popularity of new digital video products. Of these, flat-screen TVs is one of the 

fastest-growing groups. 

LCD TV demand 

We continue to expect LCD TV unit growth will remain robust; however, the 

transition to 40-inch+ appears to have slowed down. Since size mix in LCD TVs is 

the biggest swing factor for overall demand in the LCD industry, the transition to 

large-screen TVs (especially 50-inch+ segments) could be a critical inflection point 

for the TFT-LCD industry. 

We believe the gap between unit growth and area growth will significantly reduce in 

2009, vs. LCD TVs historical trend of a meaningful discrepancy between them, 

largely due to the increasing proportion of small-to-medium size TVs at the expense 

of large-size (especially 40-/42-inch). According to our industry model, the 

proportion of 37-inch+ will decrease to 35% in 2009 from 37% in 2008. Given a 

worsening macro economy, we believe price elasticity in the flat panel market is 

fading away. 

Table 77: LCD TV demand by size 

Unit in millions, Square meter ('000s), % 

1Q 

2009E 

2Q 3Q 4Q 1Q 

2010E 

2Q 3Q 4Q 

2008 2009E 2010E 

Total unit shipment 22.8 27.3 32.0 35.3 29.7 34.0 38.0 37.3 103.4 117.4 139.0 

Q/Q or Y/Y growth, % -8 20 17 10 -16 14 12 -2 20 14 18 

m² in ’000 7,260 8,645 10,127 11,347 10,016 11,677 13,422 13,339 32,733 37,378 48,455 

Q/Q or Y/Y growth, % 

% of total shipments 

-8 19 17 12 -12 17 15 -1 30 14 30 

10.4" to 14.0" 0 0 0 0 0 0 0 0 0 0 0 

15" - 19.0" 9 8 8 8 8 8 8 8 10 8 8 

20.0" to 25.0" 8 8 9 8 7 7 7 7 9 8 7 

26"-27" 11 12 13 13 9 9 8 8 9 12 9 

30"/32" 38 37 36 35 36 35 33 32 36 36 34 

37" 9 8 8 8 8 8 7 7 10 8 8 

40/42"+ 16 16 17 17 18 19 20 21 18 16 19 

46"+ 10 10 10 11 14 15 16 17 9 10 15 

Total, % 100 100 100 100 100 100 100 100 100 100 100 

Source: Company data and J.P. Morgan estimates. 

LCD diffusion rate in the global installed TVs 

We estimate the LCD TV diffusion rate in the overall TV market was about 12% as 

of the end of 2008, assuming that the total global installed TVs were about 2.2 billion 

units. Although, a few developed countries (such as Japan) are already saturated in 

terms of the LCD TV diffusion rate, they are still in the early stage of growth in 

terms of product cycle on a global basis. For 2009, we estimate that the LCD TV 

diffusion rate will remain below 20%.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 86: LCD TV diffusion rate in total installed TVs 

2,500 

2,000 

1,500 

1,000 

500 

- 

0% 0% 0% 1% 2% 4% 

7% 

12% 

2001 2002 2003 2004 2005 2006 2007 2008 2009 

Source: Company reports, NPD Group, J.P. Morgan estimates. 

Total TV installed Total LCD TV Diffusion rate 

17% 

50% 

45% 

40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

China market should represent key upside for Taiwan panel makers in 2009 

TV unit shipments in 2008 were within our expectations, with normal seasonality of 

45:55 split in 1H08/2H08, despite an inferior product mix. We estimate that LCD TV 

will grow ~22% to 120 million in 2009 and China should enjoy higher growth due 

to: 1) lower LCD TV penetration; and 2) its stimulus program in rural areas. As 

leading brands are rather conservative in end-demand forecasts, with increasing 

in-sourcing Taiwan panel makers may need to rely on CRT replacement demand (in 

2008, CRT TVs in China comprised ~5% of the total TV revenue and 14% of the 

total TV units) from non-tier brands/white-box in China for substantial upside. 

However, size migration will likely be constrained, as 32-inch and below are the 

mainstream sizes in China; hence, dollar contribution should be limited. 

Table 78: LCD TV set sales in China 

Million units 

2006 2007 2008 2009E 

LCD TV set in China 4.8 8.3 12.5 18.3 

Y/Y growth 


75% 52% 46% 

China’s stimulus package: Implications for the LCD industry 

China’s Rmb4 trillion stimulus program has a validity of four years. It applies to only 

qualified products and models with price ceilings, for which a 13% rebate can be 

availed of. We estimate LCD TVs to account for 40% of qualified models in the 

color TV segment. In this category, 15 local TV makers (foreign TV brands focus on 

32-inch+ TV segments) and around 200 TV models qualify. Due to a cap in retail 

prices, LCD TVs range from 19-inch to 26-inch, while CRT TVs range from 21-inch 

to 20-inch. Although some 32-inch LCD TVs qualify, we estimate that panel prices 

will need to be below US$145 (versus the current average price of US$165) to meet 

the price requirement. 

PDP market outlook 

Due to a sharp decline in the price of large-size LCD TVs (40-inch+) and an increase 

in full HD TVs, PDP companies have suffered substantial losses for a while. 

However, due to tight supply of LCD TVs and differentiation (32-inch SD-type PDP 

and 50-inch+ full HD PDP), major PDP makers regained their momentum in 2008, in 

our view. 

153

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154 


20 April 2009 

Hitachi announced a halt of panel cell production last September to focus on TV 

assembly by securing PDP cell from Panasonic. Also, Pioneer announced its exit 

from the PDP TV set business by March 2010 and cancellation of PDP panel 

procurement from Panasonic. In our view, this should be positive for other major 

PDP module makers, but negative for Panasonic as it will lose Pioneer as a panel 

user. 

We estimate that global PDP TV revenue increased 15% Y/Y in 2008—from a 16% 

Y/Y decline in 2007—largely driven by strong shipment growth and relatively stable 

ASP. 

Figure 87: PDP shipment and revenue trends 

US$ in millions, % 

- 

20 

15 

10 

5 

27 

96 96 

68 

2002 2003 2004 2005 2006 2007 2008E 2009E 

PDP TV shipments PDP TV rev enue PDP rev enue changes, % [RHS] 


PDP TV supply 

We believe that both Panasonic and Samsung SDI will gain market share at the 

expense of LGE and Pioneer, which plan to halt their PDP module production. Both 

Panasonic and Samsung SDI should benefit the most, given the tight supply of LCD 

TV panels. 

PDP module business 

With regard to PDP modules, we estimate that ASP decline slowed in 2008 (11% 

Y/Y) from a 28% Y/Y decline in 2007. Due to strong growth in shipments, we 

estimate that revenue from PDP modules increased—from a 15% Y/Y decline in 

2007 to 23% Y/Y growth in 2008. 

7 

-16 

15 

5 

120 

100 

80 

60 

40 

20 

0 

-20 

-40

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 88: PDP module revenue and ASP trends 

US$ in millions, US$ 

10,000 

8,000 

6,000 

4,000 

2,000 

- 

1,376 1,337 

1,192 

845 

743 

538 480 

2002 2003 2004 2005 2006 2007 2008 

Source: Company reports, DisplaySearch, J.P. Morgan estimates. 

Table 79: PDP module suppliers 

PDP rev enue ASP 

1,500 

1,000 

% 1Q07 2Q07 3Q07 4Q07 2006 2007 2008E 

FHP 10 9 7 7 10.2 7.9 7.7 

Pioneer 7 7 5 3 6.6 5.4 4.0 

Panasonic 31 36 33 38 31.6 35.1 36.9 

SDI 24 25 28 26 22.7 25.9 28.2 

LGE 27 22 27 26 28.7 25.6 23.1 

Others 0 0 0 0 0.1 0.1 - 

Total 100 100 100 100 100 100 100 


LCD-PDP competition 

For the first time, 50-inch PDP sell-through was more than the 42-inch TV. This was 

largely due to the overall pull-back of the PDP technology from the 40-inch segment. 

As 40- and 42-inch TVs become main offerings in LCD, the proportion of the PDP 

42-inch sell-through should quickly deteriorate, in our view. Although the share in 

PDP should rise, the 50-inch PDP has been challenged by the 46-inch+ LCD. LCD 

TVs have already out-sold in the 46-inch+ segment and have narrowed the gap with 

PDP in the 40-inch+ segment. However, due to tight supply of LCD TVs and 

differentiation (32-inch SD-type PDP and 50-inch+ full HD PDP), major PDP 

makers regained their momentum in 2008, in our view. 

Figure 89: LCD’s relative sell-through to PDP 

% 

Source: NPD Group, J.P. Morgan estimates. 

500 

- 

155

Bhavin Shah 

(852) 2800-8538 


156 


20 April 2009 

Full HD (1080p) 

Full HD (ultra-HD, true HDTV and 1080p) refers to a technology that surpasses the 

video quality and sharpness of the original HD (high definition) technology, 

providing an image resolution of 1920/1080 pixels. For more details on this 

technology, please refer to the 5th edition of our Supply Chain Guide. 

Increase in the proportion of full HD 

In TV panels, we expect the price gap between normal HD and full HD to continue 

to narrow due to an increase in the promotion of full HD TVs in the large-size TV 

market. Currently the gap is around US$10. As a result, the decline in the blended 

ASP of tier-1 panel makers could be lower than the industry average; this is also due 

to an increase in the proportion of full HD in large-size screens, in our view. 

Figure 90: Full HD versus normal HD price gap (40-inch and 42-inch) 

US$ 

160 

140 

120 

100 

80 

60 

40 

20 

0 

74 

61 64 

58 60 60 

40 33 

45 43 45 45 45 43 43 39 35 39 37 33 

24 20 20 20 20 

20 

10 10 10 10 

0 

Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 


Global TV makers’ strategies 

40-inch full HD v s. HD [RHS] 42-inch full HD v s. HD [LHS] 

According to our recent channel checks with major TV makers, the 37-inch+ 

proportion in LCD TVs rose to about 31% in 2008 (from 23% in 2007). As retail 

prices for large-size TVs have declined, we believe that the proportion of 37-inch+ 

could be higher than the guidance of major TV makers. This could be the biggest 

swing factor for our demand assumption. 

Market shares of global CE brands in the total LCD TV shipment continued to 

increase in 2008. Given the tight supply of LCD TV panels, we expect CE brands, 

which have strategic alliances or in-house production capabilities, to gain market 

shares at the expense of some white-box TV makers in 2009. 

80 

60 

40

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 80: Global flat panel TV makers 

Units in millions, % 

2007 2008 2009E 

LCD % of 37"+ PDP LCD % of 37"+ PDP LCD % of 37"+ PDP 

Sony 10.6 48% 0.0 15.0 53% 0.0 15.0 50% - 

Sharp 8.3 27% 0.0 9.6 32% 0.0 10.0 52% - 

SEC 13.0 40% 2.2 20.0 55% 3.0 22.0 55% 4.0 

LGE 6.7 34% 2.0 10.5 45% 2.5 14.0 45% 2.5 

Philips 9.5 30% 0.0 12.0 40% - 13.0 40% - 

Panasonic 3.3 10% 4.3 4.3 20% 5.4 4.5 30% 5.0 

Hitachi 0.8 30% 0.9 0.8 30% 0.7 0.8 28% 0.6 

Pioneer 0.0 0% 0.5 0.1 0% 0.3 - 0% - 

Funai 2.5 3% 0.0 3.3 10% - 4.0 20% - 

Vizio 2.7 0.5 4.6 0.5 5.5 0.4 

Total 57.3 10.2 80.2 12.4 88.8 12.5 

% of total shipments 72% 23% 97% 76% 31% 90% 74% 32% 82% 

Total TV set shipments 79.2 10.6 105.0 13.8 120.4 15.3 

Source: Company reports, DisplaySearch, J.P. Morgan estimates. 

Samsung Electronics (SEC) 

In its global flat panel TV market outlook, SEC stated that in 2009 flat panel TV 

shipments would reach 135 million units (16% Y/Y)—120 million units for LCD 

TVs and 15 million units for PDP TVs. 

SEC sold 13 million units of LCD TVs in 2007, and estimates that it sold about 21 

million units in 2008, according to management. We note that the initial target for 

LCD TV shipments was 11 million units in 2007, but the company ended the year 

with sales of 13 million units. We believe growth will be driven by emerging markets 

(especially China). SEC’s market share in China was 11% in 2007, and the company 

believes the market share increased to 15%+ in 2008. 

LG Electronics (LGE) 

LGE’s P60 series PDP TV was CES’s 2008 “Best of Innovations” for slim design, 

advanced calibration options, wireless connectivity and invisible speakers (tuned by 

audio expert, Mark Levinson). The company also introduced several full HD LCD 

TVs with ultra-slim 1.7-inch deep chassis, red and black finish and invisible 

speakers. 

LGE shipped 8.7 million units of flat panel TVs (2 million units for PDP TVs and 

6.7 million units for LCD TVs) in 2007. In 2008, LGE shipped 13 million units of 

flat panel TVs, comprising 10 million units of LCD TVs and at least 2.6 million units 

of PDP TVs. 

Royal Philips Electronics (Philips) 

Philips’ Connected Display (CD) business is a key brand ambassador for the 

company; however, it appears to have little impact on the group’s bottom line and 

valuation. In2008, CD accounted for about 60% of its consumer electronics business, 

which in turn accounted for 40% of the group’s sales, but only 13% of the divisional 

EBITDA. In 2008, Philips turned CD into a business unit to underscore the highermargin/growth 

profile of its remaining consumer electronics businesses. We believe 

Philips is managing its CD business with an aim to reduce the chances of a loss. We 

estimate that the business reached the breakeven point in 2007 with flat sales. We 

believe almost all of the company’s assembly is outsourced and its main supplier is 

LG Display for LCD panels; the overall capital employed in the business is negative, 

by our estimates. 

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20 April 2009 

Philips sees the TV market to be highly competitive in view of continued margin 

pressure and a structurally difficult North American market. The TV market is driven 

by price wars, competitive retail dynamics, disruptive low-cost players and low 

brand loyalty. The fluctuating demand results in strains on the company’s supplychain 

management, in our view. Philips is limiting its presence in the North 

American market in the no/low profit segments and is streamlining its operations, 

according to management; it expects growth in Europe and key emerging markets 

such as Brazil, China and Russia. Philips aims at differentiating itself through new 

concepts and consumer insight-driven innovations (such as Aurea) within its 

Ambilight range (flat TV, back ground lighting). Philips has a very strong position in 

the global hospitality TV market—number one, based on market share. 

In the long term, we believe Philips will enter into a strategic partnership in the TV 

area. However, Philips has not announced any such plans so far. Forming a JV could 

allow the company to de-consolidate its large CD business, which could stabilize its 

sales growth and result in a higher overall operating margin. Philips has used 

partnerships in the past to address challenging businesses. 

Sony 

For LCD TVs, Sony’s management estimated global market share of 20% in 2008. 

So far, Sony has been sourcing panels from SEC (including S-LCD), AUO, and 

CMO; however, the company’s market share growth is likely to get a boost from 

supplies due to its joint venture with Sharp in 2009. We estimate that Sony’s share in 

the global LCD TV market (about 100 million units) was 15% in 2008. 

At the beginning of 2008, Sony guided for 17 million LCD TV shipments in 2008. 

However, management revised down its guidance to 15 million in January. Sony has 

already exited the rear-projection TV business and strengthened its LCD TV business 

to make up for the shrinking picture-tube TV market. To increase its share in the 

overall TV market, Sony is likely to aim for a greater share in all size segments, 

including 32 and 20 inches, instead of focusing on the 40-inch and large-size TV 

segments. 

Sharp 

We believe Sharp is focusing more on panel external sales in its LCD panel business, 

and moving away from its strategy aimed at market share of TVs. With a joint 

venture with Sony and a strategic partnership with Toshiba, Sharp had expected to 

increase the proportion of large LCD panels it sells to companies from 20% in 2007 

to more than 30% in 2008, and at least 50% in 2009. We estimate the company’s 

LCD TV shipments in 2008 will be only 10 million (11% more than its 2007 

guidance, versus the market estimate of 30%). 

Panasonic 

Panasonic is likely to continue its plasma and LCD TV businesses. Besides the 

Amagasaki No. 4 plant, which started in June 2007 with a total investment of ¥180 

billion and a capacity of more than 500,000 42-inch panels at full capacity, 

Panasonic’s plasma panels are likely to be produced at its No. 5 plant, which is 

scheduled to be operational in January 2010 (with a total investment of ¥210 billion, 

and a capacity of 1 million 42-inch panels). 

A new IPS Alpha LCD plant is scheduled to be built in Himeji (with a total 

investment of ¥235 billion, and a capacity of 15 million 32-inch panels) and will

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

likely be operational in July 2010. Most of the panels to be produced in the new line 

should be in the 30-inch and 40-inch range, and larger ones should mainly be plasma 

panels. Output of 46- and 52-inch panels are also a possibility, because the company 

has chosen to go with 8G rather than 7.5G technology. 

Panasonic aims to increase the proportion of 50-inch and larger TVs from 10% in 

2006 to 18% in 2009, boosting its market share in the 37-inch and larger segment to 

at least 25% by 2010. In 2010, the company also plans to raise the proportion of 

plasma panels sold to other companies from the current low level to 20%-25%, and 

the proportion of LCD panels sold to other companies to 10%, assuming that the 

output is at full capacity. In line with these strategies, Panasonic decided to supply 

panel cells to Hitachi but Pioneer’s exit from PDP TV could be negative for 

Panasonic. 

Management has not made disclosures about margins on plasma panels, but it sees 

room for cost reduction through shorter lead times (it expects the Amagasaki No. 5 

plant to have a lead time of 1.8 days, 47% shorter than the Ibaraki No. 1 plant’s, and 

33% fewer processes than the No. 1 plant). The company also plans to differentiate 

its LCD panels by using IPS Alpha, thereby reducing the number of driver ICs and 

backlights. 

Toshiba 

A partnership with Sharp should improve Toshiba’s profit in the TV business. We 

estimate that the company’s FY2008 LCD TV sales were ¥550 billion (up 10% 

Y/Y)—or 7 million units. The business was profitable in 1H08 but the company 

could have lost ¥15 billion in 3Q08; we estimate a several billion yen loss for FY08. 

Under a LCD panel and semiconductor partnership formed with Sharp in December, 

Toshiba will likely source 40% of its LCD panels from Sharp in 2010 and supply 

half of the system LSI devices that Sharp uses for its TVs. The deal should give 

Toshiba a steady source of LCD panels and make it a major buyer of system LSI 

devices, after Sony. Toshiba is looking to sell its 16% IPS Alpha stake to Matsushita 

and unwind its joint venture with Hitachi and Matsushita. Toshiba had been sourcing 

its LCD panels from SEC and LGD, besides IPS Alpha, but is likely to reduce the 

proportion of supplies from these companies and instead increase the proportion 

from Sharp. As a result, most of its LCD TVs are likely to be made of VA-type 

panels rather than the traditional IPS-type panels. Sales of 32-inch full HD sets, 

besides 37-inch and larger ones, began in March 2008. The company had planned to 

sell SED and OLED TVs, but has shelved the SED TV plan for now. It has decided 

to focus on developing small and mid-size OLED TVs. 

Hitachi 

We believe management has shifted its strategic focus to profitability. Five key 

aspects of the company’s new TV business strategy, announced in February 2008 

are: 1) a downward revision of sales target for 2010 (from 6.5 million to 3.6 million); 

2) an increase in panel sales target to other companies (500,000 in 2H08, 1.2 million 

in 2009); 3) to develop thinner panels (plasma panels—from 130mm in 2008 to 

35mm in 2009 and 10mm in 2010-12; LCD panels—from 35mm in 2008 to 19mm in 

2009 and 15mm in 2010-12); 4) ecology (to halve the power consumption by 2010); 

and 5) to focus on the Asian market, including Japan and China. 

159

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20 April 2009 

The plasma panel subsidiary, Hitachi Plasma Display, became a wholly owned 

subsidiary of Hitachi on April 1, 2008. Hitachi announced that it would procure 

plasma glass cell from Panasonic and shut down Hitachi Plasma Display cell process 

on September 2008. The company also cancelled external plasma panel sales. We 

expect Hitachi Plasma to be a fab for panel modules and TV sets and its loss to 

decline by FY09 due to a decrease in fixed costs. This news was positive because we 

had seen substantial downside risk for external sales and the company escaped a 

substantial fixed-cost burden; hence, we believe it does not have to pursue volume 

just to maintain front-end capacity utilization. 

The company aims to be in the black by 2H09 by taking ¥80 billion in restructuring 

charges from 2007—a shutdown cost of ¥30 billion for PDP cell process, and 

impairment and inventory valuation losses of ¥50 billion. Restructuring should 

decrease fixed costs by ¥100 billion and losses in Hitachi Plasma Display should 

decline in FY09. These will likely improve profitability in the Hitachi digital media 

segment. The company’s 2008 TV sales target was 1.45 million units, of which 

plasma sets accounted for 650,000 units. 

We do not expect the company’s business to do better than just reaching the 

breakeven point in 2010, in view of the significant gap between Hitachi and its 

competitors in terms of shipment, and plans by Sharp, Matsushita, and other 

competitors to ship similar thin products. We like Hitachi’s strategy shift as we still 

expect the company’s consolidated results to improve due to a sharp reduction in 

losses in its TV business. We estimate that losses in the digital media segment, which 

includes the TV business, will decrease from ¥110 billion in FY08 to ¥29 billion in 

FY09E, and the segment should turn to a profit of ¥10 billion in FY10. 

According to management, plasma TV shipments in 2007 by region were: Japan, 

33%; the US, 35%; Asia, 23%; and Europe, 9%. The company plans to focus more 

on Japan and other parts of Asia, and expects the 2008 regional breakdown to be: 

Japan, 40%; Asia, 30%; North America, 20%; and Europe, 10%. 

The breakdown of Hitachi’s plasma TV business by size, for all markets is: 37-inch, 

16%; 42-inch, 45%; 50-inch, 36%; and 55-inch, 3%. The company’s 37-inch sets are 

sold only in Japan and account for about half of the domestic shipments. The main 

models for overseas markets are 42-inch and 50-inch; excluding the North American 

market, 42-inch models outnumber 50-inch models. 

Hitachi plans to sell a stake of 24.9% in its fully owned subsidiary, Hitachi 

Displays—a manufacturer of small and mid-size displays—to Canon and Matsushita 

and eventually reduce its stake in the unit to 10%. After the transaction, Canon would 

be the parent company of Hitachi Displays. IPS Alpha—a manufacturer of large 

LCD panels for TVs and a joint venture between Hitachi Displays (50% stake), 

Matsushita, and Toshiba—would be a Matsushita subsidiary, and Hitachi’s stake 

should decline to 10%. We believe these partnerships suggest that Hitachi is moving 

away from its stance of not getting rid of any businesses.

Bhavin Shah 

(852) 2800-8538 


Figure 91: TFT-LCD supply chain 

ODM/EMS OEM/brand 

manufacturers 

Panel module 

makers 

Components makers 

Source: DisplaySearch, J.P. Morgan. 

LCD monitors 

Dell Sony 

Samsung Proview 

HP CMV 

Acer Lenovo 

LGE Maxdata 

Philips AOC 

BenQ Sharp 

Viewsonic Hyundai-Imagequest 

NEC-Mitsubishi Gateway 

Fujitsu 

Samsung LG Electronics 

BenQ 

Compal AOC 

Lite-On Tech Innolux 

Proview Techview 

Driver IC 

SEC NEC Electronics 

Hynix Sharp 

Himax Hitachi 

Myson Century Panasonic 

Winbond Toshiba 

Novatek TI 

DenMos Topro 

Sunplus 


20 April 2009 

Backlight module 

Notebook PCs 

Lenovo NEC 

Sharp Fujitsu 

Panasonic Dell 

Gateway HP 

Acer Apple 

Sony 

Fujitsu–Siemens 

Toshiba 

Quanta Compal 

Arima Wistron 

LG Electronics Asustek 

FIC Unwill 

TFT/LCD panel module makers 

2008E Supply Market 

Share (%) 

Taesan LCD Forhouse Helix 

Wooyoung K-Bridge Coretronic 

Hansol LCD Forward Electronics NEC 

Radiant Prokia Technology Sanken 

Panasonic Harison Toshiba Stanley Electric 

Polarizer 

Nitto Denko Daxon 

Sanritz Ace Digitech 

Sumitomo LG Chemical 

Polartechno Xin He 

Optimax STHC 

Jantex Qiaye 

Liquid crystal 

Merck Chisso 

LCD TVs 

Sharp Toshiba 

Philips JVC 

Samsung Sanyo 

Sony TTE 

LG Electronics Syntax 

Panasonic 

BenQ Lite-On Tech 

TECO AOC 

Innoloux Compal 

Tatung Delta 

Chi-Mei Corp. 

2008E Supply Market 

Share (%) 

Samsung 21% Sharp 5% 

LG Philips 20% HannStar 4% 

AU 19% Innolux 2% 

Chi Mei 15% NEC-SVA 2% 

CPT 6% 

Glass substrate 

Corning 

Asahi Glass 

NEG 

NH Technology 

Schott 

Color filter 

SEC AUO 

LPL DSTI 

Toppan DNP 

CMO Cando 

Sintek 

161

Bhavin Shah 

(852) 2800-8538 


162 

Technology discussion: Flat panel displays 

Currently, there are two prominent flat panel display technologies: TFT/LCD and 

PDP. The following section provides a detailed overview of TFT/LCD technology, 

which we believe due to its light-weight and thin profile is rapidly gaining 

popularity. We also discuss about OLED, an upcoming flat panel technology, and 

compare it with the exiting ones. 

TFT/LCD 

As widely expected in the market, the proportion of TVs in TFT-LCD demand 

should continue to rise, both in unit and revenue terms. We estimate that LCD TVs 

would account for more than 50% of total TFT-LCD revenue in 2009. However, due 

to a significant decline in the ASP of TV panels, we estimate that the proportion of 

the revenue generated from TVs, on the TFT-LCD, will likely remain smaller than 

the revenue generated on a unit basis. We expect a slowdown in IT spending to result 

in lower monitor demand, and weak consumer spending to lead to lower-thanexpected 

LCD TV shipments. 

Table 81: Demand by application (by unit and revenue) 

% 

Based on area 2009E 2010E 2008 2009E 2010E 

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 

NBPC 16 14 14 14 14 13 14 15 15 14 14 

LCD Monitor 31 28 27 25 26 22 21 21 31 27 22 

LCD TV 53 58 59 61 60 64 65 64 53 58 63 

Others 0 0 0 0 0 0 0 0 0 0 0 

Total 100 100 100 100 100 100 100 100 100 100 100 

Based on revenue 2009E 2010E 2008 2009E 2010E 

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 

NBPC 17 15 15 15 15 15 15 17 18 16 16 

LCD Monitor 30 28 27 25 26 23 22 21 32 28 23 

LCD TV 52 56 57 59 58 62 62 61 50 56 61 

Others 1 0 0 0 1 1 1 1 0 0 1 

Total 100 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 

Source: Company data, DisplaySearch, J.P. Morgan estimates. 

Figure 92: Global TFT-LCD—Supply-demand trend (%) 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

-10% 

-20% 

18% 

12% 

-4% 

-5% 

8% 

18% 

8% 

8% 

17% 

2% -2% 

-4% 

0% 6% 

16% 

2% 

50% 

-4% 

24% 

41% 

1% 1% 

43% 50% 

47% 

27% 

17% 

31% 

3% 1% 0% 3% 

13% 

1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08E 3Q08E 1Q09E 3Q09E 1Q10E 3Q10E 



20 April 2009 

Supply /demand analy sis - Inv . Adj. Supply /demand (w / rev ised util. rate) 

After consecutive price falls, we believe that IT panel prices are below the operating 

cost level of first tiers, and are already approaching the cash cost of second tiers. 

With lowering utilization, weak panel prices should lead to thin margins for top tiers 

and losses for second tiers, in our view.

Bhavin Shah 

(852) 2800-8538 


Figure 93: TFT LCD panel module 

Source: LelkoTech. 


20 April 2009 

Despite the recent share price drops, we believe panel makers’ share prices will not 

rebound due to a lack of catalysts and looming concerns about peak-season demand. 

We remain cautious on panel makers. Risks to our view include a delay in new fabs 

along with capex cuts and a sudden and substantial economic recovery. 

TFT/LCD panel module 

The heart of the TFT/LCD display is the “TFT/LCD panel module”. It includes the 

LCD screen, wirings and some driver IC chips. The panel itself accounts for about 

70%-75% of the total raw material cost and comprises six major inputs—glass, 

driver ICs, color filters, polarizer, liquid crystals and backlight modules. Among 

these components, the backlight module is the most expensive, accounting for 23%- 

24% of the total panel cost. For a detailed discussion on the module, please refer to 

the 5th edition of our Supply Chain Guide. 

Table 82: Cost structure of panels 

Figure 94: TFT LCD panel (cross-section view) 

Source: Merck KGAA. 

% total cost Suppliers 

Suppliers' OP margin vs. panel 

makers' 

Glass (array and cell) 13% Corning, Asahi Flat 

Color filter materials 8% JSR, in-house High 

Polarizer 5% Nitto Denko, Sumitomo, and in-house Low 

Liquid crystal 3% Merck, Chisso High 

Other cell/array materials 5% 

Driver IC 5% Novatek, Himax Low 

BLU + inverter+ PCB 37% Coretronic, and Radiant Low 

Overhead 7% 

Depreciation 17% 

Total 100% 

Source: J.P. Morgan. Note: Sampling from 32” panel. 

Backlight unit 

As liquid crystal is not luminant itself, a backlight unit is required as the lighting 

source. The backlight module is the biggest cost element among the panel 

components, taking ~22% of the cost of large-size panels. CCFL is a traditional 

163

Bhavin Shah 

(852) 2800-8538 


Table 1: CCFL makers’ comparison 

164 


20 April 2009 

component for the LCD panel backlight and has evolved to a very mature and costcompetitive 

industry, in our view. Early suppliers were from Japan and then makers 

from Korea, Taiwan and China emerged to compete for market share. While the 

industry expanded substantially during 2005-2007, the pace has slowed down due to 

a rather cloudy outlook, the potential replacement by LED, and consistent oversupply 

issues. Due to sluggish demand from the TFT industry, current backlight makers not 

only confront heavy margin pressure from panel makers but also facing challenges 

from panel makers’ plans for in-house backlight assembling. For example, both AUO 

and CMO have increased sourcing from their subsidiaries (Darwin and Chi Lin, 

respectively). 

The challenge from LED replacement is mainly for notebook (NB), in our view. The 

growth of LED in LCD TVs is hampered by several issues, such as heat; stability and 

uniformity of LED; and a significant cost gap (>3x for 40-inch LCD TV), despite 

many functional benefits including higher color saturation, environmental 

friendliness, and dynamic dimming availability. LED also faces some obstacles to 

enter into the LCD monitor market due to the extreme cost-sensitive nature of LCD 

monitors. NBs, on the other hand, is a different story. We expect the penetration rate 

of LED in NBs to accelerate from 13% in 2008 to 40% in 2009 due to the following 

reasons: 1) LCD oversupply stimulates replacement demand; 2) top-view design 

brings down the cost of the LED backlight unit; and 3) a sharp price fall of LED 

chips due to overbuilt capacity. LED NB has the advantages of lower power 

consumption and slimmer panel design and, for 2009, at least 6 of 10 newly rolled 

out NB panels should be LED-based. 

Company Country 2006 capacity 2007 capacity 2008E capacity 2006 capacity 2007 capacity 2008E capacity 

Major customers 

(million units) (million units) (million units) share share 

share 

Harison Japan 274 338 380 14% 12% 11% SEC, LGD, Sharp, Hitachi, NEC, AUO, 

Toshiba 

CPT, Quanta, BOE-Hydis, Hannstar 

Sanken Japan 258 368 395 13% 13% 11% SEC, LGD, Hitachi, Fujitsu, AUO 

Matsushita Japan 265 341 370 14% 12% 10% SEC, AUO, Hitachi, CMO, Quanta 

Stanley Japan 91 108 120 5% 4% 3% Sharp 

NEC Japan 220 326 368 11% 11% 10% LGD, NEC, Mitsubishi, CMO 

Kumbo Korea 189 252 290 10% 9% 8% SEC, BOE-Hydis, Sanyo, Hannstar 

Heesung Korea 120 173 200 6% 6% 6% LGD 

Wooree 

ETI 

Korea 135 218 295 7% 7% 8% LGD, BOE-Hydis 

Wellypower Taiwan 159 234 303 8% 8% 9% AUO, Innolux, IVO, Sharp 

Delta Taiwan 94 173 234 5% 6% 7% AUO, CPT, Innolux, Hannstar, BOE- 

Hydis, TPV, Funai 

GIO Taiwan 55 135 182 3% 5% 5% CMO 

Sintronic Taiwan 25 83 130 1% 3% 4% CMO, CPT, Innolux 

Others 69 161 270 4% 6% 8% 

Total 1,953 2,910 3,536 100% 100% 100% 

Y/Y 79% 49% 22% 

Source: Company data, DisplaySearch, J.P. Morgan estimates.

Bhavin Shah 

(852) 2800-8538 


Figure 95: Notebook PC backlight unit—Key components and their functions 

Lamp (CCFL) 

Light source 

Kumho Electric Harison Toshiba 

Wooree ETI Sanken 

Panasonic Stanley 

Wellypower NEC 

Heesung 


Lamp reflector 

Fine DNC 

Inji Display 

Mitsui Chemical 

Alanod 


20 April 2009 

Diffuser up/down (protective film) 

Provides uniformity of light intensity and protects 

display surfaces 

SKC, Keiwa, Kolon, Kimoto, Tsujiden, Coretronic, 

Radiant, Helix, Forhouse, K-Bridge 

Reflector sheet 

Reflects light upwards 

SKC, Kolon 

Prism sheet 1/2 

Increasing brightness 

3M, LG Electronics, SKC, Nano Vision 

and MNtech 

Backlight module 

Taesan LCD Forhouse 

Wooyoung K-Bridge 

Hansol LCD Forward Electronics 

Radiant Prokia Technology 

Panasonic Harison Toshiba 

Helix Coretronic 

NEC Sanken 

Stanley Electric 

Light guide plate 

Guides the light rays from light source to 

display area 

Raygen Mitsubishi Rayon 

Wooyoung Asahi Kasei 

Nano LCD Sumitomo Chem 

Pusan Acryl Coretronics 

Radiant Helix 

Forhouse K-Bridge 

165

Bhavin Shah 

(852) 2800-8538 


Polarizer is a key optical film for 

LCD panels 

166 


20 April 2009 

Glass substrate 

Glass substrates are an important starting material for both TFT array and color filter 

production. Their physical properties have an important influence on TFT-LCD 

equipment and manufacturing processes. The largest TFT-LCD glass substrate 

industry players are Asahi Glass Co., Corning, NH Techno Glass and Nippon 

Electric Glass. 

LCD glass substrate demand growth will remain mild in 2008, according to 

Displaybank. 

Table 83: Glass substrate demand forecast 

Million square meters 

1Q08 16.4 

2Q08 16.7 

3Q08 17.6 

4Q08 18.5 

Source: Displaybank. 

Liquid crystal 

Liquid crystal is the fundamental material that modulates polarization of light when 

voltage is applied. It plays a key role in the performance of TFT-LCDs on parameters 

such as the viewing angle, response time, gray scale, power consumption, color 

saturation and contrast ratio. The demand for liquid crystals comes from three 

distinct sources: LCD TV panels, LCD monitors and TFT laptop screens. The liquid 

crystal market is dominated by Merck (Germany) and Chisso (Japan). New entrants 

include Dai Nippon Inks and Chemicals (Japan). For a detailed discussion, please 

refer to the 5th edition of our Supply Chain Guide. 

Driver ICs 

In a TFT-LCD, IC drivers are needed to control the panel circuitry, as well as to 

receive signals from the computer (or other signal source). Driver ICs make up about 

10%-15% of the module materials cost. The leading driver IC producers are 

Samsung, Novatek, Himax NEC, Oki Semiconductor and MagnaChip. For a detailed 

discussion on driver ICs and market trends, please refer to the 5th edition of our 

Supply Chain Guide. 

Color filters 

Color filters (CF) are a major component of LCD panels and are produced by adding 

color resistors and other chemicals to glass substrates. They are typically the second 

most expensive component used in LCDs at 15%-20% of the total display cost. CF 

costs are dominated by glass (39%) and equipment depreciation (15%). Since color 

filters generate color for picture quality improvements in LCD applications, LCD 

panel and TV set makers are more demanding of color filter performance from LCD 

TVs than PC monitors thereby increasing the complexity of manufacturing. For a 

detailed discussion on the suppliers and process, please refer to the 5th edition of our 

Supply Chain Guide. 

Polarizer 

Polarizer is a key optical film for LCD panels, and a pair of polarizers (bottom/top 

polarizer) is embedded in every TFT-LCD panel in order to pass through the desired 

direction of light and filter out lights with undesired delectations. A major function 

of the polarizer is to control the transmittance or shielding of light in order to 

enhance color contrast and provide crucial characteristic of TFT-LCD.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 96: Function of polarizer 

Source: DisplaySearch. 

DisplaySearch expects the TFT LCD polarizer market to grow from US$4.6 billion 

in 2007 to US$5.7 billion in 2010. Large-area panels (10-inch and larger TFT LCDs) 

account for 86% of the market revenue. LCD TVs proportion of total large-area TFT 

LCD polarizer market is expected to increase from approximately 44% in 2008 to 

reach 50% by 2011. 

Table 84: Polarizer market 

US$MM 2006 2007 2008 2009E 2010E 2011E 

LCD TV 1,368 1,961 2,187 2,280 2,678 3,020 

Monitor 1,673 2,078 2,110 2,373 2,307 2,184 

Note PC 495 600 662 698 749 794 

TFT LCD 3,536 4,639 4,959 5,351 5,734 5,998 

Mobile Phone 460 490 508 498 472 473 

Automobile Monitor 59 74 80 82 85 88 

Others 424 456 485 730 754 776 

Total 

Source: Displaybank. 

4,480 5,659 6,033 6,661 7,046 7,335 

We believe that the polarizer industry is one of the most attractive within the TFT- 

LCD sector, mainly because there are only five big players—Nitto Denko, Optimax, 

Sumitomo, Sanritz, and LG Chemical—together accounting for a majority of the 

total polarizer market. Entry barriers are perceived to be high due to its high capital 

intensity, accumulated production process know-how, limited access to triacetate 

cellulose (TAC) supply and slow yield improvements for newcomers. 

The polarizing plate in standard PCs is made of a layer of iodine-permeable 

polyvinyl alcohol film, sandwiched between two layers of TAC film. This 

construction allows for the proper amount of rigidity and strength and protects the 

light element. Polarizer producers purchase TAC films from Japan’s Fuji Photo Film 

and Konica Minolta, which are the main producers of TAC films. The production 

volume of polarizing film is controlled by the volume of TAC film supplied by these 

two companies. 

167

Bhavin Shah 

(852) 2800-8538 


Figure 97: Polarizer market trends 

US$ in billions, % 

7 

6 

5 

4 

3 

2 

1 

0 

168 

2006 2007 2008E 2009E 

Polarizer Polarizer as % of LCD market (RHS) 

Source: DisplaySearch. J.P. Morgan estimates. 


20 April 2009 

Table 85: Polarizer components, suppliers and functional roles 

Polarizer structure Suppliers Functional role 

Protective film Sekisui Chemical Co. Prevents TAC film from being scratched during 

the LCD module assembly process 

TAC film Fuji Photo Film, Konica Minolta Protects PVA sheet (on both sides) 

Poly-vinyl alcohol/iodine sheet (PVA) Kuraray, NSC Allows light to pass through the sheet 

Adhesive Saiden, Soken Allows the polarizer to be attached to the LCD 

module 

Release liner Protects the adhesive layer until it can be 

attached to the module 

Wide-view film Fuji Photo Film 

Anti-glare film DNP, Nitto Denko 

Anti-reflection film South Wall Technology 

Compensation film 


3M 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

Figure 98: Y/Y growth of TFT-LCD and polarizer markets 

% 

40% 

30% 

20% 

10% 

0% 


2007 2008E 2009E 

TFT-LCD market gorwth Y/Y Polarizer market gorw th Y/Y

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 86: TFT LCD supply chain takeaways 

Key components Producers Country Major customers 

SEC Korea SEC, LGD, Sharp, Hydis 

Hynix Korea LGD, Hydis 

Himax Taiwan CMO 

Myson Century Taiwan CPT 

Winbond Taiwan HannStar 

Driver IC 

Novatek Taiwan AUO, CPT, HannStar, QDI, SEC 

NEC Japan LGD 

Sharp Japan Internal use 

Hitachi Japan LGD, Toshiba 

Glass Substrate 

Color Filter 

Backlight Module 

Polarizer 

Panasonic Japan Toshiba Matsushita Display 

Seiko Epson Japan Internal use (40%) 

Samsung Corning Korea SEC, LGD, Sharp, AU Optronics 

China Optoelectronics Taiwan AU, CMO, CPT 

Asahi Glass Japan LGD 

NH Technologies Japan x 

NEG Japan x 

SEC Korea SEC, LGD 

LGD Korea LGD 

Sintek Taiwan Taiwan DNP, Hannstar, AU 

Cando Taiwan AU, Hydis, KCT 

CMO Taiwan CMO 

AMTC Taiwan QDI, Sumitomo, Hannstar, AU 

Taiwan Others Taiwan AU, CPT 

Toppan Japan SEC, LGD 

DNP Japan x 

Other Japanese Makers Japan x 

Taesan LCD Korea SEC, LGD, Hydis 

Wooyoung Korea SEC, LGD, Hydis 

Hansol LCD Korea SEC 

Radiant Taiwan CMO, CPT, Hannstar, AU 

Forhouse Taiwan AU, CMO, CPT, Hannstar 

K-Bridge Taiwan AU, CMO, CPT 

Forward Electronics Taiwan CPT 

Prokia Technology Taiwan AU, CMO, CPT 

Helix Taiwan AU, Sintek, Hannstar 

Coretronic Taiwan AU, CMO 

LG Chemical Korea LGD, Hydis, Hanstar, CPT 

Optimax Taiwan AU, CPT, Hannstar, CMO, QDI 

Jantex Taiwan AU, CMO, CPT 

Nitto Denko Japan LGD, SEC 

Ace Digitech Korea SEC, Hanstar 

Sumitomo Japan LGD, SEC 

Liquid Crystal Merck Germany SEC, LGD 


169

Bhavin Shah 

(852) 2800-8538 


Table 87: Technology comparison 

Picture comparison 

Color accuracy OLED TVs create realistic colors using 

carbon-based molecules with the help of 

electric impulse. Their strength is being able 

to generate deeper blacks, brighter whites 

and all the gray scales in between. 

Contrasts / black 

levels 

170 

OLED: Technology for future 

OLED (Organic Light Emitting Diode) is one of the latest technologies in the 

TV/display market. This flat panel display technology is capable of providing 

significantly better performance in terms of better viewing angles, faster response 

times, higher contrast and brightness, more saturated colors and are thinner and 

lighter compared to the existing flat panel display technologies, viz. TFT/LCD and 

PDP. The following table provides a comparison of the existing flat panel 

technologies. 

OLED TFT-LCD PDP 

OLED TVs excel in black levels and 

contrast. They do not require backlighting 

and thus, by limiting conductivity to the 

emissive organic compounds allows for 

deep rich black levels. Typical contrasts 

ratio of 1000:1 

Viewing angle In OLEDs every pixel is lit independently 

and that light will be seen from off axis 

viewing angles easily and accurately 

providing near-perfect viewing angles of 170 

degrees 

Functional comparisons 

Fast moving 

video playback 

Power 

consumption 

OLED technology has the fastest response 

rate time of any type of display and does not 

suffer from motion lag or motion blur 

OLEDs hardly require any power to energize 

the organic light emitting molecules located 

in the emissive layer of the substrate. 

Altitude usage Altitude is not an issue for OLED TVs since 

there is no pressure build up from air 

pockets in the solid panel substrate. 

Longevity OLED TV life currently is limited by the short 

life of blue LED. 

Screen burn in Since OLED TV is made from organic LED 

material there may be burn in issues. 



20 April 2009 

LCD TVs reproduce colors by manipulating 

light waves and subtracting colors from 

white light. Color information in LCD TVs 

though benefit from the higher-than-average 

number of pixels per square inch, LCDs are 

simply not as impressive in color realism. 

LCD displays utilize electric charges to twist 

and untwist liquid crystals, which causes 

them to block light and, hence, emit blacks. 

This process consumes large power as 

more the twist darker the shade. Typical 

contrasts ratio of 500:1 

LCD TVs block light to create darker 

images, thus contrast suffers at angles 

significantly. 

LCD TVs suffer from a slight "trailer" effect, 

where the individual pixels are just slightly 

out of step with the image on the screen 

LCDs use florescent backlighting to produce 

images and thus require substantially less 

power to operate than plasmas. 

Plasma TVs currently hold the best picture quality 

available in TVs above 37”. It delivers a natural, 

realistic picture due in part to the rare natural 

gasses xenon and neon and the use of 3 phosphor 

colors blue, green, and rare – the combination of 

which can make any color in the prism 

Plasma currently has excellent black level (at least 

with the better manufacturers). 

Plasma screens have emissive light through each 

pixel and perfect viewing angles of 170 degrees. 

Plasma displays do not suffer motion lag at all. 

Even at 60hz refresh rate the response times are 

fast enough so that the human eye cannot see any 

motion blur. 

Plasma technology uses a lot of power to generate 

electric pulses to each and every pixel. 

Altitude has no impact on LCD display At high altitudes, Plasma TVs display element 

emits a buzzing sound due to air-pressure 

differential between compressed rare gases in the 

glass substrate. 

LCD TV typically last as long as its backlight 

does as there is not much to wear out in it. 

LCD displays do not have burn in issues. 

The backlight passes through “twisting” 

crystals which are a hard material not 

subject to etching 

Plasma displays excite a combination of noble 

gases using electric currents to produce colors. 

These gases have life and fade over time. 

With plasma displays, static images will begin to 

"burn-in," or permanently etch the color being 

displayed into the glass display element. The time it 

takes for this to occur depends greatly on the anti 

burn-in technology of the manufacturer. 

However, in our view, OLED displays suffer from three major disadvantages: 1) life 

(as discussed in table above); 2) high price, which we think will come down as the 

technology gains momentum and manufacturing process gets refined; and 3) it can be 

easily damaged by water. 

All major display panel vendors such as Samsung SDI, Sony, Toshiba, LGD are 

introducing larger displays for NBs and TV. Samsung unveiled its 40-inch OLED

Bhavin Shah 

(852) 2800-8538 


Table 88: OLED major players' development 


20 April 2009 

TV with full HD support, in September 2008. However, whether OLED turns out to 

be the technology for tomorrow, remains to be seen. 

Company Size of current mass production Large OLED panel timetable 

Sony 11" 

1) Produce >11" panel which is still too expensive to be popular; 

2) Current pilot production of panels up to 27" 

Samsung SDI 2"-8" 

Small panel. CEO just announced its interest in combining LG’s 

1) Will adopt 5G substrate for larger size; 

2) Currently pilot production of panels up to 31" 

LG Display 

production line with that of Samsung SDI to boost OLED 

production. 

Mass produce 32" in 2011 

Toshiba TMD No mass production so far 

1) By 2010, mass produce 21" an up. 

2) Pilot production of 21" 

Lightronik Technology 

Licensed by Kodak in 2004 to set up a 370mmx470mm OLED 

production line. 

Panasonic (Hitachi, IPS 

Alpha) 

No mass production so far 2011-2012 mass produce 37” panel 

Epson 8” panel mass produced in small quantity 

CMEL 

1) 2”-7”; 

2) 2.2”-2.8” are very mature; 

3) current max size 4.3” 

1) Use LTPS to produce 2” panels for DSC; 

1) 2010-2011 sees production in larger size; 

2) Pilot production of panels up to 25” 

AUO 

2) Started to mass produce AMOLED in 2004, halted the 

production in 2007, resumed it in 2008 

Matsushita Electric 

Plans to mass-produce 37” OLED TV’s in 2011, working with Hitachi 

and IPS Alpha (Toshiba invested). 


For a detailed discussion on OLED technology and its various types, please refer to 

the LED section. 

171

Bhavin Shah 

(852) 2800-8538 



(852) 2800-8538 



Limited 

Rod Hall 

(44-20) 7325-7437 

rob.b.hall@jpmorgan.com 

J.P. Morgan Securities Limited 

172 


20 April 2009 

Internet-protocol television (IPTV) 

What’s new? 

The latest statistics for Western Europe, Africa and Middle East regions, by the 

Broadband Forum, show strong IPTV growth of 45% throughout 2008. France is the 

largest IPTV market in the Western Europe region, with over half of the 10.2 million 

subscribers. North American IPTV subscriber number doubled in 2008 with a growth 

of 113% while global subscriber number registered a growth of 63% yoy. 

Gartner forecasts that IPTV subscribers will increase from 5.5 million in 2006 to 

54.8 million in 2012, a CAGR of 36.0%. It also estimates the related service 

revenues will grow from US$925 million to US$18 billion during 2006-11, a CAGR 

of 52%. This section provides an update on IPTV subscriber numbers and revenue; 

penetration and service offered in various regions; it also includes update on 

broadband penetration. 

Microsoft and Netflix have launched Netflix on Xbox LIVE, which enables streaming 

of movies and TV episodes from Netflix on the Xbox 360. Microsoft has also 

introduced Mediaroom Anytime features, enabling viewers to access previously aired 

shows directly from the Interactive Program Guide or immediately restart an on-air 

program without any prior digital video recording. 

What is IPTV…? 

Internet-protocol television (IPTV) is the delivery of real-time streaming TV over 

broadband IP networks and is a key ingredient for triple-play. Triple-play is defined 

as a bundled customer proposition where one organization offers television, 

telephony and internet services over a single network. 

Internet protocol (IP) adds an address to a packet of information and drops it in the 

system, but there is no direct link between the sender and the recipient. TV (in IPTV) 

specifies the services offered such as linear and on-demand programming. The 

combination forms a medium of communication of video content that operates over 

an IP network referred to as IPTV. 

…and what it is not 

The concept of IPTV is often confused with TV or video content streaming over the 

internet. The ‘IP’ in IPTV refers to a delivery mechanism for sending information 

over a secure, tightly managed and a private IP network and not the public internet. 

Usually IPTV is represented by a profile of closed, proprietary TV systems such as 

those present today on cable services but delivered via IP-based secure channels. 

Television over internet is instead an open evolving framework in which a very large 

number of small and medium-sized video producers contribute content along with 

offerings from more traditional retail and distribution channels. 

There are other services such as time-shifting and place-shifting, which allow users 

to view programs at a time and location convenient to them. These services are often 

provided in conjunction with IPTV, but are not IPTV per se as they can be provided 

with other digital television services too.

Bhavin Shah 

(852) 2800-8538 


Table 89: Worldwide IPTV subscribers and service revenue (2006-2012E) 

Market overview 

The latest statistics for Western Europe, Africa and Middle East regions, by the 

Broadband Forum at the IPTV World Forum in London on 25 March 2009, show 

strong IPTV growth of 45% throughout 2008. The report also showed France, with 

over half of the 10.2 million subscribers, as the largest IPTV market in the Western 

Europe region. Despite being the centre of recession, North American IPTV 

subscriber numbers doubled in 2008, with a growth of 113%. Worldwide IPTV 

subscriber number grew by 63% oya and has reached 21.7 million. 

In a report published in September 2008, Gartner forecasts that IPTV subscribers will 

grow from 5.5 million in 2006 to 54.8 million in 2012—a CAGR of 36.0%. It also 

forecasts that related service revenues will grow from US$925 million to US$18 

billion during 2006-11—a CAGR of 52%. 

2006 2007 2008E 2009E 2010E 2011E 2012E 

CAGR 

2007-2012E 

IPTV subscribers (‘000s) 

Total IPTV subscribers 5,490 11,972 19,649 28,330 37,359 46,159 54,758 36% 

Growth - 118% 64% 44% 32% 24% 19% - 

Household penetration 0% 1% 1% 2% 2% 2% 3% - 

Multichannel Package IPTV Subscribers 3,821 7,927 13,709 21,756 30,292 38,223 45,943 42% 

Premium channels IPTV subscribers 235 1,497 2,487 2,250 2,046 2,317 2,649 12% 

VoD IPTV subscribers 

IPTV revenue (US$MM) 

1,434 2,548 3,453 4,324 5,020 5,620 6,166 19% 

Total IPTV service revenue 1,875 4,264 7,886 12,569 18,015 23,245 27,892 46% 

Growth 978 3,317 6,522 10,863 16,163 22,454 28,301 54% 

IPTV subscription revenue (basic & premium) 874 2,160 4,076 6,698 9,596 12,627 15,356 48% 

VOD IPTV service revenue 50 178 423 854 1,471 2,264 3,145 78% 

Value-added IPTV service revenue 

Source: Gartner (September 2008). 

1 5 35 93 199 341 479 149% 

Table 90: IPTV penetration, services offered, and topology by region, 1H07 

Region % of TV homes Typical IPTV services offered Typical home networking Typical home networking topology, 

penetrated by IPTV 

topology, 2007 

2012 

Americas 0.3% Multi-channel TV, VOD WLAN (802.11), CAT 5 WLAN (802.11), CAT 5, MoCA, power 

line communications 

EMEA 1.0% Multi-channel TV, Premium TV, VOD, other WLAN (802.11), CAT 5 WLAN (802.11), CAT 5, power line 

IPTV services 

communications 

Asia/Pacific 0.4% Multi-channel TV, Premium TV, VOD, other 

IPTV services 

WLAN (802.11), CAT 5 WLAN (802.11), CAT 5 

Japan 0.6% Multi-channel TV, VOD, other IPTV services WLAN (802.11), CAT 5 WLAN (802.11), CAT 5 

Source: Gartner (March 2008). 


20 April 2009 

The advent of new DSL technologies and advances in fiber technologies have led to 

increased bandwidth throughput coupled with advanced compression technologies, 

which have lowered transmission costs by making delivery of video over IP more 

bandwidth-efficient, enabling the delivery of IPTV services in an increasingly secure, 

scalable and cost-effective manner. 

Also, there has been an increase in the uptake of broadband technologies, leading to 

an increase in demand for digital content. According to Broadband Forum, 2008 

statistics show a 62.6 million line growth to 410.9 million lines. According IDC, 

about 65% broadband subscribers access internet via DSL technology and the global 

subscriptions to DSL would have reached 248 million in 2008. 

173

Bhavin Shah 

(852) 2800-8538 


174 


20 April 2009 

Figure 99: Broadband subscriber numbers—Top 10 countries 

In millions 

100 

80 

60 

40 

20 

- 

China 

USA 

Source: Broadband Forum. 

Japan 

Germany 

Why is IPTV important? 

France 

2007 2008 

UK 

South Korea 

Italy 

Brazil 

Canada 

The following section has been excerpted from our European Communications 

Technology analyst Rod B Hall’s report on IPTV, originally published on 2 March 

2007. Please see MorganMarkets for the full report. 

IPTV will bring the telecoms companies into direct competition with existing media 

distribution companies as it provides new revenue opportunity by adding TV 

subscriptions to the product mix. Aggressive companies have begun to add broadcast 

TV to their networks (for free in some cases), forcing the incumbent to do the same. 

Moreover, technology promises new interactive services and advertising revenue. 

In particular IPTV opens up a completely new TV advertising model for operators by 

injecting TV advertising in a dynamic and much smarter way. TV adverts of the near 

future will be user-specific and will even consider recent user behavior. Search 

providers like Google, with a lot of web advertising experience, have been 

considering ways to take the search patterns coming from a household during a day 

and using those to intelligently select the adverts that appear embedded in TV 

programming. A simple example of this would be a user doing a couple of searches 

for a particular type of car—lets say a Porsche 911—during the day and then finding 

that the ads on his TV that night are mysteriously centered on various types of sports 

car. Figure 100 shows an example of this process.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 100: TV advertising of the near future 


The IP nature of IPTV makes possible many other interesting interactive 

applications—automatic chat overlays for certain programs based on when your 

friends are online and watching the same content, increased ability to indicate 

interest in a product and purchase it as you watch. 

IPTV architectural demands 

IPTV is a key part of triple play services and requires a completely integrated service 

architecture that extends from the core network to the edge routers and access 

devices such as DSLAMs. It requires IP multicasting and IGMP which in some cases 

makes it necessary to completely replace existing DSL and IP networking equipment. 

To be comparable with traditional TV systems, it requires rigid quality of service 

(QOS) parameters to ensure lower error rates, comparable channel changing response 

time and service availability. Bandwidth needs of IPTV are also high since the video 

stream itself requires a lot of bandwidth. Multiple TVs in each house would demand 

even more bandwidth. For a detailed discussion, please refer to Supply Chain Guide, 

5th edition. 

Main pieces in an IPTV delivery system 

There are a number of main elements required to deliver broadcast TV content, some 

of which overlap with (or are nearly the same as) elements in existing broadband IP 

systems and some that are completely new. The following diagram lays out the major 

elements of an IPTV system: 

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176 


20 April 2009 

Figure 101: IPTV network elements 


The primary opportunities for bolstering IPTV capabilities tend to reside at the Super 

Head End (encoding and conditional access encryption) and in the middleware 

category. In the following paragraphs we briefly discuss IPTV network elements; a 

detailed discussion, however, is available in Supply Chain Guide, 5th edition. 

SHE (Super Head End) 

The SHE provides the entry point for raw data into the network. From an IPTV 

perspective it performs two critical functions apart from the aggregation of content— 

these are encoding and conditional access encryption. 

VHO, Video Hub Office 

The VHO is an edge router with both IP multicasting and IGMP (Internet Group 

Management Protocol) capabilities. Most of the existing edge routers need to be 

replaced due to the need for IP multicasting and IGMP (more IGMP than 

multicasting) or due to increase capacity required by heavy load of video. 

VSO, Video Serving Office 

This is IPTV parlance for a DSLAM. DSLAM is a rack of equipment at the local 

telephone exchange that connects to subscriber copper lines and delivers a broadband 

DSL connection. 

The VSO is where IGMP becomes a critical technology. It enables the set-top box to 

signal back to the VSO which channel it would like delivered (an essential 

requirement due to bandwidth constraints). And because of IGMP it could be 

necessary to replace some older DSLAM equipment or significantly upgrade it. 

DNG, Delivery Network Gateway 

“Delivery Network Gateway” is the set-top box-modem-router combo that will sit 

next to the TV of anyone receiving IPTV. There are a couple of key technologies

Bhavin Shah 

(852) 2800-8538 


(IGMP, middleware, video decoding capabilities) that will need to be loaded on the 

DNG to make IPTV go. While set-top box or DNG capabilities will be slightly 

different for IPTV, we are not convinced that owning DNG production and design is 

particularly necessary for an end-to-end IPTV network offering. The boxes 

themselves are increasingly becoming a commodity but the operating systems 

running them and the middleware that integrates them with the network are not. 

Middleware: Critical for the customer 

Middleware is probably the single-largest influencer of the consumer experience and, 

as such, is critical for success. Microsoft is fighting hard to dominate this space by 

getting Windows CE into the DNGs. Others like Kassena also have strong solutions 

and Alcatel-Lucent cannot be discounted due to their prominence at the 

DSLAM/VHO level. Scale becomes important in this space, as the key to owning 

middleware is probably more content than technology. The bigger your content 

distribution scale the stronger position you have with the content owners and the 

more your own DRM system becomes the de-facto standard. There are several 

functional elements within middleware. These are: 

• Metadata management 

• Subscriber management 

• Content management 

• GUI management 

• Consumer experience (the DNG client) 

For a detailed discussion on these elements, please refer to the Supply Chain Guide, 

5th edition. 

Table 91: IPTV ecosystem companies by areas of concentration 

Conditional Access VHO VSO DNG Encoders Middleware VOD 

Irdeto Cicso Alcatel-Lucent Amino Technologies Tandberg TV Alcatel-Lucent Cisco 

Latens Juniper Huawei Celrun Amevia Nokia-Siemens Microsoft 

Nagra Nokia-Siemens Motorola Humax EGT Microsoft Motorola 

NDS Alcatel-Lucent Ericsson (Marconi) Pace Harmonic Motorola Bitband 

NS8 Ericsson (Redback) Nokia-Siemens Samsung Minerva Eona Kasenna 

SecureMedia ECI Thomson Nextstream Infogate C-COR/nCube 

Verimatrix Fujitsu Cisco Optibase Orca Seachange 

Widevine NEC Motorola Visionary Solutions View Cast Terayon 

Cisco Sumitomo Envivio Yes TV Concurrent 

Microsoft Tellabs Cisco Envivio Espial 

Motorola 


Zyxel Motorola Minerva 

Myrio 

Table 92: Major IPTV competitors and product offerings 

Alcatel-Lucent 

Cisco 

Nokia-Siemens 

Microsoft 

Motorola 

Ericsson 



20 April 2009 

Encoding CA/DRM Middleware 

VHO (Edge 

Routing) 

VSO 

(DSLAM/OLT) DNG (STB) VOD 

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Microsoft Mediaroom 

Microsoft Corporation announced plans to extend its IPTV software with links to 

home PCs as well as digital terrestrial TV networks, in June 2007, and renamed its 

offering as Microsoft Mediaroom. The upgrade announced the software giant’s 

decade-long effort to extend its reach from computing to consumer electronics. 

In January 2008, Microsoft collaborated with set-top box chipmaker Broadcom to 

develop technologies that will let consumers hook their televisions to the internet 

while also help tapping a host of new products and services. Under the plan, 

Microsoft will adapt its Mediaroom internet television client software for use on settop 

boxes powered by Broadcom’s system-on-a-chip (SOC) technology. Microsoft 

disclosed the initiative at the Consumer Electronics Show in Las Vegas. The aim is 

to create new, interactive television offerings piped into consumers’ homes using the 

IPTV (Internet Protocol Television) standard. Major features include quick channel 

changing, multiple channel records simultaneously without a hardware tuner limit, 

multi-room viewing, multiple picture-in-picture, etc. 

At the 2009 International Consumer Electronics Show (CES 2009), held in January 

at Last Vegas, Microsoft introduced Mediaroom Anytime, its latest feature set for its 

multimedia and IPTV platform. In addition to existing Mediaroom features, such as 

video on demand, DVR Anywhere and Remote Digital Video Recording, the new 

Mediaroom Anytime features enables viewers to access previously aired shows 

directly from the Interactive Program Guide or immediately restart currently airing 

shows without any preplanning or prior DVR recording. In addition, Microsoft 

announced that the Mediaroom platform has reached nearly 2.5 million subscriber 

homes worldwide, an increase of more than 1.5 million new connections in the past 

year alone. 

Also unveiled, at CES 2009, were the new concept applications complementing the 

Microsoft Mediaroom TV experience with content and services from internet. These 

applications show newer ways for viewers to engage with and personalize the TV 

experience. Following are some of the displayed applications (Source: Microsoft 

Press Release): 

• BBC Worldwide TopGear.com: This application allows fans to access and 

interact with content found on http://www.topgear.com. Viewers can try 

technologies developed by emuse such as interactive features and video-ondemand 

functionality to download episodes of the BBC’s award winning 

flagship motoring show “Top Gear”. 

• Turner Sports and the PGA of America, together with ES3, built this 

application to allow viewers to switch dynamically between camera feeds, watch 

golfing instructional videos and click from static to video advertisements. 

• The Associated Press red carpet events, built by ES3 and the AP, is a celebrity 

news application which features up-to-the-minute information, photos and video 

clips at the hottest red carpet events. 

• Live Capture of Photos and Video lets viewers upload photos and videos to the 

Microsoft Live Mesh cloud storage Web site and view their personal content via 

the TV.

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20 April 2009 

• Visual Voicemail, a completely integrated visual voice mail application, lets TV 

users check their voice mail and play back messages, even at pitch-controlled, 

fast-forward speeds. 

• TV Dashboard, designed and created by ES3, shows local news and information 

that Mediaroom subscribers can access while watching TV. 

Guangzhou Digital Media Group formally launched Zhujiang Digital, a connected 

TV service powered by the Microsoft Mediaroom Internet Protocol Television 

(IPTV) platform. The new service, available to residents in the Guangzhou region of 

China, also includes the first deployment of the Microsoft Mediaroom Anytime 

feature set. SingTel is planning to use these new features and aims to offer the 

service to its mio TV subscribers in 2009. 

Now watch movies on Xbox 360 

With the launch of Netflix on Xbox LIVE in November, Microsoft has provided 

Xbox 360 users a gateway to instantly watch thousands of movies and TV episodes 

streamed from Netflix using their game system. Microsoft, at CES 2009, confirmed 

the premiere of Xbox LIVE Primetime Channel this spring, with an online version of 

the popular TV show “1 vs. 100” which will enable thousands of gamers to play 

together with real hosts and compete for real prizes. With this, Microsoft is trying to 

bring together the best of TV and gaming. 

Table 93: Service providers selected Microsoft Mediaroom platform for their digital TV offering 

Service provider Country Deployment status 

AT&T U-Verse US Commercial 

Bell Canada Trial 

BT UK Commercial 

Chunghwa Telecom Taiwan Trial 

Clubinternet France Commercial 

CNC China Trial 

Crnogorski Telekom Montenegro Commercial 

Deutsche Telekom Germany Commercial 

Magyar Telekom Hungary Commercial 

Allstream Canada Trial 

nTelos US Trial 

Portugal Telecom Portugal Commercial 

Reliance India Trial 

SingTel Singapore Commercial 

Slovak Telekom Slovakia Commercial 

Swisscom Switzerland Commercial 

TDC Denmark Commercial 

Telecom Italy Trial 

Wind 

Source: www.microsoftmediaroom.com. 

Italy Commercial 

Video-on-Demand systems 

Video-on-Demand (VOD) systems are distinctly different from IPTV, though they 

share some of the same infrastructure. Where IPTV is the provision of broadcast TV, 

VOD is the delivery of user-selected content when the user wants it. Effectively, it is 

remote play-out from a library of content residing at a central repository. For further 

details, please refer to Supply Chain Guide, 5th edition. 

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Figure 102: Netflix Player by Roku 

Source: www.netflix.com. 

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20 April 2009 

Movies-on-Demand: Netflix ready devices 

In May 2008, Netflix in collaboration with Roku introduced a new movie streaming 

device that allows the Netflix subscribers to instantly stream movies and TV 

episodes. It allows the user to choose movies for their instant Queue on Netflix 

website and then automatically display those choices on the TV screen. 

The player priced at US$99 provides user with flexibility of variety of audio-video 

output ports and is also Wi-Fi enabled. It also provides with rewind, fast forward and 

pause features, includes optimization of the Netflix video streaming technology, 

eliminating the need for a hard disk drive associated with video downloads, and has 

built-in connectivity for automatic software upgrades. 

Netflix has also teamed with TiVo for streaming movies and TV episodes on TV 

through TiVo DVRs. Apart from the set-top boxes, we also see many existing 

devices like BD players from LG and Samsung, Xbox 360, etc. providing users with 

the capability to stream content from Netflix. 

This movie streaming service comes at no extra cost to Netflix unlimited plan 

subscribers and provides access to over 12,000 movies and TV episodes to watch 

instantly. Members of unlimited plan can activate up to 4 unique devices on an 

account during a twelve month period and the number of devices that can be 

simultaneously used depends on the type of Netflix subscription. Currently the 

service is available only in the US.

Bhavin Shah 

(852) 2800-8538 


Table 94: Tier-1 carriers by IPTV subscribers, with their technology vendors, worldwide, 1H08 

Carrier Country IPTV 

subscribers, 

1H08 (in MM) 

France 

Telecom 

(Orange) 

France 


20 April 2009 

Video integration Middleware 

vendor 

STB vendor Headend 

vendor 

Server 

vendor 

DRM 

vendor 

France 1.39 Thales Thales Sagem, Thomson Tandberg Thales Viaccess ECI, Nokia 

Siemens 

Networks 

Access 

vendor 

Access 

technology 

vendor 

DSL 

Aggregation 

vendor 

Free Telecom France 1.2* Own Own design Own design, 

Cisco 

DSL, FTTH 

PCCW Hong Kong 0.93 Own Own 

Yuxing, Own TUT/ Entone Own network NEC Mainly ADSL, Juniper, 

(Cascade) 

Tandberg, 

CA 

some ADSL2+ Redback 

Harmonic 

in development, 

VDSL 

(Ericsson) 

China 

China 0.90 ZTE/UTS ZTE/UTS ZTE Custom ZTE/Dell/HP Custom ZTE/HW/ASB DSLAM/FTTB ZTE, Redback 

Telecom 

(Ericsson) 

Neuf Cegetel France 0.82 Custom Netgem Thomson Nagra Huawei/ DSL, FTTx, Cisco 

Alcatel-Lucent, FTTH 

Redback 

freehotspot.com 

(Ericsson) 

SK Broadband 

(formerly 

Hanaro 

Telecom) 

South Korea 0.80 Aircode Celrun TV Celrun TV Alcatel-Lucent FTTH 

KT South Korea 0.70 Samsung, Dasan ATEME NDS FTTH 

Telefonica Spain 0.58 Alcatel-Lucent Alcatel- Kreatel (Motorola)/ADB Various C-Cor/ Own Alcatel-Lucent ADSL2+ Juniper 

Lucent 

(originally 

Own) 

Concurrent 

AT&T U.S. 0.55 Alcatel-Lucent Microsoft Sientific Atlanta (Cisco) Scientific 

Atlanta 

Sun Alcatel-Lucent VDSL2 Alcatel-Lucent 

Chungwa Taiwan 0.51 Alcatel- 

Alcatel- Asustek/HonHai/Tatung Optibase Alcatel- Widevine Alcatel-Lucent/ 

Redback 

Telecom 

Lucent/HwaCom Lucent/ 

Lucent 

Samsung/ECI 

Systems/Chungwa Microsoft 

China Unicom China 0.40 ZTE/VCOM/ 

UTStarcom Onewave, UTStarcom, Onewave, Onewave, Onewave, ZTE, Huawei, ADSL2+/FTTB ZTE/ASB/ 

(Combination 

Alcatel-Lucent and others ZTE 

UTStarcom, UTStarcom, UTStarcom, Alcatel-Lucent 

VCOM, 

of China 

VCOM and ZTE/HP Custom 

Redback 

Netcom & 

own 

(Ericsson) 

Unicom) 

(custom) 

Belgacom Belgium 0.39 Nokia Siemens Myrio, Espial Tilgin Tandberg nCube Verimatrix Alcatel-Lucent DSL Redback 

Networks 

(Ericsson) 

TeliaSonera Sweden 0.32 Custom Kreatel (Motorola) Edgeware Irdeto 

Access 

Ericsson DSL and fiber Cisco 

Tele 2 

Versatel 

Netherlands 0.25 Samsung OTT Samsung BitBand Verimatrix Samsung Juniper 

BT U.K. 0.23 Nokia Siemens Microsoft Philips/Pace/Motorola Harmonic C-Cor Microsoft Huawei/ ADSL Cisco, Juniper 

Networks 

Fujitsu 

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Carrier Country IPTV 

subscribers, 

1H08 (in MM) 

Dacom South Korea 0.20 

Deutsche 

Telekom 

Germany 0.19 

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20 April 2009 

Video integration Middleware 

vendor 

Fastweb Italy 0.19 HP Kasenna Own Design/ 

Telsey/ 

Kreatel (Motorola)/ADB 

Total Tier 1 9.34 

Source: Gartner (November 2008). 

Notes: 

STB vendor Headend 

vendor 

Server 

vendor 

DRM 

vendor 

Access 

vendor 

Microsoft SA (Cisco), Motorola Harmonic Nokia Siemens 

Networks, ECI, 

Alcatel-Lucent, 

Tandberg/ 

Thomson 

Kasenna/ 

BitBand 

JDSU 

Access 

technology 

vendor 

ADSL2+/ 

VDSL2 

Aggregation 

vendor 

Cisco/Juniper 

Proprietary Various DSL/fiber Cisco/ 

Juniper/ 

Alcatel-Lucent 

* Free Telecom provides inclusive TV services to all broadband customers served by its unbundled network, but we estimate that only 40% of unbundled customers are within reach of the central office to receive services at close enough to serviceable data rates. 

Technology supplier information is mostly based on analysis of secondary data. 

Excludes multicountry deployments. 

Verizon Communications in the U.S. had 1.38 million subscribers for its TV service, but most of these subscribers only took broadcast video services supplied not with an IPTV technology solution but with a cable-TV-like RF overlay solution. 

NTT had 0.28 million subscribers for a cable-like overlay solution.

Bhavin Shah 

(852) 2800-8538 


Table 96: Slingbox—Specifications 

Figure 103: Slingbox Solo 

Source: www.slingmedia.com 

Figure 104: Slingbox Pro 


Figure 105: Slingbox Pro-HD 


Figure 106: SlingPlayer Mobile 


Source: www.slingmedia.com, http://reviews.cnet.com. 


20 April 2009 

IPTV alternative plays 

Slingbox 

Slingbox is a video streaming device, which allows consumers to watch and control 

the content from four video sources—DVR, digital cable, satellite receiver, and DVD 

player from any location on either notebook or cell phone. The initial success of 

Slingbox led to the launch of variety of products including SlingPlayer Mac, 

SlingPlayer Mobile, Slingbox PRO, Slingbox AV and Slingbox Tuner which 

transform PCs, laptops and windows-based mobile phones and handheld computers 

into personal portable TVs. 

Table 95: Slingbox AV components and suppliers 

Component Supplier 

Primary Chip TI (DSP based media processor) 

Video Codec TI (Digitizes analog video) 

Flash Memory Spansion 

DRAM Samsung 

Others 

Source: IDC, J.P. Morgan. 

Teridian, Atmel 

Description 

Slingbox solo supports HD content in addition to the digital cable, satellite receiver, DVR or DVD player content available in the 

earlier Slingbox products. 

Technical specifications 

• Input: Single A/V source 

• Compatibility: Mac, Windows PC, Windows Mobile, Palm Treo device 

• Internet connectivity: DSL line, 3G wireless network 

Description 

Slingbox Pro is a high-end model from Sling Media, supporting multiple device inputs including HD content. 


• Inputs: Accepts upto four A/V input 

• Compatibility: Mac, Windows PC, Windows Mobile, Palm Treo 700p 

• Internet connectivity: Wi-Fi, EVDO, UMTS/HSDPA 

• Additional features: Built-in analog TV tuner 

Description 

Slingbox Pro-HD provides HD-streaming in addition over the features of Slingbox Pro. It enables user to watch and control 

multiple devices from anywhere in the world on his computer or mobile phone. 


• Input: Multiple standard and high definition A/V source 

• Compatibility: Mac, Windows PC, Windows Mobile, Palm Treo device 

• Internet connectivity: Cable, DSL line, 3G wireless network 

Description 

SlingPlayerTM Mobile allows the user to watch the home TV network on Windows Mobile, Palm OS or Symbian cellphones and 

PDAs. 


• Operating system compatibility: Windows Media Smartphone, Windows Mobile Pocket PC, Palm, Symbian 

• Viewing modes: Full-screen video up to QVGA resolution at 30 frames per second 

• Internet connectivity: EV-DO or HSDPA, WiFi, or USB/ Bluetooth-based connections. 

183

Bhavin Shah 

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Table 97: TiVo HD overview 

Figure 107: TiVo HD DVR 

Source: https://www3.tivo.com/ 

Source: www.tivo.com. 

184 


20 April 2009 

TiVo 

TiVo is a Digital Video Recorder (DVRs), also called a Personal Video Recorder 

(PVR)—a consumer electronics device that records television content to a hard disk 

in a digital format with the help of a programming guide. DVRs allow recording of 

streaming content or pausing live TV, so it can be viewed later at the user’s 

convenience. Spurred by the success of the product, TiVo launched products like 

TiVo mobile that allows TiVo subscribers to schedule and access DVR recording 

from mobile handsets, Dual Tuner Product which will allow the user to record two 

programs at once, using TiVo to delivery broadband based video content to the TV 

sets of the consumer, and new venture with Nero which will help TiVo features to be 

brought to PC. 

Product features Product specifications 

Download movies directly to TV (uses broadband Signal sources: Digital cable, Analog cable, Digital antenna (ATSC) 

connection) 

and Analog antenna channels (satellite not supported) 

Share home movies (uses broadband connection) Outputs: HDMI, Component video, S-video, Composite video, 

Optical audio, Analog audio 

Download broadband movies, music and photos onto TV Video output modes include: 480i, 480p, 720p, 1080i 

Schedule shows online Inputs: Dual CableCARD support (2 slots), Cable coax, Antenna 

coax 

Discover broadcast and broadband shows with universal Ethernet connection, USB 2.0 ports (2), phone line, E-SATA 

Swivel Search 

Works with the TiVo Wireless G Network Adapter 

TiVo Series3 architecture 

TakeTV 

SanDisk Sansa TakeTV is a simple plug and play device, resembling a USB flash 

drive in appearance. The Sansa TakeTV video player enables the user to transfer the 

downloaded video from the PC on to the device—plug it to TV cradle, navigate the 

contents and play the video using a remote on the TV.

Bhavin Shah 

(852) 2800-8538 


Table 98: TiVo DVRs vs other DVRs 

TV 

TiVo DVRs Cable DVR* Satellite DVR** 

Record from multiple sources � � � 

Cable, antenna, and satellite. Depending on model Digital cable only Satellite and antenna 

Dual tuner � � � 

Easy, comprehensive search � Titles only Title, subject, and actor only 

Broadband connected � Use the built-in Ethernet or purchase the TiVo � Built-in Ethernet only 

THX® Certified 

Kid-safe TV 

Add recording capacity later 

Cable video on demand 

Anywhere you go 

Schedule shows online 

wireless adapter 

� 

� TiVo KidZone 

� With My DVR Expander for TiVo HD and Series3 

� 

� 

� 

� Parental controls only 

� 

� 

� 

No wireless support. 

� 

� 

Parental controls only 

� 

� 

� 

Transfer shows to a computer 

� � � 

Transfer shows to an iPod, PSP or other compatible 

Limited 

portable device � � Transfer shows to a DVD 

� � � 

Transfer shows between DVRs 

Downloads 

Movie & TV downloads 

Free video downloads 

Music 

Music streamed from your computer 

Free music videos 

Rhapsody® music service 

Internet radio & podcasts 

Photos 

Photos streamed from your computer 

Online photo services 

Home movie sharing 


20 April 2009 

� � � 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

Limited 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

� 

Price 

Upfront DVR cost $150 - $600 $0 $0 - $400 

Monthly DVR cost $0 $5 - $10 monthly $0 to $5 monthly 

Monthly DVR service fee 

Source: www.tivo.com. 

$8.31 - $12.95 monthly $10 - $14 monthly $6 monthly 

Note: Broadband Internet Connection Required for Downloads, Music and Photos. Subscription required For Rhapsody® music service. Sold separately. 

* Time Warner/Cox Communications Explorer® 8000 DVR 

** DISH Network HD ViP722 DVR . 

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20 April 2009 

Digital home concept: Apple TV 

The ‘digital home’ is a concept in which all sorts of electronic devices are connected, 

both to one another and to the internet. The concept is being promoted by consumer 

electronics firms, such as Sony and Panasonic; PC and semiconductor makers, such 

as Intel, Apple, HP and Microsoft; telecoms companies along with network 

equipment providers; internet service providers; and content providers. This is 

primarily because they expect a significant amount of their revenues to come from 

this category. 

Apple TV: Building video content; bridging the gap between the computer and 

home theatre 

Introduced in September, 2007 under the iTV code name, the new Apple TV allows 

consumers to watch content from iTunes on a television. The 40GB version is 

currently priced at US$229 and 160GB at US$329. Apple’s success has largely been 

built on the more than 50 million active iTunes users that are locked into the 

company’s music and media platform. By linking its iTunes software to Apple TV 

and iPhone, Apple has extended the evolution of its downloadable movie business 

model. 

Figure 108: Apple TV 


Table 99: Apple TV components and suppliers 

Component Supplier 

Processor Intel (1 Ghz Pentium M) 

GPU NVIDIA (GeForce) 

802.11n chipset Broadcom 

Drive Fujitsu 

DRAM Nanya & Samsung 

Analog & General-Purpose ICs 

Source: IDC, J.P. Morgan. 

Linear, Silicon Storage Tech, Cypress, Intersil, TI 

Apple TV and iTunes movie rentals 

Apple announced a major revamp of its Apple TV product in January 2008. The new 

version can sync directly with an LCD TV and does not depend on a PC for 

functionality. Hence customers can directly browse the iTunes music store, buy or 

rent movies, or access the internet from their LCD TVs. 

Once the purchase of a movie is made, the same content can be watched on a 

computer, TV, iPhone, or iPod. Apple also introduced movie rentals through iTunes. 

Once a rental is made (at a price of US$2.99-US$4.99), users have 30 days to launch 

the stream. Once started the rental is valid for 24 hours. 

Many companies have been trying to bring a viable infrastructure to support a digital 

living room over the past two years. We believe that Apple (with good content 

platform, hardware design and interface capabilities) has the best chance of bringing 

this to fruition. Admittedly, the first generation of Apple TV was limited in 

functionality, but the current generation along with innovative movie rental system 

and user familiarity with the popular iTunes interface should help Apple create a 

foothold in this space. For a detailed discussion on Apple TV, please refer to Supply 

Chain Guide, 5 th Edition.

Bhavin Shah 

(852) 2800-8538 


Eiji Maeda AC 

(81-3) 6736-8672 

eiji.a.maeda@jpmorgan.com 


(81-3) 5545-8637 


J.P. Morgan Securities Japan Co., Ltd. 


20 April 2009 

Game consoles 

What’s new? 

Game consoles is a cyclical industry and is presently in the seventh cycle. Video 

games typically have 5-7 year cycles with sales usually peaking in the third and 

fourth year of the cycle. We are currently in the midst of the Xbox 360/PS3/Wii cycle 

that started in 2005/2006 and we estimate that 2008/2009 should be the peak years. 

The launch of iPhone 3G with the new SDK has brought a new dimension to 

handheld gaming. iPhone with its new SDK and exciting features, such as 

accelerometer and multi-touch, could bring back mobile phones as a potential threat 

to dedicated handheld gaming devices like Nintendo DS and Sony PSP. 

Nintendo introduced a new version of the DS, called Nintendo DSi. The pace of DS 

sales in Japan began slowing last year, but the launch of the DSi is aimed at further 

increasing the demand. 

Game consoles: Brief overview 

The video game industry came into being with the introduction of the eight-bit 

Nintendo entertainment system (NES) in 1985. Later, the 16-bit Sega Genesis and 

Super NES were introduced in the market. The early 1990s witnessed the growth of 

the PC gaming business due to the introduction of CD-ROMs and high-level 3D 

graphic cards; also the falling prices of multimedia PCs helped the industry to 

expand. Sony PlayStation and Nintendo 64, which came into the market in 1995- 

1996, were seen as new-generation video game consoles and consumers’ response 

was largely favorable. 

The computer and video game industry touched new heights in 1999 and 2000 as 

new video game consoles were introduced. Sega’s Dreamcast was the first 128-bit 

console and Sony’s PlayStation 2 had a 300-MHz processor that enabled users to 

play DVDs and audio CDs. In 2000, sales in the computer and video game industry 

reached US$6.02 billion. In 2001, Nintendo’s Game cube (128-bit, 485 MHz) and 

Microsoft’s Xbox (128-bit, 733 MHz) were released. Sony used MIPS-based chips 

for the core processing in its PlayStation 2. Microsoft’s Xbox used Intel chips for 

core processing. The consoles industry is a highly volatile industry in terms of 

significant market share fluctutations as we move from one generation to the next. 

187

Bhavin Shah 

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Table 100: Video game console timeline 

Generation Time period Video game console Manufacturer Processor 

First 

1972-1977 

Magnavox Odyssey 

PONG 

Magnavox 

Atari 

Coleco Telstar Coleco 

Fairchild Channel F Fairchild Semi Fairchild F8 at 1.79 MHz 

Early Second 

1977-1982 

Atari 2600 

Magnavox Odyssey 2 

Atari 

Magnavox 

MOS Technology 6507 at 1.19 MHz 

Intel 8048 8-bit at 1.79 MHz 

Intellivision Mattel GI 16-bit at ~1MHz 

5200 Atari Dual CPUs: custom 6502C at 1.79 MHz and ANTIC 

Late Second 

1982-1983 

ColecoVision 

Vectrex 

Coleco 

General Consumer Electric 

Zilog Z80A at 3.58 MHZ 

Motorola 8-bit at 1.6 MHz 

SG-1000 Sega NEC 780C at 3.6 MHZ 

Third 

1983-1986 

NES 

Master System 

Nintendo 

Sega 

Ricoh 8-bit at 1.66/1.79 MHz 

Zilog 8-bit Z80 at 3.58 MHZ 

7800 Atari Custom 6502C at 1.79 MHz 

PC Engine/TurboGrafx 16 NEC 8-bit HuC6280A upto 7.16 MHz 

Fourth 

1987-1992 

Mega Drive/Genesis 

SNES 

Sega 

Nintendo 

16-bit Motorola 68000 at 7.6 MHz 

16-bit 65c816 Ricoh 5A22 at 3.58 MHz 

CD-i Philips 16-bit CPU at 15.5 MHz 

CD32 Commodore 32-bit Motorola CPU at 14.3 MHz 

3DO Panasonic, Sanyo and Goldstar 32-bit 12.5 MHz RISC CPU 

Jaguar Atari 16-bit Motorola 68000 

Fifth 

1993-1998 

Saturn 

PlayStation 

Sega 

Sony 

2x SH-2 – 32-bit RISC at 28.6MHz 

32bit RISC chip at 33.8688 MHz 

PC-FX NEC 32-Bit NEC V810 RISC running at 21.5MHz 

Nintendo 64 Nintendo 

93.75 MHz NEC VR4300, based on MIPS R4300i-series 64bit 

RISC CPU 

Dreamcast Sega 200 Mhz Hitachi SH4 RISC 

Sixth 

1999 - 2006 

PlayStation 2 

GameCube 

Sony 

Nintendo 

128 bit “Emotion Engine” clocked at 294 MHz 

485 MHz PowerPC 750CXe 

Xbox Microsoft 733 MHz Intel Coppermine Core 

Seventh 

Nov. 2005 

Nov. 2006 

Xbox 360 

PlayStation3 

Microsoft 

Sony 

3.2 GHz IBM PowerPC Tri-Core “Xenon” 

3.2 GHz PPC Cell with 7 * 3.2 GHz SPEs 

Nov. 2006 Wii Nintendo IBM PowerPC based “Broadway” 

Source: Company reports, J.P. Morgan. 

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Game consoles: Cyclical industry 

(This section contains excerpts and material adapted from the Ubisoft initiation by 

Manoj Singla, published on 18 April 2008.) 

Game consoles is a cyclical industry and is presently in the seventh cycle. Advances 

in technologies prompt hardware manufacturers to come out with better and faster 

consoles every 4-5 years. Video games typically have 5-7 year cycles. Sales usually 

peak in the third and fourth year of the cycle. We are currently in the midst of the 

Xbox 360/PS3/Wii cycle that started in 2005/2006 and we estimate that 2008/2009 

should be the peak years.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 109: Game console refresh cycle 


Initial phase: Launch of new gaming hardware by various vendors. This is the phase 

in which the game title developer adopts next-generation console technology, and 

vendors sell their products at a premium prices. 

By the third and fourth year of the cycle new-generation game console prices are 

reduced and sales achieve the peak of that cycle. 

The end of the cycle (years 5-6) is characterized by falling prices and dropping 

volumes as consumers wait for next-generation hardware consoles. 

Current cycle (2005-2010) 

The current cycle started in late-2005/early-2006 amid major hardware launches, 

which included Microsoft’s Xbox 360, Sony’s PlayStation3 (PS3) and the muchtalked-about 

Nintendo Wii. While Microsoft’s previous generation console, Xbox, 

was a leader in terms of technology, Sony has significantly upgraded its technology 

in the current cycle with the launch of PS3. Uptake of PS3 was disappointing early 

on but sales have begun to pick up since Sony decided to reduce PS3 80GB prices 

from US$600 to US$500 in Nov-07 and also launched a 40GB version for US$400. 

Nintendo’s Wii has been a huge success garnering nearly 44% market share in 2008. 

Current cycle in its mid-stage 

Microsoft launched its Xbox 360 in late 2005, kicking off the seventh-generation of 

video game consoles. The Xbox 360 worldwide installed base reached 29 million 

units by the end of 2008. In 2007, 73% growth was observed in console shipments, 

driven by next-generation consoles—Xbox 360, PS3 and Wii, however in 2008 the 

growth slowed down to 20% . PS3’s intalled base reached 21 million by end of 2008. 

In our view, Wii is slated to continue to outstrip Xbox 360 and PS3 and had already 

reached an installed base of 45 million by end of 2008. Wii has proved hugely 

successful because it offers users an entirely new play experience. This has attracted 

new users, and brought back users who had not touched household games for years. 

This increase in “light users” has been the main driver for fresh growth in the market, 

in our view. 

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We believe the household games market has the potential for major long-term growth 

spanning 10-20 years. We have two main reasons for expecting this kind of longterm 

growth: 

• Light users brought in by Nintendo could become core users: The 

emergence of Nintendo DS and Wii is encouraging as at least a certain 

percentage of light users should become future core users, which will potentially 

increase sales volume of both game hardware and software. 

• The market is expanding geographically: Currently, the household games 

market is excessively concentrated in Japan, North America and Europe, but we 

believe there is a very high level of latent potential demand in Asia and 

elsewhere. It is only very recently that Nintendo and Sony Computer 

Entertainment have really started gearing up their operations in Asia. While 

many issues remain to be resolved, including the level of consumers’ purchasing 

power, and the prevalence of pirated software, we think economic development 

will soon make Asia a fourth major market for household games. 

Figure 110: Seventh Gen video game hardware shipments 

Console Shipments ('000s) 

60,000 

50,000 

40,000 

30,000 

20,000 

10,000 

- 

Source: Company Data, J.P. Morgan estimates 

3 / 06 3 / 07 3 / 08 3 / 09E 3 / 10E 

Nintendo Wii Sony PS3 Xbox 360

Bhavin Shah 

(852) 2800-8538 


Table 101: Specifications—PlayStation3, Xbox 360 and Wii 

Product name Sony PlayStation3 Microsoft Xbox 360 Nintendo Wii 

Source: www.us.playstation.com/PS3/default.html. 

Release date November 2006 (Japan and North America 

only) 

March 2007 in Europe 

Price range US$399 for 80 GB version 

US$499 for 160 GB version 

Other models are being phased out 

Source: www.xbox.com. Source: wii.nintendo.com/home.html. 

November 2005 November 2006 

US$349 US$250 

Processor Cell processor Custom IBM PowerPC CPU “Xenon” IBM PowerPC CPU “Broadway” 

Processor clock speed 3.2 GHz 3.2 GHz 729MHz 

Graphics processor RSX “Reality Synthesizer” – 550 MHz Custom ATI Processor – 500MHz ATI GPU “Hollywood” 

System memory 256MB XDR 512MB GDDR3 (shared with GPU) 88MB 

Video memory 256MB 512MB UMA (shared with CPU) Unknown 

L2 cache 512KB L2 cache, 256KB per SPE 1MB 256KB 

Resolution 480i, 480p, 720p, 1080i, 1080p 480p, 480i, 720p, 1080i upto 480p 

Surround sound Dolby 5.1ch, DTS, LPCM, etc. (cell-based 

processing) 

Multi-channel output Unknown 

Game media format Blu-ray BD-ROM, DVD-ROM, CD-ROM Dual-layer 12X DVD-ROM SATA drive 12cm Wii optical disc, 8cm GameCube 

disc (slot-loading disc drive) 

Integrated communications 802.11 B/G Wi-Fi, Bluetooth 2.0 802.11 A/B/G Wi-Fi ready, adapter not 802.11B/G Wi-Fi, Bluetooth 2.0, 

Storage 2.5in 40GB/80GB removable hard drive 

Others Blu-Ray player 

Internal HDD 

6-axis motion sensitive controller 

Connectivity with PSP 

HDMI ports to connect to HDTV 

Source: Company websites 


20 April 2009 

included 

WiiConnect 24 persistent connection 

20GB removable hard drive Two 512 MB flash memory (expandable 

via SD memory card and USB mass 

Targeting online gaming; 

“Xbox Live”; 

HD DVD after market add-on available; 

“To be sold before end 2006” 

storage) 

24-hour content download service; 

FC, SFC, Nintendo64, Mega Drive and 

PC-contents all downloadable; 

Nintendo DS wireless connectivity 

Sony PlayStation3 

The initial launch of Sony’s PS3’s in Nov-06 was limited to Japan and North 

America. PS3 reached the shelves in Europe only in Mar-07. The root cause 

highlighted for the rescheduling of PS3’s regional debut was mass production 

problems with the blue laser diode featured in the system’s Blu-ray drive. This led to 

a delay in meeting overall production shipment levels, with impacts on all regions, 

but with special significance for Europe. 

PS3 is by far the most advanced console in the market today, in our view, but it is 

also the most expensive one. PS3 is available in two variants, the 80GB version and 

the 160GB version. In spite of the higher prices, Sony has to absorb significant costs 

due to the inclusion of the expensive Blu-ray disc drive in PS3. 

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Nintendo Wii 

As with the Xbox 360 and the PS3, Nintendo Wii has a sleek, rectangular case that 

can stand either horizontally or vertically. The console packs a customized IBMdeveloped 

CPU paired with an ATI graphics chip, alongside 512MB of RAM and an 

expandable SD media slot for saved games and user-specific content. And as with its 

next-generation competitors, Nintendo has the latest features such as wireless 

controllers, a pair of USB 2.0 expansion ports, and built-in support for WiFi internet 

access. Nintendo Wii does not have high-definition support, a feature that Microsoft 

and Sony are both touting as central to their respective console plans. 

Nintendo also includes a download service for users to access games from the 

company’s robust library of games, including for older systems such as the Famicon, 

SuperFamicon, N64, Mega Drive and PC Engine. Management expects this will 

attract previous gamers that enjoyed the older titles. 

A unique feature in Nintendo’s Wii is its controller or the “Wii Remote”. The Wii 

console package includes the “Wii Sports” game collection, one Wii Remote, and a 

Nunchuck controller. The Wii Remote operates wirelessly, and the Nunchuck 

connects to the Wii Remote with a short cord. Both controllers have three-axis 

motion detection and can be used in tandem to play any Wii game, although many 

Wii games require only the Wii Remote for player input. 

Nintendo also includes a “Wii Connect 24” feature in its new console: even when 

turned off, the console will remain connected to the internet (power consumption is 

at par with one small light bulb) for nightly downloads and updates. This allows the 

company to constantly offer its users fresh content. 

The Wii console is a hit and has been in short supply since it was released 

simultaneously in Japan, the US and Europe during the year-end holiday sales season 

in 2006. Wii looks to be the biggest hit after the Nintendo DS, which has been selling 

in record numbers. We estimate cumulative Wii sales will ultimately reach 100 

million units. 

Figure 111: Nintendo Wii’s controller with Nunchuck 

Source: media.revolutionreport.com.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

We believe Wii has succeeded by substantially stimulating consumers with its whole 

new mode of game play (based on a unique, innovative controller unlike anything so 

far), instead of trying to stimulate consumers in the traditional way, with steady 

innovation in terms of graphics and game complexity. The motion-sensing, displaypointing 

remote controller allows for intuitive game play, without requiring any of 

the knowledge of the complicated input needed for traditional games. “Wii Sports”, 

which has sold very well since the console first came out, allows people to just swing 

the special controller to experience simulated tennis, baseball, and golf play with 

realism. 

Consoles supply chain 

Central processing units 

One of the biggest winners in this new round of competition among the gaming 

industry heavyweights is IBM. All of the three players use different versions of its 

PowerPC microprocessors; thus, it is the sole supplier of core processing chips to all 

the players. It ousted Intel from Microsoft’s Xbox 360 and is supplying 

microprocessors for Sony’s PS3 and Nintendo’s Wii. Microsoft chose IBM over Intel 

(original Xbox used an Intel x86 CPU) because it viewed IBM as further ahead in 

multiple cores, a design strategy that puts more than one processor on a single chip. 

Xbox 360 has three IBM PowerPC processors, each running at 3.2 gigahertz and each 

capable of running two threads at once, which means six parallel processes can run at 

a time. 

PS3 runs at around 3.2 gigahertz, with one IBM PowerPC processor controlling eight 

smaller processing elements. Sony, IBM and Toshiba have teamed up to make 

PowerPC-based “Cell” microprocessors, which are expected to be used in everything 

from supercomputers to handheld devices, besides the PS3 (the Cell processor is 

explained in detail in the PC supply chain section). Nintendo uses a modified 

PowerPC in its GameCube console that is also used in Wii console. 

Graphics processing units 

Console makers are aware that choosing a graphics chip maker is a critical decision 

because the visual quality of the consoles is important to consumers. Because these 

chips are hard to design, the right graphics chip maker can make or break the launch. 

When Microsoft was first designing the Xbox game console in 1999, it chose 

NVIDIA for its graphics chip designing. During the course of Xbox production, 

significant disputes arose related to the terms of the agreement. Hence, for Xbox 360, 

Microsoft outsourced the chip design to ATI, instead of allowing ATI to handle 

production; Microsoft is dealing directly with the foundry supplier TSMC. This is a 

similar model to the one used by Nintendo. Xbox 360 graphic chips are packaged at 

ASE. Nintendo is also working with ATI for its graphics chip. 

PS2’s graphics chip was designed by Sony and manufactured by Fujitsu. Sony 

unsuccessfully tried to design its own graphics engine for PS3 and later turned to 

NVIDIA, in part because the other graphics chip maker, ATI, was already working 

with both Nintendo and Microsoft. Although NVIDIA designed the chips, they are 

fabricated in-house by Sony. 

Sony considers the video interface for the console important for playing highdefinition 

content from Blu-ray discs or online sources. In this regard, it provides a 

next-generation HDMI port to connect with the high-definition TV. 

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Memory chip makers are also bound to benefit, in our view, besides the processor 

and graphics chip makers. The Xbox 360 has a single, unified 512MB bank of 

GDDR3 memory. SEC, Hynix and Infineon are the suppliers for GDDR3 RAM for 

Xbox 360. The PS3 has 256MB of GDDR3 connected to the graphics chip and a bank 

of 256MB XDR connected to the CPU. Samsung Electronics, Elpida Memory and 

Toshiba are manufacturing XDR memory, and both Samsung and Elpida Memory 

supply XDR for the PS3. Sony is using Rambus to provide high-speed 

interconnection and memory technologies in the PS3. 

Figure 112: Simplified structure of processor—Memory interaction in Sony’s PlayStation3 


Storage: Both PS3 and Xbox 360 feature removable 2.5” HDDs as an option for 

storage. For Xbox 360, Seagate is the dominant supplier, followed by Hitachi. 

Seagate is the HDD supplier for PS3 also. The optical drive in the PS3 uses the 

Sony-backed Blu-ray format, whereas the Xbox 360 console provides an optional 

external HD-DVD optical drive. The ODD for Xbox 360 is provided by Lite-On IT. 

Communication: The PS3 has built-in 802.11b/g and three gigabit Ethernet ports, so 

the system can act as a gigabit router right out of the box. The physical layer, the 

antenna and the gigabit Ethernet controllers could drive the costs up a bit. The Xbox 

360 will likely be WiFi-ready but is unlikely to ship with the adapter. Marvell 

supplies the WiFi chipsets for both Xbox 360 and PS3. Broadcom makes the wireless 

LAN chips and Mitsumi makes the WLAN modules for Wii. 

Table 102: Nintendo Wii supply chain 

CPU IBM Power PC CPU "Broadway" 

- Foundry IBM 

- Substrate Kyocera, Shinko, Ibiden 

CPU packaging Shinko and SEMCO 

Graphics chip ATI GPU "Hollywood" 

- Design ATI 

- Production NEC Electronics 

- Foundry Toshiba, NEC 

- Substrate Shinko, SEMCO, PPT 

Contoller Mitsumi (6767 JP) 

- Accelerator sensor Analog Devices, STMicroelectronics 

- Bluetooth Broadcom 

- CMOS sensor Pixart Imaging 

MEMS sensor ADI 

Power supply Delta Electronics 

Assembly Foxconn Tech 

WLAN Broadcom, Mitsumi 

RAM Samsung 

Mask ROM Macronix 

USB to Ethernet controller Asix 

Source: Company reports, J.P. Morgan.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 103: PS3 supply chain 

CPU Power PC based core @3.2GHz 

- Foundry IBM 

- Substrate Kyocera, Shinko and Ibiden 

GPU NVIDIA RSA 550MHz, Toshiba "Emotion Engine" 

- Foundry Toshiba 

- Substrate Kyocera and Shinko 

Memory 256 MB XDR, Samsung 

Flash memory Sandisk, Samsung Electronics 

PCB Unimicron, Ya Hsin, Nan Ya PCB 

Power supply Delta Electronics 

- Power management International Rectifier 

Connectors Hon Hai, G-Shank 

MLCC Yageo 

HDD Seagate, Hitachi 

ODD Sony 

Casing Ju-Teng 

WiFi Marvell 

Assembly Hon Hai, ASUSTek 

Camera Nam Tai 

Blue Tooth controller CSR plc 

Source: Company Reports, J.P. Morgan. 

Table 104: Xbox 360 supply chain 

CPU IBM (Custom PowerPC) - 90nm process 

- Foundry East Fishkill, Chartered Semiconductor 

- Packaging IBM 

Flip chip substrate for CPU Shinko 

Northbridge (with GPU) Microsoft ATI R500 

- Foundry TSMC 

- Packaging ASE* 

Flip chip substrate for Northbridge PPT 

I/O Chip (Southbridge) SiS 

- Foundry UMC 

- Packaging SPIL, ASE 

Memory (512 MB GDDR3) Samsung Electronics, Infineon 

PCB YUFO, APCB 

ODD Samsung Electronics-Toshiba JV, Hitachi-LG JV, Lite On It 

HDD Seagate 

Joystick (Controller) Cheng Uei, KYE System 

Power supply Delta Electronics, Ya Hsin, Hipro, LOT 

Connectors Cheng Uei 

MLCC Yageo, SEMCO 

Power cable Ji-Haw 

Fan Sunonwealth, Nidec 

Ethernet LAN cable Cheng Uei 

WiFi Marvell 

Casing Hon Hai 

Assembly Wistron, Flextronics, Celestica 

LCD screens/TVs HDTV, Samsung Electronics - Microsoft Alliance 

Source: Company Reports, J.P. Morgan. *Multiple-chips flip chip package. 

Handheld game consoles 

In handheld gaming consoles, the controls, screen and speakers are part of a single 

unit, unlike video game consoles. Nintendo released its first handheld, the Game Boy 

system, in 1989, packaged with the game, “Tetris”, and by the end of the year, more 

than a million units were sold, and 25 million were sold by 1992. Nintendo is often 

credited for popularizing the handheld console concept. It has maintained its 

leadership position for several years, but now is facing competition from Sony’s 

PlayStation Portable. 

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Nintendo Game Boy 

In 2001, Nintendo launched Game Boy Advance, which added extra buttons (left and 

right “shoulder” tabs), had a much larger screen and far more computing power. The 

design was further enhanced about two years later in March 2003, when the Game 

Boy Advance SP (GBA SP), a compact “clamshell” (folding open and closed, like a 

briefcase) version was released. It also had a front-lit color display and rechargeable 

battery. Despite its smaller size, the screen remained the same size as that of the 

Game Boy Advance. The GBA SP accounted for a significant part of the Game Boy 

consoles sold by Nintendo. In 2005, Game Boy Micro, the next in the Game Boy 

series, was released. This revision sacrificed screen size and backwards compatibility 

with previous Game Boys for a dramatic reduction in total size and a brighter backlit 

screen. 

Nintendo DS 

Nintendo DS was released in November 2004. In January 2006, Nintendo launched 

an updated version of the DS: Nintendo DS Lite with an updated, smaller form factor 

(42% smaller and 21% lighter than the original Nintendo DS), a cleaner design, and 

much brighter displays (with adjustable brightness). The DS Lite also comes with a 

cover for “Slot 2” (also known as the Game Boy Advance slot). 

The new version: DSi 

Nintendo made announcements, at the Nintendo Conference 2008 on October 2, 

2008, about further broadening the game-playing population with the Nintendo DS 

by introducing a new version of the DS called Nintendo DSi. The pace of DS sales in 

Japan began slowing last year, but the launch of the DSi is aimed at further 

increasing the demand. The DSi console will likely incorporate an audio player and 

camera, as well as software enabling players to fully utilize these functions. The 

console will also have an SD card slot for storing software downloaded from the 

internet, and the company will start selling software downloads. Furthermore, the 

new DSi features improvements in design, being 12% slimmer than the Nintendo DS 

Lite and offering a 17% increase in LCD screen size. 

We expect Nintendo to launch a new portable game platform sometime in second 

half of FY09 or FY10, but we believe it will take until FY11 at the earliest before 

profit growth associated with a new portable gaming system can fully compensate for 

the decline in earnings from the Nintendo DS. 

Sony PlayStation Portable 

Sony’s PlayStation Portable (PSP) was first launched at E3 2004, and was released 

in Japan and North America in late 2004 and early 2005, respectively. Like previous 

competitors of Game Boy, we believe PSP is considerably superior in both 

processing power and screen quality, but inferior in battery life and price. PSP 

includes several features beyond gaming and is the most successful handheld console 

produced by Sony thus far, in our view. 

PSP as well as several other handhelds in this generation are designed with an 

emphasis on convergence. This has been done to help differentiate themselves from 

Nintendo’s game-focused offerings as well as to portray these increasingly high-tech 

handheld game consoles closer to PDAs or smartphones than “toys”. Sony, for 

example, has emphasized the PSP’s ability to play movies and music from the 

system’s UMD disks, or stored on a memory stick duo (PSP’s form of writable data 

storage). Some of the games for the PSP, such as “Wipeout Pure”, can use PSP’s

Bhavin Shah 

(852) 2800-8538 


Figure 114: Nintendo DS 

Source: www.nintendo.com. 


20 April 2009 

web features to download new content, and with firmware version 2.0, the console 

also has an integrated web browser. 

Figure 113: Current handheld videogame hardware shipments 

Console Shipments ('000s) 

60,000 

50,000 

40,000 

30,000 

20,000 

10,000 

- 

Source: Company Data, J.P. Morgan estimates 

3 / 06 3 / 07 3 / 08 3 / 09E 3 / 10E 

Nintendo DS Sony PSP 

For a more detailed discussion on the feature comparison of Nintendo DS and PSP 

please refer to the fifth edition of this guide. 

Figure 115: Nintendo DS Lite 

Source: www.nintendo.com. 

Figure 116: Sony PSP 

Source: www.playstation.com. 

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Figure 117: A racing game on 

iPhone 

Source: www.0-60mag.com. 

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20 April 2009 

It’s a console, it’s a phone! No, it’s the iPhone! 

If you are wondering what is iPhone doing in the game consoles section, then this 

section is meant just for you. With the launch of Apple’s iPhone 3G and the new 

Software Development kit (SDK), iPhone has come up as a potential challenger to 

Nintendo DS and Sony PSP. 

The table below highlights a comparison between the three challengers. 

Table 105: Handheld consoles comparison 

Nintendo-Dsi PSP-3000 iPhone 

Screen Size Two 3.25 inch displays 4.3-inch display 3.5 inch display 

Resolution 256x192 480x272 480x320 

Processor Two ARM CPUs @ 67 MHz 

and 33 MHz 

MIPS CPU @ 333MHz ARM CPU @ 620 MHz 

Input D Pad, touch screen D pad, analog stick Multi touch screen, 

accelerometer 

Dimensions 

5.85x3.33x0.99 6.7x2.9x0.9 4.5x2.4x0.48 

(in) 

Touch Screen Single touch None Multi touch 

Memory 

Source: Company websites, joystiq.com. 

SD slot Memory stick, upto 16GB 8/16 GB internal 

Mobile handset gaming, which until now lagged in comparison to handheld gaming 

mainly due to the lack of a processor, SDK and a dearth of good titles, might just be 

thanking iPhone for bringing it into perspective. iPhone not only has a processor 

capable enough to match the superior speed of Sony PSP but also has the multi-touch 

screen and accelerometer that can help provide a good gaming experience. Some of 

the popular games for iPhone include “Crash Bandicoot”, “iHunt”, “Crazy Tanks” 

and “Moto Chaser”. While we will not dwell on the game titles available, we have 

discussed the accelerometer in brief below. For multi-touch and a more detailed 

section on iPhone, please refer to the section on handsets. 

What makes iPhone a great gaming device? 

Several factors contribute to make iPhone a great gaming device, in our view. 

• Superior processor speed: iPhone has an ARM CPU running at 620MHz, 

which is far superior to DS and is capable of matching the speeds of PSP. 

• Good screen size: iPhone has a pretty good screen size compared to the 

other phones in the market and hence it facilitates a decent gaming 

experience. 

• Multi-touch: No more trying to press hard at the touch screen, and no 

restrictions on how many points can be touched, giving gamers a greater 

flexibility.

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20 April 2009 

• Accelerometer: It gives gamers another form of providing input and 

facilitates a more realistic gaming experience. 

Accelerometer: What is it? 

One of the most revolutionary aspects of iPhone that makes it far superior to the 

other mobile phones, as far as gaming is concerned, is the accelerometer. Whenever 

the iPhone is rotated it senses the rotational movement and changes the display 

accordingly. This can act as an input and allows a game to be controlled using just 

movements. 

Figure 118: Accelerometer 

Source: Apple.com. 

The accelerometer consists of a silicon mass and a set of silicon spring, and an 

electric current is passed through these coils. Whenever the iPhone rotates the shift in 

silicon springs causes a fluctuation in the electric current, which is registered by the 

accelerometer and iPhone changes the display accordingly. 

Some weaknesses that can dampen the mood 

iPhone has no keys and this could make core gamers stick to traditional consoles. 

Playing on the touch screen can be difficult and there could be a risk of damage to 

the screen. Buttons are more robust and don’t harm the screen. There is still a big “if” 

in the form of availability of good games. If good titles are not launched there might 

be a possibility of iPhone failing as a gaming device. The screen size is still not as 

big as a PSP, nor as innovative as a DS Lite’s double screens. 

The catch here is that, if the console companies keep on evolving and keep their 

USP, then mobiles might find it difficult to break into the handheld gaming consoles 

space. 

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Is this another step towards convergence? 

Just imagine not having to carry two devices, a phone (to fulfill your connectivity 

needs) and a portable gaming console (as an entertainment option). With iPhone, it is 

not only light on the “pocket” but there is no compromise in quality as well, in our 

view. We expect that with the emergence of the iPhone as a potential gaming device 

we might once again see vendors coming out with phones having better gaming 

capabilities and higher levels of software support for developing games specific to 

their brands. It remains to be seen whether we see another form of convergence here, 

with handsets and handheld gaming consoles converging into a single more powerful 

and efficient device providing high-quality communication, multimedia and 

entertainment. 

After iPhone, a number of other mobiles handsets have been launched that have 

features similar to the accelerometer, larger screen size and support mobile gaming— 

N85, Nokia 5800 and LG Cookie, to name a few.

Bhavin Shah 

(852) 2800-8538 


Alvin Kwock AC 

(852) 2800 8533 


J.P.Morgan Securities (Asia Pacific) 

Limited 

Yoshiharu Izumi AC 

(81-3) 6736-8637 


J.P.Morgan Securities Japan Co., Ltd. 


20 April 2009 

DVD and other optical drives 

What’s new? 

The alignment of all major production houses with Blu-ray marked an end to the 

format war. With the single HD format helping in the DVD upgrade cycle, we expect 

BD player and recorder shipments to grow sharply for the next 2-3 years. IDC 

expects Blue Laser DVD drive shipments to reach 229 million units by 2013 with a 

2008-13E CAGR of 109.7%. 

Sony introduced BD-Live, a new feature that enhances user experience by making 

available a variety of digital content, such as ringtones and live events, for download 

in conjunction with interactive features like gaming, for example, using Blu-ray 

players. Many Hollywood titles are now available in BD-Live-enabled Blu-ray discs. 

This year, we have included a new section on HD-VMD, another high definition 

DVD format. The biggest advantage of this format lies in its use of existing red-laser 

CD/DVD production line coupled with its cost advantage over Blu-ray. 

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20 April 2009 

DVD supply chain 

Figure 119: DVD components supply chain 

PC CD/ DVD drive Market Share 

Vendor 2008 Share Vendor 2008 Share 

HLDS 27.8% Panasonic 8.3% 

TSST 24.2% QSI 6.9% 

PLDS 14.4% Pioneer 6.1% 

Sony Optiarc 9.6% Others 3.2% 

Source: IDC, Gartner, TSR, J.P. Morgan. 

ODMs 

BBK Electronics 

Quanta Storage 

Lite-On IT 

Asustek 

BTC 

Component manufacturers 

Chipset makers 

Mediatek 

Broadcom 

Zoran 

Sunplus Technology 

STMicroelectronic 

NEC 

Matsushita 

OPU 

Hitachi Ricoh 

Pioneer Sony 

Sanyo Philips 

NIDEC Sankyo

Bhavin Shah 

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20 April 2009 

Introduction 

Digital Versatile Disc (DVD) is a high-density disk standard for storing large 

quantities of digital data. A DVD is composed of several plastic layers about 1.2mm 

thick. A single-sided, single-layered DVD holds about 4.7GB of data, while a 

double-layered DVD holds 8.5GB. A double-sided, double-layered DVD can hold up 

to 17GB. 

DVD devices generally fall into two categories: (1) DVD recorder, which includes 

both PC built-in and consumer electronics (CE) form factors; and (2) DVD player, 

which is a playback-only device that has decks for both a personal computer (PC) 

and CE market segments. 

DVD players and recorders are an important part of the consumer electronics supply 

chain. In this section, we look at the competing next generation of DVD formats— 

HD DVD, Blu-ray disc and HD VMD. With the clouds over industry standard clear 

with Blu-ray emerging as the winner, another interesting development was the launch 

of HD VMD. 

Optical drives market: Blu-ray holds the key 

The overall optical drives market showed decent growth in 2007 largely driven by 

the fast growing portable PC market. Despite 10% growth in unit shipments, the total 

revenue declined by 3% in 2007 due to strong price erosion. DVD-enabled drives 

drove shipment growth recording 18%. CD-enabled drives, however, experienced a 

decline of 66%. IDC estimates Blue Laser drives will have a 2008-13 CAGR of 

109.7%. However, with the launch of the new technology HD-VMD and its price 

advantage, we could see much more growth in the overall player market and a 

possible cannibalization of the Blu-ray market (refer to Table 115 to learn more 

about HD-VMD). Despite the ramp-up of these next generation drives, IDC, 

however, expects DVD burners to continue to dominate volume product in 2009-10. 

Table 106: Worldwide optical/removable drive shipments by drive type (2007-2013E) 

Millions 

2007 2008E 2009E 2010E 2011E 2012E 2013E 

2008–13E 

CAGR (%) 

CD-ROM 6.3 2.2 0.6 – – – – NA 

DVD-ROM 37.8 46 39.4 21.6 18.5 15.5 12.9 -22.5 

CD-R/RW 3.6 1 0.1 – – – – NA 

Combo 43.9 26.4 17.2 12 4.9 2.3 – NA 

DVD-Rec 238 253.9 255.2 284.6 281.2 250.2 206.3 -4.1 

BD 1.2 5.6 15.1 29.7 72 144.1 228.8 109.7 

Total 330.7 335.2 327.5 347.9 376.6 412.2 448 6 

Growth (%) 

Share (%) 

9.7 1.3 -2.3 6.1 8.3 9.4 8.7 

CD-ROM 1.9 0.7 0.2 – – – – 

DVD-ROM 11.4 13.7 12 6.2 4.9 3.8 2.9 

CD-R/RW 1.1 0.3 0 – – – – 

Combo 13.3 7.9 5.2 3.4 1.3 0.6 – 

DVD-Rec 72 75.7 77.9 81.8 74.7 60.7 46.1 

BD 0.3 1.7 4.6 8.5 19.1 35 51.1 

Total 


100 100 100 100 100 100 100 

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20 April 2009 

Table 107: Worldwide Blue Laser DVD drive shipments by form factor (2007-2013E) 

Millions 

2007 2008 2009E 2010E 2011E 2012E 2013E 

CAGR 

2008-13E 

Shipments 

Half height 0.7 1.6 4.1 11.4 25.7 43.3 51.6 99.7 

Slim 0.5 4.0 11.0 18.3 46.3 100.8 177.1 113.2 

Total 1.2 5.6 15.1 29.7 72.0 144.1 228.8 109.7 

Growth (%) 

Share (%) 

NA 367 170 97 142 100 59 

Half height 58.3 28.6 27.2 38.4 35.7 30.0 22.6 

Slim 41.7 71.4 72.8 61.6 64.3 70.0 77.4 

Total 


100 100 100 100 100 100 100 

Blu-ray: Adoption rate faster than VCR/CD/DVD, but expected to slow down 

BD adoption rate for its starting years has been faster compared to that of VCR, CD 

and DVD during their initial years. This is primarily driven by rapid revolution in 

digital AV and shift to digital broadcasting. However, for mid-long term, we expect 

it to slow down as HDD embedded TV and network download will spread and 

compete with BD. 

Figure 120: Shipment volumes of VCR, CD, DVD & BD for first 7 years of their launch 

Shipment (in millions) 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

Source: JEITA, J.P. Morgan estimates. 

1 2 3 4 5 6 7 

Year from launch 

VCR CD Player DVD Play er BD Play er 

Note: Timeline for VCRs starts from 1975, CD Players from 1982, DVD Player from 1996, BD Player from 2006 (estimates for year 4 

and onwards) 

According to a recent IDC report, they expect low consumer confidence and 

uncertainties in PC market driven by the global economic downturn to delay the Bluray 

disc adoption. It is expected that sub-$100 BD-ROM will lead the way for BD 

format's adoption.

Bhavin Shah 

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20 April 2009 

Table 108: Blu-ray player and recorder shipments (2007-2012E) 

’000s 

2007 2008 2009E 2010E 2011E 2012E 

BD Player 2,890 5,500 8,300 14,900 25,300 40,500 

YoY 90% 50% 80% 70% 60% 

Total DVD Player 94,642 97,656 92,773 93,000 93,500 94,000 

BD % 3% 6% 9% 16% 27% 43% 

BD Recorder 310 2,100 2,500 3,500 4,700 6,100 

YoY 577% 20% 40% 35% 30% 

Total DVD Recorder 16,027 16,000 14,400 15,800 16,600 17,500 

BD % 2% 13% 17% 22% 28% 35% 

Source: JEITA, Gartner, J.P. Morgan estimates. 

Figure 121: BD player market share by company 

Others 36% 

Funai 11% 


Panasonic 

13% 

Sony 40% 

Table 109: Front-end BD chipset market share 

Figure 122: BD recorder market share by 

company 

Sharp 28% 

Sony 29% 

Others 3% 


NEC Electronics 

Market share (%) 

30+ 

Renesas 30+ 

Panasonic 20 

Mediatek 


15 

Panasonic 

40% 

DVD format war: Blu-ray’s victory over HD DVD 

In the Consumer Electronics Show (CES) held in January 2008, Time Warner 

(Warner Brothers/HBO/New Line) announced that it will stop releasing HD DVD 

movies, and instead exclusively release them in the Blu-ray format. The other key 

events were Microsoft’s decision to not roll out HD-DVD for its Xbox 360 product, 

and Sony’s decision to continue bundling PS3 with Blu-ray. Along with these 

setbacks, Toshiba announced in February its decision to discontinue its HD DVD 

business and this allowed Blu-ray to claim victory in the format war. As a result, 

Blu-ray will likely become a household product due to an industry wide HD format. 

Blu-ray Association expects an installed base of Blu-ray players to triple in 2008. 

Despite superior user experience in large-size TV, the format war confused 

customers and thus delayed the DVD upgrade cycle. However, single HD format, 

rising content availability (~500 Blu-ray movies) and falling device price point will 

finally trigger the Blu-ray takeoff. We believe the key risk to watch out for is how 

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Figure 123: WW BD Shipments 


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20 April 2009 

online content starts to penetrate into home users and the currently launched HD 

VMD format. 

Table 110: Blu-ray vs. HD DVD developments 

Blu-ray camp 

Blu Disc Association Expect installed base for Blu-ray player to triple in 2008 

Disney Sets Date for 'Enchanted' Blu-ray 

Fox Re-announces 'Commando' for Blu-ray 

Funai Roll out sub-US$300 Blu-ray player in 1Q08 

HD DVD supporters falling out 

Warner Brothers Stop releasing HD DVD in late May 2008, move exclusively to Blu-ray camp 

New Line Follow Warner to Blu-ray Exclusivity 

HBO Follow Warner to Blu-ray Exclusivity 

Microsoft No HD DVD Xbox in works 

Toshiba Fire sale of own-brand HD-DVD player price to sub-US$130 level, finally blinked 

on 18 Feb 08 

HD DVD camp 

Universal Re-Affirms HD DVD Support 

Paramount Still Supporting HD DVD, but delaying movie dates 

Retailers 

Netflix, Best Buy, Wal-Mart Followed the content providers’ move to make Blu-ray the exclusive standard 

they support 


Format war is over, what’s next? 

Although format war victory paved the path for Blu-ray to become universal 

standard, high price has limited the BD adoption. IDC forecasts worldwide Blue 

Laser DVD to grow from 20 million in 2008 to 38 million in 2009. Gaming is still 

the largest segment and is expected to remain the same due to PS3. However, IDC 

expects PC to become take over gaming by 2010. 

Table 111: BD adoption drivers for 2009 

Accelerators Inhibitors 

Hardware prices are declining rapidly Cost, especially for titles 

DVD could prove a “good enough” technology, 

Strong Content Support 

especially with upconvert 

The DVD installed base and compatibility will keep the 

Building IB quickly with PS3 

format popular 

BD will be an important feature to differentiate higher-end Higher capacity for removable data storage is not very 

consumer PCs 

important for PC users, especially if it adds cost 

Continued declining DVD revenues will make the move to Content is key for consumers! And DVD has a vast 

BD very important for hardware vendors as well as studios 


amount available 

Table 112: Blu-ray DVD chip competitive landscape 

RF/ Servo AV decoder Middleware Backward compatibility 

Mediatek √ √ In-house √ 

Broadcom X √ Third-party X 

Sigma X √ Third-party X 

NEC √ X In-house √ 

Zoran X √ In-house √ 

Renesas √ X NA √ 

Source: Company reports.

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20 April 2009 

Table 113: Impact of Blu-ray victory on vendors 

Vendor Impact Strengths Weaknesses 

Sony √√√ Demand for PS3s 

Blu-ray intellectual property 

Blue-violet laser diode supply 

Blu-ray drive production capability 

Content titles 

Panasonic √√ Blu-ray disc players 


Blu-ray drive production capability 

Hitachi, Philips √√ 100% investment in Blu-ray 


TSST and HLDS ventures for Blu-ray drive 

production 

Sigma Design √√ 100% investment in Blu-ray 

Samsung, LG ---- Blu-ray Disc players 

Can develop Blu-ray capabilities through 

ventures with HLDS and TSST 

Cost of initial investment in dual-format support and royalties 

NEC Electronics ---- EMMA3 can be reworked 

Front-end ICs used by Sony NEC Optiarc 

Additional cost to shift engineering resources from HD DVD to Blu-ray 

Disc software development for the hardware EMMA3 architecture 

Toshiba ---- Can access Blu-ray market through TSST and 

Cell processor fab acquired from Sony 

Wasted effort on HD DVD 

MediaTek, Zoran, LSI Logic, 

STMicroelectronics 

---- No investment in HD DVD or Blu-ray 

Samsung, Hynix, Elpida, 

Qimonda 

---- DDR2 supplier 

Hynix, Qimonda ---- DDR3 supplier DDR3 supplier, but DDR3 will only be used after adoption by PCs 

Toshiba, Samsung, Elpida --- XDR supplier XDR supplier, but the usefulness of this depends on how ASSPs 

Broadcom, Horizon 

Source: Gartner, February 2008. 

√ Blu-ray media processor development skills 

and experience 

integrate XDR ports to support memory 

High initial investment and royalties for HD DVD and Blu-ray dualsupport 

drive 

BD Live: Adding interactivity to Blu-ray 

BD-Live is the latest feature added to Blu-ray discs, which enables the user to access 

a variety of content (e.g., new trailers and exclusive special features), ringtones, 

wallpaper, live events and interactions with support for gaming activities. This 

feature requires an Ethernet port on Blu-ray players along with BD-Live-enabled 

Blu-ray discs to access the server. BD-Live currently supports both high-definition 

and standard definition picture quality options and 2.0 stereo audio supports for both 

picture formats. Use of a lower-than-average bit-rate for both HD and SD content 

facilitates faster downloading speeds. Although it still does not support accessing 

content on discs while downloading, it however allows viewing of already 

downloaded content. It also supports multiple downloads as long as there is storage 

space available on players. 

Men in Black was the first BD-Live-enabled Blu-ray disc which was released in Jun- 

08. Walt Disney has released Sleeping Beauty, Tinkerbell and Wall-E with Prince 

Caspian being the latest addition to the list. These BD-Live films will allow 

interactive features such as gaming, chatting, and sending videos. Sonic Solutions is 

working in collaboration with Sony to further enhance the BD-Live interactive 

experience. 

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Figure 124: VMD—Disc structure 

Source: New Medium Enterprise (www.nmeinc.com). 

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20 April 2009 

HD VMD 

In this era of various formats competing to become the global standard, another 

format worth mentioning is HD VMD. This new system is promoted by New 

Medium Enterprises, a London-based company. 

Versatile Multilayer Disc (VMD) is a multi-layer optical storage disc, which 

provides 50%-100% more digital storage capacity than a standard DVD. It uses a 

patented multilayer technique that exploits the unused or wasted space within the 

disc itself. VMD technology allows building disks (and compatible players) with up 

to a maximum of 10 layers compared to a maximum two layers (from one side) in the 

current CD/DVD technology. The HD VMD Player is engineered to provide 

backward compatibility with VCD and standard DVDs by upscaling the picture 

quality to 1080i/p. According to New Medium Enterprises, manufacturing the VMD 

drives will require only minimal changes to existing production lines, allowing the 

technology base and machinery for manufacturing DVD. The company has made the 

VMD technology and process available for OEMs to manufacture players and PC 

drives. 

Table 114: Processes and steps in making a VMD disc 

STEP 1 Two polymer substrates enclose the disc 

They are similar to those used in the DVD-9 and are manufactured in the same moulding machines using same manufacturing process. The 

information of the first and the last layers is transferred from Nickel stampers to polycarbonate substrates. 

STEP 2 Depositing of reflective material on information layers 

In contrast to DVDs, materials providing low light reflection are used, but still standard DVD equipment is used in VMD Technology for depositing. 

STEP 3 Building plastic stampers for inner layers 

Initially, substrates for plastic stampers are produced using conventional DVD injection moulding machinery. The substrates are then treated 

under special conditions to make plastic stampers. 

STEP 4 Imprinting information upon inner polymeric layers 

A plastic stamper is glued to another polycarbonate substrate with the information layer (layers). This process can be done in a DVD-bonding unit 

with high speed and precise interlayer alignment. The stamper can be easily separated, leaving the information pattern embedded in the polymer 

layer. In contrast to other known technologies, such as DVD 18 and dual layer DVD-R discs, the VMD 2P technology is practically errorless. 

STEP 5 Depositing of reflective material upon the inner information layer 

After the information pattern has been transferred onto the polymer layer a reflective material is deposited exactly as in STEP 2. By repeating 

STEPS 4-5 the inner layers 1, 2, etc., up to the upper layer are produced. 

STEP 6 Building of the lower substrate with layer n, n-1, n-2 etc... 

This is done by the repetition of STEPS 3 to 5. 

STEP 7 Bonding together upper & lower substrates to produce a complete disc 

This is done by using a DVD-9 bonding machine. The same material which is used for DVD bonding can be used in this step. 

Source: New Medium Enterprise (www.nmeinc.com). 

Key advantages 

• Proven red laser technology using existing infrastructure: HD VMD uses the 

red laser technology with a wavelength of 650nm, which is currently used in all 

DVD optical laser devices and is proven to be stable. In contrast, the Blue Laser 

process uses a wavelength of 405nm, which enables more storage per disc but is 

less stable. The main benefit of using VMD over Blu-ray is that it can be 

manufactured using the existing infrastructure rather than requiring a total 

replacement. 

• Versatile: Inherent backward compatibility with all the existing and previous 

disc formats. VMD drives will be able to read other standard formats including 

CD and DVD. 

• Adaptable: According to the management of New Medium Enterprises, VMD 

multi-layer technology can easily be applied to Blue Laser, which would enable 

VMD to attain even larger storage capacities outperforming all competition.

Bhavin Shah 

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20 April 2009 

• Price: While Blu-ray players typically cost more than US$300, an HD VMD unit 

is priced at US$199. Moreover, disc production cost for Blu-ray is estimated to 

be somewhere in between US$2 and US$3 per unit compared to US$1 per unit 

for HD VMD. 

Due to these advantages, the VMD technology has started gaining momentum with a 

number of movies like Lucky Number Slevin, Scary Movie 2, and Hitcher available in 

this format. It has also gained the approval of many distributors to support Europeanproduced 

titles like Caramel. Due to its cost advantages over Blu-ray, it has also 

begun to penetrate the Indian entertainment market. 

Table 115: Comparison of optical drive technologies 

DVD HD VMD Blu-ray 

Capacity (GB) 8.4 20 (potential 100 GB) 50 

Data rate 1x (Mbps) 11.1 40 36 

Laser wavelength (nm) 650 (red) 650 (red) 405 (blue/violet) 

Protection layer (mm) 0.6 - 0.1 

Numerical aperture (NA) 0.6 0.6 0.85 

Dolby Digital, Dolby Digital Plus, Linear PCM, Dolby Digital, Dolby Digital Plus, 

Audio specification Dolby Digital 

DTS 

Dolby TrueHD, DTS Digital Surround 

Video specification MPEG-2 MPEG-2, MPEG-4/AVC, VC-1 MPEG-2, MPEG-4/AVC, VC-1 

Content protection CSS AES, AACS AACS BD-Plus 

Cost per Unit < $1 just over $1 $2 - $3 

Player Cost $25.49 $199 $300 

Source: IDC, 2008, PCRush.com, nmeinc.com, highdefdigest.com. 

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Hisashi Moriyama AC 

(81-3) 6736-8601 

hisashi.moriyama@jpmorgan.com 

J.P. Morgan Securities Japan Co., Limited 

Alvin Kwock 

(852) 2800-8533 



Limited 

Gokul Hariharan 

(886-2) 2725-9869 



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20 April 2009 

Digital still cameras 

What’s new? 

We expect digital camera shipments to decline by 1.2% in the fiscal year ending 

March 2009 with Sony and Canon being the top vendors, together accounting for an 

estimated ~37% market share. We believe the future growth drivers for the market 

include better sensory features, newer technologies in mid-range cameras, and 

improved specifications for the SLR camera. 

The impact of camera phones on DSCs might not be significant yet, but according to 

a recent IDC report, camera vendors should embrace similar connectivity and sharing 

features into their products as camera phones to maintain their past growth rates. 

DSLR continued to show solid growth in 2008 and we expect the market to peak at 

around 10%-15% of the overall digital camera market. For the fiscal year ending 

March 2009, Canon and Nikon should dominate the DSLR market with a combined 

market share of 79%. 

In the technology overview, we include a new section on full frame sensors. The 

ability to combine high resolution with large pixel size enables them to provide highquality 

images, making them a photographer’s preferred choice. This section 

includes a discussion on why CMOS is the preferred manufacturing choice over 

CCD, highlighting advantages and disadvantages of CMOS.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Digital camera market: Growth falls sharply into the red 

Digital camera shipments are declining sharply across all regions. We forecast digital 

camera shipments of 129 million units for the fiscal year ending March 2009, a 1.2% 

decline Y/Y, with an estimated revenue of ¥2.868 trillion, implying a 17% Y/Y 

decline. Our compact camera market volume and value forecasts are 119 million 

units (-2.4%) and ¥2.132 trillion (-22.5%), respectively, while our corresponding 

digital SLR market forecasts are 9.1 million units (+17.0%) and ¥735.8 billion 

(+2.6%). According to our estimates, Canon and Sony will be the top vendors, 

capturing nearly 37% market share. 

Table 116: Digital camera global shipments by vendor 

MM units; year-end March FY05 FY06 FY07 FY08 FY09E FY10E FY11E 

Canon 14.00 16.90 21.10 24.60 25.60 23.90 26.50 

Sony 14.00 13.50 17.00 23.50 21.50 19.00 21.00 

Kodak 8.75 13.14 13.20 14.50 13.50 12.00 13.00 

Olympus 8.90 8.40 9.60 11.30 10.30 9.30 10.20 

Samsung Techwin 2.36 3.97 7.81 11.00 12.96 16.32 18.50 

Nikon 6.61 8.45 8.01 11.64 13.40 12.70 14.00 

Panasonic 1.90 4.00 8.00 9.62 9.50 8.50 9.50 

Casio Computer 3.70 4.60 6.00 6.85 6.20 5.80 6.30 

FujiFilm Holdings 6.10 6.20 6.60 8.10 7.50 6.50 6.50 

Hewlett-Packard 3.26 4.17 6.00 6.00 5.50 5.00 5.50 

PENTAX 2.10 2.50 2.60 2.92 2.20 1.45 1.10 

KonicaMinolta 2.82 1.75 0.00 0.00 0.00 0.00 0.00 

Others 3.12 2.53 0.58 0.30 0.60 0.70 0.80 

Global total 77.6 90.1 105.0 130.3 128.8 121.2 132.9 

Market growth (%) 

Market share (%) 

35.2 16.1 16.5 24.1 -1.2% -5.9% 9.7% 

Canon 18.0 18.8 20.1 18.9 19.9% 19.7% 19.9% 

Sony 18.0 15.0 14.8 18.0 16.7% 15.7% 15.8% 

Kodak 11.3 14.6 12.6 11.1 10.5% 9.9% 9.8% 

Olympus 11.5 9.3 9.1 8.7 8.0% 7.7% 7.7% 

Samsung Techwin 3.0 4.4 7.4 8.4 10.1% 13.5% 13.9% 

Nikon 8.5 9.4 7.6 8.9 10.4% 10.5% 10.5% 

Panasonic 2.4 4.4 7.6 7.4 7.4% 7.0% 7.1% 

Casio Computer 4.8 5.1 5.7 5.3 4.8% 4.8% 4.7% 

FujiFilm Holdings 7.9 6.9 6.3 6.2 5.8% 5.4% 4.9% 

Hewlett-Packard 4.2 4.6 5.7 4.6 4.3% 4.1% 4.1% 

PENTAX 2.7 2.8 2.5 2.2 1.7% 1.2% 0.8% 

KonicaMinolta 3.6 1.9 0.0 0.0 0.0% 0.0% 0.0% 

Others 4.0 2.8 0.6 0.2 0.5% 0.6% 0.6% 

Global total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

Source: Company, CIPA, J.P. Morgan estimates. 

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20 April 2009 

Table 117: Digital camera revenue by vendor 

¥ in billions, year-end March 

FY05 FY06 FY07 FY08 FY09E FY10E FY11E 

Canon - - 781 876 781 669 690 

Sony - - 464 558 418 323 320 

Kodak - - 395 344 262 204 198 

Olympus 249 229 269 305 194 141 145 

Samsung Techwin - - 234 261 252 277 281 

Nikon 266 321 328 416 423 361 368 

Panasonic 72 130 201 243 195 166 175 

Casio Computer 100 115 135 140 102 80 83 

FujiFilm Holdings 126 115 112 108 79 59 55 

Hewlett-Packard - - 179 142 107 85 84 

PENTAX - - 80 66 44 26 22 

Others - - 17 7 12 12 12 

Global total 812.0 909.5 3,195 3,467 2,868 2,403 2,432 

Market growth (%) 9.1 12.0 251.3% 8.5% -17.3% -16.2% 1.2% 

Source: Company data, CIPA, J.P. Morgan estimates. 

Market growth drivers 

Two factors have largely contributed to the robust growth in DSC shipments: 

Attractive price points have opened new end-markets 

In the first cycle of DSC adoption, price points for mainstream cameras were around 

the US$300 level, limiting the reach of the products. However, in the past couple of 

years, strong ASP erosion (10-15%) has resulted in mainstream camera prices 

dropping to US$100-150 levels. This has opened up completely new end markets, 

including emerging markets, where the penetration rate of DSCs is much lower. Such 

a drop in prices also makes DSCs more affordable to the consumer as a personal 

digital device. 

Strong replacement rate due to additional features 

We also see strong shipments from mature markets such as North America and 

Europe due to healthy replacement buying by users who own 2-3Mpx cameras. We 

think the higher mega pixel range combined with better features (such as optical 

zoom, anti-shake, smile detection, and better video capability) and the strong price 

decline have aided the strong replacement rate. 

Future drivers 

Better sensory features, newer technologies in mid-range cameras 

Representative of the technological evolution of digital cameras is the shift to full 

frame sensors. Until now, full frame sensors have been available only in pro-use 

models and certain mid-range models such as Canon’s 1Ds Mark III and EOS 5D. 

However, this component is now appearing in mid-range models that lack 

meaningful pro-use functionality, such as Nikon’s D700 and Sony’s α-900. We 

expect an increase in the number of full frame, high-sensitivity models, partly due to 

the introduction of the successor model to Canon’s 5D. We think manufacturers 

other than Sony, which sells sensors externally, will be at a disadvantage. With the 

addition of models such as the Nikon D90, the first SLR camera with video 

functionality, we sense that technological evolution is accelerating and such 

technologies are becoming more accessible.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

SLR camera specs indicate future industry trends 

The specs of the most recent SLR camera models are outlined in Table 123. There 

has been a significant increase in full-frame cameras using CMOS technology. 

Greater emphasis is being laid on larger and better quality LCD display panels and 

higher shutter speed. Camera size, its enhanced sensitivity in low light conditions, 

lower start time, and wide-angle views are other prominent features. 

The sheer number of models in the line-ups of Canon and Nikon indicates how these 

two companies dominate the competition. For some time, the entry of companies 

such as Sony, Panasonic, and Samsung Techwin threatened to reduce the market 

share of the established camera makers, but the product launch cycle suggests that 

the top two companies are even more entrenched than before. However, the specs of 

Sony’s α-900, released on September 10, 2008, suggest that this high-end model 

would pose quite a competition to existing models. We also think that Canon, which 

launched a successor to the EOS 5D, will establish a formidable presence. 

CMOS sensor is becoming more mature 

In the past, the DSC market predominantly used CCD sensors. With huge in-house 

CCD production capacity, Japanese companies used to dominate this market. With 

an improvement in CMOS sensor technology, more DSCs have started using CMOS 

sensors. Micron is already mass-producing 5MPx CMOS sensors and has started 

sampling 8MPx sensors. The advent of merchant CMOS sensors with acceptable 

quality could help new players break into this market. 

Lens still the key, but plays a smaller role in DSCs than film cameras 

Contrary to market belief, we believe that the importance of optic lens in cameras has 

decreased since the emergence of DSCs. In the past, camera lens design required 

laborious and repetitive manual calculations to trace how light moves and refracts 

through lens to decrease aberration (to reflect proper image). Therefore, selective 

lens makers with accumulated know-how could wield significant influence over 

camera makers. 

However, the development of PC and software enabled more lens makers to easily 

design and mass-produce lenses at lower costs. Also, unlike traditional film cameras, 

whose picture quality largely depends on the degree of lens aberration, DSCs can 

improve picture quality by increasing the signal-to-noise (S/N) ratio of image sensors 

and enhancing the image processing algorithm. Producing better image sensors and 

image processing chips appears to be easier and more efficient to increase production 

yield and scalability than constructing a more precise optic lens system in cameras. 

However, the DSLR market should continue to be the bastion of traditional players 

such as Canon and Nikon, given their strong optical expertise. 

Camera phone vs. digital camera 

A primary concern from evolution of higher resolution camera phones has been the 

cannibalization of the DSC market. However, this has not materialized due to: 

(1) lower resolution of handset cameras—only 3MPx currently, compared with 

7MPx for mainstream DSCs; (2) difficulty in implementing standard DSC features 

such as auto focus and optical zoom; and (3) continued innovation in DSC features 

such as anti-shake, innovative user input options, and better video quality. Lastly, the 

rapid price decline for DSCs has also helped fend off competition from high-end 

handsets. 

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(852) 2800-8538 


Table 118: Major outsourcing DSC ODMs and EMS companies in Asia Pacific 

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20 April 2009 

Mobile continues to be the imaging device closely linked to the Internet, increasingly 

providing various useful and handy multimedia tools, applications, and newer 

mediums to share. Camera manufacturers, on the other hand, are mostly 

concentrating inwards on adding new functionalities such as face and smile 

detection. Only Nikon has been consistently providing WiFi-enabled products. 

A recent IDC report suggests that camera vendors should embrace similar 

connectivity and sharing features into their products as phones to maintain their past 

growth rates and sustain the volume of higher-margin products, especially in the 

environment of declining ASPs. 

DSC vendor outsourcing 

Key drivers for the first wave of DSC outsourcing were: (1) strong DSC unit growth; 

and (2) tier-2 vendors and latecomers such as HPQ, Kodak, Pentax and Samsung 

trying to catch up with market leaders. 

As a result, most of the Taiwan DSC ODMs were serving tier-2 vendors while 

starting to see some OEM orders from tier-1 vendors. Vertical integration capability 

was quite limited, while design services were largely restricted to private labels and 

non-Japanese customers such as HPQ and Kodak. 

We believe the key drivers for the next wave of outsourcing are: 

• Japanese vendors starting to focus on DSLRs, leading to a resource crunch in 

compact camera development; 

• High overheads increasingly a concern with low price points; and 

• Growing scale and vertical integration of Taiwan ODMs. 

Company Major clients Shipments (2007) 

(thousands units) 

IC content/supplier 

Casio, Samsung, Nikon, Polaroid, 

Texas Instruments, Sunplus, Aimtron, 

Ability Enterprise 

BenQ, Fujifilm 12120 

Zoran, SQ 

Aiptek International DigiLife 90 OmniVision 

Toshiba, Matsushita, AME, AAT, Zoran, 

Altek Kodak, HP, Pentax, Sanyo, Asus, SiRF 12000 

OmniVision 

Toshiba, Sharp, Zoran, Texas 

Asia Optical Olympus, Kodak, Fujifilm, Nikon 6100 

Instruments, Rohm 

Cal-comp Electronics (Thailand) Panasonic N/A N/A 

DXG Technology Top Trade 1500 OmniVision, Zoran, Sunplus 

Flextronics Casio, Kodak, Olympus, Nikon, Fujifilm 6000 Sharp, ADI, Texas Instruments 

Olympus, Fujifilm, HP, Konica Minolta, 

Sharp, Sony, Panasonic, Toshiba, 

Foxconn Electronics 

Pentax, Sony, Digimaster 17500 

Samsung, Aimtron, Zoran, SQ 

Foxlink Image Technology HP 2800 Toshiba, Sony, NEC 

Inventec Multimedia & Telecom Konica Minolta N/A N/A 

Qisda 

Source: Gartner, Updated as of April 2008. 

N/A 5000 Pixelworks, Novatek, MRT

Bhavin Shah 

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20 April 2009 

Table 119: vertical integration and ODM capabilities of Taiwan DSC makers 

Company Mechanical Optical ASIC ODM skills 

Hon Hai Plastic precision molding Lens element, lens unit No Good 

Metal stamping parts Assembly 

Ability Plastic precision molding Lens unit assembly No Good 

Metal stamping parts 

Altek Elementary in plastic Small lens units assembly Yes Good 

Asia Optical Plastic molding Lens element and unit assembly No Poor 

Source: Company reports and J.P. Morgan. 

Digital SLR camera 

A Digital Single-Lens Reflex (DSLR) camera uses the same lens for viewing and 

shooting. It uses a mechanical mirror system to direct light from the lens to the 

viewfinder. While clicking the photograph, the mirror momentarily flips out of the 

way to allow light to pass through to the sensor. 

A DSLR camera is primarily used by professionals due to its versatility provided by 

the flexibility to change lens as per the requirement, large image sensors producing 

high quality images, and very minimum or no time lag, which make it the perfect 

choice for action photography. For a detailed discussion on various user classes 

please refer to our Supply Chain Guide, 5th Edition. 

Differences between compact cameras and SLRs 

There are five main differences between SLRs and compact cameras: 

1. The lens can be changed in SLRs. 

2. The size of the light-sensing device is different. 

3. SLR has single lens, while a compact camera has twin lens. 

4. The viewfinders are different. 

5. SLRs can reproduce gradations better in the actual photograph. 

Compact camera technology is advancing rapidly; it takes L-size pictures of 

satisfactory quality for those taking pictures as a hobby. Nevertheless, we think 

digital SLRs sell well because they offer greater picture quality and a wider range of 

usage. For a detailed discussion on the differences, please refer to our Supply Chain 

Guide, 5th Edition. 

DSLR market overview 

The digital SLR camera market continues to see solid growth and we think the 

market will peak out at around 10%-15% of the overall digital camera market. We 

base this on the film SLR example—when the film camera market peaked in 1997, 

film SLRs accounted for 11.2% of the overall camera market. Even with the move to 

digital, we believe that about 10%-15% of users will shift to SLRs. Our bottom-up 

based FY09 total DSLR sales forecast (year-end March) is 9.1 million, suggesting 

ample room for further growth. In the SLR market, Cannon and Nikon are the top 

vendors, boasting 79% (FY09E) of the market share by unit shipments, by our 

estimates. We also estimate revenue will grow 2.6% Y/Y to ¥735.8 billion in FY09 

(year-end March). 

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Table 120: Digital camera sales 

Units in millions, year-end March 


Digital Camera 77.6 90.1 105.0 130.3 128.8 121.2 132.9 

DSLR 2.6 3.9 5.8 7.8 9.1 9.8 11.5 

DSLR percentage 3% 4% 6% 6% 7% 8% 9% 

Source: CIPA, J.P. Morgan estimates. 

Table 121: DSLR shipments 

MM units; year-end March FY05 FY06 FY07 FY08 FY09E FY10E FY11E 

Nikon 1.05 1.34 2.09 3.09 3.40 3.60 4.00 

Canon 1.30 1.90 2.53 3.20 3.80 3.90 4.50 

Sony - - 0.50 0.40 0.90 1.30 1.50 

Pentax 0.07 0.12 0.30 0.35 0.30 0.25 0.30 

Olympus 0.09 0.25 0.25 0.50 0.30 0.30 0.40 

Panasonic - - 0.05 0.10 0.20 0.30 0.50 

Fuji Film - - 0.02 0.03 0.04 0.05 0.05 

Samsung Techwin - - 0.02 0.05 0.10 0.10 0.25 

SIGMA - - 0.01 0.01 0.01 0.01 0.02 

LEICA - - 0.01 0.01 0.01 0.01 0.01 

Mamiya - - 0.01 0.01 0.01 0.01 0.01 

Total 2.6 3.9 5.8 7.8 9.1 9.8 11.5 

Market growth(%) 

Market share(%) 

174.8% 51.0% 50.1% 33.8% 17.0% 8.4% 17.4% 

Nikon 41.1 34.7 36.1 39.9 37.5 36.6 34.7 

Canon 50.9 49.2 43.7 41.3 41.9 39.7 39.0 

Sony - - 8.6 5.2 9.9 13.2 13.0 

Olympus 2.6 3.1 5.2 4.5 3.3 2.5 2.6 

Pentax 3.5 6.5 4.3 6.5 3.3 3.1 3.5 

Panasonic - - 0.9 1.3 2.2 3.1 4.3 

Fuji Film - - 0.3 0.4 0.4 0.5 0.4 

Samsung Techwin - - 0.3 0.6 1.1 1.0 2.2 

SIGMA - - 0.2 0.1 0.1 0.1 0.2 

LEICA - - 0.2 0.1 0.1 0.1 0.1 

Mamiya - - 0.2 0.1 0.1 0.1 0.1 

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

Source: Company, CIPA, J.P. Morgan estimates. 

Table 122: DSLR sales 

¥ in billions, year-end March 


Nikon 95.6 115.2 193.0 257.9 252.6 234.0 248.0 

Canon 158.0 215.2 273.5 332.9 343.8 321.4 337.5 

Sony 0.0 0.0 40.5 31.2 65.1 91.1 95.6 

Pentax 8.0 13.6 27.5 30.9 22.1 14.3 14.6 

Olympus 8.5 21.0 22.0 45.0 22.5 18.0 22.0 

Panasonic 0.0 0.0 4.9 9.4 16.3 21.0 31.9 

FujiFilm Holdings 0.0 0.0 1.8 2.7 3.4 3.9 3.6 

Samsung Techwin 0.0 0.0 1.7 4.2 7.2 6.6 15.0 

SIGMA 0.0 0.0 1.1 1.0 0.9 0.8 1.5 

LEICA 0.0 0.0 1.1 1.0 0.9 0.8 0.7 

Mamiya 0.0 0.0 1.1 1.0 0.9 0.8 0.7 

Total 270.1 365.1 568.2 717.2 735.8 712.6 771.1 

Market growth 110.4% 35.2% 55.6% 26.2% 2.6% -3.1% 8.2% 

Source: Company data, CIPA, J.P. Morgan estimates. 

Unlike the compact camera market, there are only a limited number of digital SLR 

makers, and this reduces the risk of excessive competition squeezing earnings, in our 

view. We expect only a limited number of players going forward because there are 

only five companies with both assets and production expertise to manufacture 

conversion lens—Canon, Nikon, Sony, Olympus, and Hoya (Pentax). Further, most

Bhavin Shah 

(852) 2800-8538 


Table 123: Specifications of DSLR models by companies 


20 April 2009 

digital SLRs are slightly more expensive and are aimed at the ‘pro-sumer’ crowd— 

users that are unlikely to make purchase decisions based on the ticket price alone. 

Camera makers’ positioning within the segment is increasingly based on whether the 

company has in-house lens technology assets. Nikon and Canon already appear to 

have a dominant advantage in this area, and Sony now has access to lens technology 

due to its acquisition of Konica Minolta’s camera business. We see potential for 

industry realignment, as Olympus, Hoya (acquired Pentax), exchangeable lens 

maker, Tamron or unlisted lens maker, Sigma, look to strengthen their ties with other 

camera makers such as Panasonic or Samsung Techwin. 

Our overall impression is that DSLR technology is undergoing an increasingly rapid 

change. We expect continued technological advances including the move to fullsized 

sensors. Previously, only high-end pro models (such as the 1D Mark III or the 

EOS 5D), along with a small number of mid-class models came with full-size 

sensors. However, Nikon’s D700, is a mid-range model with specs almost 

indistinguishable from higher-end models. Canon has launched a successor to its 5D; 

we expect an increase in models with full-size, higher-resolution sensors. This might 

be disadvantageous for makers that depend on third parties for sensors. Another 

recent development is the launch of Nikon’s D90, the world’s first DSLR with a 

movie function. 

Effective Image Sensor & Size Focus Viewfinder Body Start-time 

Company Camera Pixels (mm) Pic/Sec Point Viewfinder Magnificient Weight ISO LCD Panel (sec) 

Canon EOS-1Ds Mark III 21.1M CMOS 36.0 × 24.0 5.0 45 100% 0.76x 1210g 100~1600 3.0in. TFT 0.2 

EOS-1D Mark III 10.1M CMOS 28.1×18.7 10.0 45 100% 0.76x 1155g 100~3200 3.0in. TFT 0.2 

EOS 5D 12.8M CMOS 35.8x23.9 3.0 9 96% 0.71x 810g 100~1600 2.5in. TFT 0.2 

EOS 50D 15.1M CMOS 22.3x14.9 6.3 9 95% 0.95x 730g 100~3200 3.0in. TFT - 

EOS 40D 10.1M CMOS 22.4×14.8 6.5 9 95% 0.95x 740g 100~1600 3.0in. TFT 0.15 

EOS Kiss X2 12.2M CMOS 22.2×14.8 3.5 9 95% 0.87x 475g 100~1600 3.0in. TFT 0.1 

EOS Kiss F 10.1M CMOS 22.2×14.8 3.0 7 100% 0.95 450g 100~1600 2.5in. TFT 0.1 

EOS Kiss Digital X 10.1M CMOS 22.2×14.8 3.0 9 95% 0.8x 510g 100~1600 2.5in. TFT 0.2 

Nikon D3 12.1M CMOS 36.0×23.9 11.0 51 100% 0.7x 1240g 200~6400 3.0in. TFT 0.12 

D700 12.1M CMOS 36.0×23.9 8.0 51 95% 0.72x 995g 200~6400 3.0in. TFT 0.12 

D300 12.3M CMOS 23.6×15.8 8.0 51 100% 0.94x 825g 200~3200 3.0in. TFT 0.13 

D90 12.3M CMOS 23.6×15.8 4.5 11 96% 0.94x 620g 200~3200 3.0in. TFT - 

D60 10.2M CCD 23.6×15.8 3.0 3 95% 0.8x 495g 100~1600 2.5in. TFT 0.19 

D80 10.2M CCD 23.6×15.8 3.0 11 95% 0.94x 585g 100~1600 2.5in. TFT 0.18 

D40X 10.2M CCD 23.6×15.8 3.0 3 95% 0.8x 495g 100~1600 2.5in. TFT 0.18 

D40 6.1M CCD 23.7×15.6 2.5 3 95% 0.8x 475g 200~1600 2.5in. TFT 0.18 

Pentax K20D 14.6M CMOS 23.4X15.6 3.0 11 95% 0.95 715 100~3200 2.7IN. TFT - 

K10D 10.2M CCD 23.5X15.7 2.8 11 96% 0.85 630 100~1600 2.7IN. TFT - 

K10D 10.2M CCD 23.5X15.7 2.8 11 96% 0.85 630g 100~1600 2.7IN. TFT - 

K100D Super 6.1M CCD 23.5×15.7 2.8 11 96% 0.85x 570g 200~3200 2.5in. TFT 0.8 

Olympus E-3 10M Live MOS 17.3 x 13.0 5.0 11 100% 1.15x 810g 100~3200 2.5in. TFT - 

E-520 10M Live MOS 17.3 x 13.0 3.5 3 95% 0.92x 475 g 100~1600 2.7in. TFT - 

E-420 10M Live MOS 17.3 x 13.0 3.5 3 95% 0.92x 380g 100~1600 2.7in. TFT - 

E-410 10M Live MOS 17.3 x 13.0 3.0 3 95% 0.92x 375g 100~1600 2.5in. TFT - 

E-510 10M Live MOS 17.3 x 13.0 3.0 3 95% 0.92x 470 g 100~1600 2.5in. TFT - 

Sony α700 12.2M CMOS 23.5×15.6 5.0 11 95% 0.9x 690g 100~3200 3.0in. TFT 0.2 

α350 14.2M CMOS 23.5×15.7 2.5 9 90% 0.74x 582g 100~3200 2.7in. TFT 0.4 

α200 10.2M CCD 23.6×15.8 3.0 9 95% 0.74x 582g 100~3200 2.7in. TFT 0.4 

α300 10.2M CCD 23.6×15.8 3.0 9 95% 0.83x 545g 100~1600 2.5in. TFT 0.9 

Source: Company data, company websites, J.P. Morgan. 

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20 April 2009 

Digital camera: Components 

The new wave of outsourcing will result in new companies gaining ground, in our 

view. 

Figure 125: Digital camera structure 

Source: Ministry of Education, culture, sports, Science and technology. 

System assembly 

Premier appears best poised to take advantage of the tier-I DSC outsourcing and has 

a diverse customer base including Sony, Nikon and Olympus. Following Premier is 

Ability, which has emerged as the third-biggest DSC ODM, after Hon Hai and Altek, 

in 2008. Samsung Techwin and Asia Optical are the other system assembly 

companies. 

DSP vendors 

While DSC is a mature market, there are plenty outsourcing opportunities in the DSP 

market. Many Japanese DSC players (Sony, Canon, Casio, Olympus, Nikon, etc.) 

have an in-house solution for backend controller. We estimate that merchant chip 

vendors (Zoran, TI, Sunplus and Novatek) currently hold only 40-50% market share, 

but this could increase significantly in the coming years. Zoran and TI appear strong 

in quality, while Sunplus and Novatek provide better local support. 

Mediatek had acquired 69% of NuCore, and over the long term, we believe that 

Mediatek could become a strong player in this market, as NuCore has a very good IP 

portfolio. Sunplus is the other vendor and a major competitor for Mediatek, but it has 

not kept pace with its product development roadmap and appears to be losing market 

share to Zoran and Novatek. 

Power management ICs 

The current trend in DSC is a single seven-channel power IC supplying power to 

system, motor driver, DSP, CCD, WLED and memory. AAT, Richtek and GMT/ 

Aimtron have a seven-channel solution in DSC, but Richtek appears to be at an

Bhavin Shah 

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20 April 2009 

advantage as it launched solutions that were latest, but with a smaller/thinner die size 

favorable for slim DSC models. 

Maxim used to dominate in DSC power ICs. However, as other DSC components 

(e.g., hinge, DSP, etc) have started using Taiwanese suppliers, Richtek should be one 

of the beneficiaries in this localization trend. In 2008, Richtek saw design wins at the 

top four ODMs in Taiwan and it is now targeting Japanese OEMs. Battery charger IC 

is another key area for Richtek to increase its TAM on DSC in 2009. 

Mechanical components 

Sunny Optical has been supplying lenses, prisms, and filters to tier-2 DSC brands 

such as Panasonic, Samsung, Olympus and Konica-Minolta. Sunny Optical is also a 

key supplier for Mediatek and could extend the partnership to the white-box DSC 

market. In 2008, Shin Zu Shing started volume shipments to a top Japanese brand for 

digital camcorder projects. 

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Figure 126: Digital still camera components 


220 

Image sensor 

CCD 

Japan 

Sony Sanyo 

Matsushita Sharp 

Fuji Photo Film 

CMOS 

US Japan 

Omnivision Sony 

Agilent Matsushita 

Micron Sharp 

STMicro Toshiba 

Taiwan Canon 

PixArt Korea 

Hynix 

Lens 

Japan Taiwan 

HOYA Largan 

Matsushita Asia Optical 

Canon Kinko Optical 

Pentax Corp Genius Optical 

Tamron E-Pin Optical 

Fuji Photo Film Premier 

Olympus Germany 

Nikon AGFA 

Korea Schott 

Sekonix Carl Zeiss 

US 

Eastman Kodak 

Hughes Optical 

Edmund Optics 


20 April 2009 

What goes inside a digital camera? 

DSP 

US 

TI 

Zoran 

Taiwan 

Sunplus 

Novatek 

MediaTek (NuCore) 

LCD 

Korea 

Samsung 

LG Display 

Japan 

Sanyo 

Sharp 

TMD 

AUO 

Toshiba 

Toppoly 

Casio 

Memory 

DRAM/NAND 

Sandisk 

Hitachi 

Samsung 

Toshiba 

Infineon 

Sony 

SDRAM 

Toshiba 

Matsushita 

Sandisk

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20 April 2009 

Table 125: Comparison of CCD’s and CMOS’s performance 

Primary components in the DSC supply chain 

CMOS – CCD comparison 

Image sensors comprise an array of photosensitive cells or pixels and can be broadly 

bifurcated into two schools of technologies—charge coupled devices (CCD) and 

complementary metal oxide semiconductors (CMOS). Most digital cameras use CCD 

sensors to record an image. However, CMOS sensors have started to catch up in 

compact cameras in the past two years. Already, a few mainstream models (6-7MPx) 

have started to appear with CMOS imaging sensors. Given the superior cost structure 

in CMOS image sensors we think the market could move away from CCDs in the 

long run. For a detailed discussion on CCD-CMOS comparison, please refer to our 

Supply Chain Guide, 5th edition. 

Table 124: Comparison of CCD and CMOS features 

Features CCD CMOS 

Fill factor High Moderate 

System noise Low Moderate to high 

System complexity High Low 

Sensor complexity Low High 

Camera components 


PCB + multiple chip + lens Chip + lens 

Performance parameter Explanation CCD CMOS 

Responsiveness The amount of signal the sensor delivers per unit of input 

optical energy 

Moderate Slightly better 

Dynamic range The ratio of a pixel’s saturation level to its signal threshold High Moderate 

Uniformity The consistency of response for different pixels under identical 

illumination conditions 

High Low to moderate 

Uniform shuttering The ability to start and stop exposure arbitrarily Fast, common Poor 

Speed Speed of performing all the functions Moderate to high Higher 

Windowing The ability to read out a portion of the image sensor. This 

allows elevated frame or line rates for small regions of interest 

Limited Extensive 

Anti-blooming The ability to gracefully drain localized overexposure without High (requires special 

High 

compromising the rest of the image in the sensor 

engineering) to none 

Biasing and clocking 


Voltage and clock levels Multiple, higher voltage Single, low-voltage 

Full frame sensors: CMOS appears to be the clear choice 

Full frame sensors are image sensors of the same size as a 35mm (36 x 24mm) film 

frame. The ability to combine high resolution with large pixel size enables full frame 

sensors to provide high quality images, making them a photographer’s preferred 

choice. Larger pixels offer higher sensitivity and produce a high dynamic range and 

finer tonal gradations than smaller pixels. 

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Figure 128: CMOS sensors on 8” silicon wafer 

Only 20 CMOS sensors can be produced 

from an 8” silicon wafer capable of yielding 

thousands of standard LSIs 

Source: www.canon.com. 

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20 April 2009 

Figure 127: “Bokeh” effect comparison—APS-C vs. full frame sensor 

With APS-C size sensor With 35mm full-frame sensor 

Source: www.canon.com. 

The biggest drawback: High production cost 

Silicon wafers, after several hundred steps, is covered with sensors. On an 8” 

diameter wafer, there are about 200 APS-C size sensors. For APS-H size sensors, the 

number is 46, but for full frame it is a mere 20. Moreover, these sensors can be easily 

affected by dust and scratch marks because of their size, implying the need of 

extremely precise handling of full frame sensors during manufacturing, which makes 

the process highly expensive. Its circuit pattern requires three separate exposures due 

to its large size, thus tripling the number of masks and exposure processes. 

Why CMOS? 

CMOS appears to be the preferred choice for manufacturing full frame sensors for 

the following reasons: 

• Power consumption: Voltage transfer in case of CMOS requires almost no 

power compared to transferring a charge in case of CCD. So, as long as the 

number of channels is not increased, power consumption is not increased 

even with a larger CMOS sensor, while the bigger the CCD, the more power 

it consumes. 

• Size: More power creates more heat and noise. To overcome this, CCD uses 

a massive power supply and a liquid or thermostatic cooling mechanism, 

entailing a proportionate cost, complexity and weight. CMOS sensors with 

low power consumption result in a smaller battery pack, lighter cameras and 

shorter recharge time. 

• Speed: In CMOS, multiple channels of sensor data can be read out 

simultaneously, while in CCD, more than two channels is difficult, making 

faster speed hard to achieve. 

One major disadvantage of using CMOS is its higher susceptibility to electrical 

noise, resulting in poorer image quality. Manufacturers have, however, come up with 

many technologies to counter this problem. For instance, Canon altered its 

conventional three-transistor architecture by adding a fourth one. Kodak also 

designed four-transistor CMOS pixels, while Nikon’s sensors are 3-T.

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20 April 2009 

Electronic paper......................................................................... 225 

What’s new? .................................................................................................................225 

What is electronic paper?..............................................................................................225 

Technology ...................................................................................................................226 

What e-paper offers ......................................................................................................228 

E-paper market..............................................................................................................229 

E-paper products...........................................................................................................229 

Solar cells................................................................................... 231 

What’s new? .................................................................................................................231 

Solar market analysis.............................................................. 233 

PV module market: Demand.........................................................................................234 

Government Incentives in major solar markets ............................................................235 

Solar cell production: Supply .......................................................................................238 

Solar cell technology............................................................... 240 

Crystalline solar cells....................................................................................................240 

Thin-film solar cell technology.....................................................................................241 

Increasing cell-conversion efficiency: The “solar Holy Grail”.....................................248 

Cost reduction potential of solar energy using technology...........................................249 

Leading-edge PV technology derivatives .....................................................................251 

Electric Vehicles (EVs) .............................................................. 253 

Definition......................................................................................................................253 

History and current roadmap for EV ............................................................................253 

EVs: Key advantages and issues...................................................................................254 

EVs unlikely to take off in the near term......................................................................254 

Hybrid Electric Vehicles (HEVs) ............................................. 254 

Key EV/HEV components............................................................................................257 

HEV market size...........................................................................................................259 

Plug-in Hybrid Electric Vehicles (PHEVs).............................. 260 

PHEV models ...............................................................................................................262 

Batteries for EV/HEV/PHEV..................................................... 263 

How LiBs work.............................................................................................................264 

Lithium polymer batteries.............................................................................................264 

Current LiB alternatives for EV/HEV ..........................................................................265 

Key players in the battery market .................................................................................266 

Light emitting diode (LED) ........................................................ 269 

What’s new? .................................................................................................................269 

LED industry: Demand and growth drivers..................................................................269 

LED industry: Application drivers................................................................................270 

White LED demand for handsets..................................................................................271 

White LED demand for display backlights...................................................................272 

HB LED demand for automotive lighting ....................................................................276 

Illumination ..................................................................................................................276 

Competitive landscape..................................................................................................277 

Competitiveness of the Taiwan LED sector by product ...............................................278 

Structure of LED...........................................................................................................280 

Issues with LED display ...............................................................................................285 

Patent issues..................................................................................................................286 

Energy Efficient Technologies 

223

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OLEDs: Next trend in small size displays?.............................. 289 

OLED categorization: Breakdown by material technology ..........................................289 

OLED categorization: Breakdown by driving method .................................................290 

Advantages of organic LEDs:.......................................................................................291 

Some of the challenges faced by organic LEDs............................................................291 

Applications of OLED..................................................................................................292 

External electrode fluorescent lamp (EEFL) ......................... 293 

224 


20 April 2009

Bhavin Shah 

(852) 2800-8538 


Liang Lin AC 

(886-2) 2725-9863 


J.P. Morgan Securities (Taiwan) 

Limited 


20 April 2009 

Electronic paper 

What’s new? 

As electronic paper (e-paper) continues to develop, we have an increasingly larger 

number of technologies springing up that try to remove the drawbacks of the earlier 

versions. Liquavista’s e-paper, based on electro-wetting displays, brings in the 

dimension of color into e-paper. Similarly, relatively older players like E Ink and 

Prime View International (PVI; 8069 TT) continue to focus on electrophoretic 

display-based technology for their e-paper. 

Newer products on this platform are being launched as the technology continues to 

evolve and increase its presence. From being used in mobile phones and e-books to 

underwater MP3 players by Qualcomm, the technology is catching up with other 

leading display technologies. However, Amazon Kindle is the only current product 

that can boast of achieving a certain degree of success. 

According to iSuppli, e-book shipments will rise to 18.3 million units in 2012 from 

150,000 in 2007, implying a CAGR of 161%, whereas revenues during the same 

period are expected to rise to US$291.2 million from US$3.5 million, implying a 

CAGR of 143%. 

What is electronic paper? 

Electronic paper (e-paper, electronic ink or e-ink) is a reflective display technology 

designed to make it feel and look like paper. Just like paper which doesn’t have 

illumination of its own and merely reflects the light rays falling on it, e-paper is also 

based on reflective technology and does not use a backlight to illuminate its pixels. 

E-paper consists of bistable pixels which allows for holding the text and images 

indefinitely without drawing electricity or using processor power (except while 

changing display). 

Figure 129: Electronic paper 

Source: www.eink.com. 

• The photo shows a simple prototype e-reader 

application, packaged in a two-piece acrylic case. 

• This prototype weighs less than 150 gm (about the 

same as a thin magazine), is only 7.2 mm thick, and is 

powered by the internal Li-ion battery pack that is 

included in the kit. 

• Users can load content onto the device through the 

MMC card slot. 

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20 April 2009 

Technology 

There are several e-paper technologies being supported by different manufacturers. 

Most of them are still in their nascent stages. 

Electrophoretic display (EPD) 

This type of display technology relies on forming images by rearranging charged 

colored particles by using an applied electric field. 

One form of EPD is shown in the figure below. EPD primarily consists of millions of 

tiny microcapsules, which are filled with positively charged white particles and 

negatively charged black particles suspended in a clear fluid. On application of a 

negative electric field, the white particles move to the top making the surface appear 

white at that spot. Vice-versa, an opposite electric field pulls the black particles to the 

top of the capsule, which then makes the surface appear black at that spot. This grid 

of electrodes is connected to display circuitry, which controls the voltage at each 

microcapsule thus turning the electronic ink ‘on’ and ‘off’ at specific pixels. 

Figure 130: Electronic paper microcapsules cross-section 

Source: www.eink.com. 

In another form, the microcapsules might be filled with negatively charged white 

pigment particles which are suspended in a black dye. These microcapsules are of 

40-50um order. The thickness of a sheet of e-paper is of the order of a few multiples 

of a sheet of ordinary paper (nearly 40um). 

The dominant players in this technology are E Ink and PVI. PVI along with its 

subsidiary Hydis manufacture the displays for Amazon Kindle and Sony Reader. PVI 

estimates that EPD will grow to 10 times in three years. EPD accounts for 50-60% of 

PVI’s revenues now as against only 30% in 2Q07.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Figure 131: Electrophoretic display 

Source: www.newscientist.com. 

Electro-wetting displays (EWD) 

Unlike EPD, EWD does not have colored particles in capsules, but instead has 

water/oil. Upon application of voltage, there is a change in the tension between the 

surface and water causing the water to shift aside the oil. The result is a somewhat 

transparent pixel, an optical switch; for a white reflective surface, it is a white pixel. 

This switch has many attractive properties that make it suitable to be used as a 

display, as it can combine high color brightness, video speed and low power 

consumption. 

The invention of fast switching EWDs was the subject of a Nature article published 

in September 2003 and has been patented by Philips. EWD is now being 

commercialized by Liquavista, a spin-off of Philips itself. Liquavista in March 2008 

announced that it would begin volume production of the display. It has already raised 

the required capital and is setting up a production facility with an LCD partner in 

China. 

A low-cost, full-color display can be fabricated with electro-wetting using an RGB 

color filter approach. Three sub pixels are combined to form one pixel, with each sub 

pixel capable of switching between two colors. The components required for a 

simple EWD are just two sheets of plastic or glass, water and oil which are mixed 

with a dye to give it a color. In its off state, the pixel reflects the color of the dye. 

227

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228 


20 April 2009 

Figure 132: Single-layer EWD architecture 

Source: Liquavista. 

Below is a comparative performance of the various e-paper display technologies. 

Table 126: Comparative performance of various E paper technologies 

B/W 

Color 

Viewing 

Technology Reflectivity Conversion Contrast angle Switching speed (ms) 

Reflective LC 50 33 15 Limited 15 

CTLC 30 100 10 Limited 50 

Electrophoretic 55 33 12 Good 150 

MEMS 50 33 12 Limited

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

conventional reflective-type LCDs. Since the screen image does not require 

repetitive updates to be maintained, the screen does not flicker. 

E-paper market 

E-paper is still in its nascent stage; however, the arrival of several big companies like 

Amazon and Sony, is likely to speed up development in this sector. According to 

iSuppli, e-book shipments will rise to 18.3 million units in 2012 from an existing 

level of 150,000 in 2007, implying a CAGR of 161%, whereas revenues during the 

same period are expected to rise to US$291.2 million from US$3.5 million implying 

a CAGR of 143%. 

Figure 133: Worldwide e-paper shipments and revenues forecast 

Source: iSuppli. 

E-paper products 

• Amazon Kindle 2: Amazon Kindle, a wireless e-paper reader launched in 

November 2007, uses wireless connectivity to download e-books. Subsequently 

the company has launched the Kindle 2 in early 2009. Kindle uses Sprint’s 3G 

network to deliver content wirelessly; it is called Whispernet. Amazon.com 

provides more than 240,000 book titles for Kindle. Most books are priced at 

US$9.99, making them much cheaper than the printed hardcopies. 

• Sony Reader: The Sony Reader Digital Book, priced at US$400, uses a windows 

operating system (XP and VISTA) and has a full touch screen for input. Sony has 

a cheaper version of their Reader digital book without the touch screen, which 

sells for US$300. 

• Newspapers: In September 2007, the French business daily Les Echos 

announced the launch of an electronic version of the newspaper on a subscription 

basis, combining a one-year subscription and a reading device with a choice of 

devices manufactured by Ganaxa or iRex iLiad. 

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Bhavin Shah 

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Table 127: Reader specifications 

230 

Sony Reader Digital Book iRex Iliad Amazon Kindle 2 Bookeen 

Source: www.sonystyle.com. 

Source: www.irextechnologies.com. 

Source: www.amazon.com. 

Source: www.bookeen.com. 

Display 6” diagonally, with touchscreen 8.1” 6” diagonally 6” diagonally 

Resolution Approx. 170 pixels per inch XGA 1024x768 600x800 at 167 dpi 600x800 at 166 dpi 

Color 8-level grey-scale 16-level grey-scale 16 level grey scale 4 level grey scale 

Size 5.1” x 6.77” x 0.41” 6.1” x 8.5” x 0.63” 8" x 5.3" x 0.36" 4.7" x 7.4" x 0.3" 

Weight 283gm 435gm 289 gms 174gm 

Power supply Li-ion battery/ AC Adapter Li-ion battery/ Power Adapter Li-Polymer/ AC/ DC 

Battery life Up to 7,500 pages before recharge Depends on wireless coverage 8,000 screen refresh battery life 

Memory 64 MB internal + memory stick 256MB FLASH (128MB for user) 2 GB internal (1.4 GB for user) 8MB ROM,16MB RAM, 512MB 

Formats BBeB/PDF/JPEG/MS 

PDF/XHTML/TXT/JPG/BMP/PNG/PRC natively:Kindle 

Ebook formats: Mobipocket PRC, 

word/RTF/MP3/GIF/AAC/PNG/BN 

(AZW)/TXT/Audible (formats 2, 3 PalmDoc, HTML, TXT, PDF 

P/RTF/TXT/ePub 

and 4)/MP3/MOBI/PRC 

Supported image formats: JPG, GIF, 

Conversion: PDF, HTML, DOC, PNG 

JPEG, GIF, PNG, BMP 

Supported sound format: MP3 

Other interfaces Headphone jack, USB Headphone jack, WiFi 802.11b, EVDO modem with fallback to Stereo earphones, USB, 

10/100Mb Ethernet, Touch Screen, 1xRTT; Uses Sprint's high-speed 

Stylus 

data network 

Price $350 Starts at $599 $359 $350 

Source: Company reports, Company websites. Prices as of March 24, 2009 


20 April 2009

Bhavin Shah 

(852) 2800-8538 


Sandeep Deshpande AC 

(44-20) 7325 0456 

sandeep.s.deshpande@jpmorgan.com 

J.P. Morgan Securities Limited 

Liang Lin 

(886-2) 2725-9863 




20 April 2009 

Solar cells 

What’s new? 

While the incentives in key markets such as Germany and Spain are declining, we 

expect other emerging markets such as France, Greece and Italy to continue to 

register rapid volume growth in PV installations, driven by policy support. Japan 

plans to reintroduce subsidy on solar power equipment this year to help generate 

demand until technological innovations bring prices down. On a global basis, we 

expect solar cell demand to continue to expand but at a slower pace. The credit crisis 

has affected solar cell demand with several large-scale solar projects being delayed 

or shelved. In our view, polysilicon oversupply has already occurred. Due to a weak 

semiconductor market, more of the polysilicon used by semiconductor wafer 

manufacturers is available for solar use. In this section, we discuss mainstream solar 

cell types and the leading-edge PV technology derivatives. Also, we have included a 

comparison of efficiency and cost reduction potential of various PV technologies. 

Brief introduction 

Solar cell is a semiconductor device, which converts the photons from the sun into 

electricity. Since it is clean, renewable and environmentally friendly, the electricity 

produced by solar cell (solar power), has received a lot of attention recently in the 

wake of growing environmental concerns. This has given rise to the solar cell 

industry, which has been growing on the back of government subsidies and solar cell 

technology is still evolving. 

Figure 134: Photovoltaic cell structure 

load 


- 

+ + 

- 

- 

- 

Sunlight 

- 

electrical current 

- 

- 

+ 

- 

- 

Positive electrode 

n-type silicon 

p-n junction 

p-type silicon 

Negative electrode 

The basics of a photovoltaic cell 

Electricity generated from a photovoltaic cell is derived from the transfer of energy 

from a photon from sunlight to an electron within the solar cell. The energy 

transferred to the electron allows it to break free of its bonds within the material 

comprising the solar cell, creating a potential energy imbalance that can be used to 

generate electricity. This process of converting light into electricity is known as the 

photovoltaic effect. 

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20 April 2009 

Solar cell architecture: The basic P-N junction 

All solar photovoltaic (PV) cells manufactured in volume today are based on a P-N 

junction architecture, which is essentially the formation of two different 

semiconductor layers—an “N-type” and a “P-type”—separated by a thin barrier layer 

or junction. The “N-type” material has excess electrons in its crystalline structure and 

the “P-type” material, commonly referred to as the absorber material, has extra holes, 

or voids that can accept electrons. The proximity of these two semiconductor 

materials creates an electrically charged region called a P-N junction. As the photons 

in sunlight are absorbed by the “P-type” material, electrons are released and flow 

towards the now positively charged “N-type” material through electrical contacts/ 

conductors adjacent to the semiconductor materials, which provide a path for the 

electrons to flow out of the cell and into an electrical circuit to be converted into 

usable DC current. 

Figure 135: Solar power supply chain 

Polysilicon Ingot Wafer 

Cell Module 

Source: Kyocera, Motech, Sharp, SunPower. 

System & 

Installation 

1. Polysilicon: A silicon raw material which is melted and re-casted to remove 

impurities. 

2. Ingot: The cast silicon, which is stabilized in its polycrystalline form. These 

casts are called ingots and are cut into blocks. 

3. Wafer: The ingots are sliced into wafers. “P-type” and “N-type” silicon wafers 

are produced depending on the sliced silicon. 

4. Solar cell: Also known as PV (photovoltaic) cell. Electrodes are attached to the 

wafers for conducting electricity. 

5. Solar module: Used to increase the power output. Many solar cells are connected 

together to form modules, which are further assembled into larger units called 

arrays. This modular nature of PV enables designers to build PV systems with 

various power outputs for different types of applications. 

6. System and installation: An installation involves components, apart from the 

basic module. Components include electrical connections, mounting hardware, 

power-conditioning equipment and batteries that store solar energy. Installations 

are cheaper if installed before construction.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 128: Key solar industry players 

Hemlock 

MEMC 

Tokuyama 

Wacker 

REC 

PV Crystalox Solar 

Wacker-Schott 

Solar World 

Schott-Solar 

SUMCO 

Sharp 

Kyocera 

Evergreen Solar 

Yingli 

Q-Cells 

Motech 

First Solar 

Sunpower 

Suntech 

E-TON 

Solarfun 

Gintech energy 

JA Solar 

Isofoton 

Conergy 

Source: Companies, J.P. Morgan. 

Polysilicon Ingots Wafers Cell Modules System 

Solar market analysis 

The solar cell business has been established via subsidy; although the subsidy has 

decreased in countries where the market penetration has increased, subsidy has 

increased in other countries. The incentives in key markets like Germany and Spain 

are declining; we expect other emerging markets such as France, Greece and Italy to 

continue to register rapid volume growth in installations, driven by policy support. 

Japan plans to reintroduce subsidy on solar power equipment this year to help 

generate demand until technological innovations bring prices down. On a global 

basis, we expect solar cell demand to continue to expand but at slower pace than 

what was expected earlier, due to the current slowdown. 

Strong growth in 2008 installation was driven by policy support 

Last year saw the continuance of the 2007 boom in the PV industry. In 2008, major 

policy support in Spain and other countries led to global new installations reaching 

3.8 Gigawatt peak, or GWp (iSuppli). In 2009, the new installations should grow to 

4.2GWp, but overall revenue might decline sharply due to declining panel prices. 

Given that the rapid growth over the past few years was largely due to government 

subsidy in Germany and Spain, we believe the growth prospects to the point where 

solar PV reaches grid parity depend on the policies with respect to subsidy in various 

countries in Europe and the U.S. and those of the growing economies of China and 

India. 

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234 


20 April 2009 

Figure 136: The annual PV installation (MWp) 

4500 

4000 

3500 

3000 

2500 

2000 

1500 

1000 

500 

0 

PV cell New Installation 

2001 2002 2003 2004 2005 2006 2007 2008 2009 

Source: PVNews, 2008-2009 data by iSuppli Corp. 

PV module market: Demand 

Revenue likely to dip: Substantial panel oversupply 

According to iSuppli, after 10 years of strong growth, revenue from panel shipments 

will sharply decline (by 19%) in 2009 and will rebound in 2010-11. In the second 

half of 2010, PV panel revenue should return to strong growth as the demand picture 

improves, some weak players are eliminated and price declines slow. By this time, 

demand will likely be driven by additional installation capacity, improved rates of 

return due to low panel prices and renewed and extended government incentives to 

combat the economic slowdown. iSuppli forecasts panel revenue will rebound in 

2010 and rise to US$17.8 billion, up 38.2% from 2009. Revenue will rise by another 

11.1% in 2011 and by 29.1% in 2012, according to iSuppli. 

Credit crisis hurting solar demand 

Solar modules, whether installed in a home or in a solar farm, are capital-intensive 

investments and are generally financed using a combination of debt and equity. 

However, with the current turmoil in the credit and financial markets, obtaining 

financing for solar projects has become difficult and more expensive. This has 

affected solar demand, with several large-scale solar projects being delayed or 

shelved. Many solar cell/module manufacturers have been reporting weak solar 

demand since early November due to the tight credit environment. 

Figure 137: PV revenue from shipment of panels 

30.0 

25.0 

20.0 

15.0 

10.0 

5.0 

0.0 

Source: iSuppli Corp. 

Revenue in $ Billion 

Growt h 

2008 2009 2010 2011 2012 

50% 

40% 

30% 

20% 

10% 

0% 

-10% 

-20% 

-30%

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Upside to above forecasts: Declining panel prices 

iSuppli forecasts 2009 installations will increase by 9.6% to 4.2GWp, as Spain has 

put a cap of 500MWp on PV installations in 2009. However, the overall market in 

2009 could achieve upside, if pricing declines more than expected. When panel 

prices drop close to the production cost of mainstream crystalline panels, additional 

panels could be installed in 2009. This phenomenon of upside demand elasticity will 

be limited by the capacity of installers’ ramping up. In this case, market revenue 

would rise by 15.7% in 2009, according to iSuppli. 

Government Incentives in major solar markets 

Solar energy receives strong government support in many of the world’s leading 

economies. In most cases, this support is provided as part of a national policy to 

increase renewable electric generation (Table 129). The US is an exception. 

Although 29 states require utilities to obtain a specified proportion of their power 

from renewable sources, there is no such requirement at the national level. A handful 

of US states require utilities to purchase solar power, but in most states with 

renewable portfolio standards, utilities can meet their obligations by purchasing 

electricity from any renewable source. The government subsidies that are most 

common are feed-in tariffs (FIT) and investment tax credits (ITC). Typically used in 

Europe and Asia, FITs are guaranteed high rates at which utilities must purchase 

electricity and thereby ensure project developers a rate of return to build a solar 

installation. Conversely, the ITC in the US seeks to offset the costs of a solar 

installation by offering a tax credit to partially bridge the gap between solar power 

and the grid. 

Figure 138: New installed solar PV in 2007 (MWp) 

Japan 

11% 

USA 

9% 

Source: EPIA. 

South Korea 

2% 

Spain 

24% 

France 

Italy 

2% 

2% 

Germany 

50% 

Figure 139: New installed solar PV in 2008 

(MWp) 

Japan 

5% 

South Korea 

6% 

USA 

7% 

Germany 

31% 

Source: Displayback. 

Italy 

3% 

France 

2% 

Greece 

1% 

Spain 

45% 

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20 April 2009 

Table 129: Renewable energy targets in various countries 

Country Renewable energy targets 

Australia 9,500 GWh of electricity annually by 2010 

Denmark 29% of electricity output by 2010 

Finland 35% of electricity output by 2010 

France 21% of electricity output by 2010 

Germany 12.5% of electricity output by 2010 

Italy 25% of electricity output by 2010 

Japan 7% of TPES by 2010 

Netherlands 9% of electricity output by 2010, 10% of primary energy by 2020 

New Zealand 30 PJ of new capacity (including heat and transport fuels) by 2012 

Spain 30.3% of electricity output by 2010 

Sweden 60% of electricity output by 2010 

United Kingdom 10% of electricity output by 2010 

Source: International Energy Agency. 

Spain 

Since 2006 there has been an upsurge in the Spanish PV industry and in 2007 it 

recorded growth of over 400% in new installed capacity and surpassed the cap of 

400MWp set by the Spanish government in 2007 itself, three years earlier than the 

target date. According to the most recent data from the National Energy Commission 

(Comisión Nacional de Energía) a total of 512MWp PV capacity was installed and 

connected to grid in Spain in 2007, taking the cumulative installed capacity in 2007 

to 655MWp. This upsurge in PV installations can be attributed to a favorable policy 

environment in Spain. To cool down the explosive growth in PV installations, Spain 

introduced a new law on 26 September 2008 for PV systems commissioned after 29 

September 2008 that included an annual cap on installations eligible for FIT and 

significantly lower FITs. 

The new law sets a cap of 400MWp on the total PV systems eligible for the FIT for 

2009 and 2010 of which two-thirds is reserved for roof-top systems and the rest for 

ground-mounted systems. The new law also contains an additional quota of 60MWp 

for 2009 for ground-mounted systems. So, the total cap for 2009 is set at 500MWp 

(233MWp for roof-top systems and 267MWp for ground-mounted systems) and for 

2010 at 460MWp (233MWp for roof-top systems and 227MWp for ground-mounted 

systems). FITs are applicable for 25 years and are annually adjusted for inflation. 

The new cumulative installation targets under the new law is 3,000MWp by 2010 

and 10,000MWp by 2020. 

Table 130: Spanish solar energy subsidy—2008 vs. 2009 

Royal Decree 661/2007 (expired 9/29/2008) 

Cap 371MW (not enforced) 

10MWp €0.229764/kWh 

Royal Decree 1578/2008 (begins 1/1/2009) 

Cap 500MW (2009), 500MW (2010), 490MW (2011) 

Small Roof 20kWp and Ground €0.32/kWh 

Source: J.P. Morgan estimates.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Germany 

In Germany, the total installed capacity of all solar power installations rose from 

3.8GWp in 2007 to around 5.3GWp in 2008. Germany has passed the “Renewable 

Energy Act” (EEG) with a goal to increase the percentage of renewable energy 

sources in power supply to at least 12.5% by 2010 and to at least 20% by 2020. The 

act obligates the grid operators to pay fixed feed-in tariffs to renewable power 

producers as per the pre-determined schedule. Feed-in tariffs are fixed for 20 years 

and are dependent on the renewable energy source, the year the installation was put 

into operation and the size of the plant. The law also has the provision for annual 

degression rate (the annual reduction rate in the feed-in tariff paid for electricity 

produced from renewable power systems). This degression rate is again dependent on 

the renewable energy source and the size of the plant. On 6 June 2008, one house of 

Germany’s parliament decided to increase digression rates to 8%-10% depending on 

the type of systems from 5%-6.5% up to 2008, although it was not as high as some 

had predicted. These rates will be in effect for the next four years. Inclusive of the 

higher digression rates in the new law, the industry still predicts grid parity in 

Germany by 2012-15. 

Table 131: New PV feed-in tariffs in Germany from 2009 onwards 

System Rooftop Rooftop Rooftop Rooftop Ground mounted 

1000Kw (Any size) 

Feed-in Tariffs 

in € cents/kWh 

43.01 40.91 39.58 33.00 31.94 

Base Annual 8% for 2010, 8% for 2010, 10% for 2010, 10% for 2010, 10% for 2010, 

Reduction Rate 9% thereafter 9% thereafter 9% thereafter 9% thereafter 9% thereafter 

Source: Bundesverband Solarwirtschaft (BSW-Solar). 

US 

Solar tax credit gets eight-year extension 

At the federal level, the Energy Policy Act of 2005 established a 30% ITC for 

commercial and residential PV systems (and other solar and solar hybrid systems) 

with a cap of US$2,000 for residential PV systems. This act increased the tax credit 

from 10% previously to 30% of expenditures on PV systems. Under this act, all PV 

systems installed in 2006 and 2007 were eligible for the 30% ITC. However, the tax 

credit was later extended by a year to include the systems installed until December 

2008. After failing to pass the bill to extend the ITC beyond 2008 many times 

previously, a tax extender bill was finally passed by US legislators and signed by 

President Bush on 3 October 2008. It extends the 30% solar ITC for residential and 

commercial solar systems for eight years until 2016, eliminates the cap of US$2,000 

on tax credit for residential solar PV systems (effective for property placed in service 

after 31 December 2008) and allows utilities to claim a 30% ITC for large-scale 

solar-powered projects. Utilities were not allowed to claim for the credit in the 

previous bill. Solar tax credits can be also used against the Alternate Minimum Tax. 

Japan 

The “Residential PV Systems Dissemination Program” started in 1994 in Japan was 

highly effective in creating an initial market for residential PV systems in Japan. The 

program provided upfront rebates for PV systems to reduce the cost of the PV 

installation and to increase the adoption of PV systems in Japanese houses. The 

rebate was set at 50% of the installation cost in 1994 (around ¥900/watt) and was 

reduced in each subsequent year until 2005 (20 yen/watt) when the program was 

terminated. According to IEA data, during the 12 years (FY94-FY05) of this 

program, a total of 253,754 PV systems were installed amounting to a total PV 

237

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Japan takes a breather while 

Europe, China and Taiwan pick 

up steam 

238 


20 April 2009 

capacity of around 932MWp supported by this program. During the tenure of this 

program the average price for the 1kWp residential PV systems fell from around 

¥2,000/Wp in 1994 to around ¥670 yen in 2004. However, since the program was 

stopped, annual solar installations in Japan have trended downwards. Japan 

announced that it aims to reintroduce the subsidies for solar equipment from next 

fiscal year to increase the demand for solar systems, which has slowed after the 

subsidies for residential systems were stopped in FY05. METI has proposed a budget 

of ¥23.8 billion for subsidy and tax breaks to encourage installation of solar and 

other alternative energy systems for the next fiscal year starting April 2009. Japan 

also recently announced plans to provide subsidy for solar systems installed in public 

spaces such as schools, hospitals and railway stations. Currently, public facilities run 

by companies receive subsidy of one-third of the solar installation costs. Japan now 

plans to offer subsidy of half the solar installations costs for public facilities run by 

the government bodies. 

Other markets 

Italy, France and Greece all have generous FIT programs to facilitate solar demand, 

though their approaches are slightly different. Italy hopes to become 10% of the 

global market by 2020 with 17GW of installed capacity. Its range of FITs between 

large and small installations suggests that both segments will see growth, in our 

opinion. However, its market has been hindered by bureaucratic procedures where it 

is not uncommon for a completed project to face a six-month delay before 

connecting to the grid. France has directed its subsidy program more toward the 

residential market. Greece remains a relatively small market despite its subsidy. 

India and China 

The Ministry of New and Renewable Energy in India has announced a demonstration 

program to support grid-interactive solar-power generation projects, up to a 

maximum capacity of 50MW. In China, we expect the government to start 

subsidizing individual households from April 2009. The government has already 

started subsidizing solar energy generation used by businesses or office buildings. 

While we do not think the subsidy is enough to grow the solar industry in China, it 

should support a modest increase in solar demand. 

Solar cell production: Supply 

Japan established itself as the early industry leader and it is still one of the largest 

producers of PV cells today. But there is possible saturation and slowing demand in 

the Japanese market after 10 years of rapid growth. Europe was the largest producer 

of PV cells in 2008, driven by continued demand for solar systems in the region, 

predominately in Germany and Spain. Production in Asia has risen with most of that 

growth occurring in Mainland China. The Chinese PV industry grew strongly in 

2008 with increasing demand from Spain and Germany in particular. Declining 

global demand, which started at the end of 2008, suggests the Chinese PV industry 

will face hard times in 2009. Taiwanese manufacturers have been aggressively 

expanding capacity. Many other countries too have announced new plans to invest in 

solar energy; e.g., Abu Dhabi through its Masdar initiative set up thin film 

manufacturing plants in 2008.

Bhavin Shah 

(852) 2800-8538 


Figure 140: Historical PV production by region 

9.0 

8.0 

7.0 

6.0 

5.0 

4.0 

3.0 

2.0 

1.0 

0.0 

US Japan Europe ROW 

2001 2002 2003 2004 2005 2006 2007 2008 

Source: PVNews, iSuppli. 


20 April 2009 

Table 132: Top 15 companies by solar cell production volume 

Figure 141: PV production- regional ranking (2008) 

US 

14% 

Taiwan 

13% 

Japan 

16% 

Others 

4% 

Source: iSuppli, compiled by Digitimes, March 2009. 

Company 2001 2002 2003 2004 2005 2006 2007 2008 Growth 

(2007-08) 

Q-Cells (DE) 8 28 75 160 253 389 575 47.7% 

First Solar (US/DE) 3 6 20 60 200 504 152.0% 

Suntech( CH) 28 80 158 360 498 38.3% 

Sharp (JP) 75 123 198 324 428 434 363 493 35.8% 

Kyocera (JP) 54 60 72 105 142 180 207 290 40.1% 

Yingli Green Energy(CH) 10 35 143 281 96.8% 

Motech (TW) 4 8 17 35 60 102 196 280 42.9% 

Solar World 170 250 47.1% 

JA Solar (CH) 25 113 250 120.8% 

SunPower (PH) 63 150 237 58.0% 

Sanyo (JP) 19 35 35 65 125 155 165 200 21.2% 

Isofoton (ES) 18 27 35 53 53 61 85 180 111.8% 

Solarfun (CH) 25 88 175 98.9% 

Mitsubishi Electric (JP) 14 24 42 75 100 111 121 150 24.0% 

E-TON (TW) 5 28 33 72 100 38.9% 

World Total 373 539 744 1196 1771 2474 3733 7700 

Y/Y % 29% 45% 38% 61% 48% 40% 51% 106% 

Thin Film % of Total 

Source: Company data, PVNews, iSuppli Corp. 

4.8% 3.2% 5.1% 5.1% 5.4% 6.9% 10.2% 14.4% 

China 

26% 

Europe 

27% 

Polysilicon oversupply has arrived 

Polycrystalline silicon is currently used in the mainstream type of solar cells due to 

its lower production costs than mono-crystalline silicon. Polysilicon solar cells use 

wafers sliced from ingots cast using silicon melted in a crucible. These ingots are not 

formed from a single crystal, unlike mono-crystalline silicon which is slowly built up 

by revolving a seed crystal. The ingots can also be cast in a square shape, instead of 

the cylinders of mono-crystalline silicon. Polycrystalline silicon (polysilicon) is also 

used to make semiconductor wafers. Supply/demand conditions for polysilicon have 

remained tight since 2004, owing to rapid expansion in the solar cell market, 

combined with steady market growth in semiconductor applications, especially for 

300mm wafers. Does this situation persist? 

Polysilicon oversupply has arrived earlier-than-expected due to: 

1. Demand downside: Tightening inventory control in the channels due to subsidy 

cuts and challenging financing environment for installation. 

239

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20 April 2009 

2. Loosening polysilicon supply: Pricing for silicon wafers could worsen faster as 

cell/module makers’ expansion has been halted by worsening credit or equity 

markets. 

3. Weak semiconductor markets could add to polysilicon supply: With macro 

conditions deteriorating and end-demand weakening, semiconductor companies 

have started lowering their production to keep their inventory in check. Much 

more of the polysilicon used by semiconductor wafer manufacturers is available 

for solar use. 

Solar cell technology 

The rapidly growing PV industry has two primary technologies vying for market 

share: wafer-based crystalline silicon (c-Si) and thin film. c-Si has a relatively mature 

process technology and higher light conversion efficiencies. However, c-Si PV has 

been hampered by a shortage in polysilicon wafers that has driven higher 

manufacturing cost and the solar PV industry has shown strong interest in thin film 

solar panel options as they are less costly to manufacture/watt. Thin-film solar cells 

typically use less than 1% of the raw material (silicon or other light absorbers) used 

to make wafer-based solar cells. However, they are generally less efficient than 

crystalline silicon wafer-based cells and require more light absorbing surface area to 

generate the same amount of electricity as crystalline silicon-based solar cells. 

Crystalline solar cells 

Crystalline solar cells are fabricated from raw polysilicon that is cast into ingot form 

and then sawn into thin wafers. Wafers then undergo a doping process to be sensitive 

to sunlight, and finally electrical contacts are placed on the wafer surface using vapor 

deposition in conjunction with photolithography. Ingots can be made from monocrystalline 

silicon, grown from a single silicon seed crystal that results in a 

cylindrical shape, or from polycrystalline silicon, created from molten silicon and 

typically formed or cut into a rectangular block. The cost to manufacture crystalline 

silicon PV cells is very sensitive to the cost and supply of polysilicon, which was 

recently capacity constrained worldwide. 

Mono-crystalline wafer-based cells 

Mono-crystalline wafers are nearly identical to wafers used by the semiconductor 

industry and are characterized by the uniform singular crystalline structure of the 

wafer. This single or mono-crystalline structure has low electrical resistance that 

results in the highest level of solar energy efficiency of any type of solar cell. This 

single crystal structure is created using the very complex and costly process of 

forming a round ingot from molten silicon using a seed crystal in the same manner as 

all wafers are formed for use by the semiconductor industry. Due to the process 

required to achieve the uniform crystalline structure, these wafers are round when 

formed and are generally trimmed into semi-square shapes in order to arrange them 

more densely within the finished solar panel or module. 

Multi-crystalline wafer-based cells 

Multi-crystalline silicon wafers are the current workhorse of the solar PV industry. 

These wafers do not have a homogenous structure and instead consist of many 

different separate unaligned crystalline structures. This non-uniform crystal structure

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has a higher electrical resistance level than a mono-crystalline structure and thus is 

less efficient in solar energy conversion. However, multi-crystalline wafers are easier 

to produce and make better use of polysilicon. Multi-crystalline wafers are formed 

from ingots that are cast into shapes using a mold. As a result, these wafers are 

square when formed and can be more efficiently packed together in a finished solar 

panel. 

Figure 142: Mono and multi-crystalline module manufacturing 

Source: Tokuyama. 

String ribbon crystalline cells 

A small number of solar cell makers have developed cell technologies that use 

crystalline silicon but do not require ingot forming and wafer-sawing process steps. 

Instead, these technologies employ a continuous wafer growing/extrusion process, 

whereby a sheet-like wafer is drawn from molten polysilicon in a high temperature 

furnace, or crucible, and then cut into cells. These novel cell technologies use less 

silicon than more common ingot-sawn wafer-based processes, and therefore can 

potentially produce lower-cost cells. This technology, albeit very promising, is less 

mature than conventional wafer-based solar cell production and is still coming of 

age, in our view. 

Thin-film solar cell technology 

Thin-film technology is an alternative to the traditional silicon-wafer-based approach 

to manufacturing solar photovoltaic modules. Instead of starting with a monolithic 

polysilicon wafer, thin-film cells are fabricated by depositing alternating layers of 

active material on an inexpensive substrate, such as glass, metal, or plastic. Active 

materials (“N-type” and “P-type” semiconductors) are applied to the surface of the 

substrate using either chemical or physical vapor deposition or electrochemical 

plating processes in precise thicknesses to maximize light absorption and solar 

conversion efficiency. The term “thin film” refers specifically to the physical 

thickness of the resultant cells, which are often more than 10x thinner than siliconwafer-based 

cells. The thickness of the active material on a thin-film cell can be 

more than 10x thinner than a wafer-based solar cell. The key drawback to thin-film 

cells is efficiency per unit of surface area. Crystalline silicon cells are more efficient 

than thin-film cells in converting solar energy into usable electrical current by up to 

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a-Si should be the fastest growth 

segment in solar PV for several 

years, given its cost curve, 

especially versus c-Si, and the 

ease of capacity expansion 

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20 April 2009 

two fold, which means that an installed thin-film system requires substantially 

greater surface area than an equivalently rated crystalline silicon system. On a per 

watt basis, thin-film PV cells show promise to be less costly to manufacture than 

crystalline silicon-wafer-based cells, largely due to the high price of polysilicon. 

The different types of thin-film solar cells include amorphous silicon (a-Si) cells, 

micromorph thin film cells or tandem cells, Cadmium telluride solar cells (CdTe) and 

Copper Indium diSelenide and related materials (CIS/CIGS) cells. 

Figure 143: Thin film vs. crystalline 

Capacity (% Total) 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

Source: Prometheus Institute. 

2007A 2008E 2009E 2010E 

a-Si CdTe CIGS Other TF c-Si 

Amorphous silicon (a-Si)/tandem cells 

Among the various types of thin-film solar cells, a-Si cell has a relatively established 

track record and technology. The a-Si film is deposited on the substrate as a result of 

breaking down raw material monosilane gas in plasma with a diluent gas. The 

thickness of the light absorption layer is only a few micrometers, meaning that a cell 

requires only around one-hundredth of the silicon raw material used by a polysilicon 

solar cell. This is the biggest advantage of a thin-film solar cell. The efficiency rate 

for energy conversion is only around 10% because it is only sensitive to the spectrum 

of light between ultraviolet and visible light, resulting in a substantial transmission 

loss for the sun’s rays. Experiments are being conducted to improve the conversion 

efficiency of thin-film solar cells by using two or even three light absorption layers. 

The production processes involved in making a-Si solar cells are plasma-enhanced 

chemical vapor deposition (PE-CVD), laser cutting, sputtering, edge polishing, 

soldering, sealing and finishing. In particular, the equipment required for PE-CVD is 

expensive, and this is hampering development. 

The basic layers of a thin-film solar cell are: 

Substrate (glass layers as above) is a passive layer that provides a surface to apply 

the active layers. It can be made of metal, glass or polymer to achieve the desired 

mechanical and thermal expansion properties for manufacturing and the end 

application. Choice of substrate material is an important aspect of thin-film PV that 

dictates the manufacturing processes, cell performance, and the potential end 

application of the cell. Currently, glass is the most prevalent substrate used by thinfilm 

PV manufacturers (e.g., First Solar, Applied Materials) because of its smooth

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20 April 2009 

surface, chemical inertness, thermal resistance, and widespread availability. Potential 

drawbacks of glass substrates are weight, durability, and lack of flexibility. These are 

not significant concerns in free-field solar farm installations; however they can pose 

issues in roof-top applications. 

Flexible, lightweight substrates such as metal and plastic foils are also being used in 

thin-film PV and are particularly well suited for roof-top and BIPV applications, 

where weight and module form factor are key considerations. Additionally, these 

substrates lend themselves to roll-to-roll continuous processing, which is thought to 

be more cost effective than the batch type processes used in rigid substrate (wafer, 

glass) PV manufacturing. 

Figure 144: Thin film solar cross section schematic 


Transparent conducting oxide is an optically transparent layer with good electrical 

conductivity that facilitates current flow from the cell to the external circuit. 

Absorber is a “P-type” semiconductor layer. Sunlight is absorbed and electrons are 

generated in this layer. Combined with the window layer—“N-type” semiconductor 

layer above it, it forms the P/N junction. Ideally, the windows layer should be 

optically transparent to allow maximum light to pass through to the absorber. 

Back contact is a metal contact layer applied to the absorber and completes the 

external circuit. 

The materials used in each layer and the interactions between these layers will 

ultimately affect the overall performance of the solar cell. Given the inherent 

complexity of thin-film solar PV cells, a great deal of research and development is 

being invested to optimize conversion efficiency in the laboratory and develop ways 

to scale up those laboratory based processes to large-scale production. 

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Cadmium Telluride (CdTe) technology overview 

CdTe is a material with semiconductor properties (like silicon) that makes it well 

suited to absorb energy from sunlight. Best case CdTe solar cell efficiencies of 

16.5% have been achieved in a laboratory setting. Commercial production of CdTebased 

solar cells, which is today almost exclusively by First Solar, currently results 

in solar cell conversion efficiency levels of 10.7%. This compares well with a-Si thin 

film that currently has a best production cell conversion performance of only 8.5%. 

The CdTe material acts in the same manner of absorbing energy from sunlight as the 

silicon does in an a-Si thin-film cell or in a more conventional wafer-based solar cell. 

CdTe materials science and cell manufacturing sequence 

Like all solar cells, a transparent conductive oxide (TCO) layer is required in order to 

enhance cell conversion efficiency. In a CdTd-based cell, tin oxide (SnO2), is 

typically used and is either pre-coated from the glass supplier or deposited as one of 

the first steps in the production process (Figure 146). The TCO layer is then laserscribed 

into discrete areas in order to form the basis of a series of individual cells on 

the larger glass panel or substrate. The glass is then preheated for the deposition of 

the next layer, which is first of two light-absorbing materials. The first absorber 

layer, cadmium sulfide (CdS), is deposited through a liquid chemical bath and is the 

“window” layer that allows light to pass through, while acting as one side of the 

junction that forms the solar cell. The CdS layer performs the same function as the 

P- or N-layer in silicon thin-film cells. 

Figure 145: Cross-section of CdTe solar device structure 

Source: NREL. 

The second most critical absorber material, CdTe, can be deposited through electrodeposition, 

close-spaced sublimation, or vapor-transport deposition. Unlike silicon 

thin films, the CdTe deposition occurs in either a modest level of vacuum or even at 

atmosphere. The liquid/vapor deposition also occurs through thermal or chemical 

activation and does not require electrically created plasma to enhance the deposition 

rate. With vapor transport, a carrier gas passes over vaporized CdTe. The saturated 

vapor is then introduced over the heated substrate (panel) surface (which already has 

the TCO and CdS films), thereby depositing the CdTe film on the substrate (Figure 

146). By using these deposition methodologies, expensive vacuum pumps, vacuum 

tight seals, and advanced power delivery systems are not required for CdTe 

deposition, likely resulting in lower capital costs than for other types of thin-film 

manufacturers. During deposition and subsequent heat treatment, the substrates may

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20 April 2009 

be heated to temperatures as high as 600 o C to achieve the correct film morphology 

and composition, thus limiting the kinds of substrate material that can be used (i.e., 

certain metals will melt at that temperature). 

Figure 146: Vapor transport deposition schematic 

Depleted 

carrier gas 

Carrier gas 

Source: Institute of Energy Conversion, Solar Review Nov '05. 

CdTe 

q 

Substrate 

Saturated 

carrier gas 

A zinc telluride layer is then deposited either through sputtering (PVD), 

electrochemical deposition, or vapor transport and forms an interfacial layer that 

promotes adhesion with the back contact metal while stabilizing the ohmic contact. 

The back contact metal (e.g., titanium, aluminum, and/or nickel) that closes the 

electrical circuit is then deposited, typically using physical vapor deposition (PVD). 

The panel then goes through another laser scribe to define individual cells. The cells 

are then encapsulated with ethylene-vinyl acetate (EVA) and a bottom sheet of glass 

is attached to protect the cell materials from the environment over the 20-year+ 

lifetime of the product. 

We expect thin-film technologies, including CdTe and a-Si, to garner an increasing 

share of the overall PV market as it ramps up at the expense of silicon-wafer-based 

solar cells. 

CIGS thin film technology 

We believe that copper indium gallium diselenide (CIGS) thin-film is a promising 

PV technology that has proven to yield high efficiency solar cells in laboratory 

settings utilizing low-cost materials and well understood but complex process 

methods. The National Renewable Energy Laboratory (NREL), the Department of 

Energy’s research arm (in the US) for development of renewable technology, 

recently produced CIGS cells with 19.9% efficiency, the highest among current thinfilm 

PV technologies. CdTe and multi-junction a-Si thin-film cells have reached 

16.5% and 13% efficiency, respectively. Crystalline silicon cells can exceed 20% 

efficiency but use polysilicon wafers that have been in short supply in recent years 

and require an energy-intensive process to manufacture. 

However, the commercialization of CIGS has been slow due to challenges in scaling 

up the processing steps to achieve acceptable cell performance and yield in highvolume 

manufacturing. Several development stage companies are building CIGS 

factories, yet none to our knowledge have begun to produce and ship product in 

meaningful quantities. We believe the difficulty lies in the issue of maintaining film 

characteristics (uniformity, morphology) over a large surface area that is needed to 

produce a commercial solar cell. Although we do not believe the difficulties are 

insurmountable, we believe that thin film process improvement is a slow and timeconsuming 

process. In addition, process improvement for CIGS is more complex 

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than for other thin-film solar technologies as four different materials are deposited at 

the same time in order to create the desired CIGS film properties vs. only one 

material for both a-Si and CdTe. 

CIGS layers 

CIGS thin-film cells use an inexpensive substrate such as glass, metal, or plastic on 

which very thin layers of material having specific optical and electrical properties are 

deposited in precise quantities to absorb and convert sunlight into electrical current. 

The basic structure of a CIGS thin-film cell includes a CIGS absorber layer, a 

window layer (typically CdS), and electrically conductive layers on the top and 

bottom of the cell to complete the circuit 

Figure 147: CIGS thin-film structure 

Source: NREL. 

Substrate 

Glass is particularly well suited for CIGS thin film because it contains sodium, which 

diffuses into the absorber layer during manufacturing and has been found to improve 

CIGS cell conversion efficiency. Metal foils (e.g., steel, aluminum) are also suitable 

substrates for thin-film PV as they can withstand high temperature CIGS deposition 

with thermal stability. Polyimide polymer films can withstand high temperatures, are 

lighter weight than metal foils, and are another suitable substrate for CIGS. 

Polyimide films also tend to have a smother surface than metal foils and are 

chemically inert, thereby eliminating the need for a barrier layer on the substrate that 

is typically required when using a metal alloy that contains impurities that leech into 

the cell and impact performance. Non-metallic substrates also have an added 

advantage of being non-conductive, a property that allows for a simplified cell/ 

module integration process. 

Molybdenum back contact 

The first processing step in making a CIGS module is to deposit a layer of 

molybdenum that serves as the back contact for the cell. Molybdenum is used due to 

its electrical properties as well as because it is relatively inert to CIGS, which is 

deposited on the surface of the molybdenum layer. Molybdenum is deposited on the 

plastic substrate using a PVD/sputtering process, which involves bombarding a solid 

molybdenum target with argon ions in vacuum chamber. The argon ions collide with 

molybdenum atoms on the target’s surface, releasing them into the chamber in the 

presence of the substrate onto which they accumulate forming a 0.5-2 micron thin-

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20 April 2009 

film layer. The morphology, or physical structure, of the resulting layer affects 

efficiency and other characteristics of the final cell. 

Figure 148: Sputtering diagram 

Source: Wikipedia. 

CIGS absorber layer 

In CIGS thin film, the critical absorber layer consists of a complex alloy of copper, 

indium, gallium, and selenium. Copper, indium, and selenium (CIS) exhibits a high 

degree of light absorption, requiring a very thin layer to capture maximum energy 

from incident light, and is thus a good material for use in PV cells. However, the 

band-gap of CIS is 1eV, below an optimal band-gap of 1.4-1.5eV for the solar 

spectrum. The addition of gallium is a means to raise the cell band-gap from 1eV up 

to 1.7eV, closer to that of the solar spectrum and therefore increase cell conversion 

efficiency. 

Various processes have been developed in the lab to form CIGS layers. The most 

common approach is to use either thermal co-evaporation or sputtering, whereby 

constituent elements are deposited in precise concentrations forming a layer 2-3 

microns thick on the molybdenum coated substrate. Nanosolar, a private startup, is 

developing a novel approach to manufacture CIGS cells utilizing nanoparticles in a 

proprietary process that resembles ink-jet printing. 

Deposition of CIGS can occur simultaneously with all four components applied 

during a single step or in multiple steps, which typically involves the initial 

deposition of a copper or selenium rich precursor layer, followed by the addition of 

any deficient elements to bring the thin film to desired final composition. Irrespective 

of the process used, the critical ratio of copper to indium and gallium should be in the 

range of 0.86-0.96 to produce a high efficiency cell. Varying the deposition rate of 

gallium during CIGS processing allows for grading the band-gap along the depth of 

the layer. Higher band-gap at the front and at the back of the layer increases overall 

efficiency by creating a band-gap profile that can absorb a larger light spectrum and 

minimize back recombination. 

Window layer 

As the name suggests, the window layer is an optically transparent material that 

allows light to pass though to the absorber layer and acts as an “N-type” electron 

source in the cell junction. CdS, is commonly used as the window layer in CIGS cells 

as it results in high cell efficiency and is typically applied using a relatively low-cost 

chemical bath deposition process. Cadmium is a toxic substance; however, only a 

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very thin layer of CdS (~0.05 micron) is typically deposited in a CIGS-based solar 

cell. Alternative window layer materials have been investigated. 

Transparent conductive oxide 

The final layer to be deposited in CIGS thin-film cells is the transparent conductive 

oxide (TCO), which serves as the conductive element on the top surface of the cell. 

Zinc oxide, ZnO, is typically used due to its high conductivity and optical 

transparency and sputtering is the preferred deposition method. Also, a highly 

conductive TCO layer can reduce the thickness of the CdS window layer needed. 

Texturing of the TCO layer reduces surface reflections and aids in trapping light 

which the cells active layers. 

Cell interconnection 

To achieve high throughput in manufacturing, the CIGS layers are deposited on a 

large substrate area in either plate glass or flexible roll format, and from the large 

sheets, individual cells are defined and interconnected to make up the final module. 

With thin-film PV, patterning of the cells can be done monolithically without 

physically cutting the substrate to isolate each cell. This can be accomplished using 

laser scribing, mechanical scribing, or a photolithography process aided by a laseractivated 

photoresist. 

The specific processes in monolithic cell integration are proprietary to each module 

manufacturer; however, the basic steps are as follows: 1) scribing the molybdenum 

back contact; 2) scribing the CIGS absorber layer to allow the back contact layer to 

connect to the TCO layer of the adjacent cell; and 3) scribing the TCO, window, and 

absorber layers to isolate each cell. 

Module encapsulation 

The final step in manufacturing a CIGS module is to encapsulate the interconnected 

cells in a durable, weather-proof envelope. CIGS, like other thin-film materials used 

in PV, is sensitive to moisture and becomes corrosive when exposed to humidity and 

moisture, impacting cell efficiency and performance degradation. 

For glass-based modules, a second glass top sheet sandwiches the thin-film layers 

and a polymer adhesive such as EVA is used to seal the module to keep out moisture 

and the elements. Flexible thin-film modules need to be encased in a transparent and 

durable outer layer in which a transparent polymer like Teflon is typically used. 

Increasing cell-conversion efficiency: The “solar Holy Grail” 

As mentioned earlier, traditional crystalline silicon and thin-film technologies have 

inherent limitations that make them less than ideal vehicles for greater adoption over 

the long term. Before solar PV becomes a mainstream source of electricity on a 

utility scale, we believe technology breakthroughs are needed to significantly bring 

down the installed cost of solar systems. Cell efficiency is one of the main drivers for 

progress in this regard. 

Thin-film solar modules commercially available today employ either a-Si, CdTe, or 

copper indium gallium selenide (CIS, CIGS) as the light absorbing layer. Selection 

of the absorber material is critical to the performance, manufacturability, and longterm 

durability of the cell and much research has been devoted to identifying suitable 

molecules that exhibit the desired electrical and physical properties for PV

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applications. The degree to which visible light is absorbed and the energy required to 

release electrons from their lattice, or band-gap, of a given absorber material are key 

characteristics that determine the cell’s efficiency in converting solar energy to 

electrical current. 

One way to evaluate the state of progress of the various solar PV cell technologies, 

current and under development, is to look at conversion efficiency of commercially 

available cells relative to their theoretical limit or highest efficiency levels achieved 

in a laboratory setting. In this framework, silicon crystalline cells are furthest along 

the performance curve with commercially available cells of 22% conversion 

efficiency, approximately 88% of the best performance achieved in a laboratory 

setting of 25%. The theoretical best efficiency achievable for solar cells of this type 

is approximately 28% using semiconductor grade mono-crystalline wafers. 

The efficiencies of most commercial thin-film cells are somewhat farther from the 

limits observed in laboratory settings. Advanced a-Si-based cells are currently 

produced commercially with a conversion efficiency level of 10%, 76% of the best 

performance of 13% achieved in the lab. CdTe-based cells are commercially 

produced in the 12% efficiency range, only 75% of the 16% conversion efficiency 

levels seen in the lab. 

Table 133: Maximum theoretical conversion efficiencies for crystalline silicon PV 

Material Cell (%) Module (%) 

Float-Zone 24 - 25 21 - 23 

Czochralski 22 - 24 15 - 18 

Cast Polysilicon 18 - 20 14 - 15 

EFG Ribbon 14 - 15 11 - 13 

Dendritic Web 15 - 17 14 

String Ribbon 14 - 15 12 

Thick-Silicon Substrate 

Source: NREL, J.P. Morgan estimates. 

16 - 17 10 

Table 134: Maximum theoretical conversion efficiencies for thin-film PV 

Material Cell (%) Module (%) 

Amorphous Si 12 - 13 7 - 8 

CdTe 15 - 16 8 - 9 

CuInSe2 (CIS) 

Source: NREL, J.P. Morgan estimates. 

18 - 19 10 - 12 

Continued evolutionary development of solar cell technology is almost certain to 

bring improved efficiency levels over time, to a point, we believe, where large-scale 

commercially manufactured films are at or near the theoretical limits for conversion 

efficiency. In our view, the pace or rate of conversion efficiency improvement, 

coupled with the pace of cell cost reduction for each of the technology types, will 

likely be the deciding factors of which solar cell technology becomes the mainstream 

form over the long run. 

Cost reduction potential of solar energy using technology 

By 2012, the average cost of a solar PV system is likely to decline by 30%-40% 

regardless of cell technology type. Although thin-film-based systems are more likely 

to experience a higher degree of cost reduction from conversion efficiency 

improvements, silicon-wafer-based systems are likely to benefit from significantly 

lower polysilicon related costs. Currently, there are four mainstream types of 

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modules produced in volume, two that use silicon wafers and two that are thin-filmbased. 

Given the immaturity of CIGS and gallium arsenide (GaAs) based cells, we 

exclude those technology types from this comparison. 

We believe no cell technology type is likely to stand out as a cost leader in 2012. 

CdTe-based First Solar is likely to remain in the lead, similar to its standing today, 

but that lead should narrow significantly. Today most investors only focus on module 

cost/watt when they should actually be focused on overall system cost/watt. When 

considering the other factors that determine overall system cost, we forecast the 

competitive landscape will likely tighten up over the next four years as both silicon 

wafer and a-Si thin-film based systems gain on industry cost/watt leader First Solar. 

Figure 149: Solar end-market segments 

0% 

10% 

20% 

30% 

Source: Prometheus Institute. 

0% 

40% 

10% 

20% 

25% 

0% 

30% 

15% 

40% 

Residential Commercial Utility Special Applications Off Grid 

We believe that the residential market will grow, but its share will be smaller in the 

future. The grid connected, utility scale segment is expected to grow the fastest— 

ideal application for a-Si, given its lesser restrictions on space/weight constraints, 

improved resistance to temperature degradation, and relative performance under 

shading situations. Rooftop commercial is also appropriate for a-Si, but will be a 

competitive arena with other thin-film technologies. 

The utility scale solar PV market will likely be very competitive for the foreseeable 

future as the ability of silicon wafer-based systems to use trackers will level the 

playing field with thin-film-based systems. As conversion efficiency levels continue 

to rise, the incremental cost/watt of tracking falls, accelerating the benefits. We 

expect serious competition in the utility scale market segment with vertically 

integrated module makers, both thin-film- and wafer-based, likely holding the upper 

hand as they are able to provide the lowest cost by self-sourcing their own modules. 

Large commercial rooftop installs are likely to be the domain of thin film as the 

cost/watt advantage thin-film-based systems currently enjoy in this market segment 

looks to remain intact in 2012. As commercial entities look to offset high electricity 

expenses, we expect this market segment to largely be a battle between CdTe and 

a-Si system types. First Solar currently has a significant lead in both cost/watt and 

scale but is likely to see increased competition from emerging a-Si players, which are 

quickly coming up the learning curve and increasing scale. 

We expect by 2012 the conversion efficiency of each cell technology type to 

approach its practical limit. This practical limit is derived from academic studies as 

0 

35% 

25% 

35% 

5% 

10% 

20% 

30%

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well as commentary from leading cell makers of each cell-technology type. We do 

not expect any cell technology to approach the theoretical limit of conversion 

efficiency, which typically can be achieved only in a controlled laboratory setting on 

a very small surface area. We expect a-Si thin film to achieve the fastest 

improvement in conversion efficiency but will nonetheless remain well behind 

wafer-based systems (Table 135). 

Table 135: Current vs. expected module conversion efficiencies by 2012 

Current module 

conversion efficiency 

Expected module 

conversion 

efficiency by 2012 

Expected 

improvement 

Monocrystalline silicon wafer 22% 24% 9.1% 

Multicrystalline silicon wafer 17% 20% 17.6% 

CdTe thin film 11% 14% 27.3% 

Amorphous silicon thin film 


9% 12% 33.3% 

Significant conversion efficiency (CE) improvement is required for thin-film module 

makers in order to remain competitive. At this time, a-Si thin-film modules are likely 

to increase CE 33%, while CdTe thin-film modules should increase CE 27% by 

2012. This is a significantly higher level of CE improvement than is expected from 

silicon-wafer-based module makers who are uniquely benefiting significantly from 

an ongoing collapse in polysilicon pricing. If either type of thin-film technology hits 

a proverbial ‘speed bump’ in CE improvement, it could easily fall behind forecast 

cost reduction plans making it less competitive. (Please refer to our recently 

published solar energy report by Christopher Blansett, “Estimating the Cost 

Reduction Potential of Solar Energy by Technology Type”, published on January 15, 

2009, for a more detailed analysis.) 

Leading-edge PV technology derivatives 

Researchers in PV technology are continually looking for higher performance 

materials and cell designs with the goal of increasing cell conversion efficiency and 

ultimately lowering the cost of solar to be competitive with other forms of power 

generation. All commercially available PV cell technologies have inherent 

weaknesses that have proven difficult to overcome. For example, crystalline silicon 

wafer-based cells rely on a costly polysilicon, and require a relatively expensive 

manufacturing process. Thin-film cells are less expensive to manufacture but are less 

efficient and require more surface area to install. In our view, a handful of PV 

technology derivatives under development potentially offer better cost and 

performance down the road. 

Advanced multijunction thin-film technology 

As mentioned earlier, most commercially available thin-film PV cells (8%-10% 

conversion efficiency levels) are less efficient in converting sunlight to electricity as 

compared to their crystalline silicon wafer counterparts (18%-22% conversion 

efficiency levels). To address this issue, researchers are investigating the use of 

multiple active layers of semiconductor material to increase the amount of energy 

absorbed by the cell and thus increase its efficiency. Layering various forms of doped 

a-Si is one way to make a more efficient multijunction thin film cell (10%-12% 

conversion efficiency levels) but efficiency is still relatively low due to the irregular 

structure of the material. 

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In heterojunction cells, the layers can be formed from different absorber (“P-type”) 

materials that release electrons at differing energy levels, and therefore convert a 

larger spectrum of light from the sun. GaAs is a semiconductor material that has high 

absorptivity to sunlight and is relatively insensitive to heat, making it a well-suited 

absorber material for multijunction thin-film-based cells. 

GaAs wafers 

The highest efficiency PV cells in production today are from Spectrolab, a subsidiary 

of Boeing, and use GaAs layered on a single crystal germanium wafer substrate. 

GaAs cells in an advanced triple junction structure, using gallium indium phosphate 

as a third absorber layer, have reached conversion efficiencies greater than 35%. 

Unfortunately gallium is an expensive material, which has limited the use of GaAsbased 

cells to aerospace and experimental applications. To be viable in mainstream 

solar systems, the size of the cell must be minimized to keep cost down. Researchers 

are experimenting with ways to increase the area of the sunlight collector but 

minimize the size of the solar PV cell by using inexpensive mirrors or lenses to focus 

or concentrate sunlight onto a relatively small GaAs solar cell. 

Concentrator photovoltaics 

Concentrated solar is just that, the focusing of sunlight from a wide field onto a 

focused location in order to increase the power generation of the light absorbing 

substrate. This is the same principal as a magnifying glass and is a trait of the solar 

PV system architecture. In practice, concentrated solar replaces high cost silicon or 

other more expensive light-absorbing materials with less expensive mirrors or lenses 

in order to capture a greater amount of energy from the sun. 

There are many different types of concentrated solar configurations in various forms 

of development or production today. Some are very similar to a magnifying glass 

with a lens placed directly in front of the light absorbing substrate while others use 

mirrors arrayed in a large field or pattern to reflect light onto one specific location. 

Based on our interaction with industry experts, we believe that concentrated solar 

technologies are the most likely to be adopted into mainstream utility scale power 

generation. The basic reason is that the ancillary costs of a solar PV plant are reduced 

due to the higher amount of power generation coming from a significantly smaller 

area of light absorbing material. Effectively, concentrated solar means less high cost 

light-absorbing material and more cheap light reflecting/concentrating components.

Bhavin Shah 

(852) 2800-8538 


Charles Guo AC 

(852) 2800-8532 



Figure 150: Tesla Roadster 

Source: www.TeslaMotors.com. 

Table 136: Tesla Roadster—Key 

specs 

0-60 mph 3.9 sec 

Battery type LFP 

Range per charge 244 miles 

Price US$109,000 

Source: www.TeslaMotors.com. 


20 April 2009 

Electric Vehicles (EVs) 

Definition 

Pure EVs are powered only by electric motors and do not derive any energy from 

gasoline engines; all of the energy required is stored in batteries, Electric Double 

Layer Capacitors (EDLC) or fuel cells. As there is no gasoline engine to provide a 

back-up, an extensive charge station infrastructure is required to be in place for 

smooth medium/long distance travel. 

History and current roadmap for EV 

The first modern battery-powered EV was the concept car, Insight, which was 

showcased by General Motors (GM) in January 1990 at the Los Angeles Auto show. 

Subsequently, GM came out with the EV1 in 1996, which was the first full electric 

vehicle in production. The initial models of the car were powered by Lead acid 

batteries, but later, a model on NiMH batteries was also introduced. The car was in 

production until 1999 and was taken off the road in 2003, as the infrastructure to 

support the car was too expensive and did not justify its sales. 

Not many vehicle manufacturers have taken a lead in this front since then, until 

recently. Tesla, a US start-up company, came out with its full EV sports car, 

Roadster, which is powered by Lithium Ferrous Phosphate (LFP) batteries 

manufactured by A123 systems. 

Local Chinese manufacturers joining in 

Chery Automobile unveiled its mini-car, S18, in February 2009. The car is a pure EV 

based on Lithium Ferrous Phosphate (LFP) batteries and is capable of running for 

nearly 150km on a full charge. Prior to this, BYD introduced the E6 crossover at the 

Detroit Auto Show in January 2009, and expects commercial production by end-09. 

BYD has also begun manufacturing of its PHEV, F3DM, based on LFP batteries 

(discussed later in this section). 

We expect the competition to continue to increase in 2009, as our checks reveal that 

a number of local Chinese auto makers, including DongFeng, FAW and Geely, are 

also readying their EVs for launch in 2009. We believe the entry barrier for EVs may 

not be as high as many believe and that the key technology lies in Lithium batteries. 

Table 137: EV models 

Company Model Battery EV Range (km) 

Tesla Roadster LFP 393 

BYD E6 LFP 400 

Chery S18 LFP 150 

Mercedez Benz Blue Zero E-Cell LiB 200 

Nissan Nuvu LiB 125 

Source: J.P. Morgan, based on information from company websites. 

253

Bhavin Shah 

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We define HEVs according to: 

(I) the power source and method 

of electric power generation; and 

(II) motor operating rates 

254 


20 April 2009 

EVs: Key advantages and issues 

Advantages include: 

- Simpler structure (no gasoline engine) and thus fewer parts, which imply 

better reliability and lower maintenance cost in the long run. 

- Lower operational cost, as electricity is cheaper than gasoline. 

- Environmentally friendly (no burning of gasoline and no emission of 

greenhouse exhaust). 

However, EVs also face significant issues: 

- Much higher initial price due to the high battery cost. 

- Still immature battery technology, which requires further improvement in 

energy capacity and reliability. 

- Lack of charge station infrastructure restraining usability. As the 

government must be involved in building such infrastructure, the progress 

would likely be slow. 

EVs unlikely to take off in the near term 

A pure EV is not practical before the charge station infrastructure is laid out, which 

could take years and requires active government participation. In an emergency 

situation, when the vehicle runs out of electricity, the lack of alternative source of 

fuel such as gasoline in hybrid EVs would severely limit usability. Massive 

deployment thus appears highly unlikely in the next three years, in our view. 

Hybrid Electric Vehicles (HEVs) 

(This section contains excerpts from the report “Global Environment Series Volume 

2: The emergence of Hybrid Vehicles and Promising Prospects in the Value-chain”, 

published on 14 October 2008 by Kohei Takahashi, Yoshiharu Izumi, Nobuhito 

Owaki and Takaki Nakanishi) 

Definitions of HEVs 

HEV (hybrid electric vehicle) uses both a traditional gasoline engine and battery as 

power sources. However, the main source of power in a HEV is still the internal 

combustion engine (ICE) and the battery works as an assist to the ICE. We 

categorize HEVs according to two vectors: (I) the power source and method of 

electric power generation; and (II) motor operating rates. 

(I) Categorization according to power source 

HEVs have two sources of motive power, namely an engine and a motor, and these 

drive the vehicle’s wheels independently or simultaneously. The electricity used to 

power the motor is generated through energy recovered during deceleration 

(regenerative braking) or by the engine. HEVs generally fall into three categories 

according to a combination of the power source and method of generating electricity,

Bhavin Shah 

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Honda’s Civic Hybrid is a good 

example of an existing parallel 

HEV model 


20 April 2009 

namely series, parallel, and series/parallel. Table 138 summarizes each category and 

power sources/methods of generating electricity. 

Table 138: Type of HEVs by power source 

Series Parallel Series/Parallel 

Driv ing 

Engine x x 

Motor x x x 

Engine & Motor x x 

Pow er generation 

Engine x x 

Regenerating brake x x x 


(1) Series HEVs 

Series HEVs are vehicles in which the engine powers the generator and the motor 

powered by the electricity generated drives the wheels. The engine and the electric 

propulsion unit are linked directly (in series), so the engine only generates electricity 

and does not directly drive the wheels. The electricity generated powers the wheels 

and is used to charge the battery unit. This method is also the main one used by solar 

cars running on photovoltaic cells and by fuel-cell vehicles. 

Series HEVs’ engines usually run efficiently, and control over torque and speed is 

easier with the wheels solely driven by a motor. The key issue in practical 

application is that a large-capacity battery unit is needed to provide mechanical 

propulsion through electric power alone. 

Series HEVs are seen as a strong candidate for hybrid trucks and buses, but there are 

few limitations in terms of loaded weight and volumetric capacity, and practical 

application/research is underway. Nevertheless, announcements on the use of series 

hybrid technology for passenger cars have been limited to only a handful, such as 

Mazda Motor fitting a rotary engine that can run on both gasoline and hydrogen. 

Since battery capacity is the biggest problem for series HEVs, the advancement in 

high-capacity LiB could make series HEVs more interesting, especially for PHEVs. 

(2) Parallel HEVs 

In parallel HEVs, the engine and motor independently drive the wheels. The internal 

combustion engine and electric power are linked in parallel, and both can drive the 

wheels. We define parallel HEVs as those in which the engine only drives the 

wheels, and does not charge the battery (electricity is generated through regenerative 

braking). 

In parallel HEV systems the motor provides power assistance when the engine is 

running inefficiently at low revolutions, such as when moving off or accelerating, 

while the engine is the main source of mechanical propulsion. Other factors which 

improve energy efficiency are the use of energy recovery on deceleration and idling 

stop systems at standstill. Only one motor is usually added, so this is a simple system 

requiring only a minor addition to the base model, thereby keeping additional weight 

and costs to a bare minimum. There are few limitations in terms of space, either, so 

the feature of this category is that it is widely applicable in creating HEV versions of 

existing models. Honda’s Civic Hybrid (IMA) is a good example of an existing 

parallel HEV model. 

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The Prius is a good example of a 

series/parallel hybrid 

Figure 151: Series HEV 

256 

E 

G 

electric generation 

Source: J.P. Morgan, based on data from Toyota Motor. 

Note: E=engine, G=generator, B=battery, M=motor. 

Figure 152: Parallel HEV 



Hybrids are classed as micro 

HEVs, mild HEVs, and full HEVs 

in an ascending order of the 

motor’s operating rate 


20 April 2009 

(3) Series/parallel HEVs 

We define series/parallel HEVs as those with features of both series and parallel 

systems, capable of providing mechanical propulsion through an optimum 

combination of engine plus motor, motor alone and engine alone, and generating 

electricity not only through regenerative braking and but also from the engine. 

As in the parallel system, the series/parallel hybrid involves using the motor to 

provide power when the internal combustion engine is running inefficiently at low 

revolutions when moving off or accelerating, while energy is recovered on 

deceleration, and idling stop kicks in at standstill. At medium and high speeds, the 

internal combustion engine and motor run in a complex pattern, repeatedly 

recovering/reusing energy and recharging the battery unit, and the key feature is the 

dynamic use of repeatedly recharging the battery unit and using electricity to drive 

the wheels. 

The Prius is a good example of a series/parallel hybrid, and Toyota Motor is 

developing an extensive line-up of series/parallel HEVs (THS-II). The two-mode 

hybrid system developed by the GM, Daimler, Chrysler and BMW alliance can also 

be classified as a series/parallel system. 

B 

M 

driv e 

regenerate 

Figure 153: Series/Parallel HEV 

drive regenerate 

electric generation 



(2) Classification according to motor’s operating rate 

Hybrids are also often classified according to the motor’s operating rate (the amount 

of time the motor is operating). As shown in Table 4, hybrids are classified into 

micro HEVs, mild HEVs, and full HEVs in an ascending order of the motor’s 

operating rate. Series HEVs are driven by the motor alone, so this applies only to 

parallel and series/parallel HEVs.

Bhavin Shah 

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20 April 2009 

Table 139: Type of HEVs by motor operating rates 

Motor Operation 


Micro HEV Mild HEV Full HEV 

At startup and acceleration. 

Limited operation 

At startup and acceleration. 

Mainly for engine driv e 

Activ ely operates motor 

Micro/mild HEVs 

In micro/mild HEVs, engine plays the primary role while electric motor/generator 

just assists during the start-up and acceleration. The additional cost incurred is low, 

but the contribution to improving energy efficiency is small. 

The Civic Hybrid is a good example of a mild HEV model. The car can be set to run 

on the electric motor alone, but the motor only plays a supporting role in propulsion. 

Full HEVs 

In the case of full HEVs, electric power is used to drive the wheels actively—not just 

during start-up and acceleration. Series HEVs are, by definition, full HEVs. Series/ 

parallel HEVs also make dynamic use of electric propulsion and energy regeneration, 

and are likely to be classified as full HEVs. 

The Prius is a good example of a full HEV model, as it actively recovers and reuses 

energy, even though it can only manage short distances on electricity alone. 

Table 140: “Traditional HEV” models 

Company Existing Models Future models 

Toyota Prius HEV Toyota SAI HEV 

Camry Hybrid Lexus SAI HEV 

Estima Hybrid EX400h 

Harrier Hybrid 

Highlander Hybrid 

GS450h 

LS600h 

RX400h 

Auris HEV 

Honda Civic Hybrid Insight HEV 

CR-Z HEV 

Nissan Altima Hybrid FR HEV 

GM Saturn Vue Green Line Opel Flextreme HEV 

Saturn Aura Green Line 

Chevrolet Malibu 

Cadillac Escalade 

Chevy Tahoe Hybrid 

GMC Yukon Hybrid 

Corsa HEV 

Ford Ford Escape 

Ford Fusion 

Mercury Mariner 

Mercury Milan HEV 

Chery Auto A3 Hybrid 

VW VW Jetta VW Touareg HEV 

Audi Q7 HEV 

Chrysler 

Source: Company websites. 

Chrysler Aspen Hybrid 

Dodge Durango Hybrid 

Dodge Ram HEV 

Key EV/HEV components 

HEVs’ key components include motors, batteries, PCUs, power-split units, and 

electronic components. 

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Bhavin Shah 

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Figure 154: Motor 

Source: Honda HP. 

258 

Battery: Battery is the main power source for EVs. Batteries used so far in HEV 

systems include the current nickel metal hydride (NiMH) batteries, Lithium ion (LiB) 

batteries, lead acid batteries, and electric double-layer capacitors (EDLCs). In this 

section, we focus primarily on battery technology. 

Motor/generator is used as a dual device; it functions as a motor to drive the wheels 

when the vehicle is moving off or accelerating, and as a generator when the vehicle is 

decelerating, or when the motor is being powered by the engine. In existing HEV 

systems, AC motors are mainly used to provide motive power. Parallel systems 

generally have one motor/generator, while series/parallel systems have two. 

Power-split unit: This device allocates power available from the engine and motor 

to motive power or electricity generation. In ordinary vehicles, the transmission is the 

power-split unit, but in HEVs there are various methods of dividing power, such as 

using the generator as electronic CVT or adding a clutch and switching the link 

between the engine and the motor. 

Power Control Unit (PCU): A PCU is a DC-DC converter (which adjusts the 

difference in voltages that power the electric drive equipment and battery) combined 

with an inverter (that converts direct current from the battery to alternating current to 

drive the motor). This is a key component, functioning as an HEV’s brain, as it 

controls the batteries’, motor’s and generator’s electricity, determining both fuel 

economy improvements and driving characteristics. 

Electronic components and others: HEVs are fitted with equipment and functions 

requiring minute electronic control technology, including battery charge/discharge 

control and energy regeneration during deceleration. Braking, steering, airconditioning 

and other functions are also likely to be switched to electronics to 

improve fuel consumption. Products such as semiconductors, sensor, and highvoltage 

wire harnesses are needed to control electrical products. 

On the other hand, some components, such as starter motors, auxiliary batteries, and 

power-generation alternators, are no longer required in HEVs. The number of 

components no longer required increases the more electronics proliferate in full 

HEVs. 

Figure 155: Ford HEV specification 

Engine 


20 April 2009 

Generator 

Pow er split dev ice 

Source: J.P. Morgan, based on data of Toyota Motor. 

Battery 

PCU 

Motor 

mechanical pow er 

electric pow er 

Figure 156: PCU 

Source: Denso.

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We estimate that the HEV market 

will expand to 3.32 million units 

in 2013 and to 9.62 million units 

in 2018 


20 April 2009 

HEV market size 

Figure 157: Estimates for HEV market demand by region 

'000 units 

10,000 

'000 units 

9,616 

10,000 

RoW 

8,079 9,000 

8,000 

China 

6,577 

8,000 

7,000 

6,000 Japan 

5,313 

6,000 

Europe 

4,289 

5,000 

4,000 

2,000 

164 

N. America 

290 374 502 570 

3,320 

2,574 

1,4751,907 

936 

4,000 

3,000 

2,000 

1,000 

0 

0 

04 05 06 07 08E 09E 10E 11E 12E 13E 14E 15E 16E 17E 18E 

Source: Marklines, J.P. Morgan estimates. 

We estimate that the HEV market will see exponential growth, expanding rapidly in 

scale from 500,000 units in 2007 to 3.32 million units in 2013 and 9.62 million units 

in 2018. Increasing the proportion of HEVs in total sales should be the easiest and 

cheapest way of pushing down corporate average CO2 emission volume (Corporate 

Average Fuel Economy) to below 100g/km by 2020, in our view. We believe it will 

be extremely difficult to break the 100g/km barrier simply by improving engine 

combustion efficiency (mainly through fuel injection and valve management), or by 

raising the proportion of diesels in sales. Looking to 2020, we think HEVs represent 

a realistic technological avenue capable of global diffusion, allowing the industry to 

meet CO2 emission targets. 

Figure 158: HEV penetration as a percentage of total light vehicles 

20.0% 

16.0% 

12.0% 

8.0% 

4.0% 

0.0% 

04 05 06 07 08E 09E 10E 11E 12E 13E 14E 15E 16E 17E 18E 

Source: Marklines, J.P. Morgan estimates. 

N. America 

Europe 

Japan 

China 

RoW 

Total 

259

Bhavin Shah 

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PHEVs will likely be able to 

leverage the appeal of their 

product power once LiB battery 

performance improves 

The battery holds the key to 

PHEV diffusion 

260 


20 April 2009 

Plug-in Hybrid Electric Vehicles (PHEVs) 

PHEVs are hybrid vehicles that are primarily run on battery power and the ICE 

comes in as a secondary source of power to aid the battery. They can also be 

recharged using a domestic power source unlike a traditional HEV. We believe they 

are likely to attract great attention in the near future as a new hybrid technology 

capable of overcoming EVs’ weaknesses. PHEVs have a structurally similar 

approach to EVs, and run as EVs charged up on ordinary domestic power sources. 

They usually have short driving ranges and can be used as EVs without recourse to 

the internal combustion engine. For medium-to-long distances, beyond their range as 

EVs, they can be driven as HEVs, using the internal combustion engine and energy 

regeneration as the motive power source. We think this is a highly interesting system 

capable of simultaneously resolving complex problems, including driving distance, 

charging time, and infrastructural issues. We think PHEVs will likely be able to 

leverage the appeal of their product power once LiB battery performance improves. 

PHEVs represent a new technology that could lead to a reduction in CO2 on a Life 

Cycle Assessment (LCA). 

Table 141: Ratio of engine and motor drive 

Internal combustion H E V P H E V E V 

Engine Driv e 100% medium-high low -high 

M otor Driv e low -medium low -high 100% 


Setting EV run-distance the key point 

An important point for PHEVs is how far they can run on motor-drive alone. The 

longer the EV run-distance, the greater the scope to improve fuel economy, but initial 

costs and recharge times similarly increase. Furthermore, we think that EV rundistances 

demanded by users will vary in different regions and under different 

infrastructures. The HEV system adopted will also vary according to EV rundistances, 

so how companies fit PHEVs into their strategies will also affect how far 

they can run as EVs, in our view. 

LiB adoption required for PHEV to take off 

The battery holds the key to PHEV diffusion. PHEVs are said to require over five 

times the battery capacity of traditional HEVs (Table 142). Power density can be 

lowered and energy output raised with NiMH batteries, which are today’s 

mainstream technology for HEVs, but just doubling energy density more than 

doubles the number of batteries needed for HEVs, and this is unrealistic from a 

weight and volume perspective. On the other hand, LiB batteries can provide 

improvements in energy as well as power density, so it may be possible to make 

considerable weight reductions. Many issues remain unresolved, including costs and 

reliability, but we believe transition to LiB batteries is vital to increase battery 

capacity several times within a permissible gain in weight. 

Table 142: Ratio relation between vehicle type and battery capacity 

HEV PHEV EV 

Battery C apacity (kw h) 1-3 4-15 20-30 

Source: J.P. Morgan, based on “Lithium Ion Battery” by Zenpachi Ogumi.

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20 April 2009 

Specifically, the performance enhancements required of batteries are: (1) an increase 

in energy density; and (2) expansion in the usable charge range. Putting this in more 

intuitively comprehensible terms, batteries need to: (1) store as much electricity as 

possible within a given weight; and (2) use up all the stored electricity with little 

waste. 

Much higher requirement in energy density 

The battery capacity required to run PHEVs as EVs will likely turn into a bottleneck 

and capacity (energy density, Wh/kg per unit of weight) needs to be increased as far 

as possible. On the other hand, the bottleneck for HEVs is likely to be the power 

delivered to drive the wheels, rather than battery capacity, so batteries with high 

power per unit of weight (power density, w/kg) are required. PHEVs have more 

batteries than HEVs and thus they can meet total power requirements even with low 

power density. 

Table 143: Required battery performance 

unit HEV PHEV EV 

C apacity Wh low medium high 

Output W low -medium medium medium 

Energy density Wh/kg low medium high 

Output density W/kg high medium low 


Increase in available charge range 

EV run-distances can be extended if vehicle-mounted batteries can be recharged to 

their maximum limit and discharged to their lowest limit. The actual range within 

which a battery can be used compared to its capacity is called the chargeable range 

(discharge depth), and there is a proportional relationship between the usable charge 

range and EV run-distances. 

We estimate that current NiMH HEVs are repeatedly recharged and discharged in a 

relatively narrow chargeable range of 40%-60%. This is because a buffer is needed to 

meet safety and lifespan requirements. On the other hand, battery capacity can be 

increased within the permissible additional weight for PHEVs, so the usable charge 

range is usually increased to 20%-100%, and there is said to be a need to control the 

number of installed batteries. 

Growing importance of PHEVs 

In the US, the California Air Resource Board (CARB) has started to consider 

concessions for PHEVs. California’s famous zero emission vehicle (ZEV) regulation 

may provide greater concessions for PHEVs capable of running as EVs over a 

specified distance than for AT-PZEVs, a category which includes HEVs and natural 

gas vehicles. No decision has been reached yet on the required run-distance as an EV, 

but if this were set at 10 miles (16 kilometers) or so, it could provide a powerful 

catalyst for PHEV diffusion. 

261

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Figure 159: GM Chevy Volt 

Source: www.gm-volt.com. 

Figure 160: BYD’s F3DM 

Source: www.byd.com. 

262 


20 April 2009 

PHEV models 

GM’s Chevy Volt 

GM’s Chevy Volt is the much awaited PHEV from the GM stable. The car concept 

was shown in 2007 at the Detroit Auto Show and is expected to be launched in 2010. 

GM has chosen LG Chemical to provide the batteries for the car based on Lithium 

Manganese Spinel (LMS), preferring it over LFP batteries of A123 Systems. 

Currently, Volt is expected to clock nearly 40 miles in all-electric mode. Although 

this is a successor to the EV1, the car and its design are completely different from its 

predecessor. Unlike the EV1, Volt has a gasoline engine, which kicks off once the 

battery is discharged. 

BYD’s F3DM 

BYD launched the world’s first mass-produced PHEV, the F3DM, in China in 

December 2008. The car is slated to be launched in Europe in 2009 and in the US by 

2010. It is a light sedan and a PHEV version of the existing petrol version of the F3. 

The car comes fitted with a Lithium Iron Phosphate battery and is capable of 

traveling up to 63 miles in all-electric mode. The car’s price is nearly Rmb150,000 

(~US$22,000), which implies nearly 4x premium over the standard petrol/diesel 

version. 

While we think this is a good first step in environment conservation, the high cost 

and the absence of infrastructure (charging stations and service stations) should limit 

the uptake of this car. However, it does give BYD a first-mover advantage over its 

competitors such as GM (Chevy Volt), Toyota (Prius Plug In), Volkswagen (Golf 

Twin Drive) and Chrysler, in our view. 

Table 144 shows the main PHEV models due to be introduced one after the other in 

2009/10. Toyota has also revealed that it will fit LiB batteries to the new Prius 

PHEV in 2010, and we think all major PHEV models will use LiB batteries. 

Table 144: Summary of PHEV models 

Company Model HEV system EV distance (km) Battery Battery Capacity 

BYD F3DM Series/Parallel 100 LFP 13.2 KWh 

Toyota Prius PHEV Series/Parallel 13 NiMH / LiB 13. KWh 

GM Volt Series 64 LMS 16 KWh 

Volvo Recharge concept Series 100 Lithium Ion Polymer 

VW Golf Twin Drive Parallel 50 LiB 12 kWh 

Source: J.P. Morgan based on the information from company HP and websites. 

Toyota plans to launch Prius PHEV in 2010 and GM plans to launch Saturn Vue 

PHEV in 2010. Both are series/parallel HEVs and we believe that the EV running 

distance will be around 10-16km. 

GM and Volvo plan to use series systems for PHEVs, which can run a long distance 

as EVs. In series HEVs, only the motor drives the wheels, so we expect engines to be 

exclusively used to charge the batteries when they carry insufficient charge.

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20 April 2009 

Batteries for EV/HEV/PHEV 

Currently, there are two forms of rechargeable battery technologies competing with 

each other—Nickel metal hydride ion batteries and lithium ion batteries. Lithium ion 

batteries typically have higher energy density than Nickel batteries while the latter is 

the safer of the two. LiB’s higher energy density, light weight and longer life have 

made it the preferred choice for use in mobile phones, notebooks and PDAs. Nickel 

batteries, on the other hand, are being used in more rugged industries such as power 

tools and HEVs. 

Regarding EVs, the main roadblock for their mass production and ready uptake is the 

lack of good battery technology, in our opinion. Several desired characteristics 

include: 

1. Safety: The battery must be stable enough not to burst even under unusual 

circumstances such as overheat, overcharge, and collision. 

2. High power output: The power output must be high enough to drive a 

vehicle. 

3. Longer life: The battery must be capable of high number of recharge cycles 

before it dies out. 

4. High energy capacity: The vehicle must be able to travel a meaningful 

amount of distance on battery before recharging. 

5. Lower cost: Battery accounts for a large part of EV costs and thus its cost 

should come down. 

6. Fast recharging time: As drivers cannot wait for hours at the charge station, 

there should be a fast charging mode for the vehicle to recharge quickly. 

7. No memory effect: Partial charging should not result in reduced battery 

capacity. 

At present, most HEVs are fitted with NiMH batteries, while LiB-powered massproduced 

vehicles are limited to models such as Mitsubishi Fuso’s Canter Eco 

Hybrid and Isuzu’s Elf. Nevertheless, LiBs have three times the voltage of NiMH 

cells and represent a two-fold improvement in terms of power density and energy 

density. Thus, we think that Li-ion batteries are likely to take center-stage for 

automobiles as costs come down and safety improves, just as we have seen with 

consumer batteries. 

Table 145: Specs required for batteries (by types of automobiles) 

HEV PHEV EV 

Battery capacity (kwh) 1-3 4-15 20-30 

Battery power (kw)) 50-100 100 100 

Power density (W/kg) 1,500-2,100 900-1,800 250-300 

Working mode Pulse in central 

Pulse in central (around 20~40%) from full 

charge 

Electrostatic discharge from full charge by 

oscillation 

Output is required to be more than 100kw as Battery capacity should be 4-15kw to run Since EV loads dozens of kw batteries, 

capacity to start and accelerate automobile 10~60km as EV. Generally, LiB degrades more requirement for battery output is reduced from 

quickly in high SOC, so battery for PHEV tends HEV by far 

to degrade faster than battery for HEV 

Source: J.P. Morgan, based on "Lithium ion battery" (Ohm-sha) by Mr. Zenpachi Ogumi. 

263

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Figure 161: Charging the battery 

264 

Battery 

Electrolyte 


Anode Cathode 

Li + 

Li + 

Li + 

Li + 

Li + 

Separator 

E - 

Li + 

E - 

E - 

How LiBs work 

All typical batteries comprise two electrodes—the positive terminal (cathode) and the 

negative terminal (anode)—and an electrolyte between them that facilitates the 

movement of ions. An electric current is produced as ions carrying charges move 

from one electrode to the other and thus release current in the external circuit that is 

attached. The difference in rechargeable batteries is that the process can be reversed 

and the ions can be restored back to their original electrodes by application of an 

external electric current. 

Specifically, for lithium cobalt oxide batteries, the cathode is made of Lithium Cobalt 

oxide (LiCoO2) and the anode is made up of carbon. The typical electrolyte used is 

Lithium Hexafluoro phosphate (LiPF6). 

Electrons 

Li Ions 

During the charging cycle, the Li ions are pushed to the 

anode by an external voltage. 

At cathode 

LiCoO2 → xLi + + Li1-xCoO2 + xe - 

At anode 

xLi + + C + xe - → LixC6 


20 April 2009 

Figure 162: Discharging the battery 

Electrolyte 


E - 

E - 

E - 

Load 

Anode Cathode 

Li + 

Li + 

Li + 

Li + 

Li + 

Separator 

During discharging (i.e., when the battery is in use), the Li 

ions move back to the cathode. 

At cathode 

Li + 

xLi + + Li1-xCoO2 + xe - → LiCoO2 

At anode 

LixC6 → xLi + + C + xe - 

Lithium polymer batteries 

The essential difference between LiBs and Lithium polymer batteries lies in its 

electrolyte. The electrolyte in polymer batteries is a solid polymer sheet, whereas it is 

a solvent in LiBs. 

The advantages of these batteries include:

Bhavin Shah 

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20 April 2009 

• Safety: Lesser chance of electrolyte leakage. 

• Smaller size: The battery size is reduced, and more compact, thinner batteries 

can be made. 

• Lightweight: Due to the absence of liquid electrolyte, there is no need for metal 

shell, and hence lighter batteries. 

However, as the electrolyte is solid, the batteries have high internal resistance and 

hence lower current capacity. This disadvantage could be done away with the 

introduction of a gelled electrolyte along with the polymer. These batteries are 

increasingly finding more use in electrical appliances. One of the latest being the 

Apple Macbook Pro. The Apple Macbook Pro battery uses an embedded Lithium 

polymer battery and with the help of adaptive recharging it can last for up to eight 

hours. 

Current LiB alternatives for EV/HEV 

Japanese and Korean makers are more focused on LMS (Lithium Manganese Spinel), 

which is a more mature technology. BYD and A123 Systems are using LFP, a newer 

but, in our view, a promising technology. 

LMS 

In LMS, the cathode is made up of spinel Lithium Manganese Oxide (LiMn2O4). 

LMS first came into the picture some 25 years back. However, it has attracted 

significant attention only recently because of: 

• Low costs: The battery does not involve the use of expensive metals such as 

Cobalt or Nickel. 

• Outstanding power capability: LMS and LFP have high power density, which 

allows the batteries to provide the vehicle with adequate power required for 

start-up and acceleration with lower battery weight. 

• Low reactivity towards non-aqueous electrolytes when charged: The 

manganese oxide ion is highly stable and does not easily react with the 

electrolyte. 

Given these attractive properties, LMS batteries are being increasingly used in high 

power applications such as EVs. However, the dissolution of the manganese ion and 

its impact on the graphite negative electrodes results in rapidly fading capacity and 

the impedance rise of the graphite/spinel Lithium ion cells. GM’s Chevy Volt is likely 

to use LMS batteries produced by LG Chemical. 

Toshiba recently introduced its SCiB batteries, in which the anode is made of Lithum 

Titanium Oxide. They have a very fast recharging time, much better low temperature 

performance and an exceptional cycle life (6,000 cycles) as they do not suffer from 

the corrosive effects of graphite. These batteries, however, have a lower cell voltage 

(only 2.4V) and lower energy density, and are more expensive on account of the 

Titanium. 

265

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266 


20 April 2009 

LFP 

In LFP, the cathode is made up of Olivine Lithium Iron Phosphate (LiFePO4). These 

batteries are relatively newer to LMS. Both LMS and LFP are theoretically 

equivalent to one another. However, LFP is still developing as it is a newer 

technology. Compared to LMS, LFP has a lower voltage output, but a higher 

capacity. Also, LFP is thermally more stable, as FePO4 ion is thermally very stable 

and hence oxygen release is no longer an issue. BYD’s F3DM is based on LFP 

batteries. The biggest issue with the LFP batteries is their very poor low temperature 

performance. 

LFP technology is currently entangled in patent disputes. The patent for the Lithium 

olivine structure is currently held by UT Austin. A123 systems and some other LFP 

battery manufacturers are involved in patent infringement lawsuits filed by UT 

Austin and Hydro-Quebec. In December 2008, the European patent office rejected 

the patent infringement lawsuit of UT Austin, making it easier for LFP 

manufacturers to use it in automotive applications in Europe; this is even as NTT 

Japan paid US$30 million to UT as settlement of the LFP lawsuit. These patent wars 

could mean additional roadblocks in use of LFP for automotive uses. 

Table 146: Comparison of Li ion-based batteries 

LMS LFP Li-Co 

Voltage output (V) 3.7-3.8 3.2-3.3 3.6 

Energy density (Wh/kg) 110-120 95-140 110-190 

Specific capacity (mAh/g) 150 170 140 

Safety Very Good Excellent Bad 

Cost Low Low High 

Cycle life 


300-500 >1000 >300 

Besides these two dominant varieties, other Li ion batteries include Lithium Cobalt 

oxide and Lithium Nickel oxide. Besides Lithium ion and Nickel-based batteries, 

Electronic Double Layer capacitor (EDLC) and solar-powered cells are some other 

alternative technologies being developed for EVs. 

Table 147: Comparison with other automotive batteries 

PB-Acid NI/Cd Ni/MH LiB EDLC 

Energy density △ ○ ○-◎ ◎ × 

Power performance ○-◎ ○-◎ ○-◎ ◎ ◎ 

Life ×-△ ◎ ◎ ○ ◎ 

Safety ○ ○ ○ × ○ 

Reliability ○ ○ ○ ? ○ 

Cost ○ ×-△ ×-△ × ○ 

Resource ◎ ◎ △-○ △-○ ○ 

Environment 

Source: M&G EBC. 

△ × ○ ○ ○ 

Note: ◎: Excellent, ○: Great, △: Inadequate, ×: Poor. 

Key players in the battery market 

The battery market is dominated by Japanese manufacturers. At present, the five 

Japanese battery manufacturers (Panasonic EV Energy, AESC, Lithium Energy 

Japan, Sanyo Electric, and Hitachi Vehicle Energy) and five companies from other 

parts of the world (JCS, SB LiMotive, BYD, A123 Systems, and LG Chemical) 

compete on development in the automotive LiB market.

Bhavin Shah 

(852) 2800-8538 


Figure 163: Market share for consumer Li-ion batteries (FY07, value) 

% 

NEC Tokin 

2% 

Hitachi maxell 

BYD 

3% 

7% 

LG chemical 

9% 

Panasonic 

Samsung SDI 9% 

13% 

Others 

10% 

While Japanese battery makers are still dominating LiB in consumer/IT products, 

their technology lead in EV/HEV adoption is not significant, as the current HEV 

models (Toyota Prius) are still using NiMH batteries. On the other hand, GM 

recently chose LG Chem to be the LiB supplier for Chevy Volt, and BYD also 

announced F3DM (PHEV) and E6 (EV), based on its own LFP. Thus, we believe it 

is too early to say which players will come out ahead. 

Sanyo elec. 

30% 

Sony 

17% 

Source: J.P. Morgan estimates based on discussions with companies. 


20 April 2009 

Figure 164: Market share for automotive NiMH (FY07, value) 

% 

Sany o 

Others 

13% 

2% 

Source: J.P. Morgan estimates based on discussions with companies. 

Panasonic 

EV energy 

85% 

Alliances between battery makers and the automobile industry 

The pace of tie-ups between battery manufacturers and automobile OEMs on HEV 

batteries has accelerated in recent months. Companies such as Panasonic and NEC 

have established joint ventures for development and manufacture with automobile 

manufacturers, strategically seeking to secure customers for their sales. According to 

Sanyo Electric, the company has taken the bold policy step of seeking to supply to all 

Japanese, US and European automakers, rather than tying itself into a joint venture 

with a single firm. Similarly, Hitachi Vehicle Energy, mainly set up with capital from 

Hitachi, has taken on board no capital from automobile manufacturers, seeking to sell 

to all quarters. 

267

Bhavin Shah 

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268 


20 April 2009 

Figure 165: Alliances in automobile batteries 

Battery supplier Auto manufacturer 

Sany o 

Panasonic 

NEC 

NEC Tokin 

GS Yuasa 

Mitsubishi 

Hitachi 

Shin-kobe elec. 

Hitachi Max ell 

A123 Sy stems 

LG Chemical 

Samsung SDI 

JCS 

40% contribute 







w ill supply LiB by 09 

is supply ing Ni-MH 

panasonic EV energy 

is supply ing Ni-MH 

Automotiv e Energy Supply 

Lithium Energy Japan 

Hitachi Vehicle Energy 

Co-dev elop LiB 

VW 

Honda 

Ford 

Toy ota motor 

Nissan motor 

Mitsubishi motor 


Hy undai motor 

50% contribute 50% contribute 

SB LiMotiv e 

Bosch 


Co-dev elop LiB battery 




Order LiB 

Source: Compiled by J.P. Morgan based on data from from Nikkei Electronics, Automobile Technology. 

GM 

Daimler

Bhavin Shah 

(852) 2800-8538 


Liang Lin AC 

(886-2) 2725-9863 



Brightness roadmap for 

backlighting: 

2004: 700-800 Mcd 

2005: 1,000-1,200 Mcd 

2005: 1,200-1,300 Mcd 

2006: 1,500 Mcd 

2007: 1,700-1,800 Mcd 

2008: 2,000 Mcd 

2009:2,100-2,200 Mcd 


20 April 2009 

Light emitting diode (LED) 

What’s new? 

LED capex in 2008 peaked due to the high expectations over notebook penetration 

and handset demand from white-box. Both applications failed to meet expectations 

and the oversupply triggered a sharp price fall. Taiwan’s upstream makers faced 

bottlenecks from inconsistent yield for high-brightness chips. Downstream market 

share gains were hit by the decline in consumer spending. 

A bright spot appears in the dimming LED space from faster notebook penetration. 

New top-view designs bring down the cost of LED backlight units and trigger white 

LED demand for backlights in medium-size panels and notebooks. We add an 

updated brightness roadmap for LED, compare LED general lighting roadmap with 

other light sources, and talk about some emerging application of OLED. 

The LED market for notebook BLU will be more significant in FY09 with a 

penetration rate of 40%, in our view. We expect notebook panel backlighting to get 

commoditized and provide another growth opportunity for Taiwanese LED makers in 

2009. The unit increase in notebook LED should exceed the contracting demand 

from handset. 

Brief introduction 

LEDs have been on the market for over 30 years. However, strong industry growth 

started in the late 1990s after Nichia developed GaN (gallium nitride)-based blue HB 

(high brightness) LED, which fostered the creation of white LED and contributed to 

the diversification of LED applications. LED is one of the often-named “technologies 

of the future” in optoelectronics as its applications are transforming industries and 

product classes. The LED industry is expected to post robust growth over the next 

couple of years, mainly driven by general and portable lighting, automotive lighting 

and display technologies. 

LED industry: Demand and growth drivers 

The first wave of LED industry growth was driven by handset applications, including 

keypad and panel backlights. The LED adoption took two years for handset lighting 

to reach saturation in 2003. After another two years, LED successfully replaced 

CCFL in the 3.5" display backlights segment for mobile appliances like PDAs in 2005. 

In 2007, the driver for LED demand was from handsets and medium-sized panels. 

Given the rapid cost/performance improvement, we expected another wave of LED 

demand for large-size panel backlights in 2008, but LED demand from handset and 

notebook was weaker than expected due to the macro slowdown. 

Long-term industry drivers 

Two trends which we expect during the next three years are: (1) the industry’s 

technology focus will be on high-power LED; industry leaders are gradually exiting 

the lower value-added side-view business; and (2) due to this, Taiwanese LED 

makers would continue to gain market share. We view this as an incremental positive 

for Taiwan’s industry. 

269

Bhavin Shah 

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270 

While the growth of mobile applications has flattened, the key industry driver for the 

next three years will be the use of high-power LED for general lighting (illumination) 

and LED-backlit TVs/notebooks(signs & display), in our view. We estimate high 

brightness LED CAGR for 2007-2010 to be 13% and we estimate illumination and 

signs & display to enjoy a growth of 32% and 42% CAGR for FY07-FY10, 

respectively. The key impact on growth will be due to the following trends, and the 

exponential LED growth illustrated in Figure 166 might not be too far away, in our 

view. 

• Technology: Migration from low-power brightness enhancement to high power 

input. 

• Supply chain: Focus shifting from chips to package, and from industrial to 

consumers. 

• Industry benchmark from Nichia to Lumileds. 

Figure 166: LED demand evolution into high power chip—Taiwan LED taking over mature segments from red to low-end white LED 

Relative LED Unit Shipment 

1960 


Red LED 


20 April 2009 

NB, Smart Phone 

Backlighting 

Cell Phone 

Backlighting 

Red HB-LED 

Tail light 

HB-LED Headlights 

Blue & Green 

HB-LED 

General 

Lighting 

LCD-TV 

Backlighting 

Illumination 

Illumination 

White 

Backlighting 

White 

Backlighting 

Blue & Green 

HB-LED (GaN) 

Blue & Green 

HB-LED (GaN) 

Red HB-LEDs 

US$15Bn HB-LED 

Market Size 

High-power 

2006: 50 lm/w 

2007: 70 lm/w + 

2008: 100 lm/w 

Sideview & High-power 

2002: 24 lm/w 

SMD 

1998: 12 lm/w 

Red Indicator Lights 

1970 1980 1990 2000 2010 2020 Lamp 

Package evolution 

LED industry: Application drivers 

Signs and display: TV and monitor backlights are major opportunities with the 

market value expected to reach US$1.96 billion by 2010 (36.5% CAGR from 07-10). 

Automotive lighting: Headlamps require the highest brightness and efficiency, and 

are regarded to be the key value driver.

Bhavin Shah 

(852) 2800-8538 


Figure 167: HB LED market by application in 2008 

Illumination 

8% 

Signals 1% 

Automotiv es 

19% 

Others 16% 

Signs/Display 

15% 

Source: Strategies Unlimited and J.P. Morgan. 


20 April 2009 

Illumination: Applications in illumination (architecture lighting, channel letter, 

decorative lighting, large projects) will take off in 2010 and experience substantial 

growth over the next five years. General lighting prepares to dominate the LED 

market by 2010. 

Table 148: Applications drivers 

US$ in billions 

2005 2006 2007 2008E 2009E 2010E 07-10E CAGR 

Mobile appliances 2.02 2.04 2.08 2.11 1.78 2.06 -0.3% 

Signs/Displays 0.53 0.60 0.77 0.99 1.17 1.96 36.5% 

Automotives 0.53 0.64 0.70 0.77 0.76 0.94 10.3% 

Signals 0.07 0.07 0.07 0.07 0.07 0.09 8.8% 

Illumination 0.24 0.32 0.34 0.44 0.51 0.80 32.6% 

Others 0.53 0.55 0.69 0.84 0.79 0.84 6.6% 

Total market 3.9 4.2 4.6 5.2 5.1 6.7 12.9% 

Non-mobile market 


1.9 2.2 2.6 3.1 3.3 4.6 21.6% 

Mobile 

appliances 

40% 

Figure 168: HB LED market 

US$Bn 

8.00 

7.00 

6.00 

5.00 

4.00 

3.00 

2.00 

1.00 

0.00 

CAGR: 13% 

2003 2004 2005 2006 2007 2008E 2009E 2010E 

Mobile appliances Signs/Display s Automotiv es Signals Illumination Others 

Source: Strategies Unlimited and J.P. Morgan estimates. 

White LED demand for handsets 

Handheld products such as mobile phones are among the largest consumers of latest 

LED technologies, including chip LEDs. The key criterion here is the optimum 

luminous intensity from minimum PCB area and power dissipation. The ultra-small, 

high brightness chip LEDs using built-in reflectors are available in red, orange, 

yellow, green and blue, and are supplied in low-profile side-emitting packages, 

which are thin and small (of the order of 0.6mm high and a footprint of 

1.6x1.15mm). 

Key areas of demand for LED include: (1) keypad; (2) LCD backlighting; and (3) 

camera flash. Generally, the adoption for handsets has faced saturation due to the 

relatively easy entry, excessive supply from Asia, brightness improvement (hence 

less LED required), and an average annual price fall of 15-20%. Hence, we estimate 

that the market value will decline at 9% CAGR from 2007-2010. The market growth 

driver is shifting from keypad (NT$1) to higher-priced (NT$3.5) side-view for smallsized 

panel backlighting. LED enjoys growth potential from the replacement demand 

from color/camera handset shipments and camera phone flash. We estimate global 

color handset shipments to reach 1,527 million by 2010 with a 2007-2010E CAGR 

271

Bhavin Shah 

(852) 2800-8538 


272 


20 April 2009 

of 13%. The white LED penetration in color handset keypad backlights could 

increase from 75% in 2007 to 84% in 2010, in our view. We expect the side-view 

demand for backlighting, which is largely stimulated by China’s white-box handsets, 

to expand at an 8% CAGR from 2007-2010. In addition, we estimate global camera 

handset shipments to reach 1,184 million in 2010 with a 2007-2010E CAGR of 12%. 

We expect LED penetration in camera flash to increase from 78% in 2007 to absolute 

saturation levels of 92% by 2010. 

Table 149: Global white LED demand for handsets 

Units in millions 

FY04 FY05 FY06 FY07 FY08E FY09E FY10E FY07-10E 

CAGR 

Total handsets 661 835 1,027 1,241 1,349 1,250 1,664 10% 

Color handsets 415 631 847 1,071 1,199 1,139 1,527 13% 

Keypad BL: White LEDs per handset 8.0 7.8 7.6 7.4 7.4 7.0 6.5 

LED penetration in keypad BL 31% 40% 65% 75% 80% 82% 84% 

Keypad backlighting 1,029 1,967 4,185 5,943 7,100 6,540 8,336 12% 

Side-view: White LEDs per handset 3.8 3.5 3.5 3.2 3.2 3.1 2.8 

Sideview (backlighting) 1,577 2,207 2,965 3,427 3,838 3,532 4,275 8% 

LED demand for color handsets 2,606 4,174 7,150 9,370 10,938 10,072 12,611 10% 

Camera handsets 251 383 691 852 937 890 1,184 12% 

Flash: LEDs per handset 3.0 2.5 2.2 2.0 1.7 1.5 1.2 

LED penetration in camera flash 50% 60% 75% 78% 85% 86% 92% 

LED demand for camera handsets 377 575 1,140 1,329 1,354 1,149 1,308 -1% 

Total LED demand for handsets 2,983 4,750 8,290 10,699 12,292 11,221 13,919 9% 

ASP per unit (US$) 0.70 0.40 0.23 0.17 0.14 0.12 0.10 -17% 

Handset-use LED market value 2,088 1,900 1,907 1,848 1,752 1,311 1,399 -9% 


White LED demand for display backlights 

LED is being increasingly seen as the next-generation light source for displays to 

replace CCFL due to: (1) the narrowing cost gap with CCFL backlighting; (2) rising 

environmental concerns about CCFL; and (3) superior advantages of LED as a 

backlighting source—full color saturation, lower power consumption and thinner 

panels. 

Most display technologies do not generate light on their own. In fact, LCD screens 

used in LCD monitors, LCD TVs, notebooks, cell phones and numerous other 

devices require a light source behind the screen to be able to see the display. This 

illumination source is called a backlight. Backlights illuminate the LCD panels from 

the rear, and generally comprise a light source and optical components such as 

spreaders. In most screens of about four inches and above, backlights are made of 

cold cathode fluorescent (CCFL) tubes. CCFL-based lights are reliable, low-cost 

components that have served the flat-panel display industry successfully for many 

years. However, they have limitations—notably in the range of colors (color gamut) 

that they allow a display to have. In addition, CCFL lights include mercury, a 

hazardous chemical that makes disposal and recycling of displays that use CCFL 

expensive and difficult. In the CRT monitor market, already large fees (e.g. 6-10 

euros for a 17" CRT monitor) for CRT disposal are either being added to the price of 

a device or being forced upon corporations and consumers which want to recycle 

their older displays. CCFL-based LCD displays will probably face similar disposal 

issues due to their mercury content. These types of environmental requirements focus 

on the need for environmental-friendly displays and make LED-based solutions a 

popular alternative. Due to rising environmental concerns, notebooks OEMs/ODMs 

are developing mercury-free LED-backlit models.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 150: Global white LED demand for backlights in medium-size panels and NB 

Units in millions, US$ in millions 

FY07 FY08E FY09E FY10E FY07-10E 

CAGR 

7"-10" (excl. netbook) 

7"-10" panel shipment 40 38 34 44 3% 

LEDs per panel 20 17 16 14 

LED penetration in 7"-10" panel 62% 78% 85% 90% 

LED demand for 7"-10" panel 492 502 463 548 4% 

ASP per unit (US$) 0.16 0.13 0.11 0.09 -17% 

Total LED value for 7"-10" 

Notebook & netbook 

77 -13% 

Notebook shipment (excl. netbook) 107 129 143 177 18% 

LEDs per 12"/14"/15" notebook 45 45 42 40 

LED penetration in notebook 5% 12% 40% 70% 

LED demand for notebook 241 699 2,405 4,965 174% 

ASP per unit (US$) 0.22 0.17 0.10 0.09 -27% 

Total LED value for regular NB 52 121 249 422 101% 

Netbook shipment 0 12 20 28 356% 

LEDs per netbook 36 36 32 30 

LED penetration in netbook 50% 80% 100% 100% 

LED demand for netbook 5 351 642 854 441% 

ASP per unit (US$) 0.19 0.16 0.09 0.08 -27% 

Total LED value for Netbook 1 55 60 65 296% 

Total LED Demand for NB & Netbook 247 1,050 3,048 5,819 187% 

Total LED value for NB + Netbook 


53 175 309 487 109% 

Global white LED demand for backlights in medium-size panels and NB 

White LED dominated small-size display backlights and started to penetrate the 

medium-size display backlights segment from 2006. Now, the demand for LEDs 

from notebook has overtaken the demand from medium-sized panels. We expect the 

unit increase in notebook LED to exceed the contracting demand from handset. The 

LED market for notebook BLU could be more significant from FY09 with a 

penetration rate of 40%. We expect notebook panel backlighting to get commoditized 

and provide another growth opportunity for Taiwanese LED makers in 2009. 

Currently, the demand for LED BLU for NB PC is gradually strengthening as the 

adoption, though slow, is moving from 11"W and 12.1"W to 14.1"W and 15.4"W. 

Overall, LED penetration in 7"-10" panel backlights has reached an estimated 78% in 

2008 versus 62% in 2007 and should increase to 85% in 2009. 

Why notebook’s penetration rate rises faster? 

The potential upside in the penetration rate for 2009 is driven by TFT-LCD/LED 

oversupply and low-cost design. 

• LCD oversupply stimulates replacement demand: Earlier, the price gap 

between a CCFL-based notebook panel and LED-based notebook panel was 

about US$20, due to the higher cost of a backlight unit. However, after notebook 

panel prices fell by 40%, the price point of an LED-based notebook panel became 

more attractive. The notebook price fall was a result of LCD industry oversupply 

and the production of panels on a fully-depreciated fab (5G or even 6G fabs). 

Recent TFT oversupply forces TFT vendors to be more aggressive in promoting 

LED notebook panel. For 2009, at least six out of 10 newly rolled-out notebook 

panels will be LED-based, in our view. The minimum penetration rate target set 

by panel makers, excluding low-priced netbook or EeePC, is 40%. 

273

Bhavin Shah 

(852) 2800-8538 


Figure 170: LED NB BLU—V-Cut type 

274 

LED 

Flat LGP 

Thinnest and brightest 

Highest cost 

Source: DisplaySearch and J.P. Morgan. 


20 April 2009 

Figure 169: NB panel price declined by ~45%+ from 4Q07 to 2Q09 

US$ 

140 

120 

100 

- 

80 

60 

40 

20 

4Q07 1Q08 2Q08 3Q08E 4Q08E 1Q09E 2Q09E 


Figure 171: LED NB BLU—Dots type 

LED 

Thinner 

Middle cost 

Flat LGP 


15.x " 17.x " 

Figure 172: LED NB BLU—Wedge type 

LED Wedge LGP 

Lowest cost / highest yield 


Down 45% 

• Top-view design brings down the cost of LED backlight unit: Current LEDbased 

notebooks are of the side-view design, and could appeal to a better form 

factor, but they incur a higher backlight unit cost. This cost is acceptable for some 

high-end notebook models given the better features over traditional CCFL 

backlights such as thinner design, weight reduction, low power consumption, low 

temperature operation, more flexible design in the notebook PC, and longer 

battery life. In the side-view design, the LED light bar equipped on the brink of 

an LCD panel needs to diffuse the light uniformly through the display panel. 

More precise components such as V-shape light-guide are required to perform the 

task. Hence, yield has been the main obstacle in bringing down cost, not the LED 

component price. Top-view LED backlight adopts wedge-type BLU as illustrated 

in Figure 172.

Bhavin Shah 

(852) 2800-8538 


Aggressive LED cost-down 

potentials will narrow the cost 

gap with CCFL on TV BLUs to an 

acceptable level by 2008, in our 

view 


20 April 2009 

Table 151: Comparison of LED NB BLU—Low-cost top-view is aimed to replace CCFL in a regular 

14/15" notebook panel, while side-view is for high-end 12"/13" notebook 

High cost 

LED 

Middle cost Low cost 

Light source Side-view Side-view Top-view 

LGP type V-cut (Flat) Dot (Flat) Wedge type 

LGP moding High-speed High-speed injection Injection 

injection 

(mainstream) 

LGP thickness 0.7-0.9 mm 0.7-1.1mm 0.6-2.5 mm 

LGP yield rate

Bhavin Shah 

(852) 2800-8538 


Table 153: Backlight unit (BLU) cost comparison—LED versus CCFL 

15.4" W LCD NB 22"W LCD BLU monitor 40" W LCD TV 

US$ CCFL LED CCFL LED CCFL LED 

Light source 1.1 10.5 2.9 8.4 23.6 179.3 

Light assembly 1.8 2.0 2.4 8.0 5.1 5.6 

Light guide plate 3.1 1.6 4.0 8.0 

Diffusion sheet + diffuser plate + prism sheet +Inverter 0.7 1.0 3.9 8.7 60.8 93.4 

Reflective sheet 0.3 0.4 0.4 0.4 1.8 1.8 

Turning film 2.7 2.6 

Bezel & frame 1.3 1.3 2.0 2.0 10.4 12.1 

Others 0.9 0.3 1.0 1.4 10.7 36.9 

Overhead, SG&A, package 2.0 2.1 2.9 4.3 11.9 12.0 

Total cost 13.9 21.9 19.6 41.2 124.3 341.1 

LED cost to CCFL cost 


1.6 x 2.1 x 2.7 x 

LED cost for a car 

276 

$20 LED for interior lighting 

$15 for exterior signaling 

$115 for forward lighting 

(Not commercialized yet) 


20 April 2009 

HB LED demand for automotive lighting 

The HB LED demand from the automotive market will be another key growth driver 

for the LED industry as the current LED penetration rate for exterior automotive 

lighting is still very low—less than 40%, in our view. Industry experts estimate that 

the LED addressable market in automotive lighting could reach 18 billion units per 

year, based on following assumptions: (1) auto market size of 60 million units per 

year; and (2) 100 units of LEDs per car needed for dashboards, indicators, CHMSLs, 

stop lamps and turn signals. 

LED adoption in interior automotive lighting for dashboards and radio/climate 

control indicators has seen a dominant share of ~80%. Given the introduction of 

white LED and the accelerated lighting efficacy improvement, we believe LED 

applications on reading lamps, dome lamps, etc., are increasing. 

Exterior automotive lighting presents better growth potential for LED adoption than 

interior automotive lighting. Headlights or forward lighting will be a key driver and 

has the highest brightness and efficiency requirements due to safety regulations. 

Headlights mainly use white-LED and blue LED mixing phosphors. To use LED as 

the lighting source of headlamps, optic and thermal management as well as mounting 

tolerance are the key issues under concerns. Currently, Lexus LS 600h (low-beam 

application) and Audi R8 are among the first to bring cars with LED headlights. 

The market size was about US$0.7 billion in 2007 and we expect it to reach US$0.94 

billion by 2010 with a 10.3% CAGR from FY07 to FY10E. Major LED vendors 

including Nichia, OSRAM and Lumileds are working with automotive partners to 

gain market share in this application segment. But, the growth rate is slow which 

partly reflects the conservative supply chain, and is indicative that LED device is a 

low-value product, in our view. Japanese LED manufacturers and automakers have 

almost two-year design-in times for exterior applications such as brake lights, and are 

ahead of other Asian competitors. These LED manufacturers are more likely to face 

competition from international players such as Cree that are more leveraged to the 

auto market. 

Illumination 

Applications in illumination (architecture lighting, channel letter, decorative lighting, 

large projects, etc.) will take off in 2010 and experience substantial growth over the 

next five years, in our view. We expect illumination to confine to professional 

lighting such as architecture lighting, channel letter, industrial vision, maintenance 

retrofit, decorative lighting and large projects. Hence, this does not include the

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

replacement of light bulbs or fluorescent lights. In Table 154 below we describe the 

LED roadmap compared with other lighting sources. 

Table 154: LED roadmap compared with other lighting sources 

Technology SSL-LED- SSL-LED- SSL-LED- SSL-LED- Incandescent Fluorescent HID 

2002 2007 2012 2020 

Efficiency (lm / w) 20 75 150 200 16 85 90 

Lifetime (khr) 20 >20 >100 >100 1 10 20 

Flux (lm / lamp) 25 200 1,000 1,500 1,200 3,400 36,000 

Input Power (W / 

lamp) 

1.3 2.7 6.7 7.5 75 40 400 

Cost ($ / klm) 200 20

Bhavin Shah 

(852) 2800-8538 


Figure 173: Global LED supply by region 

10,000 

8,000 

6,000 

4,000 

2,000 

278 

US$mn 

0 

Source: PIDA. 


20 April 2009 

2005 2006 2007 2008E 

China Taiwan Korea Europe U.S. Japan 

Taiwanese maker that is among the Top 10. Since 2004, Korea has emerged as the 

third-largest LED producing country, after Japan and Taiwan, due to cost advantages, 

strong white LED packaging capabilities and demand from the local handset supply 

chain. 

Table 156: Global Top 10 LED downstream players in 2007 

Company Market share 

Nichia 17.6% 

Osram Opto 8.8% 

Cree 5.7% 

Citizen 5.5% 

Stanley 5.1% 

Philips Lumileds 5.1% 

Everlight 4.6% 

Avago (Agilent) 4.5% 

Rohm 3.3% 

Sanyo Electric 

Source: Everlight. 

2.7% 

Figure 173 presents global LED supply by region. Japan is the largest supplier; 

however, its market share has declined from 43% in 2005 to 36% in 2007. Taiwan 

accounts for 23% followed by US with 13% in 2007. 

Japan 

40% 

China 

7% 

Taiwan 

U.S. 

8% 

20% 

Korea 

9% 

Europe 

Competitiveness of the Taiwan LED sector by product 

Figure 174 illustrates product portfolios of the Taiwan LED sector. In the upstream 

space, Taiwanese players are strong in UHB AlInGaP LED, which will experience 

high growth in automotive exterior lighting and decorative/special lighting, in our 

view. Lumileds is the global leader, followed by Taiwan’s Epistar and Arima Opto. 

HB GaN LED is dominated by global leaders, but it could see strong growth in 

display backlighting and general illumination, in our view. Patent issue is the main 

hurdle for Taiwan’s growth. We expect Taiwanese players to gain market share by 

increasing outsourcing opportunities for cost competitiveness. NB GaN LED is a 

low-margin or loss-making business in Taiwan because of severe ASP erosion on 

oversupply. Although Taiwan is the largest GaN producing country, the individual 

market share is diluted significantly by the 20+ players. 

16%

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Double hits in FY08E: Limited 

brightness improvement should 

impact demand for high-end 

products. Low-end should suffer 

due to the demand slowdown in 

emerging markets 


20 April 2009 

Upstream facing technology bottleneck 

Taiwan’s upstream makers’ capacity growth has accelerated in 2008 as the industry 

is looking to expand into notebook LED and high-power LED for general lighting. 

However, with more than 66% Y/Y capacity growth in GaN (blue LED for white 

colors) in FY08E, the supply for high-end applications remains insufficient. The 

bottleneck is from inconsistent yield for high-brightness chips. While high-end 

products could provide thick margins, side-products, normally with lower brightness, 

create more pricing pressure for low-end LEDs used in handset keypads and 

mainstream handset displays. The current mainstream brightness chip from Epistar is 

in the range of 1,300-1,500 mcd for digital photo frames and 2.2" TFT LCD panels. 

To be competitive in smart-phone and notebook, the required mcd level is >1,800. 

In the downstream space, surface mount devices (SMD) LED will likely see high 

growth due to further market share gains for handsets, automotive interior lighting 

and consumer appliances applications. We believe there will also be market share 

gains for infrared LED from this year on photocoupler, IrDA, etc. SMD white LED 

and high power LED (>1 Watt) are the main products that will experience explosive 

growth due to booming demand for display backlighting, automotive exterior 

lighting and general illumination, in our view. However, similar to upstream players, 

Taiwanese packagers face the patent issue for white LED adoption in case of highend 

products. For high power LED, Taiwanese packagers are still in the developing 

phase, falling behind global leaders such as Lumileds and Osram by a wide margin. 

Downstream market share gains hit by consumer spending 

Taiwanese LED makers’ profit growth (especially that of downstream makers) has 

been driven by volume share gains as they have taken advantage of operating 

leverage. The volume share gain is driven by handset demand from emerging 

markets due to the relationship with LCD makers as well as the price 

competitiveness. However, emerging market demand has been impacted by a macro 

slowdown. Apart from handset demand, LED packagers have a limited customer 

base to pursue new growth opportunities. Notebook packaging is mostly supplied by 

TFT makers’ own subsidiaries. The outsourcing of general lighting is quite rare and 

it is unlikely to replicate the handset outsourcing OEM business model in the near 

future. Philips and Osram have their own vertical operations. 

Figure 174: BCG matrix for Taiwan LED sector 

Market Growth Rate 

(Cash Usage) 

Low 

High 


Upstream 

• UHB AlInGaP LED 

(Red/Yellow) 

Upstream 

• HB AlInGaP LED 

(Red/Yellow) 

Downstream 

•SMD LED 

• Infrared LED 

Downstream 

•Lamp 

•Display 

Upstream 

• HB GaN LED (Blue/Green) 

Upstream 

• NB GaN LED (Blue/Green) 

High Low 

Relative Market Share 

(Cash Generation) 

Downstream 

• SMD White LED 

• High Power LED 

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Competitive strengths of Japanese/US/European players in the LED sector 

Leading vendors in Japan, Europe and the US maintain advantageous positions on 

the strength of their intellectual property (IP) assets and licensing strategies which 

they will leverage to improve luminous efficiency and reduce heat loss for highbrightness 

white LEDs, as well as the development of LED modules to provide 

planar light sources, in our view. 

Table 157: Dominance of Japanese/ US/ European players as licensers 

Date Company Conditions Licenser 

Oct-03 Everlight White LED License Osram 

Jan-04 Lit-on Tech White LED Cross-License Osram 

Nov-04 Harvatek White LED License Osram 

Mar-05 AOT Phosphor License Intematix 

Aug-05 Unity Opto Phosphor License Intematix 

Sep-05 LigiTek Phosphor License Nemoto 

Sep-05 Taiwan Oasis Phosphor License Nemoto 

Sep-05 Yashin White LED License Osram 

Nov-05 Bright Led Phosphor License Nemoto 

Jun-06 AOT White LED License Toyoda Gosei 

Jul-07 Citizen White LED License Osram 

Sep-07 Cree White LED (Cross-license) Nichia 

Oct-07 Toyoda Gosei InGaN (patent exchange) Osram 

May-08 Toyoda Gosei LED chip & packaged LED (Cross-license) Cree 

Sep-08 Philips LED luminaire (Cross-license) Osram 

Feb-09 Seoul Semiconductors LED and laser diode (Cross-license) Nichia 

Source: Companies, LEDs Magazine, IEK and J.P. Morgan. 

Japanese vendors are top providers in standard and high brightness white color LED 

segments. Japanese vendors also take a lead in the technological development of 

high-brightness white color LEDs for large screens and the commercialization of 

blue LED using low-cost oxidized zinc, as well as flip-chip packaging for footprint 

reduction and improved luminance efficiency. 

In the increasingly price-sensitive LED market, gaining share will require efforts by 

players to increase value add-through alliances, such as IP-enabled cross licensing 

and production sharing, in addition to an aggressive pricing strategy in the low-cost 

and standard LED market, in our view. 

As LEDs are expected to replace cold cathode tubes for LCD monitor backlighting 

for larger screens and a lower price, the global LED lamp and display market is 

expected to change dramatically in market size and share ranking. 

Table 158: High-end LED players by product category 

AlInGaP GaN 

Chip Lamp Chip Lamp 

Lumileds Lumileds Nichia Nichia / Citizen 

Epistar Osram Cree Cree 

Arima Opto Japanese players Toyoda Gosei Lumileds 

Toshiba (not for sale) Osram (not for sale) Osram 


Epistar 

Epitech 

Formosa Epitaxy 

Japanese players 

Structure of LED 

An LED is a special type of semiconductor diode. Similar to a normal diode, it 

comprises a chip of semiconducting material impregnated or doped with impurities 

to create a structure called a p-n junction. A p-n junction semiconductor diode emits

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20 April 2009 

a monochromatic (single color) light when operated in a forward-biased direction. 

The wavelength of the light emitted, and therefore its color, depends on the bandgap 

energy of materials forming the p-n junction. A normal diode, typically made of 

silicon or germanium, emits invisible far-infrared light, but the materials used for an 

LED have bandgap energies corresponding to near-infrared, visible or nearultraviolet 

light. The basic structure of an LED consists of the die or light emitting 

semiconductor material, a lead frame where the die is actually placed, and the 

encapsulation epoxy which surrounds and protects the die. 

LED categorization 

LED has two main categories: 

• invisible light-like infrared and 

• visible light. 

For visible light, LED can be categorized depending on its brightness—HB LED 

and NB LED. However, the criterion is very blurred because different suppliers 

would have different definitions for HB and NB LEDs. Generally speaking, HB 

LED is defined as 700mcd (millicandelas) and above for GaN (gallium nitride)based 

LEDs, and 150mcd and above for AlInGaP (aluminum indium gallium 

phosphide)-based LEDs, or so-called four-element LEDs. HB LEDs are finding 

wider applications in existing markets and are also creating new markets for 

LED applications. 

Figure 175: Basic structure of light-emitting 

diodes 


Figure 176: Cross-section of an LED 

Source: Osram. 

For upstream epi-wafer/chip makers, LEDs are categorized depending on materials. 

As shown in Table 159, AlInGaP-based LEDs can generate red, orange, or yellow 

lights, while GaN-based LEDs emit green or blue lights. Mainstream applications for 

AlInGaP LEDs are traditional markets such as traffic lights, automotives and signage 

with steady growth, but RGB white LED solutions for large-size panel backlights 

and exterior automotive lighting will be the main growth drivers in the near future, in 

our view. We believe GaN LEDs have experienced strong growth due to applications 

in handset backlights and will continue to grow massively with LED’s penetration 

into large-size display backlighting. The dominant method to make white LEDs is to 

use a HB GaN blue chip plus yellow phosphor (see section titled “Methods to 

generate white LED”). Thus, HB GaN chips are the most lucrative products for 

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upstream LED companies because of white LED’s application in display 

backlighting and increasing penetration in general lighting. 

Table 159: Comparison of chip materials and wavelengths for wide-angle, non-diffused LEDs 

Color Standard brightness High brightness 

Chip 

Wavelength 

Chip 

Wavelength 

material 

(nm) 

material 

(nm) 

Red GaAsP/GaP 635 GaAs AlInGaP 635 

Orange GaAsP/Gap 605 GaAs AlInGaP 609 

Amber GaAsP/Gap 583 GaAs AlInGaP 592 

Yellow Gap 570 -- -- 

Green Gap 565 GaN 520 

Turquoise -- -- GaN 495 

Blue 


-- -- GaN 465 

Table 160: LED packaging type and applications 

LED packaging type Applications 

• Handset backlight 

• LCD backlight 

• Interior automotive lighting: dashboard, switch 

• Indicator lighting and switch light for consumer 

appliances 

SMD 

• 

• 

Flashlight for camera handset 

Lighting for small size device 

Lamp 

Display 

Infrared 

(Invisible) 

Source: Everlight and J.P. Morgan. 

Note: Sideview is one type of SMD. It is mainly used for 

handset panel and LCD panel backlight to reduce the panel 

thickness. 

• Indoor/outdoor display 

• Traffic signal 

• Indicator lighting for consumer appliances 

• Interior/exterior automotive lighting 

• Christmas tree lamps 

• Instrument panels 

• Appliances 

• Digital readout display 

• Audio equipment 

• IR lamp: remote controller 

• IR-PT SMD: touch panel, smoke sensor 

• Side looking IR-PT: mouse 

• Photocoupler: power, adapter, charger 

• ITR (Opto Interrupter): printer, fax, digital camera 

Packaging types of LED 

For downstream packagers, visible LEDs are categorized by packaging types—SMD, 

lamp, display and infrared. Among them, SMD is the most profitable product for 

LED packagers because of its application in display backlighting. The packaging 

types and applications are shown in Table 160:

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Methods to generate white LED 

Given the introduction of HB LED, white LEDs can be generated through different 

packaging methods and allow LEDs’ entry into display backlighting and eventually 

the general illumination market. 

There are four methods to make white LEDs (as shown in Table 161). Blue LED 

chip + yellow phosphor is the dominant method (>90%) for small-to-mid-size panel 

backlights due to its low cost, while RGB LED is the more sought-after method for 

large-size panel backlights due to its superior color saturation. 

Table 161: Methods to generate white LED 

Method Pros Cons 

RGB LEDs 

(red, blue, green) 

Blue LED chip + yellow 

phosphor 

UV LED chip + 

RGB phosphor 

• Highest efficiency 

• Tunable white point 

• Widest color gamut (NTSC 104%) 

• Simple 

• Good color rendering 

• Excellent stability and reliability 

• Low cost 

• RGB phosphor efficiency higher 

than yellow phosphor 

• Stable white point 

• High color rendering 

• Low voltage 

ZnSe 

• Single LED chip to produce white 

light 

• No phosphor needed 

Source: Lumileds and J.P. Morgan. 

• High cost 

• Requires feedback control to 

maintain white point 

• Lower efficiency 

• Narrow color gamut (NTSC 65%) 

• Need patent license from 

Japanese/US/EU LED players 

e.g. YAG phosphor by Nichia, TAG 

phosphor by Osram (85% of YAG 

phosphor’s efficiency) 

• Degradation due to UV package 

interaction 

• RGB phosphor not mature 

• Need to improve UV LED chip 

efficiency and reliability 

• Low efficiency: 8 lm/w, 50% lower 

than GaN 

• Short life: 8,000 hours 

Superior advantages of LED as a backlighting source: Full color saturation, 

lower power consumption and thinner panels 

There are numerous advantages of using RGB LEDs as the backlight source. Not 

only do RGB backlights offer a significantly wider color reproduction range than 

conventional CCFL backlights, they also make it much easier to reproduce colors 

difficult to achieve with phosphors in CRT, PDP or surface-conduction electronemitter 

display (SED) technologies. RGB LEDs make it possible to achieve color 

reproduction ranges in excess of 100% of the American National Television 

Standards Committee (NTSC) specifications versus CRT’s 75% and CCFL’s 72%, 

and freely adjust white color expression. 

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Figure 177: Comparison of CCFL and LED-based display technologies 

Source: Lumileds. 

CCFL LED 

Figure 178: Comparison of color gamut between RGB LED and CCFL 

Source: Everlight. 

The important consequence of the adoption of LEDs for backlights is that television 

sets will be able to exceed 100% of NTSC color reproduction range specifications. 

TV broadcasts saved as MPEG imagery contain the sRGB standard color information 

equivalent to about 65-70% of NTSC specifications. A new video color space 

standard called xvYCC, proposed by the Japan Electronics and Information 

Technology Industries Association (JEITA), is intended to define a color space wider 

than the sRGB standard. 

Sony has been able to commercialize LED-based LCD televisions quickly, and 

competition will certainly increase. This will make peripheral component 

manufacturers interested in the LED backlight sector. Most manufacturers working 

on LED backlights are using LEDs from Lumileds Lighting, US, as they offer the

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20 April 2009 

highest output and are available in all three (RGB) colors. But other LED 

manufacturers like Toyoda Gosei of Japan, are also trying to enter this market by 

offering LEDs in all three colors. As the number of component manufacturers 

increases, the technology can enter mainstream products at lower price points. 

Table 162: 40" LCD TV backlight source comparison—LED versus CCFL 

LED CCFL 

Luminance 500 nits 500 nits 

Power consumption 280W 160W 

Lamp number 2,275-2,880 20 

Efficiency 50 lm/W 80 lm/W 

Color gamut (% NTSC) 105% 75%-95% 

Luminance uniformity Generation of hot spots Good 

Voltage DC Low High 

Heat generation Need heat dissipation Low 

Switching speed Rapid (50 ns) Slow (1-2 sec) 

Green environment Mercury free Mercury 

Life 100,000 hours > 50,000 hours 

Operating temperature -40°C to +85°C 0°C to +50°C 

Cost down 

Source: Samsung, Citizen and J.P. Morgan. 

20-30% per year 8-12% per year 

Issues with LED display 

Color mixing: Major problems encountered by both equipment and panel 

manufacturers in generating good color characteristics when using LED backlights 

are: 

• Unevenness of color in display: The major problem with LEDs is that the 

luminance and color variation are many times (about 5x) that of CCFL. One 

method of rectifying color unevenness is to increase the distance between 

LED light sources and the LCD panel being illuminated, making it easier for 

the light to mix. But increasing this distance leads to thicker LED backlights. 

Another way to tackle the problem is to use dual-light guides—reflecting the 

light (to increase the path length), along with other changes in the LED 

positioning pattern and spacing to achieve better color. 

• Color shift: This occurs when the three LEDs exhibit different emission 

characteristics, due to temperature or temporal change. Tackling this problem 

is not easy, and requires the use of color and temperature sensors to detect 

LED fluctuation and automatically adjust individual pixel intensity. 

Lighting efficacy: The emission efficiency of CCFL is about 80 lm/W, but most 

LEDs achieve only about 70 lm/W. This problem can only be solved by improving 

the performance of LEDs—not through any innovation by equipment manufacturers, 

in our view. We expect the lighting efficacy of LEDs to improve to 150 lm/W by 

2012 from 70 lm/W in 2007 and thus lead to lower power consumption in the long 

run. Osram Opto Semiconductors’ development engineers have achieved new 

records for the brightness and efficiency of white Leds in the laboratory. Under 

standard conditions with an operating current of 350mA, brightness peaked at 155 

lumens and efficacy at 136 lumens/W. Last September, Cree Inc of Durham, NC, 

reported record efficacy for packaged LEDs driven at 350mA of 129lm/W for a coolwhite 

LED (with a correlated color temperature of 5813K) with a light output of 

135.7 lm, as measured by the US National Institute of Standards and Technology 

(NIST). 

Direct-LED designs: TV receivers require illumination by LED directly under LCD 

panels, rather than via light guides, as luminance must be at least 400 to 500cd/m2. 

Normally, LEDs are tightly grouped to facilitate color mixing, but the tighter they 

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are, more heat sources are concentrated, requiring complex thermal radiation 

structures. Loosely grouped LEDs worsen the color unevenness problem. The 

QUALIA 005 tries to achieve a balance between color and heat by packing the LEDs 

tightly in the horizontal direction and loosely in the vertical direction. 

LED efficiency improvement key to cost saving 

The most significant cost savings for LED backlights will come from increasing 

brightness of LEDs, which will enable fewer LEDs to be used. Higher brightness will 

be achieved through both improving efficiency (increasing lumens per watt) and 

LEDs that can support an increase in electrical current without degrading. This could 

be enabled through improved materials and moving on to flip-chip packaging. 

Majority of the LED brightness improvement comes from the epi-wafer and chip 

side. The performance upgrade potential for epi-wafers and chips is as follows: 

1. Internal quantum efficiency (epi-wafer level): The current efficiency of 

AlInGaP is 80-90% (the near-maximum theoretical limit), while that of GaN is 

only 30%, which can go up to 90%. 

2. External light extraction efficiency (chip processing level): The current 

efficiency of AlInGaP is 55%, which can improve to 80%, while that of GaN is 

70%, indicating not much room for improvement. 

Improving yields will be one way for lowering manufacturing costs. Initial total 

yields for red green blue (RGB) LEDs are less than 50%. Migrating to larger wafer 

sizes and improving economies of scale are other ways to reduce manufacturing 

costs, in our view. 

Patent issues 

Intellectual property rights and patents are important in the LED industry. Global 

manufacturers, including Cree, Lumileds, Osram and Nichia, all have their own area 

of expertise in the LED industry and often enter technology cross-licensing 

agreements to settle patent-infringement issues. Asia ex-Japan manufacturers, 

however, do not have as many useful LED patents of their own, thus resulting in 

fewer cross-licensing agreements. 

Nichia is world’s largest manufacturer of blue LEDs with around 60-70% market 

share and has dominated the market by patents for a long time. In 2002, Nichia 

authorized its technology to several international manufacturers, such as Osram, Cree 

and Lumileds through cross-licensing agreements. 

As Nichia has not been willing to license its patents to Taiwan’s manufacturers of 

bright-blue LEDs, they have tried to steer clear of Nichia’s patents through design 

modifications and patent issuance of their own. A major blow to Nichia in preventing 

Taiwanese companies from making white LEDs suitable for handset backlight use 

was the licensing by Osram of white-LED packaging technology to Taiwanese 

players such as Everlight, Lite-On, Harvatek, and Yashin, in our view. Toyoda Gosei 

also granted the white LED technology license to AOT lately. 

In August 2004, Nichia signed a contract with Opto Tech Corp of Taiwan that gives 

Opto Tech access to Nichia’s InGaN patents to manufacture blue LEDs. The 

agreement does not include licensing of Nichia’s white-LED fluorescent-material 

patents. Nichia may have signed the agreement because it needed to develop a lineup 

of products to be able to compete with manufacturers of the cheap white and blue 

LEDs being sold by LED manufacturers in China, where its patents do not have 

much force, in our view. It decided to seek an external partner with volume 

production technologies to compete with Chinese players. Nichia chose Opto Tech

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20 April 2009 

because it had been applying to Nichia for licenses since the blue-LED market first 

started to expand. 

We expect RGB LEDs to be the mainstream LED technology to be used in LED 

backlights for LCD monitors and TVs. While Nichia is a large holder of blue and 

green LED patents, Lumileds hold many patents in the high-power red segment. One 

reason that Nichia chose Opto over its competitors is its strong red-LED technology, 

which it can offer to Nichia as a partial technology swap. Nichia will need strong red 

technology if it intends to manufacture RGB LEDs for large-panel LCD backlights in 

the future, in our view. Unlike Nichia, Lumileds is willing to license its red-LED 

technology to other manufacturers. For instance, it has already licensed technology to 

Epistar in Taiwan. 

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Figure 179: Patent issues alleviate 

288 

Cotco 

Acquisition 

Stanley 

Seoul Semi 

UEC 

Lite-On 

License 

Cree 

Patent license 

Lumileds 

Epistar 

Samsung 

White LEDs 

license 

Kingbright 

Source: Companies, LEDs Magazine, Digitimes, IEK and J.P. Morgan. 


20 April 2009 

Citizen 

White White LEDs LEDs 

license license 

Cross Cross license license 

(white (white LEDs) LEDs) 

Chip Chip supply supply 

Laser Laser collaboration 

collaboration 

Patent Patent license license 

Everlight 

Osram 

Cross-license 

Cross-license 

Cross-license 

Cross-license 

Cross-license 

Cross-license 

WhiteLEDs license 

Cross-license 

Cross-license 

(white (white LEDs) LEDs) 

Manufacturing 

Manufacturing 

license license (white (white LEDs) LEDs) 

Opto Tech 

Cross-license 

Harvatek 

OEM OEM license license (blue (blue LEDs) LEDs) 

White White LEDs LEDs license license 

Cross-license 

Sony 

Rohm 

Nichia 

Cross-license 

Laser collaboration 

Patent Patent 

settlement 

settlement 

Vishay 

Patent dispute 

White White LED LED 

license license 

Avago 

Toyoda Gosei 

Toshiba 

White LEDs 

collaboration

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20 April 2009 

OLEDs: Next trend in small size displays? 

A revolutionary discovery that light-emitting and fast-switching diodes can be made 

from organic polymers resulted in the organic light emitting diode (OLED) 

technology. The OLED technology uses organic substances that emit red, green, blue 

or white light. Without any other source of illumination, OLED materials present 

bright, clear video and images that are easy to see at almost any angle. Figure 180 

shows the physical structure of an RGB OLED cell. A conductive, transparent anode 

material such as indium-tin-oxide (ITO) is first deposited on a transparent substrate. 

Next, the organic layers are applied by precision inkjet printing. Using this 

technology, pixels of red, green and blue materials are applied. After the reflective 

metal cathode of magnesium-silver alloy or lithium-aluminum has been applied via 

metal evaporation, the cell is sealed. The thickness of the structure, minus the 

substrate, is only about 300nm. 

The big advantage of the manufacturing process is its simplicity and potential for low 

cost. This procedure requires fewer manufacturing steps and fewer materials than the 

manufacturing of LCDs as the whole display can be built on one sheet of glass or 

plastic. 

Figure 180: OLED structure 

Source: PCTech Guide. 

OLED categorization: Breakdown by material technology 

Polymer LED (PLED) 

PLED can be manufactured by spin-coating, photolithography, and inkjet deposition 

techniques. European and American players focus on PLED. The most significant 

advantages of PLED are its cost-effectiveness, high thermal stability, mechanical 

intensity, color sensitivity of natural colors, and requirement of low driving voltage. 

One particular note about PLED is that the substrate can be flexible (such as using 

PET, a form of plastic). It leads to an increasingly popular area of research: Flexible 

OLED (FOLED), which is very cost-effective (because there is no need for vacuum 

process) and particularly suitable for RFID application. Inkjet printing is the 

dominant patterning technology in producing flexible PLED. 

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Small-molecule OLED (SMOLED) 

SMOLED requires vacuum evaporation technology, which makes SMOLED more 

expensive than PLED, although the performance of SMOLED is better than other 

OLED categories. It is also made on glass and not flexible at all. In SMOLED, 

researchers in the OLED field have shifted their research focus in materials from 

fluorescent materials to phosphorescent materials, because the electricity-to-light 

conversion efficiency is only 25-50%, whereas the latter boasts of a conversion 

efficiency of 80-100%. Rohm is a leading company in developing long-life 

phosphorescent OLED. SONY, Pioneer, Seiko Epson, AUO, and Universal Display 

Corp. (from the US) all have been working on OLED panels. 

OLED categorization: Breakdown by driving method 

Active matrix (AM) OLED displays stack cathode, organic, and anode layers on top 

of another layer or substrate that contains circuitry. The pixels are defined by the 

deposition of the organic material in a continuous and discrete ‘dot’ pattern. Each 

pixel is activated directly—a corresponding circuit delivers voltage to the cathode 

and anode materials, stimulating the middle organic layer. AMOLED pixels turn on 

and off more than three times faster than the speed of conventional motion picture 

film, making these displays ideal for fluid and full-motion video. The substrate, lowtemperature 

polysilicon (LTPS) technology, transmits electrical current efficiently, 

and its integrated circuitry cuts down the AMOLED display’s weight and cost. 

Unlike PMOLED, AMOLED can individually switch on or off the pixels. In view of 

the growing demand for high resolution and large area application, AMOLED is 

expected to become the dominant force in the future OLED market, in our view. 

Passive matrix (PM) OLED displays stack layers in a linear pattern, much like a 

grid, with ‘columns’ of organic and cathode materials superimposed on ‘rows’ of 

anode material. Each intersection or pixel contains all three substances. External 

circuitry controls electrical current passing through the anode ‘rows’ and cathode 

“columns”, stimulating the organic layer within each pixel. As pixels turn on and off 

in sequence, pictures form on the screen. A PMOLED display’s function and 

configuration are well-suited for viewing text and icons in dashboard and audio 

equipment. Comparable to semiconductors in design, PMOLED displays are easily, 

cost-effectively manufactured with today’s production techniques. 

Low temperature poly-silicon (LTPS) and amorphous silicon (a-Si) are both 

technologies integrating TFT on glass substrate. The obvious differences are electric 

characteristics and the complexity of process. Companies developing AMOLED 

technology are virtually all based on LTPS, although LTPS-TFT possesses higher 

carrier mobility. This means more current can be supplied; the process is much more 

complex and the yield is lower. However, the process of a-Si TFT is simple and 

practiced, resulting in low cost, except for low carrier mobility. 

Currently, most companies adopt low temperature poly silicon (LTPS)-based (AUO 

has already switched its focus from amorphous Si to LTPS). Thus, TFT companies 

which possess the LTPS technology become advantageous in the OLED industry. 

Therefore, we can see a lot of strategic alliances between TFT and OLED companies. 

For example, Tohoku Pioneer and ELDis, LG Electronics and LG Philips LCD, and 

Prime View and Rit Display work together to cut into the OLED industry.

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Figure 181: OLED timeline 

Source: AUO. 

Advantages of organic LEDs: 

OLED displays use organic compounds that emit light when charged with electric 

current. They have the following advantages over LCD: 

• Better contrast ratio: OLED display has better contrast ratio that makes the 

display look brighter. Unlike TFT LCD or STN, OLED is self-emitting. It 

directly emits light, instead of “filters light”. It avoids the potential loss when 

light passes the filter from the backplane in TFT LCD. Therefore, LCD’s typical 

contrast ratio is 500:1, compared with OLED’s typical contrast ratio of 1000:1. 

• Wider viewing angles: TFT LCD’s viewing angle is as wide as 165°. OLED’s 

viewing angle is approximately +90 or -90 degrees when the contrast ratio is 

1,000:1. Unlike LCD panels, the light and image coming out of the screen is not 

compromised when viewing from the side. 

• High power efficiency: OLED requires low DC drive voltage, so it is less powerconsuming 

than an LCD display. 

• Better low-temperature characteristics: LCD’s response time would be 

significantly slower when temperature goes below 0° Celsius. However, OLED’s 

response time is not affected by temperature. 

• Faster response time than LCD: While a standard LCD currently has an 

average 4-8 ms response time, an OLED can have less than 0.01 ms response 

time. 

• Easier manufacturing process: While LCD needs 200+ manufacturing steps, 

OLED requires only 86 steps. The relative simplicity of manufacturing process 

makes OLED 30-40% cheaper than TFT-LCD). 

• Reduction of display thickness: Because OLED panels do not need a backplane, 

an OLED display is approximately 1/3 thinner than LCDs. Please refer to the 

following figure for more details. 

Some of the challenges faced by organic LEDs 

• Entering a market already dominated by a large CRT-to-LCD panel conversion 

process. 

• Ensuring competitive refresh rates, contrast ratios (difference between the 

brightest whites and the darkest blacks on a display—the larger the contrast ratio 

the greater the ability of a projector to show subtle color details and tolerate 

extraneous room light), black levels and overall performance. 

291

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20 April 2009 

• Aging of the color output; the life of material combinations used for red, green 

and blue is another issue. Values of over 10,000 hours are already possible for red 

and green, but blue pixels show a marked reduction in luminescent intensity 

when used for such long hours. 

• Quickly meeting and exceeding price points set by current LCD/plasma 

technology leaders. 

Applications of OLED 

Although OLED is not ready for mass production for most applications, many 

manufacturers anticipate great potential. We expect OLED to replace TN/STN-LCD 

and VFD production of small size displays due to its simpler processing and lower 

cost. PMOLED can be utilized in products that require lower resolution and few gray 

scales, such as car audio display, mobile phones, PDAs, MP3 players, game boys, 

electronic dictionaries and other commercial electronic products. AMOLED, on the 

other hand, can be utilized in products requiring higher resolution, larger size and 

full-color display. These include: PDAs, DSCs, monitors, notebooks, and TVs. We 

expect OLED with its superior characteristics to play a significant role in the flat 

panel display market in the future. 

Figure 182: Emerging OLED Applications 

OLED watches: Diesel rolled out watches that use 

an OLED display in a minimalist style. At first 

glance it looks like a bracelet, but when a button 

on the side is pressed, its aqua-colored OLED 

lights up. The need to push a button is probably a 

power and lifetime saving technique. 

Source: DisplaySearch. 

Gaming router with PMOLED display: D-Link 

DGL 4500 gaming router is N-based, and has four 

ports in the back on top of the one with broadband 

connection. It is with configuration settings and 

up/down speeds. 

OLED keyboard: At $28,000, the Fairlight 

XYNERGI’s price is considered to be very high. 

Targeted at musical pros, the keyboard has all sorts 

of dials, programmable keypads and glowing lights 

for producers, allowing dealing with everything 

from Microsoft Word to top-end studio software 

from a single controller. Depending on the context, 

the keys switch to match, changing between a 

standard QWERTY layout and whatever the 

moment demands.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Japanese suppliers have taken a dominant position in the market for equipment used 

to manufacture OLED displays. They have leveraged their strengths in 

semiconductor and TFT-LCD manufacturing gear to gain the early lead in the OLED 

equipment market. While the OLED market remains in the nascent stage, the 

emerging flat-panel display technology should promise explosive growth in coming 

years. This could help OLED unit sales to expand significantly in the next few years 

as their use expands in mobile phones, media players and other products. 

Sony, Samsung SDI, LG Display and other makers are introducing larger displays 

for notebook PC and TV. At CES 2009, manufactures exhibited transparent, foldable 

and 3D variants of OLED-based displays with OQO introducing the first OLED 

display on a computer to date. The foldable Flex OLED is the next big thing to look 

for in OLED technology. It has the potential for future applications as it maximizes 

screen life and reduces power consumption. 

External electrode fluorescent lamp (EEFL) 

While CCFL is the current mainstream backlight technology used in large LCDpanel 

backlights, EEFL is one of the technologies to watch out for as competition 

increases for LEDs in large-panel LCD backlights. 

EEFL is a technology using an external electrode that acts as a capacitor, making a 

parallel circuit possible, therefore decreasing the number of inverters required. As the 

inverters are placed outside the lamp instead of inside, a single inverter can be shared 

between lamps, and thus fewer inverters are required. It will also be easier to produce 

mercury-free EEFLs than mercury-free CCFLs. Thus, EEFL technology will help 

satisfy the European Union’s RoHS initiative, which has sought to purge lead, 

cadmium, mercury, hexavalent chromium, polybrominated biphenyl and 

polybrominated diphenyl ether from electronic equipment sold in EU member 

countries since July 1, 2006. Korea’s LG is an industry leader in EEFL and is starting 

to use the technology in its LCD-TV products. 

Key advantages of EEFLs: 

• Lower cost due to reduced number of inverters (requiring only one inverter per 

backlight). Inverters currently account for 35-40% of the cost of a backlight unit 

for an LCD TV. Moving to EEFL would offer a 30% potential cost savings for 

total backlight costs versus current CCFL backlights, in our view. 

• Higher efficiency with improved brightness than CCFL (approximately 10-20% 

higher than CCFL). 

• Longer life and less power consumption from simpler electrode constructions. 

However, the temperature often increases in electrodes resulting in pinhole burns and 

creating other reliability problems. This may lead to slower migration to EEFL, in 

our view. 

293

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Semiconductor manufacturing technology trends 

and capital equipment ............................................................... 295 

What’s new? .................................................................................................................295 

Semiconductor manufacturing industry........................................................................295 

Semiconductor capital equipment spending .................................................................296 

Two facets of the semiconductor manufacturing process: Front-end and back-end .....302 

Individual equipment segments ....................................................................................302 

The front-end: Technology and equipment........................... 303 

Wafer fab equipment ....................................................................................................306 

Technology transitions in front-end manufacturing: Challenge and opportunity 

for capital equipment vendors.......................................................................................307 

Patterning: Immersion lithography makes a big splash ................................................308 

Transistor re-engineering..............................................................................................311 

Interconnect structure: Modest evolutionary changes...................................................313 

Lithography and process control-compelling 45nm investment themes.......................313 

Wafer manufacturing transition to 450mm from 300mm .............................................318 

Key beneficiaries ..........................................................................................................319 

Back-end: Packaging, assembly & testing............................ 319 

Packaging and assembly ...............................................................................................320 

Automated test..............................................................................................................322 

Competition ..................................................................................................................328 

Foundry....................................................................................... 330 

Sharp fall in revenues following seven year expansion................................................330 

Capex, R&D budgets come under pressure, capital intensity decline to new low........330 

The gap between fabless and foundry revenue QoQ growth converges to zero 

over time.......................................................................................................................332 

Comparison of top four foundries.................................................................................334 

Developments at leading foundries...............................................................................336 

IC backend.................................................................................. 339 

What’s new...................................................................................................................339 

We expect OSAT unit growth of ~10% over the next 10 years....................................339 

ASE and SPIL are targeting 10% revenue contribution from China in 2009E.............341 

Technology developments in IC packaging .......................... 342 

Copper wire as a low-cost solution: ASE and SPIL have started production 

in 4Q08 .........................................................................................................................342 

Three-dimensional packages.........................................................................................342 

SiP (system in package) continues to grow ..................................................................343 

Through-silicon-vias (TSV): An evolutionary and revolutionary assembly 

technology ....................................................................................................................344 

Types of TSV: First and last.........................................................................................344 

294 


20 April 2009 

Semiconductors

Bhavin Shah 

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20 April 2009 

Semiconductor manufacturing technology 

trends and capital equipment 

What’s new? 

The semiconductor manufacturing process transition to sub-90nm is facing many 

challenges and creating opportunities for capital equipment vendors. 300mm has now 

65% penetration and companies are looking for transition to 450mm. Intel, Samsung 

and TSMC reached a collaboration agreement to target the transition to 450mm from 

300mm starting in 2012. But equipment vendors—AMAT, KLA, NVLS, and 

ASML—are not interested in migrating to 450mm as the ROI for capital equipment 

companies is apparently much lower. 

Automated test equipment (ATE) is discussed in detail; which is used as the master 

electrical circuit to perform a comprehensive test on each semiconductor device. 

ATE receives a significant portion of the capital expenditure for back-end equipment, 

with approximately 40% of back-end capital expenditure. We provide a market 

overview by individual application segments. We discuss trends in test methodology 

including the impact of advanced packaging. Lithography and process control remain 

the key winners in all wafer fab equipment (WFE) spending. 

In the following sections we include a brief discussion on the semiconductor industry 

value chain and then provide a detailed discussion on the capital equipment industry. 

Semiconductor manufacturing industry 

The growth of the semiconductor industry has been rapid. From 1954 to 2006, the 

annual industry revenue grew to US$247.7 billion; the total semiconductor industry 

revenue touched US$256 billion in 2007, setting a new all-time industry high. Endmarket 

slowdown has severely impacted the booming growth of this industry and 

revenue growth has been slightly negative in 2008. 

Figure 183: Annual semiconductor industry revenue 

25% 

20% 

15% 

10% 

5% 

0% 

1985 

1986 

Source: WSTS. 

1987 

1988 

1989 

1990 

1991 

1992 

1993 

1994 

1995 

1996 

1997 

Semi rev enue $ Billion (Right) 5-y ear CAGR rev enue grow th (Left) 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

300 

250 

200 

150 

100 

50 

0 

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Figure 184: 2008 semiconductor application market 

296 

Communications 

27% 

Automotiv e 

8% 

Military /Civ il 

Aerospace 

1% 

Source: Gartner Dataquest (Mar-09). 

Consumer 

19% 

Industrial 

8% 


20 April 2009 

Data Processing 

37% 

Figure 185: 2008 semiconductor device market 

ASIC 9% 

Nonoptical Sensors 

1% 

ASSP 26% 

Optical 7% 

Source: Gartner Dataquest (Mar-09). 

Discrete 7% 

Memory 19% 

Logic IC 5% 

Analog IC 7% 

Micro component 

19% 

As of 2008, computing/data processing products accounted for 37% of the entire 

semiconductor device market. Communications-based products were second in 

revenue share at 27%. The diversification of semiconductor-based products in the 

past 10 years shifted the focus of the industry away from computing to 

communications and consumer electronics, with steady increase in revenue share. 

Devices focused on industrial and military/aerospace applications, which were the 

initial industry drivers, continue to decline and today form only a small portion of 

total manufactured devices. Semiconductor devices are not clearly segmented, as 

there is a mixed convention which categorizes chips based not only on their functions 

but also their applications. As seen below, the semiconductor market can also be 

classified in terms of types of devices such as micro-components (microprocessors, 

microcontrollers and DSPs), memory, logic ICs, ASICs, and ASSPs. 

Semiconductor capital equipment spending 

The big spenders 

The entire capital equipment market is based on the capital expenditure of 

semiconductor manufacturers. Given the limited number of companies that build 

semiconductor devices, a majority of that spending is concentrated on a very limited 

number of companies (top 10 companies spending about 55% of the total capex). 

Historically, the largest capital spenders have remained fairly constant with Samsung 

and Intel perennially at the top. In 1970s and 1980s, the US and Japan-based 

semiconductor manufacturers were in top positions in terms of capital spending. 

Starting mid-1990s, Korean and Taiwanese semiconductor manufacturers moved to 

the top of the capital spenders’ list and displaced many US and Japanese companies 

as large spenders. Since 2002, the Asia-Pacific region has emerged as a clear winner 

in capital spending with a 48% share in 2008. The region’s capital spending has 

grown as manufacturing costs are significantly lower than the US and Japan. Also, 

Chinese semiconductor manufacturers are the latest players that have entered the 

industry. Most of the capital equipment suppliers are either the US or Japan-based, 

probably due to a long history of the semiconductor industry operating in these 

regions.

Bhavin Shah 

(852) 2800-8538 


Table 163: Top 20 capital equipment customers spending—2004-2008 

$ in millions 

2004 2005 2006 2007 2008 

Samsung 4,900 Samsung 6,330 Samsung 6,899 Samsung 7,934 Samsung 5,700 

Intel 3,850 Intel 5,800 Intel 5,766 Hynix 5,161 Intel 5,197 

TSMC 2,400 TSMC 2,481 Hynix 4,845 Intel 5,000 Toshiba 

Mem+Sandisk 

2,800 

STMicro 2,050 Hynix 2,273 Toshiba 

3,114 Micron + IM JV 4,100 

2,300 

Mem+Sandisk 

Hynix 

SMIC 1,838 Elpida 1,722 TSMC 2,457 Toshiba Memory + 

Sandisk 

3,755 Micron + IM JV 2,240 

UMC 1,530 AMD 1,503 AMD 1,856 TSMC 2,557 Elpida 2,027 

Micron + IM JV 1,500 STMicro 1,441 Powerchip 1,748 Elpida 2,096 TSMC 1,794 

NEC 1,465 Texas Inst 1,330 Micron + IM JV 1,691 Powerchip 1,951 Nanya/Inotera 969 

AMD 1,406 Micron + IM JV 1,300 Nanya/Inotera 1,560 ProMOS 1,840 Sony 1,105 

Sony 1,364 Sony 1,250 STMicro 1,533 AMD 1,686 STMicro 850 

Nanya/Inotera 1,356 Powerchip 1,200 Fujitsu 1,453 Nanya 1,442 Texas Inst 800 

IBM Micro 1,300 IBM Micro 1,200 Elpida 1,336 Inotera 1,350 SMIC 790 

Texas Inst 1,300 Renesas 1,000 IBM Micro 1,300 Qimonda 1,157 Renesas 700 

Hynix 1,250 Fujitsu 1,000 Sony 1,293 STMicro 1,140 Chartered 576 

Renesas 1,167 SMIC 873 Texas Inst 1,272 Spansion 1,116 Matsushita 638 

Elpida 1,100 Nanya/Inotera 800 UMC 1,029 IBM Micro 1,100 Toshiba IDM 622 

Toshiba IDM 1,072 NEC 750 NEC 897 Fujitsu 1,065 AMD 621 

Powerchip 800 Winbond 738 SMIC 883 UMC 866 NEC Electronics 621 

Matsushita 736 Toshiba IDM 687 Toshiba IDM 870 Sony 796 Powerchip 606 

Infineon 500 Infineon 450 Quimonda 864 Chartered 758 Quimonda 526 

Total of Top 20 32,884 34,128 42,666 46,870 31,482 

% change 4% 25% 10% -33% 

Source: Companies, Dataquest and J.P. Morgan. Note: Intoera was formerly known as Hwaya Semiconductor. *Renesas (Hitachi+Mitsubishi). 

Table 164: Historical capital spending by region 


20 April 2009 

2002 2003 2004 2005 2006 2007 2008 

CAGR (%) 

2002-2008 

The Americas 9,244.0 7,929.6 10,261.0 10,915.8 11,401.6 11,975.5 9,031.7 -0.5 

Growth (%) -38.2 -14.2 29.4 6.4 4.5 5.0 -24.6 

Japan 4,560.5 7,029.3 11,407.4 11,526.9 13,149.8 11,432.1 10,643.1 18.5 

Growth (%) -54.2 54.1 62.3 1.0 14.1 -13.1 -6.9 

Europe 3,227.7 3,501.4 4,473.3 4,572.4 5,518.1 5,169.1 3,601.8 2.2 

Growth (%) -47.8 8.5 27.8 2.2 20.7 -6.3 -30.3 

Asia/Pacific 11,953.1 12,632.2 25,557.8 22,708.3 30,008.2 34,741.9 21,301.2 12.2 

Growth (%) -17.8 5.7 102.3 -11.1 32.1 15.8 -38.7 

China NA 1,787.5 4,130.8 2,679.0 3,941.8 5,011.8 3,523.1 NA 

Growth (%) 131.1 -35.1 47.1 27.1 -29.7 

South Korea NA 4,193.5 6,669.1 8,319.8 10,773.7 10,400.9 7,186.1 NA 

Growth (%) 59.0 24.8 29.5 -3.5 -30.9 

Taiwan NA 3,256.3 10,393.4 8,418.9 10,700.1 14,547.0 6,751.9 NA 

Growth (%) 219.2 -19.0 27.1 36.0 -53.6 

Rest of Asia/Pacific NA 3,394.9 4,364.5 3,290.6 4,592.6 4,782.1 3,840.0 NA 

Growth (%) 28.6 -24.6 39.6 4.1 -19.7 

Total worldwide 28,985.2 31,092.5 51,699.4 49,723.3 60,077.6 63,318.6 44,577.8 9.0 

Growth (%) 

Source: Gartner (Mar-09). 

-36.5 7.3 66.3 -3.8 20.8 5.4 -29.6 

Notes: Merchant and captive semiconductor companies are included. In July 2008, major SATs companies were added into the capex spending analysis. 

As shown in Figure 186, semiconductor capital spending has increased significantly 

since the 1980s. The proliferation of the PC and corporate information infrastructure 

throughout the 1980s and 1990s caused the semiconductor industry, as well as the 

capital equipment market supporting it, to grow tremendously. Figure 186 also 

illustrates the cyclical growth nature of the capital equipment market. Peaks were 

297

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20 April 2009 

occurred in 1984, 1991, 1996, 2000 and 2007. This cyclical behavior reflects how 

equipment purchases are not only dependent on market demand, but also on 

technology development cycles. Semiconductor capital equipment is typically 

developed for specific technology nodes. At some point, the installed capital 

equipment set is unable to meet the demands of advanced technology requirements, 

causing semiconductor manufacturers to re-tool and purchase large amounts of 

equipment to continue manufacturing in volume at the leading edge. 

Figure 186: Historical semiconductor industry capital expenditure trend (1985-2008) 

70 

60 

50 

40 

30 

20 

10 

0 

1985 

1986 

1987 


1988 

1989 

1990 

1991 

1992 

1993 

1994 

1995 

1996 

1997 

Semi Capex ($ billion) Wafer fab equipment ($ billion) 

Who spends on what? 

The three primary manufacturer categories within the semiconductor industry that 

influence capital spending are: logic-oriented integrated device manufacturers 

(IDMs), memory manufacturers, and logic foundries. IDMs and memory 

manufacturers are on different technology paths, influencing capital spending in their 

own individual manner. IDMs are focused on increasing the computational speed and 

density of their devices, while memory manufacturers are primarily focused on 

increasing bit storage capacity. Technology demands have pushed IDMs into 

introducing copper and low-dielectric constant (low-k) material in the manufacturing 

process. Memory manufacturers are primarily driven by reducing the cost per bit and 

have so far continued to use traditional aluminum-based technology for their 

products. Foundries are primarily on logic-based processes and have become the 

primary manufacturing source for a growing number of fab-less semiconductor 

companies, many of which are in the communications device segment, as well as 

logic IDMs that have decided to pursue a fab-light strategy. Since 2000, logic 

foundries have narrowed the technology gap between themselves and IDMs, and 

correspondingly their capital spending behavior and their technology roadmap have 

become more closely aligned with IDMs. Relative capital spending has decreased 

over time from logic IDMs and has shifted to foundries. Memory-related capital 

spending peaked in mid-1990s, during the high-growth period of PCs and a 

significant amount of investment in DRAM production by Korean manufacturers. 

Capital spending for memory manufacturers has been trending up recently, as 

memory usage is increasing at a rapid pace in personal mobile devices, especially for 

non-volatile flash memory. Solid state drive (SSD) is going to be a large driver of 

semiconductor capital spending. Figure 189 to Figure 191 show capex vs. revenue 

trends for total semiconductor industry, logic and memory. 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008

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Figure 187: Semiconductor industry value chain 



20 April 2009 

Integrated device manufacturers: Companies that perform every step of the chipmaking 

process, design, manufacture, test and packaging are generally termed as 

IDMs, and adopted the vertical semiconductor business model in 1960s. Intel, AMD, 

IBM, Motorola, TI, STMicro are some of the companies classified as IDM. 

Foundries: Semiconductor foundries manufacture wafers for fabless semiconductor 

companies. Historically, foundries obtained the latest wafer manufacturing process 

from major IDMs. TSMC, UMC, Chartered Semiconductors and SMIC are the major 

four foundries. 

Fabless: Fabless (FABricationLESS) are the companies that do not have in-house 

wafer manufacturing facility. Most new semiconductor companies adopt fables-kind 

of business models. Examples for this type of companies are Broadcom, Qualcomm, 

RFMD, Omnivision and NVIDIA. 

Intellectual property supplier: Intellectual property core suppliers are important to 

those companies that do not develop cores. Most of the successful system-on-chip 

(SoC) companies use third-party intellectual property in their design. ARM, Rambus, 

Synopsis and Imagination Technologies have commercialized the supply of 

intellectual property. 

299

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300 

IDM 


20 April 2009 

Figure 188: Semiconductor supply chain 

AMD Analog Devices Melexis Microchip Tech 

ELMOS Elpida Memory Micron Nanya Tech 

Hynix Fairchild Semi NEC National Semi 

Infineon Inotera ON Semi Powerchip Semi 

IDT Intersil Corp ProMos TI 

Intel Linear Tech Rohm Sandisk Corp 

LSI Logic MaximIntegrated Sanken Semtech Corp 

Spansion STMicro Winbond IBM 


Foundries 

TSMC UMC Chartered Semi 

ASMC Vanguard UMC Japan 

IC assembly & test 

SPIL STATSChipPAC 

ASE ASAT Holding 

Unisem MPI 

Amkor Powertech 

Fabless 

Altera Himax Novatek Micro Solomon Systech 

Applied Microcircuit Lattice Semi OmniVision Sunplus 

Arm Holding Marvell Tech PMC-Sierra TriQuint 

Broadcom MediaTek QUALCOMM VIA Tech 

Corning Microsemi RF Micro Devices Vitesse Semi 

CSR Microtune Richtek Tech WJ 

Cypress Semi Mtekvision Sierra Wolfson Micro 

Elan Microelectronic Novatel SigmaTel Xilinx 

Greatek NVIDIA SiS Zoran 

IC and components 

EMS/ODM Distributors 

OEM

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20 April 2009 

Figure 189: Semiconductor capex vs. revenue 

300.0 

250.0 

200.0 

150.0 

100.0 

50.0 

0.0 

2000 2001 2002 2003 2004 2005 2006 2007 2008 

Source: WSTS, companies and J.P. Morgan. 

Figure 190: Logic capex vs. revenue 

250.0 

200.0 

150.0 

100.0 

50.0 

0.0 

Semiconductor Capex Semiconductor Revenue Capital Intensity 

2000 2001 2002 2003 2004 2005 2006 2007 2008 

Source: WSTS, companies and J.P. Morgan. 

Figure 191: Memory capex vs. revenue 

50.0 

45.0 

40.0 

35.0 

30.0 

25.0 

20.0 

15.0 

10.0 

5.0 

0.0 

Logic Revenue Logic Capex Capital Intensity 

2000 2001 2002 2003 2004 2005 2006 2007 2008 

Source: Companies and J.P. Morgan. 

Memory Revenue Memory Capex Capital Intensity 

25% 

20% 

15% 

10% 

5% 

0% 

25.0% 

20.0% 

15.0% 

10.0% 

5.0% 

0.0% 

80.0% 

70.0% 

60.0% 

50.0% 

40.0% 

30.0% 

20.0% 

10.0% 

0.0% 

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20 April 2009 

Two facets of the semiconductor manufacturing process: 

Front-end and back-end 

The manufacturing process of the semiconductor industry is separated into two 

unique areas, known as the front-end and the back-end. The term front-end refers to 

the formation of semiconductor devices on the surface of a silicon wafer. This 

portion of the manufacturing process is performed in a facility called a fab, which is 

short for fabrication. Once the wafer-level manufacturing is completed, the follow-on 

manufacturing is called back-end, where most of the processing occurs after the 

wafer has been cut into individual units and usually occurs away from the fab, often 

in different countries. This is where individual devices are assembled and packaged, 

and then tested before shipping to the end-user. The capital equipment required for 

each side of the manufacturing process is unique and has evolved over time into very 

specialized segments. The two sides of the equipment industry are very different 

from each other and only a few companies, such as TEL and ASML supply 

equipment to both sides. 

Front-end and back-end revenue comparison 

A majority of the capital spent on semiconductor manufacturing is allocated to frontend 

manufacturing. The technology requirements for wafer fab equipment (WFE) 

used in front-end manufacturing takes up the majority of capital investment. In 2008, 

WFE was nearly 80% of all capital equipment spending. However, we expect the 

difficulties of packaging, assembly and testing to increase significantly with the 

advancement of semiconductor devices. We also expect the technologies such as flipchip 

and less robust device materials (like low–k materials) to push up the 

requirements of back-end manufacturing technology. It is possible that capital 

spending on back-end could increase in order to adopt and implement newer 

technologies. 

Table 165: Capital equipment revenue share—Front-end versus back-end 


Capital equipment segment 2008 revenue Revenue share 

Front-end manufacturing/wafer fab equipment 24,698 80.1% 

Back-end manufacturing/packaging assembly and test 

Source: Dataquest (Mar-09). 

6,134 19.9% 

Individual equipment segments 

The revenue for each equipment segment is heavily derived from two specific 

drivers; how widespread the use of that segment is, and the level of technology 

required for that equipment segment. In lithography, steppers/scanners are used 

throughout the device manufacturing process and are considered by most to have the 

highest level of technology in the capital equipment industry. It is not surprising to 

see that this segment also has the largest revenue share of all the equipment 

segments. Process control is the second-largest equipment segment, given the 

diversity of measurements required and the necessity of monitoring the 

manufacturing process on a real-time basis to ensure that it is within required 

specifications. CVD and Etch are also other large equipment segments, primarily due 

to the widespread use of these technologies throughout the manufacturing process. 

We expect the lithography and process control segments to outgrow the wafer fab 

equipment industry average as chip fabrication becomes increasingly more difficult 

at the 45nm technology node and below.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 166: Semiconductor capital equipment segment revenue (2007-2008) 


Total 

revenue 

2008 2007 

% of overall 

market 

Total 

revenue 

% of 

overall 

market 

Y/Y 

change 

(%) 

Stepper/scanner $5,371 17.4% $7,144 16.0% -24.8% 

Packaging and assembly $3,681 11.9% $5,182 11.6% -29.0% 

Automated test $2,453 8.0% $3,557 7.9% -31.1% 

Process control $3,406 11.0% $4,607 10.3% -26.1% 

Etch, clean and planarization $6,215 20.2% $9,574 21.4% -35.1% 

CVD $2,722 8.8% $4,736 10.6% -42.5% 

Manufacturing automation & control $1,648 5.3% $2,355 5.3% -30.0% 

PVD/sputtering $1,017 3.3% $1,643 3.7% -38.1% 

Ion implant $848 2.7% $1,337 3.0% -36.6% 

Oxidation/diffusion $948 3.1% $1,639 3.7% -42.2% 

Electrochemical deposition $126 0.4% $167 0.4% -24.6% 

Epi $292 0.9% $449 1.0% -34.9% 

Others $2,105 6.8% $2,354 5.3% -10.6% 

Total 

Source: Gartner (Mar-09). 

$30,831 $44,743 -31.1% 

The packaging, assembly and test segments are large due to the requirements of 

testing non-homogenous products, and thus specialized equipment is required by 

each customer. However, the technology requirements for these segments are 

typically considered below that of front-end processing and thus limit revenue 

growth prospects in these segments as equipment becomes more commodity-like. 

For our analysis, we have shown packaging/assembly and automated test as large 

aggregated segments, even though there are diverse technologies within those 

equipment segments. 

The front-end: Technology and equipment 

This is where transistors and circuits of a semiconductor device are formed. Frontend 

manufacturing is centered on the lithography process, which is the means of 

patterning and then forming each layer in each device. In lithography, two specific 

steps are required. First, a thin film, known as photoresist, is coated onto the surface 

of a wafer. That film is then selectively exposed to light through a mask, which only 

allows a specific pattern of the film to be exposed to light. After exposure, the film is 

developed, where only the photoresist that was exposed to the light is removed from 

the surface of the wafer. This leaves a pattern on the wafer that is used as the basis to 

form one layer of the semiconductor device. The lithography process is performed 

repeatedly in conjunction with other process steps to form different circuits and 

features of devices. Front-end manufacturing is further broken up into two segments; 

these subcategories are based on transistor formation (front-end of line, FEOL) and 

interconnect formation (back-end of line, BEOL). 

Table 167 explains wafer fab equipment: (industry players, equipment functions and 

industry scenario). (Please see our report, “WFE Market Share Report”, published 

in June 2008, for more discussions). 

303

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Table 167: Front-end segments—Wafer fab equipment (industry players, equipment functions and industry scenario) 

Wafer fab equipment 

category Function J.P. Morgan growth expectations Major players 

Physical vapor Used to deposit metal that is used in the formation of electrical interconnects within a Higher equipment productivity with each new generation along with the continued Applied Materials 

deposition (PVD) semiconductor device. It uses electrically created plasma to strip away metal ions from transition from bulk aluminum PVD to copper electroplating should cause the PVD Ulvac 

an adjacent metal source and deposit them onto the surface of the wafer. 

segment to grow less than the overall equipment market. We also expect a modest Novellus 

competitive environment to stabilize system ASPs, lowering the overall revenue growth Canon Anelva 

below that of the overall WFE equipment industry. Aziva Tech 

Chemical vapor 

deposition (CVD) 

Oxidation/Diffusion 

(Ox/Diff) 

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20 April 2009 

CVD equipment is most commonly used to deposit materials that are used as the 

insulation between interconnects of a semiconductor device. 

Ox/Diff equipment is used for many different applications, including the growth of very 

thin silicon oxide films, modification of the material properties of a pre-deposited film 

such as annealing or film densification, and controlled diffusion of dopants from ion 

implant following the implant process. 

Wet processing Wet processing includes three specific applications: cleaning, etching, and stripping. 

Wet cleaning is focused on removing residual material following other processes, such 

as CVD, PVD, and Photoresist strip, in order to reduce the spread of contamination. 

Wet etch is used to remove inorganic films or material that was previously deposited 

but will not remain in the completed device. Wet stripping refers to the removal of 

organic materials such as photoresist, where plasma-based stripping is not applicable. 

Etch Etch equipment is used to selectively remove material from the surface of a wafer to 

create device structures such as trenches and vias. 

Stepper/Scanner Stepper/Scanner equipment is the core of the lithography process and typically the 

most expensive equipment in the fab. The wafer is moved in large “steps” that correlate 

to individual die. Once “stepped” into position, the wafer is then “scanned” across the 

light source within the die to fully expose the photoresist not covered by the mask. 

Increasing interconnect layers for advanced logic devices, additional applications for 

strain engineering at the transistor, and declining average system productivity are likely 

to drive the need for incremental unit shipment at each successive technology node. 

We expect a combination of the above mentioned factors to drive CVD equipment 

Applied Materials 

Tokyo Electron 

Novellus 

Hitachi Kokusai 

segment revenue growth above the wafer fab industry average. ASM International 

Increasing gate engineering requirements as well as tighter control of very thin oxides 

and diffusion performance should drive additional complexity in oxidation/diffusion 

steps at advanced technology nodes, leading to higher value systems and therefore 

increasing ASPs. As a result, we expect this segment to modestly outperform overall 



Hitachi Kokusai 

ASM International 

equipment revenue growth. Mattson Tech 

We expect the continued transition from batch processing to single wafer processing, 

which generally has lower productivity per system, to drive incrementally more system 

unit shipments at each new technology node. However, this is a very segmented and 

competitive market, and we expect wet clean/wet strip ASPs to grow less than the 

Dainippon Screen 


SEZ Group 

S.E.S. 

wafer fab equipment industry market due to continued pricing pressure. FSI International 

Similar to CVD, the increase in the number of interconnect layers as well as transistor 

complexity are likely to drive the need for incremental system unit shipments at each 

successive technology node. We believe severe competition from the three major 

equipment suppliers will likely result in flat ASPs with the increase in unit shipments 

driving the above average growth rate. FOI 

The continued adoption of advanced technology for lithography is driving system ASPs 

higher, absorbing an increasing percentage of wafer fab equipment spending over 

time. We expect the adoption of immersion and/or double exposure to accelerate ASP 

appreciation. Together with higher unit demand based on an increasing number of 

lithography steps, we expect ASP progression to drive above-average revenue growth. 

Photoresist strip PR strip equipment is used to remove photoresist from the surface of a wafer. PR strip is a very competitive market and considered by many to be less critical than 

other equipment segments. This is offset by a robust increase in the number of steps, 

causing this equipment segment to grow relatively in line with the overall equipment 

market. 

Track Track equipment is used to coat a wafer with photoresist and then develop the 

photoresist once it has been exposed in the stepper/scanner system. Track systems 

are also known as coater/developers. 

The general lack of need for new technology, coupled with very high system 

productivity, leads us to believe that the track segment will grow less than the overall 

equipment segment. 

Lam Research 



Hitachi High-Tech 

ASML 

Nikon 

Canon 

PSK Inc 

Novellus 

Mattson Tech 

Axcelis 

Shibaura Mechatronics 


Sokudo 

SEMES 

SUSS 

Applied Materials

Bhavin Shah 

(852) 2800-8538 



category Function J.P. Morgan growth expectations Major players 

Chemical mechanical CMP equipment is used to planarize or flatten out the hills and valleys on a particular We expect the high cost of process-related consumables and increasing competition to Applied Materials 

polishing (CMP) film or layer after deposition. CMP equipment usage has grown significantly since its offset the modest growth from increasing interconnect layers and CMP applications, Ebara 

mainstream introduction in mid 1990s. 

keeping this equipment segment’s overall revenue growth below-average industry Novellus 

growth. Tokyo Seimitsu 

Electrochemical ECD equipment is used to deposit the copper metal that forms interconnects within a ECD equipment productivity increases at each new technology node, offsetting the Novellus 

deposition (ECD) semiconductor device. 

high growth rate of copper-based production and increased interconnect layers, limiting Semitool 

system unit growth and bringing this equipment segment’s overall growth in line with 

the industry. 


Ion Implant Ion implant equipment is used to “dope” or physically insert specific ions into the silicon Each new device generation requires incrementally more implants in order to tune Varian 

that is the basis for the gate structure. 

transistor performance. Additionally, the ongoing transition from multi-wafer processing Axcelis/SEN 

to single-wafer processing reduces system productivity, driving the need for more unit Nissin Electric 

shipments at each new technology node. We believe a combination of these factors is Applied Materials 

likely to drive Ion Implant revenue growth at a higher rate than the overall wafer fab 

equipment industry. 

ULVAC 

Epitaxial deposition Silicon epitaxial equipment is used to grow a high quality layer of silicon on the surface The development of silicon germanium (SiGe) for enhanced transistor performance in Applied Materials 

(Epi) 

of a wafer onto which the transistor structures will be built. By building the transistor advanced logic devices adds new applications for Epitaxial deposition. However, the ASM International 

structure on top of a previously deposited silicon germanium (SiGe) layer, the 

trend toward more complex system architectures with higher productivity is likely to LPE 

performance of the transistor can be significantly enhanced. 

negate the growth potential provided by this new SiGe application and cause this New Flare 

equipment segment to perform in line with the overall wafer fab equipment industry. Technologies 

Process control Process control equipment is one of the most diverse segments including equipment We expect that the continued introduction of new materials, more complex transistor KLA-Tencor 

for inspection, defect review and analysis, critical dimension measurement, and thin structures and lithography will require incrementally more process control steps and Hitachi High-Tech 

film metrology. 

corresponding equipment at each new technology node in order to maintain acceptable Applied Materials 

yield levels. We believe these factors will drive process control revenue to outgrow the Nanometrics 

wafer fab equipment industry average. Vistec Semi Sys 

Manufacturing 

automation and 

control 



20 April 2009 

Factory automation and control encompass a very diverse segment, as it includes the 

equipment used to transfer, store, and sort both wafers and photo-masks within a fab 

and also includes the software needed to integrate and control equipment for the entire 

manufacturing process. 

As more semiconductor manufacturers build 300mm facilities, manufacturing 

automation/control adoption should outpace the overall wafer fab equipment industry in 

terms of unit growth. However, this is a highly competitive segment, and ASPs are 

expected to remain under severe pressure, causing it to grow below the overall 

Asyst Tech 

Brooks Auto 

Daifuku 

IBM 

equipment average. Hewlett-Packard 

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20 April 2009 

FEOL: Transistor formation 

FEOL is where transistors are formed and it requires a specialized equipment for 

epitaxial deposition, ion implant, and oxidation/diffusion. In general, the formation 

of transistors is a non-repeating sequence. Each part of the transistor’s structure is 

unique, requiring very diverse equipment and mask sets to build them. The 

transistors are also the smallest and most sensitive features in a semiconductor 

device, requiring very stable processes and a large amount of process control to 

monitor the manufacturing process. 

BEOL: Interconnect formation 

BEOL is the place where interconnects are formed. Interconnects are circuit wirings 

that connect the various components of the semiconductor device together, and also 

connect the device with the outside world. In general, as components and complexity 

in a semiconductor device increase, more interconnect layers are required. The 

process of forming interconnects is a repeating sequence for each metal layer. So, in 

general, the same equipment set that is used to form one metal layer can be used for 

the second metal layer, the third and so on. This results in significant amount of 

CVD, PVD and other equipment dedicated to BEOL manufacturing. 


Wafer fab equipment (WFE) is a specialized machinery that is used for the formation 

of semiconductor devices on silicon wafer. In early days of the semiconductor 

industry, most manufacturing equipment was designed and built by semiconductor 

companies themselves. As chip design became more complex, the requirement from 

the manufacturing equipment needed to produce chips became increasingly 

demanding and thus specialized equipment companies emerged to focus on building 

and designing equipment that would meet those demands. Due to the very complex 

manufacturing process, various types of equipment have evolved for a particular 

task. Some of the equipment is used for very limited but critical applications, such as 

ion implant, while others are used repeatedly throughout the manufacturing process, 

such as CVD. Most of the equipment used in front-end manufacturing is used 

throughout the process in both FEOL and BEOL. However, some equipment types 

are only used for one or the other. Figure 192 illustrates different types of equipment 

segments used in front-end manufacturing and where they are required for, either 

FEOL or BEOL applications. 

Figure 192: Front-end equipment segment usage—FEOL and BEOL 

Used only in the 

Transistor Formation 

Used in both the Transistor and 

(FEOL) 

Interconnect Formation (FEOL and BEOL) 

Epitaxy 

Ion Implant Etch 

Wet Processing 

Oxidation/Diffusion 


CVD 

Process Control 

Stepper/Scanner 

Track 

PVD 

Photoresist Strip 

CMP 

Factory Automation 

Used only in the 

Interconnect 

Formation (BEOL) 

ECD

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Technology transitions in front-end manufacturing: 

Challenge and opportunity for capital equipment vendors 

Wafer manufacturing has been witnessing technological changes over years. The 

semiconductor manufacturing process transition from 90nm to 45nm is facing many 

challenges and creating opportunities for capital equipment vendors. 300mm now has 

65% penetration and companies are looking for the transition to 450mm. 

45nm process technology roadmap 

In 2H07, Intel became the first logic chipmaker to enter volume production using the 

45nm (nanometer) process technology. As logic device makers initiate 45nm volume 

production, increasing device complexity will continue to present new challenges 

and drive major changes in semiconductor manufacturing. These include the 

introduction of new materials as well as evolving device architectures and 

manufacturing techniques, which create the need for a more complex set of capital 

equipment. Major manufacturing changes occurring in advanced logic devices and 

the effects on the capital equipment industry will be: 

• The number of wafer passes for an advanced logic device will increase by 

approximately 35%, to 547 wafer passes from 404, at the 45nm technology 

node versus 90nm. This directly results in the need to purchase a larger capital 

equipment tool set to produce the same number of devices at 45nm versus 90nm. 

• For the first time since the start of the semiconductor industry, radical new 

materials will be incorporated into the transistor in the form of metal gates 

and “high k” dielectrics (insulators). Additionally, the widespread use of 

“strained silicon” technology adds incremental layers and complexity to the 

overall transistor design. 

• Immersion lithography will be adopted into mainstream production. This 

new technology, which is “wet” 193nm ArF, coupled with the continued overall 

mix shift towards more advanced “dry” 248nm KrF and 193nm ArF (i.e., DUV) 

tools, will result in an estimated 50% increase in blended ASPs for a suite of 

photolithography systems for 45nm chip production versus 90nm, in our view. 

Three core areas of technology change at 45nm 

In the move to the 45nm technology node, we have classified important technology 

changes into the following three broad categories: 

• Patterning: The creation of device features versus lithography which is the 

exposure of an image that is part of the patterning process after deposition and 

before etch. 

• Transistor engineering: Front-end of line (FEOL) device processing (essentially 

on/off switches). 

• Interconnect formation: Back-end of line (BEOL) interconnect formation (like 

wires connecting light switches together). 

Table 168 summarizes the most important changes for logic chips within these areas. 

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20 April 2009 

Table 168: Summary of process changes in logic devices (90-45nm) 

Category Technology changes (90nm-45nm) Affected equipment segments 

Patterning Adoption of immersion lithography Steppers, DUV laser sources 

Mix shift to DUV lithography (ArF and KrF) Steppers, DUV laser sources 

Adoption of "ashable" amorphous carbon hardmasks CVD, etch 

Transistor Strained silicon using dual high stress liners CVD, etch 

Strained silicon using epitaxial Si/Ge in etched recesses Epitaxy, etch 

Ultra-shallow junctions (shallower and more abrupt) Ion implant, oxidation/Diffusion 

High-k gate dielectric with metal gates ALD, PVD, etch 

Further gate dielectric modification (Nitridation) Oxidation/Diffusion 

Interconnect Additional layers CVD, Etch, PVD, ECD, CMP 


Lower dielectric constant barriers (silicon carbide) CVD, Etch 

Figure 193: Graphical representation of major changes to transistors at the 45nm technology 

node 


Patterning: Immersion lithography makes a big splash 

Defining the terminology 

The lithography segment of the wafer fab equipment market is segmented by the type 

of light source in terms of defining various products. Specifically, the nomenclature 

is defined by the wave length of a light source and/or the gas used to create light for 

lithography systems. There are critical, mid-critical, and non-critical lithography 

systems, and each type of system requires unique lenses and light sources, among 

other complex features. Critical lithography tools image the smallest features that are 

found at the bottom of a chip at the transistor level. Mid-critical tools do the middle 

layers; while non-critical tools do very large upper level interconnect layers. 

Mainstream lithography tools today include critical 193nm ArF (argon fluoride); dry, 

mid-critical 248nm KrF (krypton fluoride); and non-critical 365nm i-Line systems. 

193nm ArF and 248nm KrF-based lithography systems use laser light sources, while 

365nm i-Line systems use mercury arc lamps. Lithography tools based on shorter 

light wavelengths can image or “resolve” smaller device features. The theoretical 

limit is 1/3 the wavelength of the light source. For example, a 65nm device feature

Bhavin Shah 

(852) 2800-8538 


NAND is leading the processtechnology 

curve in semiconductors 


20 April 2009 

can be imaged with a dry 193nm ArF system, which is the leading edge in the highvolume 

logic chip production today. 

Figure 194: Immersion lithography 

Source: Nikon. 

Adoption of immersion lithography 

Recently, a new leading edge critical lithography system subcategory called 

“immersion” lithography was created. Immersion tools use a 193nm ArF laser light 

source. However, in a revolutionary advancement, they use water in addition to the 

lenses to expose the pattern through the surface of the wafer. Water sits between the 

bottom of the lens and the surface of the wafer. This effectively increases the 

resolution of the system and extends the usability of 193nm ArF lenses and laser 

light sources. It also increases the theoretical and practical limit/imaging capability of 

193nm ArF-based lithography systems to 1/4th the wavelength of light (for single 

exposure systems), in other words 45nm. 

Immersion lithography makes a big splash 

The primary changes in photolithography include the adoption of immersion 

lithography coupled with an overall mix-shift towards more complex and higherpriced 

193nm ArF and 248nm KrF DUV (deep ultraviolet) systems. Although 

memory applications will likely continue to drive the lithography technology 

roadmap (i.e. technological innovation), logic chipmakers could use immersion 

lithography at the 45nm node for the most critical four layers of the device. Intel is 

an exception to this rule as it has decided to continue using dry 193nm ArF 

lithography at 45nm. However, it is likely to use the most advanced and probably the 

most expensive mask technology and/or double exposure lithography to overcome 

the challenges of using dry 193nm ArF for 45nm production versus immersion. 

Foundries to widely adopt immersion lithography 

Logic foundries face unique challenges in lithography as they need to accommodate 

a multitude of designs and therefore cannot fine-tune their processes for a particular 

design, thus requiring the need for greater latitude in resolution and focus. As a 

result, in contrast to integrated device manufactures (IDMs) like Intel which 

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Ashable hardmasks are layers 

used along with photoresist to 

serve as the mask for etch 

processes in cases where the 

use of photoresist alone is not 

adequate. 

310 


20 April 2009 

produces a relatively limited number of designs, we expect foundries to widely adopt 

immersion lithography for critical layers at 45nm and possibly at sub-65nm half step 

designs (i.e., ~55nm). 

Immersion side-effects: Increased defect inspection 

Immersion lithography has introduced new potential sources of defects into chip 

fabrication. In order to increase the effective numerical aperture of a leading-edge 

lithography system, water, which provides a magnifying effect, instead of air, fills 

the space between the bottom of the lens and the surface of the wafer. Water actually 

comes into contact with the wafer’s surface, increasing the potential of defects 

occurring as well as possibly transporting particles from the wafer’s edge onto the 

surface of the wafer where the devices are formed, resulting in an increased risk of 

“killer defects” (i.e. unwanted particles that result in device failure). 

Examples of immersion lithography-specific defects are shown in Figure 195 below. 

This new source of device-killing particles require a higher level of defectmonitoring 

to ensure that yield levels remain high. Defect control is usually quoted 

as the major issue in the successful ramp of device yields using immersion 

lithography. The bottom line: frequent change in advanced lithography is one of the 

major drivers of increased process control usage. 

Figure 195: Examples of immersion lithography specific defects 

Source: Yield Management Solutions and Company reports. 

Increasing complexity requires more use of process control to keep yields high 

An increase in complexity drives the need for more aggressive or more stringent 

design rules, which makes high-yield chip fabrication more difficult as there is less 

leeway or error budget in the manufacturing process. The resulting level of the 

combined variation in overlay and CD (critical dimension) uniformity will be higher 

(worse), prompting higher sampling frequency (i.e. a higher level of process control 

sampling rates). As a result, there will be greater use of patterning-related process 

control including photo-mask inspection, overlay metrology and optical CD 

metrology. 

CVD layers are increasingly used to assist lithography 

Ashable hard masks and antireflective coatings have been adopted in the 

manufacturing of NAND flash chips for certain critical applications such as shallow 

trench isolation (STI), gate etch and contact etch. These films offer high selectivity to 

the material being etched and therefore enable enhanced profile control (i.e., vertical 

walls) when etching high aspect ratio features, even as the thickness of the patterned 

photoresist continues to thin. The number of process steps that use these films will 

first increase in NAND flash and also grow beyond flash as these films/processes are 

adopted in DRAM and logic applications as well.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Additional CVD layers require more etch steps 

In conjunction with the additional CVD layers needed to assist the lithography 

process, the number of etch steps should increase as additional “hard mask open” 

etch steps would be required in order to accommodate the use of hard masks, 

including ashable hard masks, particularly in the fabrication NAND flash and DRAM 

chips as well as advanced logic devices at the 45nm technology node. 

Immersion lithography vendors 

Currently, only ASML, Nikon and Canon supply immersion lithography equipment. 

Intel is planning to use ASML immersion lithography for the first time while 

migrating to 32nm. IC steppers and scanners utilizing immersion lithography 

technology are used in advanced flash memory and other leading-edge device mass 

production lines, and will soon be applied to the production of DRAM and personal 

computer CPU. 

ASML has introduced the TWINSCAN XT:1950i lithography system using a 1.35 

NA lens, which the company claims increases the performance of its immersion 

lithography systems by 25% and enables high-volume manufacturing at 38nm 

memory and 32nm logic nodes. ASML also claims that 1950i offers a throughput of 

148 wafers/hour, a 15% improvement over 1900i. Nikon’s 610C was the key 

competitor to 1900i and it has a rated throughput of 130 wafers/hour, though we 

believe the achievable throughput is lower. The 1950i will enable ASML to maintain 

ASML’ throughput lead on Nikon tools, in our view. 

Beyond immersion: Alternative for sub-45 processing 

High index immersion: 

A material with larger refractive index is required to take immersion lithography to 

the sub-45 process. This can be expensive and may not be feasible as the liquid 

should also have certain electrical properties that make this option little less feasible. 

It needs better lenses for this purpose. 

Double patterning and extreme ultraviolet (EUV) technology 

Depending on their product portfolio, customers might opt for either double 

patterning or EUV for 32-nm production. A better option in such cases is double 

patterning. It requires improved overlay. EUV is the most cost-effective option. 

Hydrolith technology: Measure dry expose wet 

The wafer is measured in dry position before exposing it wet. Thus, it has the benefit 

of immersion lithography while maintaining superior measurement. ASML 

TWINSCAN uses this technology and produces significant throughput. 

Transistor re-engineering 

Critical new materials are added at 45nm to enable continued scaling 

The basic effect of making transistors smaller is that it also makes them faster and 

with each technology node not only are more transistors packed onto each device, the 

speed at which those transistors are able to switch on and off also increases. 

Recently, however, several problems have arisen in this traditional scaling scheme 

that has limited further improvements in transistor performance (speed) and 

negatively impacted other important aspects of the device, such as electrical leakage. 

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20 April 2009 

Figure 196: Illustration of electrical leakage mechanisms in transistors 


The need for “high k” gates and enhanced process control 

Basic design principles dictate as the transistor shrinks, features and structures within 

the transistor also shrink. This has led to the thinning of the gate oxide, which acts as 

an insulator within the transistor, to only 1.2nm (approximately 4 atoms across). The 

thinning of this very critical isolation layer has caused it to lose its ability to act as a 

good insulator. Using traditional materials, the gate oxide cannot be scaled below 

1.2nm as electrical leakage levels become unacceptable. This drives the need to 

modify the electrical properties of this insulator, specifically to increase the dielectric 

constant or “k” of the gate insulator. That makes it act electrically as if it were 

thinner, and this defines the need for “high k” gates. The use of metal and “high k” 

materials versus the traditional materials could reduce electrical leakage across the 

gate oxide by as much as 10x, helping to alleviate electrical leakage issues. The use 

of new materials in the transistor does not in itself materially increase the number of 

wafer passes, but is likely to result in a significant increase in the number of process 

control and metrology measurements in order to ensure that yield levels remain high 

with this immature technology. 

Strained silicon usage becomes widespread 

Strained silicon is a process in which the silicon within transistors is locally stretched 

or compressed in order to improve the transistor’s performance. This is achieved by 

depositing layers on top of the transistor and/or by depositing slightly modified 

silicon next to the transistor. 

There are two types of transistors in a logic device, called nMOS and pMOS 

transistors. The nMOS transistors perform better if the silicon is stretched (tensile 

strain), while pMOS transistors perform better if the silicon is compressed 

(compressive strain). Tensile strain is created by depositing a thick tensile layer over 

the transistor using CVD equipment. Compressive strain is induced by depositing 

slightly modified silicon (Si) known as silicon germanium (Si/Ge) in recesses next to 

the transistor using epitaxial deposition. The compressive strain can be further 

enhanced by depositing a compressive layer over the transistor using CVD 

equipment. Intel first used strained silicon, obtained using high stress tensile layers 

over the transistor and epitaxial silicon germanium (Si/Ge) around the transistor at 

90nm. It is being increasingly adopted at the 65nm node and will become 

commonplace in logic devices at 45nm, in our view. Further, we expect that an 

additional compressive layer will be used at the 45nm node. We expect the number 

of etch steps to increase in order to enable strained silicon, which includes etch 

processes for creating the recess to accommodate Si/Ge epitaxy as well as the

Bhavin Shah 

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20 April 2009 

patterning of compressive and tensile strain films over the two different types of 

transistors (pMOS and nMOS, respectively). 

Incremental complexity is creeping into other areas 

Adding to the complexity of using new materials and more strained silicon, 45nm 

logic makers also have to contend with the incremental increase in complexity and 

difficulties for other areas of the transistor. More difficult oxidation/diffusion 

requirements are driving new technology development in the RTP (rapid thermal 

processing) equipment segment in order to provide the optimum level of energy to 

the wafer while controlling temperature. Ion implant requirements are also becoming 

more complex with the increased usage of co-implants to help limit the spread of 

dopants used in transistor, which becomes an issue as transistors continue to shrink 

down the Moore’s Law curve. 

Interconnect structure: Modest evolutionary changes 

In prior process technology transitions along with the Moore’s Law curve, majority 

of changes were occurred at the metal interconnect portion of the semiconductor 

device with a rapid increase in the number of interconnect layers, which drove 

majority of additional wafer passes and increased complexity. Starting with the 90nm 

tech node and the shift of focus to transistor engineering, we expect the rate at which 

new interconnect layers are added to moderate versus the historical trend. Two 

additional interconnect layers will be added, going from 90nm to 45nm, one at 65nm 

and another at 45nm. Also, while we expect interconnect structures to change 

modestly, it will be largely through incremental/evolutionary changes. 

As mentioned previously, only a few years ago logic makers were planning to use 

second-generation “low k” insulating materials broadly throughout the metal 

interconnect structure at 45nm to enable increasingly higher device speeds. However, 

the electrical leakage issues, which became apparent starting at the 90nm tech node, 

derailed the roadmap for these new “low k” materials when it became clear that 

higher device speeds would be impossible to achieve until the electrical leakage 

problem in the transistor was resolved. Thus the metal interconnect structure at 45nm 

only changes on an evolutionary basis versus 90nm, with the expectation that lowerk 

materials will be used incrementally in specific areas of the interconnect structure 

and not in a broad-based manner as previously expected. This is materializing in the 

use of lower k dielectric materials (i.e., silicon carbide) as barrier layers used for 

controlling the etch process. Bulk dielectric (insulating) materials are currently 

expected to remain the same as in the 90nm and 65nm tech nodes. 

Lithography and process control-compelling 45nm 

investment themes 

We expect the lithography and process control segments to outgrow the wafer fab 

equipment industry average as chip fabrication becomes increasingly more difficult 

at the 45nm technology node and below. The most compelling theme that has 

emerged from our primary research into leading-edge semiconductor device 

manufacturing is that photolithography is the most significant challenge faced by 

chipmakers as they ramp 45nm logic chips into volume production. These challenges 

require increasingly complex and expensive lithography systems. Hence, the overall 

economic benefits of shrinking device features along the Moore’s Law curve remains 

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in place, driving adoption/demand for very expensive and advanced products such as 

dry 193nm ArF and immersion and/or “wet” 193nm ArF lithography tools. 

Memory chipmakers are actually adopting immersion systems first at 55nm, while 

most logic chipmakers will adopt immersion at 45nm (Intel is the exception). 

Interestingly, foundries may use immersion for a 65nm half node shrink, which is 

essentially 55nm. This is driven by the need for more “process latitude” compared to 

IDMs such as Intel that produce large volumes of the same device type and can 

uniquely leverage other lithography “levers” such as expensive and advanced 

photomasks or dry-double exposure techniques. 

A substantial reduction in process latitude (i.e. how much error can be tolerated) 

in photolithography processes increases the demand for more complex lithography 

tools. As chipmakers pack an increasingly larger number of features onto integrated 

devices (i.e. chips), they often utilize a tightening of “design rules”. This in turn 

results in less leeway or error budget in the manufacturing process. The adoption of 

increasingly aggressive design rules drive demand for more complex and higher 

priced lithography systems. 

Our 45nm technology report highlights the drivers of increasing device complexity 

with a focus on logic chips as the anatomy of a memory device does not change 

much at 45nm despite the need for more advanced tools for the smaller feature size 

and more process steps. In particular, major material, architecture, and fabrication 

technique changes at the transistor level of 45nm logic semiconductor devices, plus 

the general trend to smaller feature sizes and more metal layers, is driving 

compelling growth in demand for an increasingly expensive suite of lithography 

tools. This is the case for the bottom transistor layers of a chip up through the metal 

interconnect layers that happen to be substantially larger and easier to produce 

features. Hence, demand is increasing for all three categories of lithography tools, 

critical, mid-critical, and non-critical. The bottom line is, at 45nm, we estimate the 

blended ASP in a suite of photolithography tools will be about 50% higher than that 

at 90nm. 

The number of lithography steps could increase and blended ASPs could rise as 

the mix becomes richer 

In our 45nm Technology Roadmap report, we forecast a 40% increase in the number 

of lithography steps (from 30 to 42) for a typical logic process going from 90nm to 

the 45nm. Increases in the number of patterning steps for logic chips have 

historically been driven by a larger number of metal “interconnect” layers. While we 

expect this trend to continue, interconnect layers could increase at a slower pace in 

the move to 45nm from 90nm (two additional layers) than it did in the move to 90nm 

from 180nm where many more layers were added. 

Additional growth in patterning layers at 45nm will be driven by increasing 

complexity in transistor formation. Tiny transistor layers drive demand for leading 

edge or “critical” lithography tools from a dimensional perspective as well as for 

increasingly stringent overlay requirements. This drives the increased demand for 

193nm ArF critical layer tools at 45nm (dry for Intel, immersion for most others). It 

could also drive more demand for 248nm KrF mid-critical tools as the resolution and 

overlay requirement for non-critical layers become more intense. This also reduces 

the demand for non-critical 365nm i-Line systems that will increasingly fall out of 

the mix. This could benefit Cymer as it sells laser light sources for 193nm ArF and 

248nm KrF lithography systems. 365nm i-Line tools do not use a laser light source. 

They use mercury arc lamps.

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(852) 2800-8538 



20 April 2009 

Table 169 summarizes the four categories of lithography tools and their estimated 

ASPs using ASML’s tools as an example. 

Table 169: Estimated ASPs of four types of lithography tools 

Wavelength Estimated ASP 

i-Line 365nm $6.5MM 

KrF 248nm $16MM 

ArF 193nm $23MM 

ArF Immersion 


193nm $ 36MM 

Table 170 illustrates our estimates for the number of lithography steps for logic and 

memory devices, including estimates of how the mix of lithography tools used for 

various steps change with advancing technology nodes. 

Table 170: Modeled ASP progression of steppers by technology node 

Total layers ArF Immersion 

layers 

ArF 

layers 

KrF layers i-line layers Blended 

ASP (MM$) 

Logic 90nm 30 0 4 12 14 12.4 

Logic 65nm 38 0 11 21 6 16.4 

Logic 45nm 42 6 9 21 6 18.9 

DRAM 90nm 26 0 6 4 16 11.8 

DRAM 65nm 30 0 7 14 9 14.7 

DRAM 55nm 32 5 6 14 7 18.3 

Flash 90nm 25 0 6 4 16 12.3 

Flash 55nm 28 4 5 9 10 16.7 

Flash 45nm 30 5 5 11 9 17.6 


Lithography is likely to outgrow WFE spending 

We estimate a 50% increase in the overall cost of a lithography suite at 45nm vs. 

90nm. The growth is driven by increasing process steps, partially offset by 

increasingly productive tools, and rapidly rising ASPs. Figure 197 shows the 

historical trend of increasing revenues for the lithography segment as a percentage of 

the overall WFE industry, which we expect to continue. At 45nm, the number of 

interconnect layers as well as transistor complexity are driving the need for 

incremental etch systems. In addition, increased gate engineering requirements and 

tighter control of very thin oxides are increasing the need for additional oxidation 

steps. Epitax is growing because it is used to control device leakage at smaller nodes. 

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Figure 197: Lithography steppers is increasing as a percentage of the total WFE market 

22.0% 

20.0% 

18.0% 

16.0% 

14.0% 

12.0% 

1993 1996 1999 2002 2005 2008 

Source: Gartner and J.P. Morgan. 

Figure 198 shows the historical trend of increasing revenues for the etch segment as a 

percentage of the WFE industry. We believe that the etch segment will sustain 

growth in its share of the overall WFE market as the number of etch applications 

continues to grow at 45nm and below, especially as double exposure/double 

patterning is implemented at 32nm. In the transitions to 45nm and beyond, we expect 

modest tool productivity increases to be overcome by a stronger underlying trend 

towards a larger number of etch steps and increasing complexity in logic, foundry 

and memory fabs, resulting in an increase in the number of etch tools required to 

support a given number of wafer starts. 

Figure 198: Etch is increasing as a percentage of the total WFE market 

18.0% 

16.0% 

14.0% 

12.0% 

10.0% 

1993 1996 1999 2002 2005 2008 

Source: Gartner and J.P. Morgan. 

Opportunity for process control 

We expect process control to be a major beneficiary of the move to complex 45nm 

process technology. Process control equipment is used to inspect and monitor 

semiconductor wafers as they undergo a sequence of processing steps on their way to

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becoming finished products with a view to maximizing the “yield” of functional 

devices (i.e. integrated circuits) from the wafer. The most important technical trends 

that we believe will drive increased process control equipment demand and higher 

priced process control systems include: 

• A significant increase in the number of process control steps in the transition to 

the 45nm technology node. 

• Feature size shrinkage and increasing adoption of leading-edge dry- and 

immersion-based lithography should drive growth in metrology and inspection, 

the two major types of process control tools. 

• The introduction of new materials increases the complexity of various 

measurements in the chip fabrication process. Also, as many chip fabrication 

materials and manufacturing techniques are new, they often create yield 

problems. This should drive an increase in sampling rates. Both factors should 

boost demand for metrology tools, but also for more expensive/more sensitive 

higher-priced models. 

• New device architectures and fabrication techniques that drive process integration 

challenges and require more complex process control systems to manage yield. 

• Die size for microprocessors and advanced logic devices will either stabilize or 

continue to increase, mainly because memory cache size continues to increase 

even with the transition to 45nm technology as multi-core processors proliferate. 

As the die size increases, the impact of defects on yield goes up faster than the 

increase in the die size, driving the need for stringent monitoring of defects to 

prevent yield crashes. This is also very relevant for Flash chip production as 

device density grows rapidly. 

From an economic standpoint, process control equipment is the mechanism for 

optimizing the return on investment on wafer processing equipment. This is difficult 

to achieve technically and there are not a lot of strong process control vendors, thus 

margins are at the high-end of the industry average on high value-add and relatively 

limited competition. 

The fundamental reason that process control equipment adds a high level of value is 

performance, and therefore the yield of the final product (i.e. complex chips) is 

extremely sensitive to defects and variations in individual processing steps. During 

the development and ramp-up phase of a device, process control shortens the 

duration by enabling faster “debugging” of equipment and processes. Also, during 

volume manufacturing, it enables yield control via monitoring of equipment and 

processes to ensure that processes are operating within specified limits. The critical 

relationship between yield and defects can be illustrated by how leading chipmaker 

Intel uses the trend in defect density to communicate maturation of yield to the 

outside world, an example of which is shown in Figure 199. 

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Figure 199: Illustration of how defect density is used as a proxy for yield 

Source: www.intel.com/technology/itj/2008/v12i2/5-design/8-manufacturability.htm. 

Table 171: Major process changes and their impact on demand for process control equipment 

Category Technology changes (90nm - 45nm) Process control impact 

Patterning Adoption of immersion lithography New defect types drive demand for inspection 

DUV lithography (ArF and KrF) for additional layers Drives advanced lithography metrology and mask inspection 

Adoption of "ashable" amorphous carbon hardmasks Increases complexity of thin film measurement and overlay metrology 

Transistor Strained silicon using dual high stress liners New defect types and materials drive metrology and inspection 

Strained silicon using epitaxial Si/Ge in etched recesses New defect types and materials drive metrology and inspection 

Ultra-shallow junctions (shallower and more abrupt) Increase in implant related metrology 

High-k gate dielectric with metal gates Materials characterization and monitoring drives metrology 

Further gate dielectric modification (Nitridation) Materials characterization and monitoring drives metrology 

Interconnect Additional layers Increased process control wafer passes 

Low dielectric constant barriers (Silicon Carbide) Incremental change in complexity 


Wafer manufacturing transition to 450mm from 300mm 

Intel, Samsung and TSMC reached a collaboration agreement to target a transition to 

450mm from 300mm starting in 2012. 

Why Intel, Samsung and TSMC? It costs US$3.5 billion to US$4 billion to build a 

300mm fab for 65nm/45nm technology nodes, compared with US$900 million to 

US$1 billion for building a 200mm fab. By the same scale-up, a 450mm fab could at 

least cost around US$8 billion to US$10 billion. Not too many semiconductor 

companies can afford such high investment to build a single fab, in our view. 

Minimum interest from equipment vendors: AMAT, KLA, NVLS and ASML are 

not interested to migrate to 450mm. For example, when a company moved from 

200mm to 300mm, the total wafer needs for a certain amount of chips decreased by 

55% ( as the gross die per wafer expanded to 2.25x), while the equipment ASPs only 

expanded ~1.3x. The capital equipment companies’ revenue peaked in FY00 after 

the emergence of 300mm demand. The ROI on the 300mm for capital equipment 

companies is apparently much lower than 200mm. 

Our reading on this 450mm migration: We really doubt about the success of this 

transition. Without the early involvement from capital equipment companies, one is 

skeptical how these companies could work on 450mm process development. The 

transition to 450mm is apparently benefiting the customers of Intel, Samsung and

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TSMC with a better productivity and lower unit cost. It, however, is not of the 

biggest interest for capital equipment vendors as most of them are still loss-making 

on 300mm transition. 

It seems that there would be more companies in memory, than just Samsung— 

Toshiba, and some combination of Micron and others, and potentially Elpida and 

others. However, we believe, as far as foundry goes, TSMC is the only one, and in 

microprocessor, Intel’s slot is no longer secured; TSMC could give Intel tough 

competition when we combine three variables—price, performance and power 

consumption. If one of these companies fumbles on execution, it could be a different 

matter. Else, these three are going to be the last three strongest ones standing in the 

semiconductor industry, in our view. 

Key beneficiaries 

The entire equipment industry wins as device complexity increases with more 

process steps and 300nm wafers become standard. The advent of the 45nm process 

technology leading plus the trend towards mega fabs and the lack of a larger wafer 

are likely to drive the wafer fab equipment (WFE) market equal to or faster than 

semiconductors. Key winners within the WFE markets are lithography (ASML, 

Cymer) and Process Control (KLA-Tencor) segments, in our view. 

Back-end: Packaging, assembly & testing 

Back-end refers to the manufacturing segment that commenced after the 

semiconductor devices sector was formed on wafer. This area of semiconductor 

manufacturing is focused on testing and packaging of the devices into standardized 

units that could be attached to a printed circuit board with other electrical 

components. Historically, there was a clear line of demarcation between the frontend 

and back-end manufacturing segments. Front-end manufacturing was focused on 

device formation and used a silicon wafer, while back-end processing was performed 

after the silicon wafer was cut into the individual die. However, due to the increasing 

requirements of advanced devices, a number of back-end applications, such as testing 

and encapsulation, are migrating towards processing similar to front-end, as 

traditional back-end methodologies are no longer viable solutions. 

Back-end equipment 

The equipment used for back-end manufacturing falls into two major categories: 

packaging/assembly and automated test. This is a diverse spectrum of equipment that 

is used to separate, package, burn-in and test each devices that were formed on the 

surface of a wafer. Most of the individual equipment segments are relatively small, 

except for automated test equipment (ATE), which comprises a significant part of the 

entire back-end equipment market. 

Table 172 lists major categories of back-end equipment. 

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Table 172: Back-end equipment categories 

Automated test (ATE) Wire bonders 

Memory 

Logic Wafer thinning 

Analog 

Mixed signal Electrochemical deposition 

RF/microwave 

SoC Molding/encapsulation 

Die bonders Test handlers 

Vision inspection Contact probers 

Packaging lithography Wafer dicing 

Solder ball attach Probe cards 

Package singulation Flip-chip bonders 

Source: Dataquest and J.P. Morgan. 

Packaging and assembly 

The packaging and assembly segment covers a diverse group of equipment that is 

used to assemble and package individual devices into forms that can be used in larger 

electrical circuits. The overall packaging and assembly market was about 60% of all 

back-end equipment (BEE), in 2008. Historically, back-end equipment has been used 

to package semiconductor devices into standardized forms that would then be placed 

onto a printed circuit board. However, space constraints demanded by mobile 

electronics have required new packaging designs for semiconductor devices, which 

has resulted in innovative packaging schemes such as multi-chip packages and 

necessitated new back-end processes such as thinning of the silicon on which the 

devices are formed, in order to decrease the overall thickness. In some cases, a 

technology such as wire bonding, which was losing ground to flip-chip bonding, has 

found new applications in multi-chip packages and thus has extended that technology 

back to the leading edge. 

Basic packaging 

Packaging entails the encapsulation of each individual device, or die, into a package 

that protects the device from harm, as well as enabling the device to be connected to 

other electrical circuits, usually through a printed circuit board (PCB). The primary 

steps involved in mainstream packaging are die bond, wire bonding, and 

encapsulation. Die bond is the physical attachment of the device or die onto a 

standardized metal lead-frame, which is the structural base of the finished package. 

The die is attached to the lead-frame with either epoxy, which is the most common, 

or with solder. Wire bonding is the process of connecting the die electrically with 

packaging inputs/outputs. This is most commonly performed using gold or aluminum 

wiring. Finally, the die, lead-frame, and wire bonds are encapsulated into one unified 

package for protection with only the input/output pins exposed. This explanation is a 

very simplified version of what actually occurs in order to complete the packaging 

process but the fundamental steps are along these lines. Figure 200 and Figure 201 

illustrate how the semiconductor device is electrically connected with pin-outs, 

which connect the entire unit to a PCB. Bond pads, which are specific connection 

points on semiconductor devices, are used to attach the gold wire with pins which are 

the interface to a PCB.

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Advanced packaging 

As leading-edge semiconductor devices have become more complex and more 

compact, basic mainstream packaging techniques have not been sufficient to meet 

their needs. These devices can have very high numbers of input/output, or may have 

small form factor requirements. 

Flip-chip packaging 

Very advanced microprocessors can have input/output (I/O) densities of over 900 per 

device. Traditional standardized packaging is unable to support such high I/O counts. 

Flip-chip packaging, formally known as controlled collapse chip connection (C4), is 

becoming more common today to meet the requirements. In flip-chip packaging, 

wire bonding is no longer used. This advanced methodology connects the device I/O, 

which is equivalent to bond pads, directly to output pins, or in some cases directly to 

the PCB through a direct solder connection. Figure 202 illustrates the packaging 

configuration using a flip-chip along with a pin grid array, which is currently used by 

Intel and AMD for their microprocessors. The pin grid array allows the 

microprocessor to be removable from the motherboard in a PC, allowing the 

motherboards to be manufactured and assembled separately. 

Figure 200: 3-D cross-section of basic packaging components 


Bond Bond Pads Pads 

Die (Face-up) 

Lead-Frame 

Wire Bonds 

Pins Pins to to Printed Printed Circuit Circuit Board Board 

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Figure 201: Basic packaging technology (side view) 

Final Encapsulation Material 

Wire Bonds (electrical connection) 


Die 

Lead-Frame 

Input/Output Pins 

Figure 202: Flip-chip pin grid array packaging (side view) 


Die (facing down) 

Substrate 

Pin Grid Array 

Solder Connections 

Automated test 

Automated test equipment (ATE) is used as the master electrical circuit to perform a 

comprehensive test on each semiconductor device. It is a common practice to test 

every device to ensure that the known good die (KGD) can be identified. It is 

important to remove the non-functioning die from KGD, as the assembly of an 

inoperable device into a larger electronics assembly could result in the scrapping of 

that entire assembly. 

ATE receives a significant portion of the capital expenditure for back-end equipment, 

with approximately 40% of all back-end capital expenditure. Testing is segmented by 

the types of devices that are tested. The categories are memory, mixed-signal, system 

on chip, RF/microwave, analog, and logic. The size of the market for each device 

segment is based on two specific factors: the quantity of devices manufactured each 

year and the time it takes to test each device. Memory has the largest market as the

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number of individual memory device units each year is quite large, and memory 

devices require a relatively long time to burn in and test. The system on a chip, on 

the other hand, which has a very small unit volume each year, tests at premium prices 

and requires a very long time to test, giving it a disproportionately large market, 

given the small number of devices tested. The ATE market sales fell by 31% to 

record a revenue of $2.45 billion in 2008. 

ATE market overview 

ATE is very different from other semiconductor manufacturing equipment in that it is 

highly application-specific. In front-end fabrication and back-end packaging, the 

device application is somewhat irrelevant. In contrast, the ATE solution for a 

particular device is highly dependant on the device’s final application. 

Table 173 is a historical view of the size of the ATE market by application. Note 

that, applications are grouped into six categories: logic, memory, linear/analog, 

mixed-signal, RF/microwave, and SoC. 

Table 173: ATE by application 


2003 2004 2005 2006 2007* 2008 

Memory IC $1,077 $2,007 $1,147 $1,378 $1,547 $530 

Digital/Logic IC $442 $263 $241 $230 * * 

Analog/Linear IC $65 $107 $55 $131 $82 $76 

Mixed-Signal IC $646 $634 $111 $184 * * 

RF/Microwave IC $180 $228 $210 $306 $264 $252 

SoC $520 $1,376 $1,767 $1,825 $1,537 $1,479 

Other ATE $92 $177 $243 $69 $128 $116 

Total ATE $3,022 $4,790 $3,773 $4,122 $3,557 $3,557 

Source: Dataquest (Mar-09). *Included in SOC category. 

Testers can be broadly classified into memory, non-memory and special-purpose 

testers, with further classification subject to the end-device application category. 

Memory testers 

Memory devices are not too different from logic devices from the point of view of 

the testing signal used to test them. The same DC or a digital signal is used in both 

cases. However, the differences become more apparent from a testing perspective, 

given the vastly different types of testers, handlers and probe cards used in testing 

both types of devices. 

Memory testing times are much longer, lasting hundreds of seconds compared to 

non-memory or SoC testing which may last between one to twenty seconds. 

Consequently, the throughput (called parallelism—number of die tested at a given 

moment) is considerably higher in memory compared to non-memory. Memory 

devices are more standardized and hence share common testing interfaces and 

techniques but are not usually designed for ease of test. There are no inbuilt designrelated 

features in the die which streamline the testing process. Consequently, the 

back-end process flow after testing (validation) is more complex for memory devices 

compared with their counter parts. 

There are two main types of memory tested on ATE: (1) slow-speed, non-volatile 

memory called flash, and (2) high-speed, volatile memory called DRAM. Flash 

memories are used to store and retrieve data in a long-term sense. 

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In terms of test solutions, DRAM and flash have different requirements for speed and 

parallelism. Because of this, some companies have specialized more in one memory 

type than the other. Advantest and Yokogawa are the two dominant companies that 

make DRAM-specific testers. The flash memory space is more crowded, with 

Advantest, Nextest (Teradyne), Verigy and Yokogawa all competing. With regard to 

speed, DRAM devices operate at high digital data rates, meaning that DRAM test 

systems need high-end digital instrumentation. Flash devices operate at lower digital 

data rates than DRAM devices, so their digital instrumentation is less advanced. On 

the parallelism side, one difference between DRAM and flash is that each die on a 

flash wafer has its own personality—each die will respond to tester stimulus at an 

arbitrary time. On the other hand, DRAM devices are more uniform—each die will 

respond simultaneously. This difference makes DRAM parallel testing much simpler 

than flash parallel testing. Since DRAM devices operate in a very predictable way, 

DRAM testers can share instruments across many sites. As site count increases, the 

tester cost does not increase significantly as each new site can share many 

instruments used for existing sites. In flash testers, each site can only benefit from its 

own set of independent instrumentation because of the variability between sites. 

In terms of pin-count, DRAM devices have more pins than flash devices. This means 

that DRAM testers need to have more digital channels per site than flash testers. The 

number of pins per device generally dictates the maximum site count. For this 

reason, most legacy DRAM testers have a maximum parallelism of around 128 sites, 

whereas flash applications can accommodate parallelism in excess of 250+ sites. 

Non-memory testers 

Test applications in the non-memory space are generally characterized by the amount 

of digital and analog content in the chip. 

Table 174: ATE application categories 

Big A Little a 

Big D Soc, mixed-signal High-end logic, microprocessors, 

graphics processor (GPU), networking interface 

Little d Analog, linear, power automotive, RF, Low-end logic, microcontrollers, programmable logic 

discrete devices DC probe 


High-end logic devices (big D, little a) 

Devices with high-end digital content and minimal analog content are classified as 

high-end logic devices. This category includes devices like graphics processors 

(GPUs), microprocessors (MPUs), digital signal processors (DSPs) and telecom 

interface devices. Devices that operate above 200Mbps (200 million bits per second) 

digital speed would generally be considered high-end digital. These device types are 

the early adopters of the latest manufacturing technology, both in front-end wafer 

fabrication and back-end assembly and test. 

The time it takes to test a high-end digital device is mostly dependent on the device 

itself. In other words, the ATE system is not a major factor in determining the test 

time. Since high-end digital devices can be tested with high-parallelism, the way to 

increase throughput is to maximize the site-count. The main limitation in increasing 

site-count is that these devices tend to have large number of digital pins. Since each 

device’s digital pin needs its own corresponding tester digital channel, a high-end 

digital tester needs to have very high digital channel capacity. Most high-end digital 

testers can support about 1,000 digital channels. Many high-end digital devices have

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between 200 and 400 digital pins, effectively limiting parallelism to between 2 and 4 

sites. 

Some leading semiconductor companies that rely on high-end digital ATE systems 

are Intel, AMD, Sony, IBM, NVidia, and ATI. 

Linear/Analog devices (big A, little d) 

Devices with a large amount of analog content and little digital content are generally 

classified as linear or analog devices. This category includes devices like power 

management ICs (PMICs) and amplifiers. In this device category, digital pins are 

only used for the simple task of controlling the device’s analog circuitry. Devices 

generally have less than 20 digital pins, and those pins operate under 200Mbps. 

The cost of test is extremely important because the average selling price (ASP) of 

analog devices is a fraction of the price of large digital devices. Analog testers can 

reduce the cost of test by improving throughput. 

Leading purchasers of analog test systems include National Semiconductor, Analog 

Devices (ADI), Infineon, STMicroelectronics, and Texas Instruments (TI). 

Mixed-signal/SoC devices (big D, big A) 

Almost all SoC devices are mixed-signal, but not all mixed-signal devices are SoC. 

The most complex “big D, big A” devices tend to be SoCs, while less complex “big 

D, big A” devices are mixed-signal. In the SoC category are disk-drive controllers, 

network interfaces (cellular, DSL, etc), and set-top box ICs. Data converters and 

digital devices with complex analog clocking circuitry are considered mixed-signal. 

The main challenge in mixed-signal and SoC test is integrating a diverse set of 

instruments into one test system. 

Some top semiconductor companies in the SoC and mixed-signal areas are 

Broadcom, Freescale, ST Micro, Marvell and Texas Instruments. 

Low-end logic devices (little d, little a) 

Low-end logic devices are commodity devices without significant technology 

challenges. These devices have very low selling prices, and the main test challenge is 

cost reduction. Microcontrollers and programmable logic devices are examples of 

low-end logic devices. These devices operate at low digital data rates (below 200 

megabits per second) and have minimal analog test needs. Another use for low-end 

logic testers is to test high-end devices at wafer probe. 

Special purpose testers 

There is another class of testers which does not broadly categorize either as memory 

or non-memory testers. Such testers, though firmly centered in the non-digital area, 

require highly specialized instrumentation—RF/Wireless, LCD and image sensor 

testers. 

RF/Wireless 

RF/Wireless devices are used in wireless communication products like cell phones, 

cordless phones, wireless-LAN, and bluetooth. These devices come in three grades of 

complexity: radios, wireless SoCs, and amplifiers. 

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From a test perspective, radios are like analog/linear devices. They have very little 

digital content and most of the test challenges are on the analog front. 

Wireless SoCs have similar test challenges to regular SoCs—complex digital and 

analog test challenges. In addition, wireless SoC test systems have RF 

instrumentation, making these systems some of the most complex in the ATE 

industry. 

RF amplifiers are relatively simple devices from an ATE perspective. They have 

little digital or analog test requirements. Their main requirement is RF 

instrumentation. For this reason, amplifiers are generally tested on home-made test 

systems that comprise stand-alone instruments from different ATE vendors. 

LCD driver 

LCD driver devices are similar to memory devices. They are highly standardized and 

perform a conceptually simple operation. For this reason, LCD driver ATE systems 

are dedicated to this one application. LCD driver devices output analog signals. So 

LCD driver ATE systems are like memory testers with analog measurement 

instrumentation. Generally, LCD driver devices are tested with four sites in parallel. 

Image sensor 

An image sensor tester is simply a low-end logic tester with a light source and a 

high-performance computer attached. The throughput of an image sensor tester is 

largely determined by the speed at which the tester can process the device’s digital 

output. Successful image sensor test platforms use advanced software and highperformance 

computers to crunch the device’s data as fast as possible. The top image 

sensor device manufacturers are OmniVision, Micron, ST, Toshiba, and Sony. 

Trends in test mMethodology 

"Single platform” tester 

The shift to “single platform” tester architecture is a positive trend in the ATE 

industry, in our view, as ATE suppliers have moved away from application-specific 

platforms that were common a decade ago to highly flexible and scalable platforms 

that can test a broad array of device types and can be upgraded with modern 

instruments to increase the platform’s useful life. Essentially, a single platform tester 

allows a semi manufacturer to upgrade an existing installed base of ATE systems 

with more advanced instrumentation to keep pace with evolving device test 

requirements, rather than be forced to periodically replace outdated platforms, as was 

the case with legacy platforms. 

The two most important trends in testing that have been evolving over the past few 

years are system on a chip (SoC) and system in a package (MCP—also called multichip-package). 

The testing requirements are different for both, with a brief 

explanation offered in this sub-section. 

System-on-a-chip (SoC) 

The system-on-a-chip (SoC) technology integrates many device functions onto a 

single die and requires high-end, highly integrated test solutions. The trend towards 

SoC devices is positive for largest ATE vendors, which have the scale to offer test 

platforms with a wide range of instrumentation.

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In terms of test cost, SoC increases the complexity and cost of the tester. However, it 

decreases the amount of test needed. The need to test three or more chips is generally 

replaced by the need to test one. This one insertion will take less time than the 

combined test time of existing multiple devices. The conclusion is that SoC testing 

needs fewer testers, but those testers are more expensive. The reduced test time 

offsets the increased tester price, leading to a reduction in the overall cost of test. 

To test a cell phone SoC chip, an ATE system needs to have RF, high-end digital and 

mixed-signal capability. SoC devices cannot be tested on niche testers; rather, they 

must be tested on high-performance general purpose testers, and as SoC devices 

become more prevalent, niche testers become less relevant. As an example, there are 

platforms available today that specialize in RF testing. These platforms lack the 

capability to test high-end digital devices, but they are very good at testing 

standalone RF devices. As long as RF devices remain as stand-alone die, these testers 

will provide a very cost-effective targeted solution. However, as device 

manufacturers integrate the RF function into digital-intensive cell phone SoCs, the 

RF-specialty tester market will shrink, in our view. 

Multi-chip-package (MCP) 

MCP is another alternative to SoC to reduce the footprint on PCB. While SoC 

integrates different device functionalities into a single die, MCP integrates different 

die (with different functionalities) into a single package. MCP is used if either a 

single SoC becomes a classic case of Sum being more expensive than parts or the 

design cycle for a SoC is too long, owing to the complexity of combining different 

functionalities into a single die. MCP also saves time in terms of reducing the time to 

market while achieving the desired size reduction. Once an MCP is fully packaged, it 

is functionally equivalent to a SoC. 

MCPs present unique challenges to production testing, changing the device test flow. 

Figure 203 compares a standard test flow with an MCP test flow. The top diagram 

shows a standard test flow. As usual, the wafer is probed (also called Wafer Sorting), 

the wafers are cut and devices packaged, and then final-tested. In the bottom 

diagram, a MCP device goes through a more complex test flow. First, many unique 

wafers are probed, then each wafer is cut and a die from each wafer is assembled into 

a package. This final MCP then goes through the final test. For example, an MCP 

with three die inside will go through four test steps: die #1wafer probe, die #2 wafer 

probe, die #3 wafer probe, and MCP final test. 

The main challenge with MCP devices is that scrap cost becomes a much bigger 

issue. There are two reasons why scrap cost increases for MCP devices. First, the 

cost of packaging is higher for MCPs. The MCP technology is cutting-edge, and the 

equipment, materials and labor are more expensive for these advanced packages. 

Also, scrapping an MCP means scrapping all the dies in the package, even if only 

one die is defective. Therefore, the cost of each scraped MCP is much higher than the 

cost of a regular scraped package. 

Second, the probability of having to scrap a MCP at final test is much higher than the 

probability of having to scrap a standard device. The reason for this is that for an 

MCP device to pass the final test, all the dies inside the MCP must be functional. As 

an example, take an MCP with three dies inside. Each die has passed a simple wafer 

sort, which catches most of the bad devices. However, of all the devices passed at 

wafer sort, 5% were misdiagnosed and are actually faulty. At packaging, these three 

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die are put into a package, each with a 95% chance of being functional. What are the 

odds that the final package will be functional? The answer is 95% * 95% * 95%, 

which is about 86%. Therefore, 14% of the packages will be discarded. 

Figure 203: “Standard” test flow vs. MCP test flow 


MCPs require extensive wafer sort prior to wafer cutting, die separation, packaging 

and final testing. 

Competition 

Since only a limited number of ATE companies currently participate in the memory 

test market, it is instructive to track memory and non-memory market share 

separately. Advantest leads the industry in market share mainly due to its dominance 

in the memory test segment, where it participates in both flash and DRAM test 

applications. The non-memory ATE market is somewhat fragmented and 

characterized by 3-4 broad line suppliers and several small players that serve niche 

application segments, and have a concentrated set of customers. Tester platforms 

such as FLEX from Teradyne and the 93000 series from Verigy (Agilent, HP) are 

targeted at this space and generally compete with one another for the non-memory 

share. Advantest has historically derived a large portion of its non-memory tester 

sales from Intel’s microprocessor test business, and LTX receives approximately 

45% of total revenue from its largest customer, Texas Instruments. 

Advantest has enjoyed a major share in the memory ATE market with a monopoly in 

commodity DDR2-DRAM testing as well as a strong position in NAND flash. 

Verigy also competes in the flash memory space and is actively qualifying its V5000 

series platform at flash memory customers with the goal to expand and diversify its 

memory customer base. Teradyne recently acquired Nextest and intends to leverage 

the Magnum platform to gain share in flash wafer sort. 

There are five major ATE vendors: Advantest, LTX-Credence, Teradyne, Verigy and 

Yokogawa. Each ATE company attempts to compete and differentiate along a 

number of capabilities. In ATE sales, there are three main areas of competition: 

features, reliability, and cost.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Features 

The most common area of feature differentiation is where ATE companies attempt to 

compete on tester technology primarily in the digital space, where the demand for 

faster digital data rates is endless. Today, this fight is concentrated in the area of 

high-speed PC bus such as DDR and hyper-transport. ATE vendors sell their digital 

capability as having higher speed, higher accuracy and greater-flexibility than the 

competition. Verigy and Teradyne each claim to have the most advanced digital 

instrumentation. 

Another area of feature differentiation is the ability to integrate a wide variety of 

instruments into one tester. This capability is highly valuable in the SoC space. The 

chief complexity of integrating analog, digital DC and RF instruments into one tester 

is managing the software environment. Creating a platform that allows these various 

instruments to perform harmoniously is a major challenge for ATE vendors. Verigy 

and Teradyne both claim leadership in the area of instrumentation integration. 

Reliability 

Like differentiation based on features, reliability has multiple facets too; the two 

most important being platform availability and customer support. Customers want to 

buy test platforms that will continue to be available, improved and supported for 

many years. 

ATE companies provide support in the areas of engineering and operations. IDMs, 

Subcons and fables customers depend on this support in order to keep their ATE 

systems running efficiently. 

All major ATE vendors have worldwide teams of application engineers that directly 

assist customers with engineering issues. In terms of operations support, ATE 

vendors provide worldwide teams of hardware repair specialists who fix testers at 

customers’ sites. These teams are supported by networks of spare parts depots and 

offsite repair facilities. The purpose of these operation support teams is to ensure that 

inoperative testers are repaired as quickly as possible, minimizing down-time. 

In terms of overall customer support, the largest ATE companies have a considerable 

advantage. Advantest, LTX-Credence, Teradyne and Verigy have the scale to offer 

top quality support around the world. Smaller ATE companies cannot offer this level 

of service. For this reason, customer support is a positive differentiator for largest 

ATE vendors, in our view. 

329

Bhavin Shah 

(852) 2800-8538 



(852) 2800-8538 



Patrick Liao 

(886-2) 2725-9874 

patrick.kh.liao@jpmorgan.com 


Figure 204: Top four foundry shipments 

16,000 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

0 

330 

000's unit 

Foundry 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 

Top 4 foundty shipment Y/Y grow th % 


20 April 2009 

A sharp fall in revenue following seven years of expansion 

After the 2001 downturn, the foundry industry has seen relatively healthy unit and 

revenue growth. Revenue growth has lagged unit growth primarily due to the 2003- 

2006 period of aggressive pricing, driven by the new entry of SMIC. From 2H07, 

foundries’ ASPs have been fairly stable. However, starting from 4Q08, driven by 

inventory correction as well as end-market decline, foundries have entered a period 

of very sharp decline. We expect foundry revenue to decline by 25% in 2009. 

Capex and R&D budgets under pressure; capital intensity declined to a new low 

For 2009, we expect capacity growth of 7% for the top four foundries and the overall 

foundry industry. In 2008, the aggregate capex-to-sales ratio of the top foundries fell 

below the trough value since 2002 and will likely fall further to a new low in 2009. 

Capex and R&D go hand in hand. If leading-edge capex is terminated, R&D on 

leading-edge loses its relevance. Over the past five years, CHRT has spent US$500 

million or more on R&D and US$2 billion on capex with no results. We believe 

foundries will not be able to raise capital from the market, and with cash balance 

running down, we believe all the foundries, but TSMC, will have to make the 

virtually inevitable decision of giving up aggressive investments in leading-edge 

technology. 

We believe SMIC will finally slow its investment in China foundry capacity, but the 

investments by Chinese local governments in Wuhan, Chendu and Shenzhen are not 

transparent, which we believe will be the hidden capacity in 2009. Besides, 

Vanguard had invested aggressively in 2007 to acquire Winbond DRAM 8-inch fab 4 

and 5, and is now running at partial DRAM capacity to be converted to logic. The 

benefit of capacity increase was not visible in 2008, and we believe it will remain a 

heavy burden; we do not expect it to turn around in 2009. 

7-yr CAGR 25% -24% 

YoY 

Source: Company reports, Bloomberg, J.P. Morgan estimates. Top four foundries include: TSMC, 

UMC, CHRT, SMIC. Estimates for SMIC are based on Bloomberg consensus and company 

guidance. 

80% 

60% 

40% 

20% 

0% 

-20% 

-40% 

-60% 

Figure 205: Top four foundry sales 

18,000 

16,000 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

0 

US$m 

7-yr CAGR 18% 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 

Top 4 foundty sales Y/Y grow th % 

-25% 

YoY 

Source: Company reports, Bloomberg, J.P. Morgan estimates. Top four foundries include: 

TSMC, UMC, CHRT, SMIC. Estimates for SMIC are based on Bloomberg consensus and 

company guidance. 

80% 

60% 

40% 

20% 

0% 

-20% 

-40% 

-60%

Bhavin Shah 

(852) 2800-8538 


Figure 206: Foundry capacity outlook 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

000's of 8" equiv . 

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 

Top 4 foundries Total foundry Top 4 foundries grow th Total foundry grow th 



guidance. 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

-10% 

-20% 

Figure 207: Foundry capex outlook 

10,000 

9,000 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 


0 

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 

Top 4 foundries capex Total foundry capex Top 4 foundries grow th Total foundry grow th 



guidance. 

Figure 208: Top four foundries' 2008/2009E capex change 

-200 

-400 

-600 

-800 

-1,000 

-1,200 

Figure 209: Top four foundries' aggregate capex-to-sales 

20,000 

16,000 

12,000 

8,000 

4,000 

0 

-26.0% 

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 

200 

Capex (LHS) Sales (LHS) Capex-to-sales (RHS) 


20 April 2009 

-52.0% 



guidance 

0 

-57.4% 

-29.6% 

-24.0% 

-34.9% 

10.2% 

TSMC UMC CHRT SMIC 

Foundry capex 07/08 change Foundry capex 08/09 change 

Foundry capex 07/08 chg % Foundry capex 08/09 chg % 

-74.7% 

Source: Company reports, Bloomberg, J.P. Morgan estimates. Top four foundries include: TSMC, UMC, CHRT, SMIC. Estimates for 

SMIC are based on Bloomberg consensus and company guidance. 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

Figure 210: Capex-to-sales comparison among foundry companies 

100% 

80% 

60% 

40% 

20% 

0% 

195% 

145% 

95% 

45% 

-5% 

0% 

-55% 

20% 

-20% 

-40% 

-60% 

-80% 

2002 2003 2004 2005 2006 2007 2008 2009E 

TSMC UMC CHRT SMIC Vanguard 

Source: Company reports, Bloomberg, J.P. Morgan estimates. 

331

Bhavin Shah 

(852) 2800-8538 


The gap between fabless and 

foundry revenue Q/Q growth 

tends to converge to zero 

Our analysis suggests that 

either foundry orders will drop in 

3Q09, or the fabless revenue will 

have to be revised upward 

332 


20 April 2009 

The gap between fabless and foundry revenue Q/Q growth 

converges to zero over time 

Over time, we expect the gap between fabless and foundry revenue Q/Q growth to 

converge to near zero as: a) fabless houses are major clients of foundries, 

contributing around 70% of the total foundry revenue; and b) the gap created in each 

quarter due to inventory buildup/burn-down should be offset over time because of the 

consistency. 

Having reached near zero back in 3Q05, based on current 2Q09E estimate of around 

100% Q/Q revenue growth for foundry and 8% Q/Q for fabless, the cumulative 

difference of the gap should do a complete flip-flop—from a record high of +50% in 

1Q09 to -45% (i.e., higher foundry growth versus fabless growth) in 2Q09. Hence, 

the market must adjust itself to narrow the gap and imply one key message: Either 

foundry orders will drop in 3Q09, or the fabless revenue will have to be revised 

upward, in our analysis. We do believe that through the earnings season, fabless 

revenue growth estimates will be revised upwards, but the gap should remain fairly 

large—at least -15% to -20%. Although we assume fabless revenues would grow 9% 

in 3Q09 and 8% in 4Q09 and that foundry revenues will decline 11% in 3Q09 and 

3% in 4Q09, the gap should not get back to zero by end-2009, in our view. 

Table 175: Cumulative gap of fabless vs. foundry revenue Q/Q since the last near-zero quarter 

3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09E 2Q09E 3Q09E 4Q09E 

Cumulative gap 1% -4% 4% 2% 6% 14% 24% 21% 12% 11% 12% 8% 17% 24% 50% -45% -24% -14% 

Source: Companies, Bloomberg, and J.P. Morgan estimates. 

A similar case could also be observed in historical data: In 2Q02, foundry revenue 

grew 34% Q/Q, whereas fabless revenue declined 2% Q/Q. In the following two 

quarters, foundry revenues saw a 4% Q/Q decline despite 8% and 9% Q/Q increases 

in fabless revenue. As another example, in 3Q04, fabless inventory days peaked with 

the cumulative gap reaching a record low of -12%. It ended up that foundry revenue 

then met with sequential drops of 8% and 14% in the next two quarters (Figure 211). 

Given continued lack of confidence on global end-demand improvement, we believe 

a correction in foundry is a more likely scenario. We expect most of the market 

adjustments to happen in 3Q09. 

Figure 211: The cumulative gap between fabless and foundry revenue, Q/Q 

- 

40 

30 

20 

10 

(10) 

(20) 

Day 

1Q98 

2Q98 

3Q98 

4Q98 

1Q99 

2Q99 

3Q99 

4Q99 

1Q00 

2Q00 

3Q00 

4Q00 

1Q01 

2Q01 

3Q01 

4Q01 

1Q02 

2Q02 

3Q02 

4Q02 

1Q03 

2Q03 

3Q03 

4Q03 

1Q04 

2Q04 

3Q04 

4Q04 

1Q05 

2Q05 

3Q05 

4Q05 

1Q06 

2Q06 

3Q06 

4Q06 

1Q07 

2Q07 

3Q07 

4Q07 

1Q08 

2Q08 

3Q08 

4Q08 

1Q09 

2Q09 

3Q09 

4Q09 

Fabless DOI - abov e/below av erage of 65 day s Foundry rev QoQ (RHS) 

Fabless rev QoQ (RHS) Cumulativ e gap (RHS) 

Source: Bloomberg, companies, J.P. Morgan estimates. 

150% 

100% 

50% 

0% 

-50% 

-100%

Bhavin Shah 

(852) 2800-8538 


Fabless inventory days might 

reach another peak in 2Q09 

Foundry orders could be cut 

again in 3Q09, if end-demand 

remains weak 


20 April 2009 

Figure 212: Fabless inventory days (by current COGS) 

US$m Day s 

5,000 

4,500 

Fabless companies' Inv entory Lev el (US$M, Left) 

Fabless companies' COGS (US$M, Left) 

Inv entory Day s (Day s, Right) 

100 

4,000 

3,500 

90 

3,000 

2,500 

80 

2,000 

1,500 

70 

1,000 

500 

60 

0 

50 

1Q00 

2Q00 

3Q00 

4Q00 

1Q01 

2Q01 

3Q01 

4Q01 

1Q02 

2Q02 

3Q02 

4Q02 

1Q03 

2Q03 

3Q03 

4Q03 

1Q04 

2Q04 

3Q04 

4Q04 

1Q05 

2Q05 

3Q05 

4Q05 

1Q06 

2Q06 

3Q06 

4Q06 

1Q07 

2Q07 

3Q07 

4Q07 

1Q08 

2Q08 

3Q08 

4Q08 

Source: Bloomberg, Company data, J.P. Morgan. Note: Companies include: QCOM, NVDA, BRCM, MRVL, LSI, Mediatek, XLNX, 

ALTR, Novatek, RFMD, HIMX, CSR, OVTI, CNXT, ZRAN, Realtek, PMCS, VIA, ATHR, SSTI, SLAB, SIRF, SMTC, Sunplus, TRID, 

DSPG, AMCC, LSCC, Richtek, CRUS, ADPT, and Orisetech. 

Fabless inventory days might reach another peak in 2Q09 

Exiting a high DOI of 75 in 4Q08, we believe foundry suffered from an 

unprecedented drop in 1Q09 and inventory days thus would have come to a very low 

level. However, the jump in 2Q09E foundry orders together with relatively flat 

fabless growth might bring the DOI to another peak level, in our view. 

If end-demand doesn’t pick up, foundry orders could be cut again in 3Q09 

To digest the piled-up inventory, fabless companies must adjust their orders booked 

to foundries. If they don’t see an end-demand pickup, the only answer for these 

foundry customers would be to cut orders, in our view. This supports our previous 

argument of either a correction in foundry or an upward revision in fabless. 

Note that exiting 4Q00, fabless inventory days piled up to 81 days and continued to 

be built up to 101 days in 1Q01, resulting in a significant foundry volume correction 

in the subsequent three quarters by 61% in total, which is at a similar level to our 

forecast of a 60% drop (3Q08-1Q09E) in the current downturn. However, endmarkets 

were down only low-single digits in 2001 and we now assume that endmarkets 

would be down 15% in 2009. This implies end-markets will have to have a 

very strong recovery in 2H09. 

Table 176: Fabless inventory assessment model 

US$MM 1Q08 2Q08 3Q08 4Q08 1Q09E 2Q09E 3Q09E 

Fabless-related foundry sales: 2,851 3,027 3,033 2,133 1,248 2,530 2,253 

QoQ -2% 6% 0% -30% -41% 103% -11% 

Fabless sales 9,368 9,654 10,597 7,906 6,810 7,354 8,052 

QoQ 

Annual forecasting basis 

-4% 3% 10% -25% -14% 8% 9% 

Implied inventory build-up / burndown % -4% 6% 7% 3% -7% -8% -8% 

Fabless Inventory days (by Current COGS) 

Quarterly forecasting basis 

68 69 64 75 70 64 59 

Implied inventory build-up / burndown % 1% 3% -10% -4% -28% 95% -20% 

Fabless Inventory days (by Current COGS) 68 69 64 75 54 106 84 

Source: Bloomberg, Company data, J.P. Morgan estimates. 

333

Bhavin Shah 

(852) 2800-8538 


Figure 213: Net margin comparison among foundry companies 

40% 

30% 

20% 

10% 

0% 

-10% 

-20% 

-30% 

334 

2002 2003 2004 2005 2006 2007 2008 2009E 

TSMC UMC Chartered SMIC Vanguard 


Figure 215: Top 4 foundry non-depreciation COGS as % of sales 

65% 

55% 

45% 

35% 

25% 

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 



20 April 2009 

TSMC UMC Chartered SMIC 

Comparison of top four foundries 

TSMC has been the most profitable large-size semiconductor company and one of 

the most profitable industrial firms globally. TSMC has the dominant market share of 

leading-edge nodes. It has had a market share of around 70% in 90nm for a long 

time, notwithstanding the maturity of that node. We estimate that TSMC still 

accounts for >85% revenue market share for 65nm/55nm bulk CMOS technologies. 

TSMC has been less vulnerable to an end-demand slowdown due to its leadership in 

advanced node technology, lean cost structure, high capital efficiency, and lower 

breakeven utilization level. We continue to believe that TSMC is the only foundry 

that gets adequate returns from its investment in new technology. 

Figure 214: ROIC comparison among foundry companies 

40% 

30% 

20% 

10% 

0% 

-10% 

-20% 

-30% 

2002 2003 2004 2005 2006 2007 2008 2009E 

TSMC UMC Chartered SMIC Vanguard 


Figure 216: Top 4 foundry depreciation COGS as % of sales 

90% 

70% 

50% 

30% 

10% 

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 

TSMC UMC Chartered SMIC 

Source: Company reports, J.P. Morgan estimates.

Bhavin Shah 

(852) 2800-8538 


Table 177: Foundries utilization trend 


20 April 2009 

Figure 217: Top foundries ASP trend 

US$ 

1,600 

1,400 

1,200 

1,000 

800 

600 

TSMC 

UMC 

Chartered (incl. SMP shares) 

SMIC 

Top 4 foundry av erage ASP 

2002 2003 2004 2005 2006 2007 2008 2009E 

Source: Companies, J.P. Morgan estimates 

2007 2008 2009E 

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 

TSMC 

Wafer O/P (k) 1,566 1,856 2,226 2,357 2,196 2,329 2,411 1,532 926 1,944 1,750 1,662 

Capacity (k) 1,890 1,967 2,169 2,263 2,180 2,303 2,416 2,478 2,496 2,536 2,558 2,609 

Utilization (%) 

UMC 

80% 91% 100% 102% 98% 99% 97% 64% 33% 75% 67% 62% 

Wafer O/P (k) 732 804 1,017 921 807 875 883 567 334 881 762 749 

Capacity (k) 1,043 1,070 1,095 1,100 1,100 1,107 1,149 1,151 1,151 1,151 1,172 1,188 

Utilization (%) 

Chartered 

74% 76% 93% 86% 73% 85% 79% 48% 29% 77% 65% 63% 

Wafer O/P (k) * 325 382 426 415 457 549 545 378 249 349 348 356 

Capacity (k) 462 483 502 512 534 625 639 645 633 650 662 668 

Utilization (%) 70% 79% 85% 81% 86% 88% 85% 59% 39% 54% 53% 53% 

Source: Companies, J.P. Morgan estimates. 

Market share trend at leading-edge node of 65nm bulk CMOS 

Graphics, game console CPU and handset basebands have been the key drivers for 

TSMC’s 65nm/55nm technologies, in our view. Most 65nm shipments were likely 

graphics to Nvidia and AMD followed by Qualcomm’s 3G handset chipsets. We 

believe Nvidia, AMDgraphics and Qualcomm account for >80% of the total 65nm 

volume. CHRT’s 65nm business is primarily for PC graphics, PC storage, branded 

handset and gaming CPU, while UMC’s 65nm basis is mainly for PC graphics, 

FPGA and branded handset clients on 65nm. We believe SMIC is working mostly on 

handset chips in the 90nm segment and will continue to work primarily on backend 

metal-layers foundry. SMIC is encouraging domestic Chinese fabless companies for 

making MP3, HDTV and even handset for 90nm production. However, we believe it 

should take years for the local fabless companies to boost their business. Over the 

past 18 months or so, TSMC has maintained very high revenue and volume market 

share of 65nm bulk CMOS. We do believe that both UMC and TSMC continue to 

see more 65nm wafer orders for 2Q09, while Chartered is reaching “fully booked” 

for its 65nm capacity now. 

335

Bhavin Shah 

(852) 2800-8538 


Intel is likely to port Atom Core 

onto TSMC's process and gain 

access to TSMC’s SoC IP 

336 


20 April 2009 

TSMC volume increase in 2Q09, slightly higher price erosion 

Wafer shipment increase in 2Q09 comes from PC graphics, CMOS image sensor, 

HDD disk controller and Bluetooth; we believe there has been a further rise in orders 

post mid-March, especially from PC graphics and handsets, including China white 

box and RIM. Customers that we believe account for more than half of 2Q09 order 

increase are Ominvision, Nvidia, Marvell, CSR, Qualcomm, Mediatek and AMD. 

Our checks indicate that TSMC may have offered additional price discount to 

customers in exchange for wafer loading increase in 2Q09 and in exchange for 

assuring that TSMC gets bulk of the leading-edge orders from some of the 

customers. 

UMC have finally gained business at 65nm 

Customers working with UMC likely include TI, Qualcomm, Broadcom, Nvidia and 

Xilinx. We believe UMC could largely improve its utilization rate with the China 

demand. The main contributors for UMC’s 2Q09 utilization improvement should be: 

1) its product deployment in China, such as white-box handsets, netbooks and China 

3G; 2) iPhone; and 3) new orders from top branded handsets. However, the risk of 

overbooking in the supply chain could be a key threat to their sustainability. 

Table 178: 65nm market shares by revenue 

1Q08 2Q08 3Q08 4Q08 1Q09E 2Q09E 

TSMC 85% 88% 90% 88% 87% 85% 

UMC 11% 7% 6% 7% 7% 11% 

Chartered 4% 5% 4% 5% 6% 4% 

Source: Company reports, J.P. Morgan estimates. Note: CHRT's SOI contribution has been excluded. 

Table 179: 90nm market shares by revenue 

1Q08 2Q08 3Q08 4Q08 1Q09E 2Q09E 

TSMC 72% 71% 71% 70% 67% 62% 

UMC 22% 23% 22% 26% 25% 33% 

Chartered 2% 2% 1% 0% 1% 2% 

SMIC 4% 4% 6% 4% 7% 3% 

Source: Company reports, J.P. Morgan estimates. Company guidance and Bloomberg for figures for SMIC. 

Developments at leading foundries 

TSMC’s emerging business with Intel: It is about Atom, but SoCs and not CPUs 

Intel will likely port its Atom processor core to TSMC’s process. We believe Intel 

will get access to TSMC’s IP library, which is critical to building SoC solutions. 

Intel is targeting various end-markets, including embedded applications, consumer 

electronic devices, nettops and future netbooks, as well as handheld devices with 

these SoC applications. ARM has very a strong hold in many of the SoC 

applications, and TSMC has a very strong market presence in the ARM-based 

processor market, in our view. As Intel tries to penetrate these markets, an alliance 

with TSMC may be beneficial because of TSMC’s IP library. For TSMC, this may 

open more doors to do SoC business with Intel and potentially Atom-based CPUs in 

the future. A less likely but also possible option is for TSMC to become the de-facto 

foundry for Atom-based SoCs, if other semiconductor companies decide to adopt 

Atom. 

What has changed in UMC? 

Progress led by new CEO Dr. Sun: We observe some structural changes since Dr. 

Sun was appointed as the CEO last July:

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

• Reorganization and intensive daily review: Dr. Sun has reunited UMC from two 

operational units—one 12" business operation unit and one separate 8" business 

operation unit—into one, which includes fabs as separate cost-centers. Besides, 

Dr. Sun does intensive daily review of operations for better execution. In our 

view, discipline and execution are key competencies of a manufacturing serviceoriented 

company. 

• Disciplined capex and headcount reduction: The 8" fab and the fab 12i in 

Singapore were fully depreciated in 2008 and are not chasing capacity build. Dr. 

Sun has implemented a policy of headcount reduction versus the previous “10% 

more headcount” strategy. Besides, UMC is not chasing either the early 

investment of the advanced technologies development, N-1, or the capacity buildup. 

We believe some of the measures are practical and do eliminate cost to lower 

the breakeven utilization rate from 75% to 65%. 

More favorable product mix to reduce per-unit cost: By stepping into some more 

advanced products/applications such as iPhone, WCDMA, and PC Ethernet, we 

believe UMC would have a more favorable product mix with higher percentage 

contribution from advanced technology. Therefore, the company would load at 

higher utilization rate in its 12-inch fabs and this larger shipment volume would 

bring down the per-unit cost since a 12-inch fab would have higher total cost than an 

8-inch fab. ASP should also have improved because of the better product mix. 

However, given around 6-7% price erosion for each advanced technology node, we 

still expect a decrease in blended ASP and limited positive impact on breakeven 

utilization improvement. 

Breakeven utilization: Down for UMC to 65% in 1Q09; getting back to profitability 

in 2Q09: According to UMC, it has brought its operating breakeven utilization rate 

down to around 65% in 1Q09, versus 70-75% in 4Q08—a significant improvement, 

although it is still much higher than TSMC’s 38%. We believe reasons for this 

improvement could be: (1) lower depreciation cost in 2009; (2) depreciating NT$ in 

1Q09; (3) more favorable product mix; and (4) cost-down measures. With the largely 

improved utilization in 2Q09, we expect UMC to make a profit in 2Q09. 

Chartered: Viable technologies from IBM license, but worrisome financials 

Stronger 2Q09 outlook with viable technologies from IBM license, but cautious 

beyond that: CHRT’s fab 7 appears to be enjoying >85% utilization due to demand 

from CDMA handsets and China TVs, among others. As utilization for other fabs has 

also improved, we expect very strong shipments in April. CHRT is likely to enjoy 

full utilization of its 65nm line, which does prove the viable technologies from IBM 

license. However, we are mindful of the end-demand picture, which we do not expect 

to see follow-through orders in 2H09. 

Still high in the breakeven utilization rate, and huge debt to pay off: CHRT’s 

breakeven utilization rate is believed to be in mid-80s. Although the company is 

planning to reduce it to mid-70s, we have to question in a downturn year scenario 

Chartered’s ability to reach this goal in the near term. Besides, there is additional 

debt of US$542 million maturing in 2010, and we cannot figure out a scenario of 

guarantee for Chartered to pay this off without further measures of funding, or being 

acquired with such worrisome financials. 

337

Bhavin Shah 

(852) 2800-8538 


338 


20 April 2009 

SMIC: Still a long learning curve in growing advanced logic Foundry 

Building logic foundry technologies on the basis of DRAM has finally ended, but to 

adopt flash is not a good solution either: SMIC started its first product with 0.18um 

SDRAM in 2001. The intention to build logic foundry technologies on the basis of 

DRAM ended in 2007, and the company’s licensing of IBM logic technologies goes 

back to December 2006. Although we agree with SMIC on stopping the DRAM 

business, we hardly foresee a good business outcome in the flash memory foundry 

business. 

Still a long learning curve to grow advanced logic foundry business: SMIC is 

licensing IBM’s 45nm technology and has been looking for partners for the 65nm 

technology node. Although the most likely 65nm partner could be TI or Broadcom, 

we expect SMIC to experience a long learning curve with a leaner technology talent 

pool and scarce technology portfolio on the shelf. 

Vanguard: Improving with the environment of TFT-LCD panel market 

Benefits from higher TFT-LCD utilization and inventory depletion of driver ICs: 

With around 55%-65% of revenue concentrated in the driver IC business, Vanguard 

appears to be benefiting from the improved utilization of global TFT-LCD plants. 

Fab 2 ready for 0.11um new process, with diminishing DRAM production: R&D 

activity and technology transfer from TSMC are continuing in Fab 2. The 0.11um 

process baselines are ready and some product qualifications are proceeding smoothly 

in Vanguard. Although it is still too early for order visibility on 0.11um CIS and 

driver IC, conveyed from TSMC, Vanguard could start small volume production in 

2H09. We believe DRAM production is shrinking at Vanguard, given both Winbond 

and Vanguard are suffering from low DRAM market prices.

Bhavin Shah 

(852) 2800-8538 


Patrick Liao AC 

(886-2) 2725-9874 




20 April 2009 

IC backend 

What’s new 

Given the potential downturn ahead, we estimate the total IC backend industry to 

register a 48% decline in sales, which would be back to the 2003 revenue level. For 

the backend sector, margins have been high during the past few years, and growth 

started to fall from 2007. We believe this somewhat shows the sign of a saturated 

industry structure due to the increase in competition. Thus, companies are likely to 

see lower profitability and limited growth in coming years. Capex discipline is a 

major theme for 2009, and we forecast top backend companies to cut the aggregate 

capex by 64% in 2009, with a historical-low capex-to-sales ratio of 8%. 

We expect new technologies to be adopted in 2009. Cost benefit is the main driver 

for copper wire adoption, but reliability and production track record are main 

concerns. Advanced three-dimensional packaging technologies will provide more 

value addition per package, in our view. TSV is still in the development phase, and 

different TSV technologies—via first and via last—are being developed by various 

companies. 

We expect OSAT unit growth of ~10% over the next 10 years 

We expect the IC backend addressable market to grow at a 10% CAGR over the next 

10 years and the package of bare-chip BGA to surpass the CAGR. We believe that 

the backend outsourcing ratio will stabilize in the 65-70% range, which also implies 

that the long-term unit growth estimate will be around 9-11%. Our long-term unit 

growth rate estimate is about 5% lower than the 2002-2006 CAGR, but higher than 

the estimated long-term unit growth for the semiconductor industry. 

Table 2: Implied backend packaging unit CAGR over 10 years from 2008E 

% addressable market over 10 years 

Backend addressable market growth rate for 10 years 

5% 8% 10% 13% 15% 

40% 0% 3% 5% 7% 9% 

50% 2% 5% 7% 10% 12% 

60% 4% 7% 9% 12% 14% 

70% 6% 9% 11% 14% 16% 

80% 7% 10% 12% 15% 17% 

90% 8% 11% 13% 16% 19% 

100% 

Source: Gartner and J.P. Morgan estimates. 

9% 12% 15% 18% 20% 

Unit growth could exceed revenue growth estimate for the next five years 

We expect OSAT revenue to grow at 8-9% CAGR from 2007 to 2012; hence the 

10.0% OSAT unit growth could surpass the revenue growth estimate for the next five 

years. 

We estimate the IC backend industry to post a 48% revenue slump in 2009 

Given that the current recession started in 4Q08, we estimate a 48% revenue decline 

for the IC backend industry in 2009, starting from a -2% growth rate in 2008E. 

According to Gartner data, the OSAT revenue had a 20% CAGR during 2002-2007, 

surpassing the semiconductor and top 4 foundry company revenue CAGR of 13% 

and 17%, respectively. We believe the OSAT market is still volume-driven and 

339

Bhavin Shah 

(852) 2800-8538 


Figure 1: The capex-to-sales ratio of top three IC backend companies 

10,000 

8,000 

6,000 

4,000 

2,000 

340 

0 


20 April 2009 

2002 2003 2004 2005 2006 2007 2008E 2009E 

Aggregate capex (LHS) Aggregate sales (LHS) Aggregate Capex -to-sales (RHS) 

Source: Company reports, Bloomberg and J.P. Morgan estimates. Companies included in this 

sample are ASE, AMKR, and SPIL. *Forecasts for AMKR are based on Bloomberg consensus 

and company guidance. 

should maintain a relatively higher growth versus the semiconductor and the foundry 

markets. 

Table 3: Semiconductor revenue CAGR comparison 

US$B 2002 2003 2004 2005 2006 2007 2008E 2009E 

02-07 

CAGR 

07-09E 

CAGR 

Semiconductors 140.7 166.4 213.0 227.5 247.7 255.6 248.6 185.5 13% -15% 

Y/Y 18% 28% 7% 9% 3% -3% -25% 

Top 4 foundry 7.4 9.7 13.6 13.5 16.3 16.4 16.7 9.2 18% -24% 

Y/Y 33% 39% 0% 20% 1% 4% -45% 

Backend (OSAT) 8.4 10.5 13.5 15.2 19.2 20.6 20.2 10.6 20% -28% 

Y/Y 17% 25% 28% 13% 26% 7% -2% -48% 

Source: Company data, Gartner and J.P. Morgan estimates. 

Substrate-based assembly sustains package value 

The assembly package ASP is dropping by 5-10% each year, and a few small outline 

packages, especially leadframe-based packages such as PDIP, SOP, TSOP, and QFN, 

and some small pin-count QFP, are far below $1. Substrate-based packages such as 

BGA and flip-chip BGA are sustaining ASP and even creating higher ASP with a 

high pin-count package >1,000, and more power dissipation is needed, in our view. 

Table 4: Package ASP in 2009E 

PDIP SOP TSOP QFN QFP/ LQFP BGA Flip-Chip 

Pin count (

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Table 5: Cost reduction impact of top backend companies’ plans in 2009 

Eliminate 

Working day reduction Headcount 

Cost reduction 

overtime Salary cut (per week) 

reduction 

(FY09E sales, %) 

ASE Yes Plan (15%) 1-2 day off Plan (15%) 10 

SPIL Yes Plan (15%) 1-2 day off NA 9 

Source: Company reports and J.P. Morgan estimates. 

Low- to mid-double-digit gross margin for most top IC backend companies, and 

SPIL should be able to outperform with concentrated client support, in our 

view: Except for Powertech and Greatek (based on Bloomberg consensus for 

Greatek), which had higher operating margins, most top IC backend companies 

delivered low- to mid-double-digit gross margins in FY08. Powertech (6239 TT) 

started logic assembly in 2007, with better cost structures to support its marginality. 

Given the potential recession scenario ahead in 2009, we expect SPIL to make a 

profit next year and outperform among top backend companies. Main reasons for 

which we expect SPIL to outperform are better top clients support and less IDM 

order exposure, which we believe will be pulled back during the recession. 

Figure 3: Known eight backend companies’ FY08 operating margin 

2008E Sales (LHS) 

US$B 

3.5 

2008E Op Margin (RHS) 

3.0 

2.5 

2.0 

1.5 

1.0 

13% 

15% 

6% 

23% 

12% 

9% 

19% 

-5.2% 

0.5 

0.0 

-16% 

ASE Amkor SPIL STATS Pow ertech KYEC Unisem Greatek Foundries 

ChipPAC 

ex TSMC 

Source: Companies, Bloomberg and J.P. Morgan estimates. Note: The operating margins for Greatek and KYEC are based on 

Bloomberg consensus as the two companies have not reported their 4Q08 results. 

ASE and SPIL are targeting 10% revenue contribution from 

China in 2009E 

We add the weight of the China capacity into ASE and SPIL given the localized 

manufacturing advantages; especially material and labor cost could sum up to more 

than 20% cost-saving. Both ASE and SPIL are targeting to increase the revenue 

contribution from the China portion from about 4% to 10% in 2009E. The 

differentiated strategies of ASE and SPIL are as below: 

� ASE will focus on inorganic growth opportunities of a merger or a joint 

venture, and focus more on low-entry level products, such as QFN, QFP and 

some low pin-count BGA, in our view. 

� SPIL will work with strategic clients, who are expected to come from the 

handset and PC spaces, and put effort on relatively higher-end products, such 

as BGA package. Given the recession which started in 4Q08, we believe 

ASE’s strategy could be more feasible to cope with the product-mix in China 

30% 

20% 

10% 

0% 

-10% 

-20% 

341

Bhavin Shah 

(852) 2800-8538 


342 


20 April 2009 

and more likely to gain benefits in 2009. However, without the support from 

inorganic growth during the 2009 downturn, SPIL would not see a decent 

recovery before 2010, in our view. 

Technology developments in IC packaging 

Copper wire as a low-cost solution: ASE and SPIL have 

started production in 4Q08 

Cost benefit is the main driver for copper wire 

To provide better cost performance for the package, both ASE and SPIL are 

aggressively developing the copper-wire technique to replace gold wire in packages, 

such as TSOP, BGA and QFP. Although the raw material cost of gold could be 2,000 

times that of copper, the treatment of copper wire as a wire-bonding alloy does 

increase cost. We estimate the real cost-saving for ASE and SPIL to be about 30- 

50% compared to gold wire. 

Reliability and production track record are main concerns 

Copper wire is not new to the backend industry, but the technology being developed 

in recent years for production is incorporated with a special wire-bonding technique 

to prevent copper oxidation during the high temperature wire-ball formation of first 

bonds on the chip. Since semiconductor manufacturing requires high standards of 

reliability assurance and volume production of up to a couple of million pieces to 

identify the failure rate and failure modes for improvement, the hesitation in adopting 

copper wire still exists and many clients of backend companies such as ASE and 

SPIL are still observing performance results. 

ASE and SPIL have started production in 4Q08 

As the companies indicated, both ASE and SPIL have started copper wire package 

production in 4Q08, and we believe the main production site should be in China. The 

most likely packages to use copper wire, in our opinion, could be low-cost products 

such as PDIP, SOP and QFN packages, in which there are not many concerns about 

reliability, and face less reimbursement in terms of reliability issues. 

Table 6: Characteristic comparison of gold wire and copper wire 

(★: Fair; ★★: Good; ★★★: Excellent) 

Cost Reliability Workability 

Pin-count 

limitation 

Production 

record 

Beneficial 

companies 

Gold wire ★ ★★★ ★★★ ★★★ ★★★ All 

Copper wire ★★★ ★ ★★ ★★ NA ASE, SPIL 


Three-dimensional packages 

The backend industry is driving more I/Os, and three-dimensional packages to 

provide more value-addition per package 

When semiconductor wafer fabrication is driving down geographical limits to create 

more transistor shipment per unit cost, the assembly industry cannot grow directly 

with the chip count per package, but is delivering more I/O and also three-dimension 

package to provide more value-added solutions. Although the conventional 

leadframe-type package may still stay below 256 pins (I/O), the ball-grid array 

invented by Motorola in the 1990s, with a substrate-type package, did open the era of

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

more I/O. In 2002, the flip-chip package started to deliver volume production in top 

backend companies and more I/Os could be done on the basis of a substrate-based 

flip-chip package. The evolving technology of rolling out volume production in 2009 

has further migrated into 3D packages, which we list in the table below. Among 3D 

package technologies, the TSV (through silicon via) technology is still under some 

development, and the pilot run of applications like camera module—i.e., integrated 

with CMOS sensor, DSP and memory—are not expected to see volume production 

before 2010, in our view. 

Table 7: Summary of 3D package technologies 

SiP TSV Embedded substrate 

Brief description Numerous integrated circuits 

enclosed in a single package 

or module 

Applications Handset, memory cards, PC, 

MP3s 

Entry barrier Medium, fine pitch wire 

bonding and substrate-based 

technologies needed 

Expected to benefit ASE, SPIL, AMKR, Stats 

ChipPAC 


A technique to connect the top 

of the bottom chip with the 

bottom of top chip by inter 

metallic connection instead of 

using gold wires 

Memory, CPU + memory, 

graphic +memory, handset, 

consumer 

High, fab 

manufacturing/integration 

technologies involved 

TSMC, IBM, Samsung, ASE, 

AMKR 

To bury a passive or/even an 

active chip in the substrate 

build-up layers 

Graphics, CPUs, 

High, integration with 

substrate makers needed 

SPIL, ASE 

SiP (system in package) continues to grow 

Among 3D packages, the SiP (system in package) will likely be the main focus of 

production in 2009. The “hot” application should still be the main handset chip 

package, including baseband chip, and the multi-chip module of NOR flash and 

SRAM, or pseudo-SRAM, or even adding up one more DDR DRAM. Compared to 

SoC (system on chip), SiP is better in overall development cycle time and testing 

workability, and SoC is better in terms of performance with shorter inter-routing, and 

form factor, and no KGD (known good die) issues are there given a single-chip 

integration. We expect that backend companies should benefit from SiP technologies, 

and front-end companies like IBM and TSMC should take advantage of SoC 

technologies. The SiP market is growing moderately and is expected to reach a 6% 

CAGR from 2006 to 2012, as per Gartner forecasts. 

Table 8: SiP—A lower cost and shorter time-to-market solution for SoC 

(★: Fair; ★★: Good; ★★★: Excellent) 

Time to 

market 

Testing 

workability 

Form 

factor 

Performance 

Unknown good 

die issue 

Beneficiary 

SiP ★★★ ★★★ ★★ ★ ★ Backend companies 

SoC ★ ★ ★★★ ★★★ ★★★ TSMC, IBM etc 


343

Bhavin Shah 

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344 

Figure 218: SiP—A lower cost and shorter time-to-market solution for SoC 

Cost / function 

Time to market 

Source: Fraunhofer IZM. 

Table 9: Worldwide system-in-package (SiP) unit growth estimates 

System Integration 

System 

on Chip 

MEMS 

SiP and 3D Packaging 

System complexity 

Bio-Interface 

Power supply 

2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 

CAGR 

2006-2011E 

Automotive 163 214 251 333 395 518 557 575 589 611 656 4.8% 

Communications 1,057 1,369 1,540 2,383 3,361 4,499 4,888 5,065 5,158 5,355 5,753 5.0% 

Consumer 512 762 1,209 2,103 2,616 3,501 3,945 4,286 4,408 4,576 4,916 7.0% 

Data processing 447 581 663 975 1,043 1,223 1,297 1,331 1,362 1,414 1,519 4.4% 

Industrial 0 6 22 47 37 39 32 23 23 24 26 -8.0% 

Total SiP 


2,179 2,932 3,685 5,841 7,452 9,780 10,720 11,280 11,540 11,980 12,870 5.6% 

Via first: A small opening in an 

insulating oxide layer that allows 

metallic interconnect (tungsten, 

copper) on the adjacent 

interconnect layers to form a 

connection 


20 April 2009 

Through-silicon-vias (TSV): An evolutionary and 

revolutionary assembly technology 

While stacked die SiP is emerging as the mainstream technology for SiP, efforts are 

on to reduce the Z-axis height (thickness) of 3D-stacked dies and improve the 

connection quality. Through-silicon-vias (TSV) is a new technique that meets both 

the requirements. The TSV technology connects stacked dies without using the gold 

wire between the chip and the substrate, and should significantly reduce the Zthickness 

of the as-packaged dies. The technology, to connect the top of the bottom 

chip with the bottom of the top chip, is of forming interconnection channels through 

the silicon. It can largely eliminate the usage of wire bonding or flip chip as side-byside 

SiP. TSV is started to be used on the stacked memory assembly or stacked die 

package for handset applications, and can be further expanded to high-density 

memory and integrated memory with CPU, graphic cards and other new applications. 

Types of TSV: First and last 

There are many TSV technologies being developed by various companies. One way 

to classify them is the stage at which the overall wafer packaging is implemented. 

Via first: TSV in 3D-stacked IC (front-end process) 

3D ICs are produced by die-to-die stacking using TSV, created after FEOL and 

before BEOL processing. The process is called via first TSV, and the resulting IC is 

called 3D-stacked ICs.

Bhavin Shah 

(852) 2800-8538 


Via last: TSV in 3D WLP (back-end process) 

When circuits are connected at the bond-pad level after both FEOL and BEOL, it is 

called the via last TSV approach. It results in 3D wafer level packaging chips. This is 

done after wafer thinning, hence it is difficult to handle. CMOS image sensors based 

in TSV mainly use this technique. 

Figure 219: Evolution of IC assembly technologies 

1st generation: Leadframebased 

2nd generation: BGA 3rd generation: Flip chip 

Source: Google image. 

Figure 220: TSV applications roadmap 

Source: ASE Group. 


20 April 2009 

4th generation: Through 

silicon vias (TSV) 

345

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346 


20 April 2009 

Company Information 

P A R T2

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Semiconductors 

IC IDM .............................................. 348 

Memory............................................ 372 

IC Fabless ....................................... 379 

IC Foundry ...................................... 412 

IC Assembly & Test ........................ 417 

Semiconductor Equipment............ 425 

Semiconductors Materials............. 457 


347

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(852) 2800-8538 


348 


20 April 2009 

IC IDM 

Advanced Micro Devices ............... 349 

Analog Devices............................... 350 

Fairchild Semiconductor ............... 351 

Infineon Technologies AG ............. 352 

Integrated Device Technology ...... 353 

Intel Corp......................................... 354 

Intersil Corporation ........................ 355 

Linear Technology.......................... 356 

LSI Corporation .............................. 357 

Maxim Integrated Products ........... 358 

Melexis ............................................ 359 

Microchip Technology ................... 360 

Nanya Tech. Corp........................... 361 

National Semiconductor ................ 362 

NEC Electronics Corporation ........ 363 

ON Semiconductor Corporation.... 364 

Rohm Co., Ltd................................. 365 

SanDisk Corp.................................. 366 

Sanken Electric Co., Ltd. ............... 367 

Semtech Corporation ..................... 368 

STMicroelectronics ........................ 369 

Texas Instruments Inc.................... 370 

Winbond .......................................... 371

Bhavin Shah 

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Advanced Micro Devices 

Company Description: 

Advanced Micro Devices, Inc. supplies integrated circuits for the personal and networked computer and 

communications markets, with manufacturing facilities in the United States, Europe, Japan, and Asia. The 

company produces microprocessors, flash memory devices, and support circuitry for communications and 

networking applications. 

Country: United States 

Ticker: AMD 

Analyst: Christopher Danely 

Rating: Neutral 

Price (US$): 2.4 

Market Cap (US$MM): 1,600 

No. of Shares (MM): 667 

Founded: 1969; Listed: 1972 Fiscal Year End: December 

Key Management: Derrick R Meyer; Hector De J Ruiz; Robert J Rivet No. of Employees: 14,700 

Business Alliances/Partnerships (US$ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 5,649 6,013 5,601 3,800 

Gross Profit 2,854 2,291 2,117 1,360 

Operating Profit 504 (929) (1,021) (1,490) 

Net Profit 385 (1,443) (1,480) (1,910) 

Earnings per Share (US$) 0.8 (2.6) (2.44) (2.92) 

Return on Equity (%) -2 -14 NM (130.9) 

Capital Spending (1,856) (1,686) (622) (1,200) 

Research & Development Expenses 1,205 1,847 1,830 1,710 

Cash & Cash Equivalents 1,541 1,889 1,096 2,154 

Gross Debt 3,672 5,269 4,788 4,680 

Owners’ Equity 5,785 2,990 (82) 1,451 

Book Value per Share (US$) 10.9 5.2 (0.1) 2.2 

Geographical Mix (2008) 

NA 

Other 

22% 

US 

12% 

Key Suppliers 

Europe 

18% 

japan 

3% 

china 

44% 

Asia pacific 

48% 

Source: Company, J.P. Morgan estimates. Share price is as of 12 March 2009. 


20 April 2009 

Product Mix (2008) 

Advanced Micro Devices 

Graphics 

20% 

Computing 

80% 

Large 

Multinationals 

(core OEM 

customers) 

Key Customers 

Selected regional 

accounts (core OEM 

customers) 

Target- Foreign and domestic manufacturers 

of PCs and PC motherboards 

COMPANY WEBSITE IC IDM 

349

Bhavin Shah 

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350 

Analog Devices 


Analog Devices, Inc. designs, manufactures, and markets integrated circuits used in analog and digital signal 

processing. The company’s products are used in communications, computer, industrial, instrumentation, 

military/aerospace, automotive, and high-performance consumer electronics applications. Analog Devices sells 

its products worldwide. 


Ticker: ADI 



Price (US$): 19.95 



Founded: 1965; Listed: 1969 Fiscal Year End: October 

Key Management: Jerald G Fishman; Ray Stata; Joseph E Mcdonough No. of Employees: 9,000 


NA Revenues 2,573 2,701 2,583 1,737 

Gross Profit 1,526 1,550 1,577 950 

Operating Profit 596 551 628 141 

Net Profit 537 499 522 127 

Earnings per Share (US$) 1.5 1.5 1.8 0.4 

Return on Equity (%) 15 21 23 5 

Capital Spending (101) (142) (157) (43) 

Research & Development Expenses 536 590 628 141 


Gross Debt 0 0 0 0 

Owners’ Equity 3,436 2,338 2,420 2,238 

Book Value per Share (US$) 9.6 7.5 8.2 7.7 


TSMC 

US 

20% 

Europe 

26% 

Key Suppliers 

Rest of North & 

South America 

4% 

Japan 

19% 

China 

16% 

Rest of Asia 

15% 



20 April 2009 


Analog Devices 

Consumer 

21% 


25% 

Computer 

5% 


Industrial 

49% 

Key Customers 

Diversified

Bhavin Shah 

(852) 2800-8538 


Fairchild Semiconductor 


Fairchild Semiconductor International, Inc., is a global supplier of high performance products that minimize, 

convert, manage and distribute power for multiple end markets. The company’s focus is on developing power 

and interface solutions for a broad range of electronic devices. Fairchild Semiconductor components are used 

in computing, communications, and other applications. 


Ticker: FCS 

Analyst: Shawn Webster 


Price (US$): 3.55 

Market Cap (US$MM): 440 



Key Management: Mark S Thompson; Mark S Frey; John M Waltkins Jr No. of Employees: 9,771 


NA Revenues 1,651 1,670 1,601 1,315 

Gross Profit 497 494 468 345 


Net Profit 112 104 91 8 


Return on Equity (%) 10.44 8.87 7.30 0.60 

Capital Spending 114 140 169 105 


Cash & Cash Equivalents 584 411 389 465 

Gross Debt 593 590 536 536 

Owners’ Equity 1,132 1,219 1,283 1,313 



NA 

Other Asia/Pacific 

13% 

Key Suppliers 

Other Americas 

United States 

3% 

9% 

Europe 

12% 

Korea 

13% 

China 

29% 

Taiwan 

21% 



20 April 2009 


Fairchild Semiconductor 

Analog Products 

21% 

Standard 

Products 

24% 

Functional Power 

56% 

Key Customers 

Samsung Motorola 



351

Bhavin Shah 

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352 

Infineon Technologies AG 


Infineon Technologies AG designs, manufactures, and markets semiconductors and related products. The 

company's products include microprocessors, memory components, microcontrollers, integrated circuits, digital 

and analog sensors, and fiber optics. Infineon markets its products to the communications, automotive, 

industrial, and consumer electronics sectors. 

Country: Germany 

Ticker: IFXGn.F 

Analyst: Sandeep S Deshpande 

Rating: Underweight 

Price (€): 0.485 



Founded: 1999; Listed: 2000 Fiscal Year End: September 

Key Management: Peter Bauer; Dr. Marco Schröter; Prof. Dr. Hermann Eul No. of Employees: 43,079 

Business Alliances/Partnerships (€ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 7,929 7,682 4,320 3,119 

Gross Profit 2,050 1,568 1,493 503 

Operating Profit (15) (255) (48) (442) 

Net Profit (268) (367) (122) (436) 

Earnings per Share (€) (0.36) (0.45) (0.16) (0.58) 

Return on Equity (%) (5.06) (7.48) (5.65) (28.40) 

Capital Spending (1,298) (1,375) (312) (200) 

Research & Development Expenses 1,249 1,147 742 553 

Cash & Cash Equivalents 2,029 1,073 883 582 

Gross Debt 2,005 1,409 1,170 922 

Owners’ Equity 5,300 4,914 2,161 1,537 

Book Value per Share (€) 7.09 6.57 2.89 2.05 


Germany 

15% 

Rest of Europe 

16% 

Key Suppliers 

Agilent ASMI 

Phillips Teradyne 

Novellus Canon 

Dupont Photomask 

Rest of the World 

Japan 

2% 

9% 

North America 

25% 

Asia/Pacific 

34% 



20 April 2009 


Infineon Technologies 

Communication 

Solutions 

33% 

Automotive, 

Industrial 

67% 

Key Customers 

Ericsson Siemens 

Dell IBM 

Avnet Nokia 

HP Bosch 

COMPANY WEBSITE IC IDM

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Integrated Device Technology 


Integrated Device Technology, Inc. designs, develops, manufactures, and markets a variety of semiconductor 

products and modules. Applications for the company's products include data and telecommunications 

equipment, storage area networks, networked peripherals and servers, and personal computers. The company 

markets its products worldwide, primarily to original equipment manufacturers. 


Ticker: IDTI 

Analyst: Not Covered 

Rating: Not Rated 

Price (US$): 5.03 



Founded: 1980; Listed: 2004 Fiscal Year End: March 

Key Management: Theodore Locke Tewksbury III; Hock E. Tan; Clyde R. Hosein No. of Employees: 2,353 

Business Alliances/Partnerships (US$ in millions) FY07 FY08 FY09E FY10E 

NA Revenues 804 782 676 514 

Gross Profit 352 294 NA NA 


Net Profit 8 39 116 34 


Return on Equity (%) 0.41 2.23 (9.06) (2.28) 

Capital Spending 21 17 NA NA 

Research & Development Expenses 167 166 NA NA 

Cash & Cash Equivalents 561 432 NA NA 

Gross Debt 0 0 NA NA 

Owners’ Equity 1,839 1,621 NA NA 

Book Value per Share (US$) 9.37 9.46 NA NA 


NA 

Japan 

9% 

Americas 

28% 

Key Suppliers 

Europe 

7% 


20 April 2009 

Asia Pacific 

56% 


Integrated Device 

Source: Company, Bloomberg estimates (FY09E and FY10E). Share price is as of 12 March 2009. 

Standard Produts 

& Others 

17% 

Networking 

26% 

Timing & Memory 

Interface 

57% 

Key Customers 


NA 

353

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354 

Intel Corp 


Intel Corporation designs, manufactures, and sells computer components and related products. The company's 

major products include microprocessors, chipsets, embedded processors and microcontrollers, flash memory 

products, graphics products, network and communications products, systems management software, 

conferencing products, and digital imaging products. 


Ticker: INTC 



Price (US$): 14.52 


No. of Shares (MM): 5,562 


Key Management: Paul S Otellini; Craig R Barrett; Stacy Jared Smith No. of Employees: 83,900 


NA Revenues 35,382 38,334 37,586 28,600 

Gross Profit 18,218 20,017 20,844 13,259 

Operating Profit 5,969 8,319 8,954 2,776 

Net Profit 4,710 7,019 5,292 1,647 



Capital Spending (5,766) (5,000) (5,197) (5,000) 



Gross Debt 2,028 2,122 1,988 1,988 

Owners’ Equity 36,752 42,762 39,088 38,810 



NA 

Europe 

19% 

Americas 

20% 

Key Suppliers 

Japan 

11% 

rest of Asia 

51% 



20 April 2009 

Intel Corp 


others 

4% 

Mobility group 

42% DEG 

55% 

Key Customers 

OEMS and ODMS PC and network 

communications 

products users 

Others, including manufacturers of 

industrial and communication equipment 


Bhavin Shah 

(852) 2800-8538 



Intersil Corporation 


Intersil Corporation designs and manufactures high performance analog semiconductors. The company's Ticker: ISIL 

products are used in flat panel displays, optical storage, and power management applications. 



Price (US$): 12.05 




Key Management: Gary E Gist; Richard M Beyer; Louis Dinardo No. of Employees: 1,531 


TSMC Revenues 741 757 770 458 

Gross Profit 425 432 406 256 

Operating Profit 161 165 138 (4) 

Net Profit 148 156 103 2 







Owners’ Equity 2,422 2,239 1,034 1,001 



NA 

United States 

18% 

Key Suppliers 

International 

82% 



20 April 2009 


Intersil Corporation 


100% 

Diversified 

Key Customers 


355

Bhavin Shah 

(852) 2800-8538 



Linear Technology 


Linear Technology Corporation designs, manufactures, and markets a line of linear integrated circuits. The Ticker: LLTC 

company's products are used in a variety of applications including telecommunications, cellular telephones, Analyst: Christopher Danely 

networking products and satellite systems, notebook and desktop computers, computer peripherals, 


video/multimedia, and military and space systems. 

Price (US$): 22.91 

356 



Founded: 1981; Listed: 1986 Fiscal Year End: June 

Key Management: Lothat Maier; Robert H Swanson Jr; Paul Coughlan No. of Employees: 1,106 


NA Revenues 1,083 1,175 940 785 

Gross Profit 842 908 693 559 


Net Profit 412 388 247 165 

Earnings per Share (US$) 1 1.71 1.11 0.75 

Return on Equity (%) NM NM NM NM 




Gross Debt 1,700 1,700 1,500 1,500 

Owners’ Equity (708) (434) (351) (267) 

Book Value per Share (US$) (2.7) (1.9) (1.6) (1.2) 


NA 

US 

30% 

Key Suppliers 

Europe 

18% 

Japan 

13% 

rest of Asia 

39% 



20 April 2009 


Linear Technology 

10% 

Military 

5% 

12% 

6% 

Industrial 

32% 

Diversified 

Communication 

35% 

Key Customers 


Bhavin Shah 

(852) 2800-8538 


LSI Corporation 


LSI Corporation designs, develops, manufactures, and markets integrated circuits and storage systems. The 

company offers products and services for a variety of electronic systems applications that are marketed to 

original equipment manufacturers in the networking, telecommunications and wireless, computers, consumer 

products, and storage industries. 


Ticker: LSI 



Price (US$): 2.92 




Key Management: Abhijit Y Talwalkar; Bryon Look; Jean F. Rankin No. of Employees: 5,488 


NA Revenues 1,982 2,604 2,757 2,557 

Gross Profit 855 1,127 1,295 1,183 


Net Profit 188 89 235 105 






Gross Debt 350 718 716 716 

Owners’ Equity 1,896 2,485 2,370 2,342 



NA 

EMEA 

22% 

North America 

28% 

Key Suppliers 

Asia, including 

Japan 

51% 



20 April 2009 

LSI Corporation 


Storage Systems 

33% 

Semiconductor 

67% 

Key Customers 

IBM Samsung 

LG Electronics EMC 

Philips Seagate 


357

Bhavin Shah 

(852) 2800-8538 


358 

Maxim Integrated Products 


Maxim Integrated Products, Inc. designs, develops, manufactures and markets a broad range of linear and 

mixed-signal integrated circuits. The company also provides a range of high-frequency design processes and 

capabilities that can be used in custom design. 


Ticker: MXIM 



Price (US$): 12.2 




Key Management: Tunc Doluca; B Kipling Hagopian; Bruce Earl Kiddoo No. of Employees: 9,810 


NA Revenues 2,007 2,053 1,532 1,300 

Gross Profit 1,216 1,238 776 644 


Net Profit 378 318 13 (5) 

Earnings per Share (US$) 1.20 0.97 0.03 (0.01) 

Return on Equity (%) 11.8 8.4 -2.0 0.2 

Capital Spending (332) (213) 49 115 


Cash & Cash Equivalents 577 1,013 959 1,261 


Owners’ Equity 3,132 3,148 2,725 2,737 



NA 

Rest of Asia 

18% 

Europe 

18% 

Rest of world 

3% 

Key Suppliers 

Japan 

8% 

US 

24% 

China 

29% 



20 April 2009 


Maxim Integrated 

Diversified 


IC 

100% 

Key Customers

Bhavin Shah 

(852) 2800-8538 


Melexis 


Melexis NV designs and manufactures advanced integrated semiconductors, sensor ICs, and programmable 

sensor IC systems that meet the requirements of the automotive industry. Headquartered in Belgium, the 

company is present in France, Germany, Switzerland, Bulgaria, Ukraine, and the United States. 

Country: Belgium 

Ticker: MLXS.BR 



Price (€): 3.6 




Key Management: Ronald M Duchatelet; Rudi De Winter; Francoise Chombar No. of Employees: 763 


NA Revenues 198 202 186 163 


Operating Profit 42 38 NA 20 

Net Profit 35 37 22 16 

Earnings per Share (€) 0.80 0.86 0.52 0.44 

Return on Equity (%) 52.56 50.19 NA 25.75 

Capital Spending (15) (15) NA (10) 




Owners’ Equity 70 78 NA NA 

Book Value per Share (€) 1.6 1.8 NA 1.7 


USA 

14% 

Asia 

38% 

Key Suppliers 

XPEQT Group 

ROW 

6% 


20 April 2009 


42% 

Source: Company, Bloomberg estimates (FY09E). Share price is as of 12 March 2009. 

Melexis 


Opto 

15% 

Actuators 

35% 

Wireless other 

7% 2% 


Sensors 

42% 

Key Customers 

TI TRW 

Delphi Takata 

Vishay Bosch 

Brose TT/AB Electroniks 

359

Bhavin Shah 

(852) 2800-8538 



Microchip Technology 


Microchip Technology Incorporated designs, manufactures, and markets microcontrollers, related mixed-signal Ticker: MCHP 

and memory products, and application development systems for high-volume embedded control applications. Analyst: Christopher Danely 

The company also designs, develops, and markets linear/mixed-signal, power management, and thermal Rating: Neutral 

management products. 

Price (US$): 20.62 

360 




Key Management: Steve Sanghi; Ganesh Moorthy; Mitchell R Little No. of Employees: 4,811 


NA Revenues 1,040 1,036 1,083 1,180 

Gross Profit 625 625 661 726 


Net Profit 305 325 309 341 





Cash & Cash Equivalents 750 1,325 1,092 1,232 

Gross Debt 9 1,285 1,296 1,296 

Owners’ Equity 2,004 1,036 1,068 1,159 



NA 

Americas 

27% 

Key Suppliers 

Europe 

28% 

Asia 

46% 



20 April 2009 


Microchip Technology 

Analog & 

Interface Products 

10% 

Memory Products 

9% 

Microcontrollers 

81% 

Key Customers 

Several OEM customers and distributors 


Bhavin Shah 

(852) 2800-8538 



Nanya Tech. Corp. 

Country: Taiwan 

Nanya Technology Corp. manufactures and markets dynamic random access memories (DRAMs). The Ticker: 2408.TW 

company sells its products in Taiwan and exports worldwide. 



Price (NT$): 5.82 




Key Management: Wu Chia-Chau; Lien Jih-Chang; Chang hia-Fang No. of Employees: 4,899 

Business Alliances/Partnerships (NT$ in billions) FY06 FY07 FY08E FY09E 

Inotera, a JV with Infenion Technologies AG; Revenues 74.8 54.4 38.2 35.5 

MeiYa, a JV with Micron Technology Gross Profit 23.3 (0.2) NA NA 

Operating Profit 14.3 (10.5) NA (18.9) 

Net Profit 17.4 (12.5) (35.2) (25.1) 

Earnings per Share (NT$) 4.4 (2.9) (7.5) (5.1) 

Return on Equity (%) 25.8 (17.5) NA (103.8) 

Capital Spending (3.9) (47.2) NA (9.0) 

Research & Development Expenses 6.3 6.5 NA NA 

Cash & Cash Equivalents 30.1 3.1 NA NA 

Gross Debt 44.4 48.0 NA NA 

Owners’ Equity 77.2 65.3 NA NA 

Book Value per Share (NT$) 19.5 14.0 NA 2.6 


NA 

Europe 

16% 

Key Suppliers 

America 

33% 

Taiwan 

8% 


20 April 2009 

Asia 

43% 


Nanya Tech. 



DRAM 

100% 

Key Customers 

Dell IBM 

HP PanRam 

361

Bhavin Shah 

(852) 2800-8538 


362 

National Semiconductor 


National Semiconductor Corporation, through its subsidiaries, designs, develops, manufactures, and markets a 

wide variety of semiconductor products. The Company produces systems on a single chip as well as analog, 

mixed-signal, and other multichip integrated circuits. National provides solutions for the information appliance, 

personal computing, consumer, and communication markets. 


Ticker: NSM 


Rating: Overweight 

Price (US$): 11.02 



Founded: 1959; Listed: 1987 Fiscal Year End: May 

Key Management: Brian L Halla; Lewis Chew; Donald Macleod No. of Employees: 7,300 


NA Revenues 1,930 1,886 1,450 1,140 

Gross Profit 1,172 1,214 900 667 


Net Profit 378 335 156 23 






Gross Debt 143 1,595 1,183 1,113 

Owners’ Equity 1,749 197 404 159 



NA 

Japan 

11% 

Germany 

11% 

UK 

11% 

Key Suppliers 

Singapore 

16% 

China 

30% 

US 

20% 



20 April 2009 


National Semiconductor 

Others 

2% 

Analog segment 

98% 

Key Customers 

Samsung Nokia 

IBM Sony Ericsson 

Motorola Apple 

Siemens LG 


Bhavin Shah 

(852) 2800-8538 


NEC Electronics Corporation 


NEC Electronics Corporation researches, develops, and manufactures electronic components such as 

semiconductors and integrated devices. 

Country: Japan 

Ticker: 6723.T 

Analyst: Yoshiharu Izumi 


Price (¥): 467 




Key Management: Toshio Nakajima; Hiroshi Sato; Junshi Yamaguchi No. of Employees: 23,110 

Business Alliances/Partnerships (¥ in billions) FY07 FY08 FY09E FY10E 

NA Revenues 692.3 687.7 555.5 448.4 

Gross Profit 190.2 202.1 139.0 134.6 

Operating Profit (28.6) 5.1 (55.0) (54.4) 

Net Profit (41.5) (16.0) (64.0) (59.4) 

Earnings per Share (¥) (336.0) (129.5) (222.0) (356.3) 


Capital Spending 105.9 56.1 60.0 35.0 

Research & Development Expenses 131.8 112.3 110.0 100.0 

Cash & Cash Equivalents 185.4 165.5 123.8 99.4 

Gross Debt 144.0 124.6 125.0 125.0 

Owners’ Equity 265.1 227.1 156.1 94.3 

Book Value per Share (¥) 2,146.3 1,839.2 1,264.2 763.3 


NA 

USA 

10% 

Europe 

13% 

Asia 

23% 

Key Suppliers 

Japan 

55% 



20 April 2009 



Multi Market IC 

13% 

Others 

20% 

Automotive & 

Industrial 

15% 

Computing & 

peripherals 

18% 

Consumer 

electronics 

17% 

Optical, 

microwave & 

discrete devices 

17% 

Key Customers 

Ryousan Nintendo 


363

Bhavin Shah 

(852) 2800-8538 


364 

ON Semiconductor Corporation 


ON Semiconductor Corporation supplies analog, standard logic, and discrete semiconductors for data and 

power management. The company's products include integrated circuits, and analog ICs. ON also offers 

discrete semiconductors in a variety of surface mount and standard packages. 


Ticker: ONNN 



Price (US$): 4.15 




Key Management: J Daniel McCranie “Dan”; Keith D Jackson; William John Nelson No. of Employees: 14,172 


NA Revenues 1,532 1,566 2,055 1,470 

Gross Profit 589 590 746 464 


Net Profit 266 245 212 (94) 


Return on Equity (%) NM 722.1 31.0 (23.6) 




Gross Debt 1,176 1,159 1,061 1,036 

Owners’ Equity (205) 34 683 398 

Book Value per Share (US$) (0.6) 0.1 1.8 1.0 


NA 


Singapore 

0.1% 

8% 

Belgium 

8% 

UK 

10% 

Other Asia 

12% 

Key Suppliers 

US 

25% 

China 

38% 



20 April 2009 


ON Semiconductor 

Automotive and 

power 

21% 

Computing 

Products 

21% 

Digital and 

Consumer 

9% 

Custom and 

Foundry 

26% 

Standard 

Products 

24% 

Key Customers 

Intel Nokia 

Motorola Philips 

Siemens Avnet 


Bhavin Shah 

(852) 2800-8538 


Rohm Co., Ltd. 


Rohm Company Limited manufactures custom linear integrated circuits and semiconductor devices for use 

primarily in consumer electronics. The company has plants and sales offices worldwide. Rohm's subsidiaries 

include Wako Electric and Apollo Electronics. 


Ticker: 6963.OS 



Price (¥): 4,340 



Founded: 1954; Listed: NA Fiscal Year End: March 

Key Management: Kenichiro Sato; Naotoshi Watanabe; Satoshi Sawamura No. of Employees: 20,539 


NA Revenues 395.1 373.4 313.0 299.0 

Gross Profit 143.6 142.6 98.5 84.5 

Operating Profit 69.5 67.4 0.5 (28.5) 

Net Profit 47.4 31.9 (11.0) (11.9) 

Earnings per Share (¥) 417.0 284.7 (18.3) (61.2) 





Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 817.5 755.5 718.9 681.5 

Book Value per Share (¥) 7,182.6 6,735.6 6,561.2 5,938.0 


NA 

Japan 

39% 

Key Suppliers 

Europe 

4% 

America 

4% 

Asia 

53% 



20 April 2009 

Rohm Co. 


Components 

Displays 6% 

10% 


Discreet 

40% 

NA 

LSI 

44% 

Key Customers 

365

Bhavin Shah 

(852) 2800-8538 


366 

SanDisk Corp 


SanDisk Corporation supplies flash data storage products. The company designs, manufactures and markets 

industry-standard, solid-state data, digital imaging, and audio storage products using its patented, high-density 

flash memory and controller technology. 


Ticker: SNDK 

Analyst: Paul Coster, CFA 


Price (US$): 9.95 




Key Management: Eli Harari; Irwin Federman; Sanjay Mehrotra No. of Employees: 3,565 


Flash Vision Revenues 3,258 3,896 3,351 2,121 

Gross Profit 1,239 1,203 63 268 

Operating Profit 326 277 (1,973) (569) 

Net Profit 199 218 (2,070) (333) 

Earnings per Share (US$) 1.0 0.9 (9.2) (1.5) 




Cash & Cash Equivalents 1,581 834 962 450 

Gross Debt 1,225 1,225 1,225 1,225 

Owners’ Equity 4,774 4,961 3,162 2,921 



EMEA 

23% 

Key Suppliers 

Toshiba UMC 

Samsung 

Japan 

6% 

Others 

2% 

United States 

31% 

APAC 

38% 



20 April 2009 

SanDisk Corp 


License & royalty 

15% 

NAND-Based 

Flash Storage 

Cards 

85% 

Key Customers 

Best Buy Canon 

Costco Wall-Mart 

Motorola Nikon 


Bhavin Shah 

(852) 2800-8538 


Sanken Electric Co., Ltd. 


Sanken Electric Co., Ltd. manufactures and sells discrete semiconductors such as diodes and transistors, and 

analogue integrated circuits. The company also manufactures various kinds of adapters and surge/transient 

protectors. 



Analyst: Shoji Sato 


Price (¥): 226 




Key Management: Sadatoshi Iijima; Hirohito Sekine; Kiyoshi Imaizumi No. of Employees: 10,489 


NA Revenues 204 184 147 132 

Gross Profit 43 35 22 27 

Operating Profit 15 8 (5) (2) 

Net Profit 7 2 (15) (4) 

Earnings per Share (¥) 60 13 (112) (30) 





Gross Debt 58 55 50 50 

Owners’ Equity 83 78 58 55 

Book Value per Share (¥) 683 643 477 452 


NA 

North America 

7% 

Asia 

37% 

Key Suppliers 

Europe 

7% 

Japan 

49% 



20 April 2009 

Sanken Electric 


Pow er Module 

14% 

Pow er Sy stem 

11% 

CCFL 

16% 

Semiconductor 

58% 

Key Customers 

Sharp Samsung 

AU Optronics 


367

Bhavin Shah 

(852) 2800-8538 


368 

Semtech Corporation Country: United States 


Semtech Corporation designs, manufactures and markets a wide range of analog and mixed-signal 

semiconductors, including integrated circuits, discrete circuits, and assembly products. The company's devices 

are used in computer, communications, industrial, military-aerospace, and automotive applications. 

Ticker: SMTC 



Price (US$): 13.64 



Founded: 1960; Listed: 1967 Fiscal Year End: January 

Key Management: Mohan R Maheswaran; Rock N. Hankin; Emeka Chukwu No. of Employees: 781 


NA Revenues 253 285 295 230 

Gross Profit 136 155 160 NA 


Net Profit 32 47 38 31 



Capital Spending 3 4 7 NA 

Research & Development Expenses 41 43 41 NA 

Cash & Cash Equivalents 291 209 148 NA 

Gross Debt 0 0 0 NA 

Owners’ Equity 481 349 378 NA 

Book Value per Share (US$) 6.65 5.70 6.17 NA 


NA 

North America 

19% 

Key Suppliers 

Europe 

16% 


20 April 2009 

Asia Pacific 

65% 



Semtech Corporation 

Rectifier, 

Assembly & Other 

Products 

9% 

Standard 

Semiconductor 

Products 

91% 

Key Customers 

Apple HP 

Dell Cisco 

Motorola LG Electronics 

Intel 


Bhavin Shah 

(852) 2800-8538 


STMicroelectronics Country: France 


STMicroelectronics N.V. designs, develops, manufactures, and markets semiconductor integrated circuits and 

discrete devices. The company's products are used in the telecommunications, consumer electronics, 

automotive, computer, and industrial sectors. Geographically, its customers are located in North America, 

Europe, and the Asia/Pacific region. 

Ticker: STM.PA 



Price (€): 3.369 




Key Management: Carlo Bozotti; Alain Dutehil; Carlo Ferro No. of Employees: 52,180 


NA Revenues 9,855 10,001 9,841 7,100 

Gross Profit 3,524 3,536 3,648 2,189 

Operating Profit 753 684 416 (1,025) 

Net Profit 837 742 158 (927) 

Earnings per Share (€) 0.88 0.81 0.18 (1.06) 

Return on Equity (%) 8.59 7.75 1.94 (13.45) 


Research & Development Expenses 1,668 1,803 (2,153) (2,138) 


Gross Debt 2,130 2,220 2,697 2,583 

Owners’ Equity 9,747 9,573 8,156 6,889 



NA 

North America 

12% 

Rest of 

Asia/Pacific 

19% 

Key Suppliers 

Emerging 

Markets 

6% 

Japan 

5% 

China 

28% 

Europe 

32% 



20 April 2009 


STMicroelectronics 

Wireless Product 

Sector) 

26% 

Industrial & 

Multisegment 

Sector 

33% 

Other 

1% 

Automotive, 

Consumer, 

Computer and 

Telecom 

Infrastructure 

40% 

Key Customers 

Nokia Alcatel-Lucent 

Hughes Seagate 

Motorola Siemens 

LG Electronics Delphi 


369

Bhavin Shah 

(852) 2800-8538 


370 

Texas Instruments Inc. 


Texas Instruments Incorporated is a global semiconductor company that designs and supplies digital signal 

processing and analog technologies. The company also operates materials and controls, and educational and 

productivity solutions businesses. Texas Instruments has manufacturing or sales operations in countries around 

the world. 


Ticker: TXN 



Price (US$): 15.94 



Founded: 1930; Listed: NA Fiscal Year End: December 

Key Management: Joseph F Hubach; Micahel J Hames; Kevin P March No. of Employees: 29,537 


NA Revenues 14,255 13,834 12,501 7,650 

Gross Profit 7,259 7,292 6,245 3,109 

Operating Profit 3,368 3,459 2,691 302 

Net Profit 2,638 2,602 2,004 260 



Capital Spending (1,272) (686) (763) (300) 




Owners’ Equity 11,360 9,975 9,326 8,225 



NA 

Us 

12% 

Europe 

15% 

Key Suppliers 

Japan 

10% 

others 

3% 

Asia 

59% 



20 April 2009 


Texas Instruments 

Embedded 

processing 

13% 


Others 

21% 

Wireless 

27% 

Analog 

39% 

Key Customers 

Nokia (~10%) Major OEMs, ODMs 

Contract manufacturers and distributors

Bhavin Shah 

(852) 2800-8538 



15 20 April 2009 

Winbond 


Winbond Electronics Corporation designs, manufactures, and sells integrated circuits (IC) and related products. 

The company sells its products in Taiwan, the United States, and Hong Kong. 


Ticker: 2344.TW 



Price (NT$): 3.35 




Key Management: Chiao You-Chun "Arthur"; Chang Ching-Chu; Chiao Ting-Piao No. of Employees: 2,026 

Business Alliances/Partnerships (NT$ in millions) FY06 FY07 FY08E FY09E 

Dram Technology Alliance with Infineon Revenues 35,477 32,899 NA NA 

Gross Profit 10,267 1,457 NA NA 

Operating Profit 2,427 (6,321) NA NA 

Net Profit 2,364 (5,812) (7,365) (8,996) 


Return on Equity (%) 4.22 (10.78) NA NA 

Capital Spending (21,859) (8,160) NA NA 

Research & Development Expenses 3,889 3,894 NA NA 

Cash & Cash Equivalents 8,715 17,002 NA NA 

Gross Debt 27,055 28,325 NA NA 


Book Value per Share (NT$) 15.4 13.7 NA NA 


NA 

America 

Others 

7% 

3% 

Japan & Korea 

11% 

Hong Kong 

23% 

Key Suppliers 

Taiwan 

24% 

Europe 

32% 

Winbond 



Non-Dram memory 

12% 

Logic Products 

29% 


Others 

3% 

Dram 

56% 

Key Customers 

Infineon Toshiba 

EMLS Diverse Customers 

371

Bhavin Shah 

(852) 2800-8538 


372 


20 April 2009 

Memory 

Elpida Memory, Inc......................... 373 

Hynix Semiconductor..................... 374 

Inotera Memories, Inc..................... 375 

Micron Technology......................... 376 

Powerchip Semiconductor Corp... 377 

ProMos Technologies Inc. ............. 378

Bhavin Shah 

(852) 2800-8538 


Elpida Memory, Inc. Country: Japan 


Elpida Memory, Inc. manufactures and supplies Dynamic Random Access Memory (DRAM) products. The 

company is based in Tokyo, Japan, with sales and marketing operations located in Japan, North America, 

Europe, and Asia. 




Price (¥): 420 




Key Management: Yukio Sakamoto; Takehiro Fukuda; Shuichi Otsuka No. of Employees: 3,477 


NA Revenues 490.0 405.5 359.3 488.4 

Gross Profit 122.6 33.3 (80.9) 9.9 

Operating Profit 68.4 (24.9) (142.0) (50.1) 

Net Profit 52.9 (23.5) (163.3) (50.7) 

Earnings per Share (¥) 422.5 (187.9) (1,303.1) (404.3) 

Return on Equity (%) 14.0 (6.8) (90.1) (38.8) 




Gross Debt 229.6 289.1 356.2 356.2 

Owners’ Equity 379.0 347.9 181.3 130.7 



NA 

Asia 

42% 

Key Suppliers 

Europe 

10% 

North America 

48% 



20 April 2009 


Elpida Memory 

Premium DRAMs 

43% 

COMPANY WEBSITE Memory 

Other 

3% 

PCs 

54% 

Key Customers 

Dell IBM 

HPQ Canon 

373

Bhavin Shah 

(852) 2800-8538 



Hynix Semiconductor 

Country: South Korea 

Hynix Semiconductor Inc. manufactures semiconductors, such as dynamic random access memory (DRAM), Ticker: 000660.KS 

NAND flash memory, and static random access memory (SRAM) chips. 

Analyst: JJ Park 


Price (Won): 8,590 

374 




Key Management: Kim Jong-Kap; Lee Seung-Yon; Kwon Oh-Chul No. of Employees: 18,257 

Business Alliances/Partnerships (Won in billions) FY06 FY07 FY08 FY09E 

ProMos - Taiwan Foundry Revenues 7,692.9 8,600.8 6,819.0 6,819.0 

STMicro - JV at Wuxi, China Gross Profit 3,010.1 1,635.0 (545.0) (545.0) 

Operating Profit 2,057.2 490.2 (1,901.0) (1,901.0) 

Net Profit 2,055.1 362.3 (4,385.5) (4,385.5) 

Earnings per Share (Won) 4,496.6 783.1 (9,475.2) (9,475.2) 


Capital Spending 4,521.2 5,397.4 2,856.0 800.0 


Cash & Cash Equivalents 2,156.4 2,038.0 719.0 510.0 

Gross Debt 3,411.6 5,100.0 7,749.0 8,349.0 

Owners’ Equity 8,772.5 9,310.0 5,887.0 3,301.2 

Book Value per Share (Won) 18,965.5 20,118.6 12,721.6 7,133.7 


NA 

North America 

28% 

Key Suppliers 

South Korea 

Europe 4% 

12% 

Asia 

57% 



20 April 2009 


Hynix Semiconductor 

Memory 


100% 

Key Customers 

IBM Dell 

HP Gateway 

COMPANY WEBSITE Memory

Bhavin Shah 

(852) 2800-8538 


Inotera Memories, Inc. 


Inotera Memories Inc. manufactures dynamic random access memory (DRAM) chips. 





Price (NT$): 10.75 




Key Management: Charles Kau; Kai Strohbecke; Peter Bailey No. of Employees: 3,320 

Business Alliances/Partnerships (NT$ in billions) FY06 FY07 FY08 FY09E 

Micron/Nanya Tech's JV Revenues 40.8 45.9 37.5 36.3 

Gross Profit 16.5 16.5 16.5 16.5 

Operating Profit 15.9 3.2 (14.7) (12.6) 

Net Profit 15.9 1.0 (18.1) (16.2) 

Earnings per Share (NT$) 5.1 0.3 (5.4) (4.9) 


Capital Spending (45.9) (44.1) (19.8) (6.4) 



Gross Debt 35.8 62.7 69.2 62.7 

Owners’ Equity 79.1 71.9 53.8 37.6 

Book Value per Share (NT$) 24.0 21.5 16.1 11.3 


Asia 

50% 

Key Suppliers 

Shin Etsu - Wafer 

Europe/USA 

50% 



20 April 2009 


Inotera Memories 

Commodity 

DRAM 

100% 

Key Customers 

Micron Nanya Tech 


375

Bhavin Shah 

(852) 2800-8538 



Micron Technology 


Micron Technology, Inc., through its subsidiaries, manufactures and markets dynamic random access memory Ticker: MU 

chips (DRAMs), very fast static random access memory chips (SRAMs), Flash Memory, other semiconductor Analyst: Shawn Webster 

components, and memory modules. 



376 



Founded: 1978; Listed: 1989 Fiscal Year End: August 

Key Management: Wang Chen-Tang; Gianfranco Lanci; Chan Hao "Howard" No. of Employees: 22,800 


Acquired Lexar Media Revenues 5,688 5,841 5,602 6,562 

Joint Venture with Tech Semiconductor 

Gross Profit 1,078 (55) (505) 758 

Singapore Pte. Ltd. Operating Profit (261) (1,099) (1,523) (302) 

Net Profit (301) (1,123) (1,632) (402) 

Earnings per Share (US$) (0.39) (1.46) (2.1) (0.52) 

Return on Equity (%) (3.79) (16.10) 31.70 (8.50) 

Capital Spending 3,996 2,729 700 1,350 



Gross Debt 2,410 2,451 2,523 2,323 

Owners’ Equity 7,752 6,178 4,888 4,597 



NA 

North America 

25% 

Europe 

10% 

Key Suppliers 

Other 

5% 

Asia Pacific 

60% 



20 April 2009 


Micron Technology 


Imaging 

11% 

Memory 

89% 

Key Customers 

Computing market represents majority of 

sales

Bhavin Shah 

(852) 2800-8538 


Powerchip Semiconductor Corp. 


Powerchip Semiconductor Corp. develops, manufactures, tests, packages, and markets dynamic random 

access memory (DRAM) chips. 


Ticker: 5346.TWO 



Price (NT$): 3.16 




Key Management: Frank Huang; Eric Lu; Tsai-Chu Shieh No. of Employees: 4,873 


Elpida holds 3% of PSC Revenues 92.1 77.5 60.6 71.6 

Renesas holds 2% of PSC Gross Profit 32.9 (5.8) (31.5) (15.0) 

Technology transfer from Elpida for DRAM Operating Profit 27.8 (11.0) (37.0) (19.9) 

manufacturing (90/70/65nm) Net Profit 27.5 (12.3) (43.1) (24.3) 






Gross Debt 58.0 88.4 93.5 101.7 

Owners’ Equity 125.8 103.5 59.3 35.0 



Rest of World 

39% 

Key Suppliers 

Shin Etsu Sumco 

MCC/MCG Taiyo Nippon Sanso 

Taiwan 

61% 



20 April 2009 


Powerchip Semiconductor 


Foundry 

10% 

DRAM 

90% 

Key Customers 

Elpida Spot market buyer 

377

Bhavin Shah 

(852) 2800-8538 


378 

ProMos Technologies Inc. 


ProMOS Technologies Inc. manufactures and markets dynamic random access memories (DRAMs). 





Price (NT$): 0.97 




Key Management: Ming Liang Chen; Jessie Peng; Hsing Tuan No. of Employees: 6,700 

Business Alliances/Partnerships (NT$ in billions) FY06 FY07 

Mosel Vitelic holds 16% of ProMos Cooperation Revenues 60.1 47.6 

Licensing agreement with Hynix for 90nm and Gross Profit 22.3 (0.6) 

below DRAM Operating Profit 17.3 (6.2) 

Net Profit 14.5 (7.3) 

Earnings per Share (NT$) 2.6 (1.1) 

Return on Equity (%) 18.4 (8.9) 

Capital Spending (32.9) (58.8) 

Research & Development Expenses 2.4 2.8 

Cash & Cash Equivalents 21.0 8.9 

Gross Debt 33.3 68.6 

Owners’ Equity 87.7 76.3 

Book Value per Share (NT$) 13.4 11.4 


Europe 

28% 

America 

10% 

Key Suppliers 

Shin Etsu Sumco 

MEMC-Wafer BASF 

Showa ROHM 

HAAS 

Source: Company. Share price is as of 12 March 2009. 

Asia 

30% 


20 April 2009 

Taiwan 

32% 


ProMos Technologies 


Foundry 

17% 

DRAM 

83% 

Key Customers 

Mosel Vitelic Hynix

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

IC Fabless 

Altera ............................................... 380 

Applied Microcircuits ..................... 381 

Arm Holdings Plc............................ 382 

Atheros Communications Inc........ 383 

Broadcom Corporation .................. 384 

Cambridge Silicon Radio ............... 385 

Cavium Networks ........................... 386 

Corning............................................ 387 

Cypress Semiconductor ................ 388 

Elan Microelectronic Corp ............. 389 

Greatek Electronics Inc.................. 390 

Himax Technologies, Inc. .............. 391 

Lattice Semiconductor................... 392 

Marvell Technology Group ............ 393 

MediaTek Inc................................... 394 

Microsemi Corporation .................. 395 

Novatek Microelectronics Corp......396 

Novatel Wireless............................. 397 

NVIDIA Corporation........................ 398 

OmniVision Technologies ............. 399 

PMC-Sierra Inc................................ 400 

QUALCOMM Inc.............................. 401 

RF Micro Devices............................ 402 

Richtek Technology Corporation.. 403 

Sierra Wireless Inc. ........................ 404 

Silicon Integrated Systems Corp. . 405 

Sunplus Technology ...................... 406 

TriQuint Semiconductor ................ 407 

Via Technologies............................ 408 

Wolfson Microelectronics Plc ....... 409 

Xilinx................................................ 410 

Zoran Corp ...................................... 411 

379

Bhavin Shah 

(852) 2800-8538 


380 

Altera 


Altera Corporation designs, manufactures, and markets programmable logic devices and associated 

development tools. Programmable logic devices are semiconductor integrated circuits that offer on-site 

programmability to customers. The company's products, including a variety of programmable logic devices, 

serve the telecommunications, data communications, and industrial applications markets. 


Ticker: ALTR 



Price (US$): 17.46 




Key Management: John P Daane; Timothy R Morse; Lance M Lissner No. of Employees: 2,760 


NA Revenues 1,286 1,264 1,367 965 

Gross Profit 858 816 918 642 


Net Profit 323 290 360 121 






Gross Debt - 250 500 500 

Owners’ Equity 1608 861 800 853 



Japan 

19% 

Europe 

23% 

Key Suppliers 

TSMC - wafer supplier 

North America 

23% 

Asia pacific 

35% 



20 April 2009 

Altera 


Computer 

7% 

Consumer 

15% 


43% 

COMPANY WEBSITE IC Fabless 

Industrial 

35% 

Key Customers 

14,000 PLD customers

Bhavin Shah 

(852) 2800-8538 


Applied Microcircuits Country: United States 


Applied Micro Circuits Corporation designs, develops, manufactures, and markets high-performance, highbandwidth 

silicon solutions for the world's communications infrastructure. The company provides products for 

the automated test equipment, high-speed computing, and military markets. 

Ticker: AMCC 



Price (US$): 4.18 




Key Management: Cesar Cesaratto; Kambiz Y Hooshmand; Paramesh Gopi No. of Employees: 583 


TSMC Revenues 262 293 246 253 

IBM Gross Profit 139 152 119 NA 

UMC Operating Profit (21) (23) (46) 4 

Net Profit (148) (24) (115) 14 

Earnings per Share (US$) (1.96) (0.36) (1.70) 0.21 

Return on Equity (%) (17.05) (3.18) (17.16) 3.11 








North America 

39% 

Key Suppliers 

IBM Motorola 

Amkor ASAT 

Kyocera America NTK Ceramics 

ASE 

Other 

1% 

Asia 

39% 

Europe 

21% 


20 April 2009 



Applied Microcircuits 

Transport 

34% 


Store 

17% 

Process 

49% 

Key Customers 

Avnet Sanmina 

381

Bhavin Shah 

(852) 2800-8538 


382 

Arm Holdings Plc 


Arm Holdings Plc develops processors, data engines, peripherals, software, and tools. The group's solutions 

are used in a variety of applications, including in automotive, consumer entertainment, digital imaging, mass 

storage, networking, security, and wireless industries. 

Country: United Kingdom 

Ticker: ARM.L 



Price (£): 98.75 




Key Management: Warren East; Tim Score; Tudor Brown No. of Employees: 1,701 

Business Alliances/Partnerships (£ in millions) FY06 FY07 FY08E FY09E 

NA Revenues 263.3 259.2 298.9 328.4 

Gross Profit 232.4 231.2 266.1 289.4 

Operating Profit 82.3 81.3 97.6 110.1 

Net Profit 45.2 36.8 47.5 55.2 

Earnings per Share (£) 5.03 4.68 5.64 6.41 


Capital Spending 14 8.0 13.1 7.2 



Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 574.6 493.7 630.1 657.2 

Book Value per Share (£) 0.40 0.36 0.49 0.51 


NA 


Netherlands 11% 

6% 

Rest of Asia 

Pacific 

5% 

South Korea 

9% 

Taiwan 

11% 

Japan 

16% 

Key Suppliers 

United States 

37% 

Rest of North 

America 

5% 



20 April 2009 

Arm Holdings 


Development 

Systems 

11% 

Physical IP 

Division 

16% 

Services 

6% 

Processor 

Division 

68% 

Key Customers 

Intel Motorola 

TI STMicro 

Infineon TSMC 

COMPANY WEBSITE IC Fabless

Bhavin Shah 

(852) 2800-8538 


Atheros Communications Inc. 


Atheros Communications develops networking technologies for secure, high performance wireless local area 

networks. 


Ticker: ATHR 



Price (US$): 15.2 




Key Management: Dr. Craig H. Barratt; Jack R Lazar; William J. McFarland No. of Employees: 1,079 


NA Revenues 302 417 472 353 

Gross Profit 144 208 236 172 


Net Profit 29 51 31 (23) 

Earnings per Share (US$) 0.54 0.86 0.50 -0.39 






Owners’ Equity 281 401 471 467 



NA 

Hong Kong 

10% 

Other 

19% 

Key Suppliers 

China 

29% 

United States 

1% 

Taiwan 

41% 



20 April 2009 


Atheros Communications 

Networking 

Technologies 

100% 

Key Customers 

Personal Computing Networking 

Consumers 


383

Bhavin Shah 

(852) 2800-8538 


384 

Broadcom Corporation 


Broadcom Corporation provides integrated silicon solutions that enable broadband digital transmission of voice, 

data, and video content to the home and within the business enterprise. The company designs, develops, and 

supplies integrated circuits for cable set-top boxes, cable modems, high-speed networking, direct satellite and 

digital broadcast, and digital subscriber line. 


Ticker: BRCM 



Price (US$): 19.1 




Key Management: Scott Alan McGregor; Henry Samueli; Eric K Brandt No. of Employees: 7,402 


TSMC Revenues 3,668 3,776 4,658 3,605 

Gross Profit 1,885 1,958 2,461 1,781 


Net Profit 390 228 463 (371) 







Owners’ Equity 4,192 4,036 3,607 3,275 



NA 

Outside US 

41% 

Key Suppliers 

United States 

59% 



20 April 2009 


Broadcom Corporation 

Enterprise 

Networking 

27% 

Mobile and 

Wireless 

36% 

Broadband 

Communication 

37% 

Key Customers 

Motorola Dell 

HP 


Bhavin Shah 

(852) 2800-8538 


Cambridge Silicon Radio 


CSR Plc designs and manufactures single-chip radio devices, focusing on solutions for the 2.4 GHz Bluetooth 

personal area networking standard. The company's integrated single-chip Bluetooth solutions are based on 

commodity CMOS technology. 


Ticker: CSR.L 



Price (£): 208 




Key Management: John W WHYBROW; Paul G Goodridge No. of Employees: 923 

Business Alliances/Partnerships (£ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 704.7 848.6 694.9 464.0 

Gross Profit 328.7 396.3 309.8 194.9 


Net Profit 111.2 112.8 (6.9) (26.4) 

Earnings per Share (£) 0.83 0.94 0.43 (0.20) 





Gross Debt 4.1 28.4 5.2 5.2 

Owners’ Equity 406.2 508.7 466.7 440.3 

Book Value per Share (£) 3.12 3.90 3.63 3.44 


NA 

Europe 

9% 

Key Suppliers 

Americas UK 

USA 

6% 

2% 0.2% 

Asia 

83% 



20 April 2009 


Cambridge Silicon 

Semiconductor 

Manufacturing 

100% 

Key Customers 

Handset OEMs 


385

Bhavin Shah 

(852) 2800-8538 


386 

Cavium Networks 


Cavium Networks, Inc. provides semiconductor processors that enable intelligent networking, communications 

and security applications. The company offers a broad portfolio of software compatible processors and 

accelerator boards ranging in performance from 10 Mbps to 10 Gbps. 


Ticker: CAVM 



Price (US$): 12.01 




Key Management: Syed B Ali; Arthur D Chadwick; Anil Jain No. of Employees: 347 

Business Alliances/Partnerships (US$ in billions) FY06 FY07 FY08 FY09E 

Wind River Revenues 34 54 87 90 

Teknovus Gross Profit 21 34 51 NA 

Nextone Operating Profit (8) 0 2 (1) 

Net Profit (9) 2 2 1 

Earnings per Share (US$) (1.11) 0.07 0.04 0.03 

Return on Equity (%) NA NA 1.22 (0.09) 








NA 

Others 

9% 

Taiwan 

19% 

Key Suppliers 

China 

6% 

Japan 

5% 


20 April 2009 

United States 

60% 



Cavium Networks 

Networking 


100% 

Key Customers 

Alcatel-Lucent Cisco 

Aruba Networks Citrix 

Furukawa Electric F5 Networks 

GE Fanuc Motorola ECC 

IBM Nokia 

Juniper Networks Netgear 

Radisys Qualcomm 

Sofaware Sonicwall 


Bhavin Shah 

(852) 2800-8538 


Corning 


Corning Incorporated conducts operations in the telecommunications, advanced materials, and information 

display industries. The company produces optical fiber, cable, and photonic components for the 

telecommunications industry. Corning also produces glass. 


Ticker: GLW 

Analyst: Ehud A. Gelblum, PhD 


Price (US$): 11.85 




Key Management: Wendell P Weeks; James B Flaws; Peter F Volanakis No. of Employees: 27,000 


Dow Corning Corp. Revenues 5,174 5,860 5,948 NA 

Samsung Corning Precision Glass Gross Profit 2,283 2,749 2,738 NA 

Operating Profit 898 1,262 1,199 NA 

Net Profit 1,855 2,150 5,257 NA 

Earnings per Share (US$) 1.2 1.4 3.4 NA 

Return on Equity (%) 29.1 25.7 45.8 NA 

Capital Spending (1,182) (1,262) (1,921) NA 


Cash & Cash Equivalents 3,167 3,516 2,816 NA 

Gross Debt 1,716 1,537 1,605 NA 

Owners’ Equity 7,291 9,542 13,491 NA 



NA 

North America 

29% 

Europe 

14% 

Key Suppliers 

Others 

2% 

Asia Pacific 

55% 



20 April 2009 

Corning 


Life Sciences 

Speciality Materials 6% 

6% 

Environmental 


12% 

Telecommunications 

30% 

Display Technology 

46% 

Key Customers 

AU Optronics Hannstar Display 

Quanta Display Sharp 

Verizon Toppan CFI 

CMO 


387

Bhavin Shah 

(852) 2800-8538 


388 

Cypress Semiconductor 


Cypress Semiconductor Corporation designs, develops, manufactures, and markets a line of digital and mixedsignal 

integrated circuits. The company's circuits are used in the data communications, telecommunications, 

computers, and instrumentation systems markets. Cypress' products are marketed worldwide through a 

network of sales offices, distributors, and sales representative firm. 


Ticker: CY 



Price (US$): 5.94 




Key Management: Thurman J Rodgers; Eric A Behnhamou; Brad W Buss No. of Employees: 4,100 


NA Revenues 1,092 1,597 1,800 475 

Gross Profit 460 549 604 169 


Net Profit (17) 68 (46) (223) 


Return on Equity (%) 4 3.2 -7 -31 


Research & Development Expenses 239.3 188 209 190 

Cash & Cash Equivalents 580.2 1,558 238 290 

Gross Debt 599 1,025 28 28 

Owners’ Equity 1,046 2,100 643 715 



NA 

Amercia 

26% 

Europe 

16% 

Key Suppliers 

Asia 

58% 



20 April 2009 


Cypress Semiconductor 

data 

communication 

17% 

Memory and 

Imaging division 

41% 

other 

1% 

Consumer and 

computing 

41% 

Key Customers 

Motorola Sony 

Intel Apple 

Alcatel-Lucent Cisco 

STMicro Infineon 


Bhavin Shah 

(852) 2800-8538 


Elan Microelectronic Corp 


Elan Microelectronics Corp. designs, manufactures, and markets integrated circuits (ICs). The company's 

product lines include telecoms, consumer electronic, microcontroller, personal computer (PC) peripheral, and 

memory. 





Price (NT$): 32.4 




Key Management: Yeh Yi-Hao; Lai Li-Ling; Wu Chia-Miao No. of Employees: 450 


NA Revenues 4,460 4,807 4,071 4,694 


Operating Profit 365 606 NA 666 

Net Profit 283 594 206 460 

Earnings per Share (NT$) 0.85 1.75 0.55 1.05 


Capital Spending (18) (8) NA (9) 


Cash & Cash Equivalents 456 1,048 NA NA 





NA 

South East Asia & 

HK 

42% 

Key Suppliers 

North East Asia 

1% 


20 April 2009 

Taiwan 

56% 


Elan Microelectronic 


PC Peripheral IC 

27% 

Microcontroller IC 

30% 

Multimedia 


22% 

Communication IC 

20% 

Key Customers 


NA 

389

Bhavin Shah 

(852) 2800-8538 


390 

Greatek Electronics Inc 


Greatek Electronics Inc. tests, assembles, and packs integrated circuits (ICs). The company's products and 

services include plastic dual-in-line package (P-DIP), quad flat pack (QFP), wafer test, and final test. 





Price (NT$): 24.45 




Key Management: Chueh Chuang-Hsien; Ning Chien-Chao; Ma Ching-Sen No. of Employees: 2,158 


NA Revenues 8,188 8,872 8,606 6,374 



Net Profit 2,135 2,403 1,800 762 










NA 

Key Suppliers 

America 

Europe 

4% 

4% 

Taiwan 

92% 


20 April 2009 



Greatek Electronics 

Testing 

9% 

Packaging 

91% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Himax Technologies, Inc. 


Himax Technologies, Inc. designs and manufactures integrated circuits. The company produces liquid crystal 

displays (LCD). 


Ticker: HIMX 







Key Management: Jordan Wu, Max Chan, Donald J. Puglisi No. of Employees: 1,050 


NA Revenues 745 918 833 621 



Net Profit 75 113 94 33 



Capital Spending (18) (19) (17) NA 







NA 

Other Asia-pacific 

14% 

Key Suppliers 


20 April 2009 

Taiwan 

86% 



Himax Technologies 


NA 

LCD 

100% 

Key Customers 

391

Bhavin Shah 

(852) 2800-8538 


392 

Lattice Semiconductor 


Lattice Semiconductor Corporation designs, develops, and markets high speed programmable logic devices. 

The company's products provide electronic systems customers with quickly designed, easily configured 

components. Lattice markets its products to original equipment manufacturers of communication, computing, 

industrial, and military systems. 


Ticker: LSCC 







Key Management: Patrick S Jones; Bruno Guilmart; Michael G Potter No. of Employees: 883 


NA Revenues 245.5 228.8 222.3 174.0 

Gross Profit 138.7 125.6 119.4 NA 

Operating Profit (12.5) (25.7) (13.5) (18.8) 

Net Profit 3.1 (239.9) (38.2) (15.1) 



Capital Spending 13.7 (11.0) (10.1) NA 

Research & Development Expenses 82.0 83.0 68.6 NA 

Cash & Cash Equivalents 40.4 37.3 65.9 NA 

Gross Debt 89.1 0.0 0.0 NA 

Owners’ Equity 511.8 286.2 254.9 NA 



NA 


Other Asia 4% 

7% 

Taiwan 

9% 

Japan 

14% 

Key Suppliers 

US 

17% 


20 April 2009 

China 

28% 

Europe 

21% 



Lattice Semiconductor 


FPGA 

26% 

PLD 

74% 

Key Customers 

OEMs in the computing, consumer, 

communications, industrial, automotive, 

medical and military end markets

Bhavin Shah 

(852) 2800-8538 


Marvell Technology Group 


Marvell Technology Group Ltd. designs, develops, and markets integrated circuits for communications-related 

markets. The company's products provide the interface between analog signals and the digital information used 

in computing and communications systems. Marvell's technology is applied in the broadband data 

communications market. 


Ticker: MRVL 



Price (US$): 8.86 




Key Management: Dr. Sehat Sutardja; Weili Dai; George Hervey No. of Employees: 5,331 


NA Revenues 2,895 3,138 3,088 2,265 

Gross Profit 1,397 1,631 1,605 1,169 


Net Profit 49 373 347 (84) 





Cash & Cash Equivalents 596 631 965 1,194 

Gross Debt 395 391 0 0 

Owners’ Equity 3,227 3,412 3,783 3,791 



NA 

North America 

14% 

Key Suppliers 

Others 

3% 

Asia-Pacific 

83% 



20 April 2009 


Marvell Technology 

Communication 

Products 

46% 

Storage Products 

54% 

Key Customers 

Samsung Intel 

Western Digital Toshiba 

Fujitsu 


393

Bhavin Shah 

(852) 2800-8538 


394 

MediaTek Inc. 


MediaTek Incorporation designs, manufactures, and markets compact disk read only memory (CD-ROM) and 

digital versatile disc read only memory (DVD-ROM) chip sets. The company sells its products in Taiwan and 

exports to other countries in Asia. 



Analyst: Alvin Kwock 


Price (NT$): 303 




Key Management: Tsai Ming-Chieh; Yu Ming-To; Chuo Chih-Che No. of Employees: 3,833 


NA Revenues 53.0 80.4 90.2 91.6 

Gross Profit 30.7 45.2 48.4 53.4 


Net Profit 10.2 24.9 19.2 24.6 






Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 67.5 85.9 81.9 98.7 



Tawian 

10% 

Key Suppliers 

UMC King Yuan 

TSMC Chartered Semi 

SPIL 

Others 

90% 



20 April 2009 

MediaTek Inc. 


DVD 

25% 

Others 

TV 

2% 

9% 


Handset 

64% 

Key Customers 

LG Electronics Lite-on IT 

Wistron Amtran 

Samsung China handset brands

Bhavin Shah 

(852) 2800-8538 


Microsemi Corporation 


Microsemi Corporation designs, manufactures, and markets analog, mixed-signal, and discrete 

semiconductors. The company's semiconductors manage and regulate power, protect against transient voltage 

spikes and transmit, receive, and amplify signals. 


Ticker: MSCC 



Price (US$): 10.93 




Key Management: James J Peterson; Dennis R. Leibel; David R. Sonksen No. of Employees: 1,500 


NA Revenues 442 514 457 473 



Net Profit 72 92 75 77 


Return on Equity (%) 14.00 14.86 12.03 NA 








NA 

Outside US 

40% 

Key Suppliers 


20 April 2009 

United States 

60% 


Microsemi Corporation 


Notebook / LCD 

TV / Display 

11% 

Medical 

13% 

Mobile 

Connectivity 

15% 

Industrial / 

Semicap 

8% 

Diversified 

Defense 

33% 

Commercial Air / 

Space 

20% 

Key Customers 


395

Bhavin Shah 

(852) 2800-8538 


396 

Novatek Microelectronics Corp. Ltd. 


Novatek Microelectronics Corp., Ltd. designs, manufactures, and markets integrated circuits (ICs). The 

company’s products are used in telecommunication, computer peripherals, and LCD (liquid crystal display) 

drivers. 



Analyst: Patrick Liao 


Price (NT$): 44.15 




Key Management: Ho Tai-Shung; Chou Sheng-Cheng; Wang Shou-Ren No. of Employees: 1,172 

Business Alliances/Partnerships (NT$ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 31,428 36,117 26,176 19,390 

Gross Profit 8,509 10,170 7,780 5,947 


Net Profit 6,277 7,585 4,885 1,864 






Gross Debt 3,422 4,183 3,174 3,344 

Owners’ Equity 15,170 17,449 18,360 17,600 



Taiwan 

30% 

Key Suppliers 

UMC He Jian 

ChipMOS Chipbond 

Vanguard 

Asia 

70% 



20 April 2009 


Novatek Microelectronics 

Integrated Circuits 

100% 

Key Customers 

AU Optronics CPT 

LGD Samsung 

Innolux 


Bhavin Shah 

(852) 2800-8538 


Novatel Wireless 


Novatel Wireless, Inc. provides wireless data communications access solutions. The company provides 

wireless data modems and software for use with handheld computing devices and portable personal 

electronics. Novatel also offers provisioning, activation, and systems integration services to its customers to 

facilitate use of its products. 


Ticker: NVTL 



Price (US$): 5.72 




Key Management: Peter Vincent Leparulo; Kenneth Leddon; Slim S Souissi No. of Employees: 301 


NA Revenues 218 430 321 250 


Operating Profit (7) 54 (6) (23) 

Net Profit 0 38 (1) (13) 







Owners’ Equity 134 217 198 185 



EMEA 

23% 

Key Suppliers 

LG Innotek Celestica 

SerComm 

Asia, Australia 

2% 

United States 

75% 



20 April 2009 


Novatel Wireless 

Embedded 

Modules 

28% 

PC Cards 

10% 

USB Modems 

62% 

Key Customers 

AT&T Wireless CSL 

T-Mobile Cingular 

Hutchinson SingTel 

Verizon Wireless 


397

Bhavin Shah 

(852) 2800-8538 



NVIDIA Corporation 


NVIDIA Corporation designs, develops, and markets three dimensional (3D) graphics processors and related Ticker: NVDA 

software. The company's products provide interactive 3D graphics to the mainstream personal computer Analyst: Shawn Webster 

market. 


Price (US$): 9.85 

398 




Key Management: Jen-Hsun Huang; Marvin D Burkett; Debora C Shoquist No. of Employees: 5,420 


Microsoft Revenues 3,069 4,098 3,425 2,020 

Sony Gross Profit 1,300 1,869 1,368 775 


Net Profit 462 798 135 (329) 







Owners’ Equity 2,007 2,618 2,395 2,222 



NA 

Key Suppliers 


3% 

United States 

8% 

Europe 

11% 

Asia Pacific 

78% 



20 April 2009 


NVIDIA Corporation 

Professional 

Solutions 

Business (PSB) 

14% 

Media & 


17% 

Consumer 

Products 

Business (CPB) 

6% 

Others 

1% 

Graphics 

Processing Unit 

61% 

Key Customers 

EDOM Microsoft 

Microstar Atlantic Semi 


Bhavin Shah 

(852) 2800-8538 


OmniVision Technologies 


OmniVision Technologies, Inc. provides integrated single chip semiconductor imaging devices. The company 

designs, develops, and markets semiconductor imaging devices for computing, communications, and consumer 

electronics applications. OmniVision's image sensor product is used in cameras and camera-related products 

such as personal computers, digital and security cameras. 


Ticker: OVTI 



Price (US$): 7.49 



Founded: 1995; Listed: 2000 Fiscal Year End: April 

Key Management: Shaw Hong; Peter V Leigh; He Xinping "James" No. of Employees: 1,882 


Visera Technologies Revenues 528 800 483 462 

Silicon Optronics Gross Profit 155 206 117 112 

Powerchip Operating Profit 26 65 (38) (31) 

Net Profit 24 65 (41) (23) 






Gross Debt 35 118 123 123 

Owners’ Equity 490 510 485 488 



Key Suppliers 

TSMC UMC 

PSC SMIC 

USA Other 

Malaysia 2% 1% 

7% 

Taiwan 

7% 

Japan 

1% 

China 

83% 



20 April 2009 


OmniVision Technologies 

Analog Sensors 

5% 

Digital Sensors 

95% 

Key Customers 

Several ODMs and OEMs 


399

Bhavin Shah 

(852) 2800-8538 


400 

PMC-Sierra Inc 


PMC-Sierra, Inc. designs, develops, markets, and supports semiconductor networking solutions. The 

company's products are used in the high speed transmission and networking systems which are used to 

restructure the global telecommunications and data communications infrastructure. 


Ticker: PMCS 



Price (US$): 6.03 




Key Management: Robert L. Bailey; Michael W Zellner; James V. Diller No. of Employees: 1,064 


NA Revenues 425 449 529 487 

Gross Profit 288 291 347 318 


Net Profit 21 19 76 40 






Gross Debt 225 225 127 127 

Owners’ Equity 573 596 764 808 



NA 

Europe & Middle 

East 

9% 

Singapore 

10% 

Taiwan 

10% 

Asia (excluding 

China & Japan) 

10% 

Key Suppliers 

Other Foreign 

5% 

Japan 

16% 

United States 

20% 

China 

20% 



20 April 2009 

PMC-Sierra Inc 


Networking 

Products 

100% 

Key Customers 

Cisco Alcatel - Lucent 

Samsung Ricoh 

Lexmark 


Bhavin Shah 

(852) 2800-8538 


QUALCOMM Inc 


QUALCOMM Inc. develops and delivers digital wireless communications products and services based on the 

company's CDMA digital technology. The company's business areas include integrated CDMA chipsets and 

systems software, technology licensing, Eudora email software for Windows and Macintosh platforms, and 

satellite-based systems, including Omnitracs and Globalstar systems. 


Ticker: QCOM 



Price (US$): 36.79 




Key Management: Paul E Jacobs; William E Keitel; Len J Lauer No. of Employees: 15,400 


NA Revenues 7,525 8,870 11,130 9,613 

Gross Profit 5,383 6,297 7,873 6,844 


Net Profit 2,804 3,405 3,739 2,952 



Capital Spending (685.0) (818.0) (1,397.0) (895.8) 




Owners’ Equity 13,406 15,835 17,944 18,437 



NA 

China 

21% 

Key Suppliers 

Other 

International 

22% 

United States 

9% 

Japan 

14% 

South Korea 

35% 



20 April 2009 


QUALCOMM Inc 

QTL - Tech 

Licensing 

33% 

QWI - Wireless & 

Internet Group 

7% 

QCT - CDMA 


60% 

Key Customers 

Samsung LG Electronics 

Kyocera Motorola 


401

Bhavin Shah 

(852) 2800-8538 



RF Micro Devices 


RF Micro Devices, Inc. designs, develops, and markets proprietary radio frequency integrated circuits. The Ticker: RFMD 

company's products are used for wireless communications applications such as cellular and PCS, cordless Analyst: Christopher Danely 

telephony, wireless LANs, wireless local loop, industrial radios, wireless security and remote meter reading. Rating: Neutral 

Price (US$): 0.99 

402 




Key Management: Robert A Bruggeworth; Albert E Paladino; William A Priddy Jr No. of Employees: 4,646 


NA Revenues 1,024 958 874 680 

Gross Profit 357 276 216 155 

Operating Profit 82 (49) (79) (104) 

Net Profit 89 (13) (45) (91) 





Cash & Cash Equivalents 

319 230 303 352 

Gross Debt 246 617 582 582 

Owners’ Equity 720 1,239 429 404 



NA 

Europe 

19% 

Key Suppliers 

Central and 

South Americas 

1% 

US 

11% 

Others 

1% 

Asia 

68% 



20 April 2009 

RF Micro 


Multi Market 

Products group 

12% 


Cellular 

88% 

Key Customers 

Sony Ericsson Nokia 

Siemens Philips 

Motorola Samsung

Bhavin Shah 

(852) 2800-8538 


Richtek Technology Corporation 


Richtek Technology Corporation designs, tests, manufactures, and markets analog ICs (integrated circuits). 

The company’s products include power conversion ICs, power management ICs, power protection ICs, drivers, 

and amplifiers. 





Price (NT$): 153.5 




Key Management: Tai Chung-Ho; Wang Ming-Hung; Hsieh Shu-Liang No. of Employees: 430 


NA Revenues 4,297 6,062 6,955 6,599 

Gross Profit 1,853 2,576 2,692 2,324 


Net Profit 225 957 1,393 1,187 







Owners’ Equity 2,736 3,928 4,174 4,442 



TSMC 

Asia 

44% 

Key Suppliers 

Taiwan 

56% 

Source: Company, J. P. Morgan estimates. Share price is as of 12 March 2009. 


20 April 2009 


Richtek Technology 

Power 

Management IC 

100% 

Key Customers 

Asustek LGE 

Samsung AU Optronics 

CMO 


403

Bhavin Shah 

(852) 2800-8538 



Sierra Wireless Inc. 


Sierra Wireless Inc. is a wireless data communications equipment company. The company delivers a variety of Ticker: SWIR 

products including PC cards for portable computers, ruggedized vehicle-mounted modems, original equipment Analyst: Paul Coster, CFA 

manufacturer modules for embedded applications, telemetry modems, and software tools and utilities. 


Price (US$): 2.92 

404 




Key Management: Charles E Levine; Jason W Cohenour; David G McLennan No. of Employees: 265 


Alltel Revenues 221.3 439.9 567.3 450.1 

Cingular Gross Profit 69.2 123.1 156.7 140.5 

Cellular One Operating Profit 5.6 38.6 44.6 (47.9) 

US Cellular Net Profit 9.8 32.5 62.6 (32.7) 

Sprint Earnings per Share (US$) 0.38 1.14 2.01 (1.00) 

Casio Return on Equity (%) 1.60 2.75 4.38 (2.51) 

Hitachi Capital Spending (10.7) (11.6) (22.7) (21.5) 



Gross Debt 1.1 4.0 8.5 8.5 

Owners’ Equity 152.8 295.3 357.4 324.9 



Asia Pacific 

23% 

EMEA 

7% 

Key Suppliers 

Creation Technologies Flextronics 

Americas 

70% 



20 April 2009 

Sierra Wireless 


Embedded 

Modules 

21% 

Mobile & M2M 

5% 

Other 

1% 

AirCard (USB & 

Express Cards) 

72% 

Key Customers 

Palm One Verizon Wireless 

Sprint Cingular 


Bhavin Shah 

(852) 2800-8538 


Silicon Integrated Systems Corp. 


Silicon Integrated Systems Corp. manufactures and markets chipsets for computers and multimedia products. 





Price (NT$): 7.56 




Key Management: Chen Wen Hsi Daniel; Chen Tsan Hui; Chini Ching Po No. of Employees: 445 


NA Revenues 7,908 6,514 5,550 3,328 

Gross Profit 1,837 92 NA NA 

Operating Profit (432) (1,534) 439 (3) 

Net Profit 165 (1,882) (228) (366) 



Capital Spending (156) (62) NA NA 







Taiwan 

15% 

Key Suppliers 

Major Semiconductor Equipment 

companies 

Others 

1% 


20 April 2009 

Asia 

84% 


Silicon Integrated Systems 


Memory Module 

36% 

Others 

0.1% 

Multimedia 


64% 

Key Customers 

ECS Gigabyte 

MSI ASUS 

Qualcomm ASRock 


405

Bhavin Shah 

(852) 2800-8538 


406 

Asia Pacific Equity Equity Research 

14 20 April 2009 




Sunplus Technology Co., Ltd. designs, manufactures, and markets integrated circuits (IC). The company's Ticker: 2401.TW 

products include liquid crystal display (LCD) controllers, microcontrollers, voice and music synthesizers, and Analyst: Not Covered 

multimedia applied ICs. 


Price (NT$): 15.3 




Key Management: Huang Chou-Chieh; Chen Yang Cheng; Hung Chien Hui No. of Employees: 585 


NA Revenues 17.1 9.2 6.9 5.9 

Gross Profit 5.5 3.8 NA NA 


Net Profit 3.0 2.1 0.5 0.2 



Capital Spending (0.4) (0.2) (0.5) NA 







Key Suppliers 

TSMC UMC 

America 

8% 

Taiwan 

4% 

Others 

1% 

South East Asia 

87% 




Other Ics 

12% 

Multimedia ICs 

88% 

Key Customers 

Zi-Huan Vtech 

AU Optronics 


Bhavin Shah 

(852) 2800-8538 


TriQuint Semiconductor 


TriQuint Semiconductor, Inc. designs, develops, manufactures, and markets a variety of high performance 

analog and mixed signal integrated circuits for the communications markets. The company utilizes its 

proprietary gallium arsenide technology to enable its products to overcome the performance barriers of silicon 

devices in various applications. TriQuint's products are sold worldwide. 


Ticker: TQNT 



Price (US$): 2.42 




Key Management: Ralhp G Quinsey; Steven J Sharp; Steven J Buhaly No. of Employees: 2,297 


Anthem Partners, LLC Revenues 401.8 475.8 573.4 587.5 



Net Profit 21.8 23.4 (14.6) 8.9 

Earnings per Share (US$) 0.2 0.2 (0.1) 0.1 

Return on Equity (%) 4.7 4.8 (2.8) NA 

Capital Spending 39.7 32.5 (87.6) NA 



Gross Debt 218.8 0.0 0.0 NA 




NA 

Others 

35% 

Key Suppliers 

China 

24% 


20 April 2009 

US 

29% 

Hong Kong 

13% 



TriQuint Semiconductor 

Military 

11% 

Networks 

37% 

Wireless 

Handsets 

52% 

Key Customers 

Ericsson Nokia 

LG Group Nortel 

Motorola Northrop 

Kyocera Grumman Corp 


407

Bhavin Shah 

(852) 2800-8538 


408 

Via Technologies 


Via Technologies Inc. designs, manufactures and markets integrated chipsets for PC (Personal Computer) 

motherboards. The company's products include core logic and peripheral controller chips. 









Key Management: Wang Husueh-Hung; Chen Wen-Chi; Lin Tsu-Mu No. of Employees: 1,189 


NA Revenues 21,450 14,674 8,176 8,283 


Operating Profit (548) (1,840) (76) 497 

Net Profit (1,155) (4,938) (2,966) (1,444) 

Earnings per Share (NT$) (0.9) (3.8) (2.3) (1.1) 









NA 

Key Suppliers 

AmericaROW 

9% 3% 

Europe 

6% 

Taiwan 

31% 


20 April 2009 

Asia 

52% 



Via Technologies 

Semiconductor 

Devices 

Key Customers 

Asustek Elitegroup 

IBM Gigabyte 

Microstar WYSE 


Bhavin Shah 

(852) 2800-8538 


Wolfson Microelectronics Plc 


Wolfson Microelectronics PLC supplies integrated circuits. The company has partners that manufacture its 

circuits, which are used in analog and data converter products for audio, video, and communications 

applications. Wolfson has partners in Europe, the United States, and Asia. 


Ticker: WLF.L 



Price (£): 82 




Key Management: Michael C Ruettgers; J Michael Hickey "Mike"; Mark Cubitt No. of Employees: 366 


NA Revenues 204.1 231.6 198.2 129.1 



Net Profit 31.7 29.5 7.7 (5.1) 










NA 


12% 

Japan 

17% 

Key Suppliers 

Americas 

4% 


20 April 2009 

Asia Pacific 

68% 



Wolfson Microelectronics 

Imaging 

Semiconductor 

9% 

Consumer 

Semiconductor 

16% 

Portable 

Semiconductor 

75% 

Key Customers 


NA 

409

Bhavin Shah 

(852) 2800-8538 


410 

Xilinx 


Xilinx, Inc. designs, develops, and markets complete programmable logic solutions. The company's solutions 

include advanced integrated circuits, software design tools, predefined system functions delivered as cores of 

logic, and field engineering support. Xilinx sells its products through several channels of distribution to 

customers in the United States and overseas. 


Ticker: XLNX 



Price (US$): 19.11 




Key Management: Moshe Gavrielov; Willem P Roelandts; Jon A Olson No. of Employees: 3,415 


NA Revenues 1,843 1,841 1,815 1,540 

Gross Profit 1,124 1,154 1,150 963 


Net Profit 353 374 353 205 






Gross Debt 1,000 1,000 760 760 

Owners’ Equity 1,773 1,672 2,018 1,844 



NA 

Europe 

22% 

Key Suppliers 

Japan 

10% 

Asia 

29% 

North America 

39% 



20 April 2009 

Xilinx 


Logic 


100% 

Key Customers 

The Memec group Avnet 


Bhavin Shah 

(852) 2800-8538 


Zoran Corp 


Zoran Corporation develops and markets software, integrated circuits (ICs), and IC intellectual property (IP) 

cores for digital audio and video applications enabled by compression. The company also provides complete 

reference designs based on its technology. Applications incorporating Zoran's products and IP include video 

editing systems, filmless digital cameras, and audio speakers. 


Ticker: ZRAN 



Price (US$): 7.95 




Key Management: Uzia Galil; Levy Gerzberg; Karl Schneider No. of Employees: 1,411 


Dolby Digital - Technology Licensing Revenues 496 507 439 270 

DivX - DVD burning of downloaded movies Gross Profit 270 271 210 122 


Net Profit 16 66 (216) (69) 






Gross Debt 13 21 27 28 

Owners’ Equity 584 688 479 423 



TSMC 

Japan 

17% 

United States 

7% 

Korea 

11% 

Key Suppliers 

Others 

3% 

Taiwan 

22% 

China 

40% 



20 April 2009 

Zoran Corp 


Imaging Product 

4% 

Imaging Software 

13% 

Mobile Phones 

6% 

Digital Players & 

Recorders 

15% 

Other 

2% 

Digital Camera 

32% 


Digital TV 

28% 

Key Customers 

Samsung Toshiba 

Mitsubishi Sanyo 

Sonic Sharp 

Panasonic Kyocera 

411

Bhavin Shah 

(852) 2800-8538 


412 


20 April 2009 

IC Foundry 

Chartered Semiconductor Manufacturing Ltd..........413 

Taiwan Semiconductor Manufacturing Company....414 

UMC ...................................................................415 

Vanguard International Semiconductor Corp...........416

Bhavin Shah 

(852) 2800-8538 


Chartered Semiconductor Manufacturing Ltd 


Chartered Semiconductor (Nasdaq: CHRT, SGX-ST: CHARTERED), one of the top dedicated semiconductor 

foundries in the world, offers leading-edge technologies, down to 65 nanometer (nm). Total capacity in 2008 

was around 2 million 8” equivalent wafers. 


Ticker: CHRT 

Analyst: Bhavin Shah 


Price (US$): 0.597 




Key Management: James A Norling, Chia Song Hwee, George Thomas No. of Employees: 5,800 

Business Alliances / Partnerships (US$ in millions) FY06 FY07 FY08 FY09E 

IBM Revenues 1,415 1,355 1,661 1,124 

Gross Profit 342 260 214 (67) 


Net Profit 68 102 (93) (389) 






Gross Debt 1,336 1,775 1,766 1,850 

Owners’ Equity 1,679 1,797 1,709 1,310 



Asia ex Japan 

19% 

Europe 

10% 

Japan 

9% 

Key Suppliers 

Applied Materials Novellus 

LAM Research KLA Tencor 

ASML Shin-Etsu (Wafers) 

TEL MEMC (wafers) 

SUMCO Corp. 


20 April 2009 

Americas 

62% 

Source: Company, J.P. Morgan estimates. Note: Share price is as of 12 March 2009. 


Chartered Semiconductor 

Consumer 

31% 

Computer 

13% 

Others 

4% 

Communication 

52% 

Key Customers 

Broadcom M-Star 

IBM Mediatek 

COMPANY WEBSITE IC Foundry 

413

Bhavin Shah 

(852) 2800-8538 


414 

Taiwan Semiconductor Manufacturing Company 


Taiwan Semiconductor Manufacturing Company (TSMC) (TAIEX: 2330, NYSE: TSM) is the world’s largest 

dedicated semiconductor foundry, with leading manufacturing capacity, process technology, and the largest 

portfolio of process-proven libraries, IP, design tools and reference flows in the industry. Total managed 

capacity in FY08 was 9.4 million of 8” equivalent wafers. 





Price (NT$): 48.25 




Key Management: Morris Chang, Rick Tsai, Lora Ho No. of Employees: 20,702 

Business Alliances / Partnerships (NT$ in billions) FY06 FY07 FY08 FY09E 

Intel Revenues 317.4 322.6 333.2 180.3 

ASE Gross Profit 155.8 142.4 141.7 31.4 


Net Profit 94.8 86.5 99.9 7.6 






Gross Debt 30.5 28.2 12.7 9.8 

Owners’ Equity 509.1 490.7 480.4 414.0 



Asia 

13% 

Europe 

10% 

Japan 

3% 

Key Suppliers 


LAM Research Shin-Etsu(Wafers) 

Siltronic AG TEL 

KLA Tencor ASML 

ATMI SUMCO Corp 

MEMC (wafers) 


20 April 2009 

North America 

74% 


TSMC 


Consumer 

20% 

Communication 

41% 

Industrial/Others 

6% 


Computer 

33% 

Key Customers 

NVIDIA Qualcomm 

Marvell Omnivision 

Broadcom Altera 

Freescale AMD(ATi)

Bhavin Shah 

(852) 2800-8538 


UMC 


United Microelectronics Corporation (UMC) designs, manufactures, and markets integrated circuits (ICs) and 

related electronic products. The company’s main products are consumer electronic ICs, memory ICs, personal 

computer peripheral ICs, and communication ICs. 





Price (NT$): 7.05 


No. of Shares (MM) 12,988 


Key Management: Stan Hung, Sun Shih-Wei, Liu Chi-Tung No. of Employees: 13,239 


TI Revenues 104.1 106.8 92.5 74.5 

Mediatek Gross Profit 20.7 22.5 15.6 5.1 

Novatek Operating Profit 6.1 6.8 2.3 (7.0) 

Net Profit 30.5 15.4 (22.3) (8.1) 






Gross Debt 35.7 30.4 7.6 9.0 

Owners’ Equity 291.2 236.5 184.7 176.6 



Asia-Pacific 

32% 

Europe 

10% 

Japan 

2% 


20 April 2009 

N. America 

56% 

Key Suppliers 


LAM Research ATMI 

Sumco Corp TEL 


Canon 

Shin-Etsu 

MEMC 



Consumer 

22% 

Computer 

17% 

Memory 

Others 

1% 

1% 

Communication 

58% 

Key Customers 

TI Mediatek 

STMicro Freescale 

Xilinx Novatek 

Infineon Marvell 


UMC 

415

Bhavin Shah 

(852) 2800-8538 


416 

Vanguard International Semiconductor Corporation 


Vanguard International Semiconductor Corporation (Vanguard) offers integrated circuit foundry services. The 

company manufactures 0.18um logic, mixed-signal, analog, high voltage, low power, CMOS RF, flash, 

embedded memory, and bipolar CMOS DMOS semiconductors. 





Price (NT$): 9.70 




Key Management: Yang Yanquing, Willian J Amelio, Wong Wai Ming No. of Employees: 3,743 

Business Alliances / Partnerships (NT$ in millions) FY06 FY07 FY08 FY09E 

TSMC Revenues 12,973 15,973 16,121 9,667 

Gross Profit 4,733 6,349 2,604 NA 

Operating Profit 3,627 5,029 1,029 (2,122) 

Net Profit 3,019 4,321 1,042 (1745) 

Earnings per Share (NT$) 1.83 2.56 0.61 (1.1) 


Capital Spending (1,265) (10,870) (4,696) NA 







USA 

25% 

Europe 

10% 


20 April 2009 

Asia 

65% 


Vanguard International 

Key Suppliers 


LAM Research Shin-Etsu (wafers) 

Siltronic AG Tel 


ATMI 

Episil 

SUMCO Corp. 

Source: Company, J.P. Morgan, Bloomberg estimates (2009E). Note: Share price is as of 13 March 2009. 

Management 

17% 

Others 

16% 

Driver IC (small) 

26% 

Driver IC (large) 

41% 

Key Customers 

TSMC Novatek 

TI Himax 

Yamaha Solomon Systech 

Intersil Siltronix 

COMPANY WEBSITE IC Foundry

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

IC Assembly & Test 

Advanced Semiconductor Engineering........418 

Amkor Technology, Inc..................................419 

Powertech Technology Inc......................420 

Siliconware Precision Industries Co., Ltd.....421 

STATS ChipPAC Ltd.......................................422 

Unisem (M) Berhad........................................423 

Verigy Ltd.......................................................424 

417

Bhavin Shah 

(852) 2800-8538 


418 

Advanced Semiconductor Engineering 


Advanced Semiconductor Engineering, Inc. (TAIEX: 2311, NYSE: ASX), is the world’s largest independent 

provider of IC packaging and testing services. The company, along with its subsidiary, ASE Test Limited 

(NASDAQ: ASTSF, TSEC: 9101), provides solutions for backend semiconductor manufacturing services with 

emphasis on the computing, communication, and consumer market segments. 





Price (NT$): 14.9 




Key Management: Jason C.S. Chang, Richard C. Hung-Pen, Joseph Tung No. of Employees: 14,300 


TSMC Revenues 100.4 101.2 94.4 53.9 

NXP Gross Profit 28.8 29.1 22.5 2.8 


Net Profit 15.4 11.1 6.2 (6.4) 


Return on Equity (ROE) (%) 23.4 13.3 7.6 (8.5) 


Research & Development Expense 2.6 3.3 3.8 3.4 


Gross Debt 37.9 39.7 62.7 45.7 

Owners’ Equity 77.1 89.7 72.0 79.4 



Taiwan 

18% 

Japan 

9% 

Europe 

15% 

Key Suppliers 

Kulicka & Soffa Ultratech 

Agilent NanYa PCB 

ASM Pacific Teradyne 

PPT 

Other Asia 

3% 

North America 

55% 



20 April 2009 


Advanced Semiconductor 

Automotive and 

Consumers 

33% 

Computer 

23% 

Communication 

44% 

Key Customers 

Qualcomm NVIDIA 

CSR ATI 

Broadcom Intel 

Mediatek Misrosoft 

COMPANY WEBSITE IC Assembly & Test

Bhavin Shah 

(852) 2800-8538 


Amkor Technology, Inc. 


Amkor Technology, Inc. provides semiconductor packaging and test services. The company offers deep 

submicron wafer fabrication, wafer probe testing, integrated circuit packaging assembly and design, final 

testing, reliability testing, burn-in, and electrical characterization. 


Ticker: AMKR 



Price (US$): 2.08 




Key Management: James J Kim No. of Employees: 20,500 


NA Revenues 2,729 2,739 2,659 1,659 



Net Profit 170 220 (457) 37 


Return on Equity (ROE) (%) 55.0 41.9 (102.4) 6.0 


Research & Development Expense 39 42 56 NA 


Gross Debt 2,005 1,764 1,493 NA 




Others 

14% 

China 

3% 

Korea 

United States 

5% 

37% 

Taiwan 

7% 

Japan 

9% 

Key Suppliers 

Kulicka & Soffa Advantest 

Credence 

Singapore 

25% 


20 April 2009 

Source: Company, Bloomberg estimates (FY09). Share price is as of 12 March 2009. 


Amkor Technology 

Packaging 

88% 

COMPANY WEBSITE IC Assembly & Test 

Test 

12% 

Key Customers 

IBM TI 

Freescale Intel 

Samsung Infineon 

419

Bhavin Shah 

(852) 2800-8538 


420 

Powertech Technology Inc 


Powertech Technology Inc tests, packages, and assembles integrated circuits (ICS). The company’s products 

and services include memory product test and various kinds of IC package services, such as thin small-outline 

package (TSOP) services. 





Price (NT$): 53.7 




Key Management: Tsai, DK, Lee, PC, Liao, CC No. of Employees: 4,192 

Business Alliances / Partnerships (NT$ in billions) FY06 FY07 FY08E FY09E 

Kingston holds 11% of PTI Revenues 17.0 24.4 31.2 25.8 

Gross Profit 5.6 7.7 8.5 5.1 


Net Profit 4.8 6.2 6.6 3.7 


Return on Equity (ROE) (%) 23.4 26.2 33.9 17.3 




Gross Debt 10.1 13.9 15.0 13.4 

Owners’ Equity 13.5 17.8 21.1 22.1 



Asia 

44% 

US 

10% 

Key Suppliers 

Shinko Mitsui High Tec 

Unimicron Shinko 

Kinsus Tanaka 

Sumitomo 

Europe 

0.2% 

Taiwan 

46% 



20 April 2009 


Powertech Technology 


Testing 

40% 

Assembly 

60% 

Key Customers 

Elpida ProMos 

Toshiba Powerchip 

IM Flash Kingston 

Hynix Sandisk

Bhavin Shah 

(852) 2800-8538 


Siliconware Precision Industries Co., Ltd. 


Siliconware Precision Industries Co., Ltd. operates integrated circuit packaging consultation, design, simulation, 

assembly, and final test. The current products are quad flat package (QFP) and small outline package (SO). 





Price (NT$): 34.5 




Key Management: Bough Lin , C.W. Tsai, Eva Chen No. of Employees: 15,134 


Virtual SPIL group Revenues 56.4 64.6 60.5 34.3 

Gross Profit 15.3 19.2 12.8 1.8 


Net Profit 10.5 14.7 6.3 (0.7) 






Gross Debt 5.7 3.0 3.0 2.7 

Owners’ Equity 62.9 68.9 59.3 53.1 



Asia 

35% 

Europe 

4% 

Key Suppliers 

Sumitomo Kinsus 

ASM Pacific Teradyne 

PPT Kulicka & Soffa 

Ultratech Agilent 

Japan 

2% 

North America 

59% 



20 April 2009 


Siliconware Precision 

Consumer 

24% 

Memory 

16% 


29% 


Computer 

33% 

Key Customers 

Mediatek NVIDIA 

Marvell Xilinx 

Sandisk AMD(ATi) 

Broadcom 

421

Bhavin Shah 

(852) 2800-8538 



STATS ChipPAC Ltd 

Country: Singapore 

STATS ChipPAC Ltd. provides semiconductor test and assembly services. The company assembles leaded Ticker: STTS.SI 

and laminate packages and provides related services such as package design and leadframe and substrate Analyst: Not Covered 

designs. The company provides these tests and assembly services to semiconductor companies which do not Rating: Not Rated 

have their own manufacturing facilities. 

Price (S$): 0.28 

422 




Key Management: Charles Richard Wofford, Tan Koon Lay, Wan Choong Hoe No. of Employees: 11,145 


NA Revenues 1,617 1,652 1,658 NA 


Operating Profit 156 163 117 NA 

Net Profit 77 89 26 NA 

Earnings per Share (US$) 0.04 0.04 0.01 NA 

Return on Equity (ROE) (%) 6.4 6.8 1.8 NA 








Asia 

22% 

Europe 

5% 

Key Suppliers 

Kulicke & Soffa Shinkawa 

Unaxis Asahi Engineering 

Towa Corporation Teradyne 

LTX Corporation ASM Technology 

Verigy Dai-Ichi Seiko 


20 April 2009 

US 

73% 



STATS ChipPAC 

Packaging - Leaded 

18% 

Test & Other 

Serv ices 

26% 

Packaging - 

Laminate 

57% 

Key Customers 

CHRT Freescale Semi 

NVIDIA Intel 

ATI (AMD) Broadcom 


Bhavin Shah 

(852) 2800-8538 



Unisem (M) Berhad 

Country: Malaysia 

Unisem (M) Berhad manufactures semiconductor devices. The company provides turnkey solutions to its Ticker: UNSM.KL 

customers in wafer grinding, packaging and testing of integrated circuits, tape and reel, and dropship services. Analyst: Not Covered 

Unisem also provides packaging and testing a wide range of leadframe packages. 


Price (M$): 0.46 




Key Management: Chia Sin Ter " John", Ang Chye Hock, Chia Mong Tet "Francis" No. of Employees: 4,719 

Business Alliances / Partnerships (M$ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 693 972 1,233 886 

Gross Profit NA NA NA NA 


Net Profit 78 119 20 2 

Earnings per Share (M$) 0.2 0.2 0.0 0.0 



Research & Development Expense 3 4 NA NA 




Book Value per Share (M$) 1.6 1.7 1.8 1.7 


NA 

Key Suppliers 

Europe 

USA 

4% 

1% 

Aisa 

95% 


20 April 2009 




NA 

Unisem 

NA 

Key Customers 

423

Bhavin Shah 

(852) 2800-8538 


424 

Verigy Ltd. 


Verigy Ltd. manufactures testing equipment for the semiconductor manufacturing industry. The company 

produces equipment for testing system-on-a-chip, system-in-a-package, high-speed memory devices, flash 

memory, and multi-chip packages. 


Ticker: VRGY 



Price (US$): 6.95 

Market Cap (US$ MM): 411 



Key Management: Keith L Barnes, Robert J Nikl, Jorge Luis Titinger No. of Employees: 1,650 


NA Revenues 778 761 691 276 



Net Profit 96 107 73 (136) 










United States 

17% 

Japan 

9% 

Key Suppliers 

All major PC component makers 

Europe 

10% 

Source: Company, Bloomberg. Share price is as of 12 March 2009. 


20 April 2009 

Singapore 

64% 


Verigy Ltd. 

Test System 

Services 

23% 

Test System 

Products 

77% 

Key Customers 

Enterprises Consumers 


Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Semiconductor Equipment 

Advanced Energy ......................................................426 

Advantest Corporation..............................................427 

Agilent Technologies ................................................428 

AIXTRON AG..............................................................429 

Applied Materials, Inc................................................430 

ASM International N.V...............................................431 

ASM Pacific................................................................432 

ASML ..........................................................................433 

ATMI Inc .....................................................................434 

Brooks-Automation...................................................435 

Cabot Microelectronics Corporation.........................436 

Cymer, Inc..................................................................437 

DAINIPPON SCREEN MFG. CO., LTD........................438 

Disco Corp. .................................................................439 

Entegris Inc.................................................................440 

Jusung Engineering Co Ltd.......................................441 

KLA-Tencor Corp........................................................442 

Lam Research.............................................................443 

Mattson Technology...................................................444 

MKS Instruments, Inc..................................................445 

Novellus Systems........................................................446 

Shimadzu Corporation................................................447 

Teradyne, Inc ..............................................................448 

Tokyo Electron, Ltd....................................................449 

Tokyo Seimitsu Co., Ltd.............................................450 

Ultra Clean Holdings ..................................................451 

Ultratech Inc................................................................452 

Ulvac, Inc......................................................................453 

Ushio, Inc. ....................................................................454 

Varian Semiconductor Equipment Associates, Inc. .455 

Yokogawa Electric Corporation .................................456 

425

Bhavin Shah 

(852) 2800-8538 



Advanced Energy Industries, Inc. manufactures power conversion and control systems used in plasma-based 

thin-film production equipment. The company's systems are integrated in semiconductor, data storage, flat 

panel display, and other industrial manufacturing equipment that utilize gaseous plasmas to deposit or etch 

thin-film layers on materials or substrates such as silicon and glass. 

426 

Advanced Energy Country: United States 

Ticker: AEIS 



Price (US$): 6.51 




Key Management: Hans Georg Betz; Lawrence D Firestone; Yuval Wasserman No. of Employees: 1,679 


NA Revenues 411 385 329 145 



Net Profit 88 34 (2) (51) 










NA 

ASIA 

35% 

Key Suppliers 

Europe 

11% 


20 April 2009 

US 

54% 

Source: Company, J.P. Morgan, Bloomberg estimates. Share price is as of 12 March 2009. 


Advanced Energy 

Flat Panel 

10% 

Adv anced Product 

Application 

14% 

Data Storage 

Solar 3% 

17% 

Semiconductor 

56% 

Key Customers 

Applied Materials LAM Research 

Mattson Novellus 

Tokyo Electron Ulvac Inc. 

COMPANY WEBSITE Semiconductor Equipment

Bhavin Shah 

(852) 2800-8538 


Advantest Corporation 


ADVANTEST CORPORATION produces semiconductor testing devices and electronic measuring instruments. 

The company's products include large-scale integration (LSI) test systems, memory test systems, dynamic test 

handlers, network analyzers, electronic meters, optical testing devices, and signal sources. 



Analyst: Hisashi Moriyama 


Price (¥): 1,278 




Key Management: Toshio Maruyama; Shinpei Takeshita; Takashi Tokuno No. of Employees: 3,820 


NA Revenues 235 183 75 53 



Net Profit 36 17 (78) (10) 







Owners’ Equity 295 254 150 135 

Book Value per Share (¥) 1,575.4 1,422.2 820.0 742.0 


NA 

USA 

12% 

Key Suppliers 

Europe 

13% 

Japan 

25% 

Asia 

37% 



20 April 2009 


Advantest Corporation 

Mechatronics 

Systems 

15% 

Services,Support 

& Others 

21% 

Semiconductor & 

Component test 

system 

64% 

Key Customers 

ASE TSMC 

Samsung MEI 

SPIL UMC 

COMPANY WEBSITE Semiconductor Equipment 

427

Bhavin Shah 

(852) 2800-8538 



Agilent Technologies 


Agilent Technologies, Inc. provides solutions to markets within the communications, electronics, and life Ticker: A 

sciences industries. The company designs and manufactures test, measurement and monitoring instruments, Analyst: Mark Moskowitz 

semiconductors and optical components, and chemical analysis instruments, systems and services. 


Price (US$): 13.81 

428 




Key Management: William P. Sullivan; Adrian T. Dillon; James G. Cullen No. of Employees: 19,000 


NA Revenues 5,437 5,420 5,774 4,591 

Gross Profit 3,122 2,969 3,247 2,484 


Net Profit 3,771 638 729 352 






Gross Debt 1,500 2,087 2,125 2,154 

Owners’ Equity 3,648 3,234 2,559 2,427 



NA 

Japan 

11% 

Key Suppliers 

China 

11% 

US 

32% 

ROW 

46% 



20 April 2009 


Agilent Technologies 

Bio-Analytical 

Measurement 

40% 

Electronic 

Measurement 

60% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


AIXTRON AG 


Aixtron AG engineers and manufactures metal organic chemical vapor deposition (MOCVD) equipment for the 

semiconductor industry. The company's customers use its equipment to produce compound semiconductor 

layer structures for use in LED, laser, solar cell, transistor, telecommunications, and other applications. Aixtron 

markets its products worldwide. 


Ticker: AIXGn.DE 



Price (€): 3.89 


No. of Shares (MM) 90 


Key Management: Paul Kent Hyland; Bernd Schulte; Wolfgang Breme No. of Employees: 619 

Business Alliances/Partnerships (€ in millions) FY06 FY07 FY08E FY09E 

NA Revenues 171.7 214.8 274.4 163.0 

Gross Profit 63.4 85.0 112.9 64.8 


Net Profit 5.9 17.3 23.0 0.8 






Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 183.9 198.4 212.9 205.4 



NA 

Key Suppliers 

Europe 

United States 2% 

6% 

Asia 

92% 



20 April 2009 

AIXTRON AG 


Services & 

Spares 

12% 

Silicon 

Semiconductor 

Equipment 

0.3% 

Compound 

Semiconductor 

Equipment 

88% 

Key Customers 

SemiLeds Formosa Epitaxy 

Showa Denko K.K. 


429

Bhavin Shah 

(852) 2800-8538 



Applied Materials, Inc 


Applied Materials, Inc. develops, manufactures, markets, and services semiconductor wafer fabrication 

Ticker: AMAT 

equipment and related spare parts for the worldwide semiconductor industry. The company's customers include Analyst: Christopher Blansett 

semiconductor wafer manufacturers and semiconductor integrated circuit manufacturers. 


Price (US$): 10.14 

430 




Key Management: Michael R Splinter; George S Davis; Franz Janker No. of Employees: 14,824 


Revenues 9,167 9,735 8,129 3,973 

Gross Profit 4,346 4,611 3,570 1,201 

Operating Profit 2,481 2,584 1,514 (413) 

Net Profit 1,517 1,710 961 (371) 




Research & Development Expenses 1,052 1,123 1,097 860 


Gross Debt 407 205 203 203 

Owners’ Equity 6,651 7,821 7,449 7,268 



North America 

19% 

Europe 

12% 

Key Suppliers 

MKS Instruments Brooks Automation 

Advanced Energy Ultra Clean Holdings 

Asia Pacific 

70% 



20 April 2009 



Adjacent 

technologies 

10% 

Display 

12% 

Fab solutions 

29% 


Silicon 

49% 

Key Customers 

Intel TSMC 

Toshiba Samsung 

Hynix

Bhavin Shah 

(852) 2800-8538 


ASM International N.V. 


ASM International N.V. develops, manufactures, markets, and services machines used to produce 

semiconductors. The company manufactures machines that process silicon wafers, and assemble and package 

semiconductors. ASM operates in Europe, the United States, Japan, and in Asia. 

Country: Netherlands 

Ticker: ASMI.AS 



Price (€): 5.4 




Key Management: Paulus Cornelis Van Den Hoek , Arthur H Del Prado , Arnold J M Van Der Ven No. of Employees: 12,254 


NA Revenues 877.5 955.2 747.4 262.3 

Gross Profit 338.7 361.0 270.3 87.2 


Net Profit 42.3 61.0 18.4 (78.0) 






Gross Debt 228.5 186.9 153.7 171.9 

Owners’ Equity 276.5 318.9 317.9 277.0 



NA 

Europe 

9% 

United States 

13% 

Key Suppliers 

Japan 

9% 

Southeast Asia 

68% 



20 April 2009 


ASM International 

Front-End 

Equipment 

47% 

Back-End 

Equipment 

53% 

Key Customers 

Intel IBM 

Micron ST Micro 

Samsung TI 

Infineon 


431

Bhavin Shah 

(852) 2800-8538 


432 

ASM Pacific 


ASM Pacific Technology Limited, through its subsidiaries, designs, manufactures and markets machines, tools 

and materials used in the semiconductor industry. 

Country: Hong Kong 

Ticker: 0522.HK 

Analyst: Charles Guo 


Price (HK$): 24.7 




Key Management: Arthur H. Del Prado; Lo Tsan Yin; Lee Wai Kwong No. of Employees: 10,063 

Business Alliances/Partnerships (HK$ in millions) FY06 FY07 FY08 FY09E 

Subsidiary of ASM International Revenues 4,556 5,393 5,258 2,997 

Gross Profit 2,079 2,353 2,095 915 


Net Profit 1,149 1,269 974 145 

Earnings per Share (HK$) 2.96 3.26 2.49 0.37 






Owners’ Equity 3,029 3,536 2,864 2,656 

Book Value per Share (HK$) 7.8 9.1 7.3 6.7 


N/A 

Others 

34% 

Key Suppliers 

Malaysia 

13% 

Taiwan 

17% 

Mainland China 

35% 



20 April 2009 

ASM Pacific 


Lead Frame 

22% 

Equipment 

78% 

Key Customers 

SATs IDMs 


Bhavin Shah 

(852) 2800-8538 


ASML 


ASML Holding N.V. develops, produces, and markets semiconductor manufacturing equipment. The company's 

products allow semiconductor manufacturers to choose the optimal numerical aperture and wavelength for their 

applications, assure uniformity, and produce more using less floor space. 


Ticker: ASML.AS 



Price (€): 12.73 




Key Management: Eric Meurice; Peter T F M Wennink;, Martin A Van Den Brink No. of Employees: 6,840 


NA Revenues 3,597 3,809 2,954 1,116 

Gross Profit 1,462 1,560 1,016 226 


Net Profit 625 688 322 (318) 






Gross Debt 380 855 647 647 

Owners’ Equity 2,156 1,908 1,989 1,584 



Cymer 

Taiwan Other 

China 

7% 

United States 

14% 

2% 3% 

Europe 

15% 

Key Suppliers 

Japan 

20% 

Korea 

39% 



20 April 2009 

ASML 


KrF 

8% 

ArF dry 

10% 

i-Line 

5% 

ArF Immersion 

77% 

Key Customers 

Intel TSMC 

Infineon Samsung 

Hynix 


433

Bhavin Shah 

(852) 2800-8538 


434 

ATMI Inc 


ATMI, Inc. supplies high performance materials, materials packaging and materials delivery systems used 

worldwide in the manufacture of microelectronics devices. The company serves markets that include integrated 

circuit (IC) fabrication (including ion implant and interconnect materials and delivery systems), flat-panel 

displays, and the life sciences market. 


Ticker: ATMI 



Price (US$): 14.79 




Key Management: Eugene G Banucci; Douglas A Neugold; Timothy C Carlson No. of Employees: 761 


NA Revenues 326 364 334 218 

Gross Profit 163 182 161 87 


Net Profit 44 41 24 (21) 







Owners’ Equity 435 434 409 359 



NA 

United States 

23% 

Key Suppliers 

South Korea 

14% 

Other Pac Rim 

14% 

BelgiumJapan 

1% 13% 


20 April 2009 

Europe 

12% 

Taiwan 

24% 

ATMI Inc 

Source: Company, J.P. Morgan, Bloomberg estimates (FY09E). Share price is as of 12 March 2009. 


Lifesciences 

9% 

Microelectonics 

92% 

Key Customers 

IBM TI 

Freescale Intel 

Samsung Infineon 


Bhavin Shah 

(852) 2800-8538 


Brooks-Automation Country: United States 


Brooks Automation, Inc. delivers automation solutions to the global semiconductor and related industries. The 

company's hardware, factory/tool management software, and professional services can manage every wafer, 

reticle, and data movement in the fab. Brooks helps semiconductor manufacturers optimize throughput, yield, 

and cost reduction. 

Ticker: BRKS 



Price (US$): 4.28 




Key Management: Robert J Lepofsky; Ralf Wuellner; Michael pippins No. of Employees: 1,658 


NA Revenues 607 743 526 242 



Net Profit 26 151 (236) (88) 










NA 

Asia Pacific 

21% 

Key Suppliers 

Europe 

15% 


20 April 2009 

North America 

64% 



Brooks-Automation 

Global Customer 

Support 

24% 

Critical 

Components 

24% 

Automation 

Systems 

52% 

Key Customers 

LAM Research Fairchild Semi 

KLA-Tencor Varian 

Novellus 


435

Bhavin Shah 

(852) 2800-8538 


436 

Cabot Microelectronics Corporation 


Cabot Microelectronics Corporation supplies slurries used in chemical mechanical planarization, a polishing 

process used in the manufacture of integrated circuit devices. The slurries are liquids containing abrasives and 

chemicals that enhance the polishing process. The polishing process itself facilitates the manufacture of 

smaller, faster, and more complex integrated circuit devices. 


Ticker: CCMP 



Price (US$): 23.36 




Key Management: William P Noglows; William S Johnson No. of Employees: 818 


NA Revenues 338 375 228 293 

Gross Profit 160 174 102 135 

Operating Profit 49 49 (11) 22 

Net Profit 37 38 (4) 19 


Return on Equity (%) 9.5 9.0 (1.0) 4.1 


Research & Development Expenses (50) (49) (46) (46) 



Owners’ Equity 413 434 443 464 



NA 

Key Suppliers 

Asia Pacific 

74% 


20 April 2009 

United States 

19% 

Europe 

7% 



Cabot Microelectronics 

CMP 

Consumables 

100% 

Key Customers 

Intel Samsung 

AMD 


Bhavin Shah 

(852) 2800-8538 


Cymer, Inc. 


Cymer, Inc. supplies excimer laser illumination sources for use in deep ultraviolet photolithography systems. 

The company's lasers are incorporated into step-and-repeat and step-and-scan photolithography systems for 

use in the manufacture of semiconductors. 


Ticker: CYMI 



Price (US$): 19.44 




Key Management: Robert Akins; Paul Bowman; Edward Brown Jr No. of Employees: 994 


NA Revenues 544 522 459.8 275.0 

Gross Profit 263 261 221 111 


Net Profit 96 88 39 (7) 






Gross Debt 141 141 141 0 

Owners’ Equity 688 504 518 497 



Carl Zeiss 

Asia 

15% 

Korea 

16% 

Key Suppliers 

Europe 

7% 

Japan 

25% 


20 April 2009 

US 

38% 

Cymer, Inc. 


Key Customers 

ASML Canon 

Nikon 


437

Bhavin Shah 

(852) 2800-8538 


438 

DAINIPPON SCREEN MFG. CO., LTD. 


DAINIPPON SCREEN MFG. CO., LTD. manufactures precused for electronic industry and image processors. 

The company's products include manufacturing systems for semiconductors, liquid crystal, and printed circuit 

boards (PCB), test systems for wafers, liquid crystal and PCB, and electronics color scanners. 





Price (¥): 113 




Key Management: Akira Ishida; Masanari Tsuda; Masahiro Hashimoto No. of Employees: 5,184 


NA Revenues 301 280 220 120 



Net Profit 18 5 (38) (19) 






Gross Debt 16 25 58 58 




NA 

North America 

16% 

Key Suppliers 

Europe 

10% 

Asia 

14% 

Japan 

60% 



20 April 2009 


DAINIPPON SCREEN 

Graphic Arts 

Equipment 

26% 

Other- Equipment 

Leasing 

1% 

Electronics 

Equipment & 

components 

73% 

Key Customers 

NEC Toshiba 

AU Optronics FujiFilm 


Bhavin Shah 

(852) 2800-8538 


Disco Corp. 


DISCO CORPORATION manufactures abrasive and precision industrial machinery for cutting and grinding 

purposes. The company's products are applied in the semiconductor, electronics, and construction industries to 

produce consumer goods such as personal computers, digital cameras, video game systems, and Digital Video 

Disc (DVD) players. 





Price (¥): 2,665 




Key Management: Hitoshi Mizorogi; Keizo Sekiya; Kazuma Sekiya No. of Employees: 2,434 


NA Revenues 86 92 52 41 



Net Profit 11 11 (1) (30) 








Book Value per Share (¥) 2,398 2,627 2,344 2,235 


NA 

Europe 

11% 

Asia 

19% 

Key Suppliers 

North America 

8% 

Japan 

62% 



20 April 2009 

Disco Corp. 


Industrial 

products 

4% 

Other software 

development 

0.4% 

Electronics 

Industry related 

products 

96% 

Key Customers 

Toshiba Melco 

Hitachi MEI 

ASE SPIL 


439

Bhavin Shah 

(852) 2800-8538 


440 

Entegris Inc. 


Entegris Inc. provides materials management products and services to the microelectronics industry on a 

worldwide basis. The company provides products such as wafer shippers, wafer transport and process carriers, 

pods, and work-in-process boxes. Entegris also provides chemical delivery products such as valves, fittings, 

tubing, pipe, and containers. 


Ticker: ENTG 



Price (US$): 0.84 




Key Management: Gideon Argov; Gregory B Graves No. of Employees: 2,781 


NA Revenues 673 626 555 393 



Net Profit 63 44 (517) (67) 







Owners’ Equity 1,016 852 336 NA 



NA 

United States 

26% 

Key Suppliers 

Others 

12% 

China 

3% 

Korea 

8% Singapore 

6% 

Japan 

23% 


20 April 2009 

Taiwan 

14% 

Malay sia 

3% 

Germany 

5% 


Entegris Inc. 


Semiconductor 

Equipment 

Key Customers 

AMD Dainippon Screen 

Applied Materials Seagate 

TSMC IBM 


Bhavin Shah 

(852) 2800-8538 


Jusung Engineering Co Ltd 


Jusung Engineering Co., Ltd. is a semiconductor equipment manufacturer. The company's products include low 

pressure chemical vapor deposition (CVD) systems for wafer fabrication. Jusung Engineering exports its 

products to the United States, Singapore, Taiwan, and Japan. 


Ticker: 036930.KQ 






Founded: 1995; Listed: Fiscal Year End: December 

Key Management: Hwang Chul-Joo; Ahn Dong-Zoon; Lee Yeong No. of Employees: 460 


NA Revenues 121 212 152 201 



Net Profit 17 39 (29) 3 

Earnings per Share (Won) 527 1,248 (907) 90 







Book Value per Share (Won) 4,245 5,805 4,854 5,074 


NA 

ROW 

60% 

Key Suppliers 


20 April 2009 

South Korea 

40% 



Jusung Engineering 

Raw Materials 

7% 

Semiconductor/ 

LCD equipment 

93% 

Key Customers 


NA 

441

Bhavin Shah 

(852) 2800-8538 


442 

KLA-Tencor Corp 


KLA-Tencor Corporation manufactures yield management and process monitoring systems for the 

semiconductor industry. The company's systems are used to analyze product and process quality at critical 

steps in the manufacture of circuits and provide feedback so that fabrication problems can be identified. KLA- 

Tencor operates sales, service, and application centers worldwide. 


Ticker: KLAC 



Price (US$): 17.79 



Founded: 1976; Listed: 1980 Fiscal Year End: July 

Key Management: Richard Wallace; Mark Dentinger; Virendra Kirloskar No. of Employees: 6,000 


Revenues 2,071 2,731 2,522 1,469 

Gross Profit 1,185 1,602 1,442 698 


Net Profit 380 528 359 (517) 






Gross Debt 0 0 916 889 

Owners’ Equity 3,568 3,550 2,982 2,237 



Korea 

Asia Pacific 9% 

11% 

Europe and 

Israel 

12% 

Key Suppliers 

Asyst Carl Zeiss 

Brooks Automation 

US 

21% 


20 April 2009 

Japan 

25% 

Taiwan 

23% 



KLA-Tencor Corp 


Serv ices 

20% 

Product 

81% 

Key Customers 

Intel TSMC 


Hynix

Bhavin Shah 

(852) 2800-8538 


Lam Research 


Lam Research Corporation manufactures, markets, and services semiconductor processing equipment used in 

the making of integrated circuits. The company's products are used to deposit special films on a silicon wafer 

and etch away portions of various films to create a circuit design. Lam sells its products around the world. 


Ticker: LRCX 



Price (US$): 22.26 




Key Management: Stephen Newberry; Martin Anstice; Ernest Maddock No. of Employees: 3,800 


Revenues 2,567 2,475 1,079 870 

Gross Profit 1,307 1,192 388 302 


Net Profit 678 468 (102) (83) 






Gross Debt 252 390 371 371 

Owners’ Equity 1,176 1,779 1,649 1,506 



Europe 

10% 

Aisa Pacific 

13% 

US 

17% 

Japan 

18% 

Key Suppliers 

Advanced Energy Entegris 

MKS Instruments Brooks Automation 

Ultra Clean Holdings 


20 April 2009 

Korea 

22% 

Taiwan 

20% 

Lam Research 


Key Customers 

UMC TSMC 

AMD Samsung 

Hynix 


443

Bhavin Shah 

(852) 2800-8538 


444 

Mattson Technology Country: United States 


Mattson Technology, Inc. designs, manufactures, and markets advanced fabrication equipment. The company's 

semiconductor process equipment is used in photoresist strip/etch, chemical vapor, deposition, epitaxial, and 

rapid thermal processing. Mattson maintains sales and support centers throughout the United States, Europe, 

Asia/Pacific, and Japan. 

Ticker: MTSN 



Price (US$): 0.58 




Key Management: David Dutton; Andrew Moring; Stephen Lanza No. of Employees: 613 


Revenues 282 259 127.2 66.0 

Gross Profit 108 115 41 (4) 


Net Profit 24 23 (58) (64) 










Key Suppliers 

Ultra Clean Hldgs 

MKS Instruments 

Europe 

9% 

Asia/Pacific 

57% 

North America 

9% 


20 April 2009 

Japan 

24% 


Mattson Technology 


Logic 

22% 

Foundry 

14% 

Memory/DRAM 

65% 

Key Customers 

TSMC Samsung 

UMC Hynix 


Bhavin Shah 

(852) 2800-8538 


MKS Instruments, Inc. 


MKS Instruments, Inc. develops, manufactures, and supplies instruments and components used to control and 

analyze gases in semiconductor manufacturing and similar industrial manufacturing processes. The company's 

products are used to manufacture flat panel displays, magnetic and optical storage devices and media, solar 

cells, fiber optic cables, and diamond thin films. 


Ticker: MKSI 



Price (US$): 13.63 




Key Management: Leo Berlinghieri; Ronald Weigner; John Smith No. of Employees: 2,631 


Revenues 783 780 647.0 380.0 

Gross Profit 340 331 265 128 


Net Profit 110 95 40 (39) 






Gross Debt 29 26 19 19 

Owners’ Equity 901 954 887 833 



NA 

Japan 

15% 

Key Suppliers 

Europe 

15% 

Asia 

14% 


20 April 2009 

US 

57% 


MKS Instruments 


Pow er & Reactiv e 

Gas Products 

38% 

Vaccum Products 

10% 

Instrument & Control 

Sy stems 

52% 

Key Customers 

Applied Materials LAM Research 

Ulvac Novellus 



445

Bhavin Shah 

(852) 2800-8538 


446 

Novellus Systems Country: United States 


Novellus Systems, Inc. manufactures, markets, and services advanced automated wafer fabrication systems for 

the deposition of thin films. The company supplies deposition systems used in the fabrication of integrated 

circuits. Novellus has subsidiaries in the United Kingdom, France, Germany, China, Japan, the Netherlands, 

Singapore, and Taiwan. 

Ticker: NVLS 



Price (US$): 13.3 




Key Management: Richard Hill; Fusen Chen; Thomas Caulfield No. of Employees: 3,048 


Revenues 1,659 1,570 1,011.0 488.0 

Gross Profit 826 769 448 142 


Net Profit 190 214 (116) (124) 



Capital Spending (39) 14 (27) (40) 



Gross Debt 143 145 178 178 

Owners’ Equity 1,834 1,529 1,247 1,111 



Greater China 

28% 

Key Suppliers 

Advanced Energy 

Brooks Automation 

Entegris MKS Instrument 


U.S. 

31% 

Europe 

12% Korea 

Japan 17% 

12% 


20 April 2009 



Novellus Systems 

Industrial 

applications 

11% 

Semiconductor 

89% 

Key Customers 

Intel TSMC 


Hynix 


Bhavin Shah 

(852) 2800-8538 


Shimadzu Corporation 


Shimadzu Corporation is a precision tools and equipment maker. The company develops, manufactures, and 

sells analytical and measuring instruments, medical systems, and aircraft and industrial equipment. Shimadzu 

researches, develops and markets the products through its related companies in Japan, the US, the UK, and 

China. 


Ticker: 771.T 



Price (¥): 597 




Key Management: Shigehiko Hattori; Akira Nakamoto; Hidetoshi Yajima No. of Employees: 9,704 


NA Revenues 262 290 272 257 



Net Profit 13 14 9 7 

Earnings per Share (¥) 45.3 46.5 29.0 25.2 









NA 

North America 

Europe 

6% 

6% 

Asia 

11% 

Key Suppliers 


20 April 2009 

Japan 

77% 


Shimadzu Corporation 


Medical 

Equipment 

19% 

Aircraft/ industrial 

22% 

Others 

2% 

Measuring 

instrument 

57% 

Key Customers 


NA 

447

Bhavin Shah 

(852) 2800-8538 


448 

Teradyne, Inc 


Teradyne, Inc. manufactures automatic test systems and related software for the electronics and 

communications industries. The company's products include systems to test semiconductors, circuit boards, 

telephone lines and networks, and software. Teradyne also manufactures backplanes and associated 

connectors used in electronic systems. 


Ticker: TER 



Price (US$): 4.18 




Key Management: Michael Bradley; Gregory Beecher No. of Employees: 3,800 


NA Revenues 1,377 1,107 1,107 628 

Gross Profit 673 516 501 237 


Net Profit 191 83 33 (125) 






Gross Debt 0 0 123 123 

Owners’ Equity 1,361 1,229 1,039 933 



NA 

United States 

21% 

Key Suppliers 

ROW 

3% 

Japan 

10% 

South East Asia 

55% 


20 April 2009 

Europe 

11% 

Teradyne, Inc 



System Test 

Group 

19% 

Semiconductor 

Test 

81% 

Key Customers 

Intel TI 

ASE Toshiba 

IBM Amkor 


Bhavin Shah 

(852) 2800-8538 


Tokyo Electron, Ltd. Country: Japan 


Tokyo Electron Limited manufactures and sells industrial electronics products, such as semiconductor 

manufacturing machines, computer system, and electronic components. The company products are sold in the 

US, Taiwan, and others as well as in Japan. 




Price (¥): 3,230 




Key Management: Tetsuro Higashi; Tetsuo Tsuneishi; Kiyoshi Sato No. of Employees: 10,566 


NA Revenues 852 906 510 330 

Gross Profit 273 311 127 30 


Net Profit 91 106 1 (36) 

Earnings per Share (¥) 511 594 5 (203) 






Owners’ Equity 461 533 528 465 



NA 

Taiwan 

15% 

Key Suppliers 

United States 

11% 

Korea 

15% 


19% 

Japan 

41% 



20 April 2009 

Tokyo Electron, 


Electronic/ 

Computer 

Components 

19% 

Other-Machine 

Leasing, 

Distribution 

0.1% 

Semiconductor 

Machinery 

Manufacturing 

81% 

Key Customers 


NA 

449

Bhavin Shah 

(852) 2800-8538 


450 

Tokyo Seimitsu Co., Ltd. 


Tokyo Seimitsu Co., Ltd. manufactures and sells semiconductor manufacturing equipment and measuring 

instruments. The company produces wafer probing machines, wafer dicing machines, electron beam 

lithography systems, wafer inspection systems, and chemical mechanical planarizers (CMP) systems. 





Price (¥): 805 




Key Management: Sadakatsu Suzuki; Kunimasa Ohta; Kazuo Fujimori No. of Employees: 1,290 





Net Profit 9 5 (8) (5) 








Book Value per Share (¥) 1,353 1,274 1,029 902 


NA 

Germany 

United States 7% 

11% 

Key Suppliers 

Japan 

82% 



20 April 2009 

Tokyo Seimitsu 


Measuring 

Systems 

27% 

Semiconductor 

Manufacturing 

Equipment 

74% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Ultra Clean Holdings Country: United States 


Ultra Clean Holdings, Inc. develops and supplies critical subsystems for the semiconductor capital equipment 

industry, focusing on gas delivery systems. These gas delivery systems enable the precise delivery of specialty 

gases used in a majority of the key steps in the semiconductor manufacturing process. 

Ticker: UCTT 







Key Management: Clarence Granger; Jack Sexton; David Savage No. of Employees: 1,027 


Revenues 337 404 266.9 130.0 



Net Profit 20 17 (3) (14) 






Gross Debt 37 27 23 23 




Euroe & Asia 

2% 

Key Suppliers 

Advanced Energy MKS Instruments 

Entegris 

US 

98% 


20 April 2009 

Ultra Clean 


Key Customers 

Applied Materials Mattson 

Novellus LAM Research 


451

Bhavin Shah 

(852) 2800-8538 


452 

Ultratech Inc. 


Ultratech, Inc. designs, manufactures and markets photolithography equipment used worldwide in the 

fabrication of semiconductor and nanotechnology devices. The company has expanded its technology scope in 

pioneering laser processing technology for IC manufacturing. 


Ticker: UTEK 



Price (US$): 11.3 




Key Management: Arthur Zafiropoulo; Bruce Wright No. of Employees: 270 


NA Revenues 119.6 112.3 131.8 113.5 


Operating Profit (14.4) (5.8) 9.1 6.1 

Net Profit (9.0) (1.0) 11.8 7.6 

Earnings per Share (US$) (0.4) (0.0) 0.5 0.3 

Return on Equity (%) (4.9) (0.6) 6.4 4.6 


Research & Development Expenses (26.2) (23.4) (23.3) NA 


Gross Debt 17.4 14.2 14.8 NA 




Rest of World 

17% 

United Sates 

38% 

Key Suppliers 


Taiwan 

10% 


20 April 2009 

Europe 

19% 

Japan 

16% 


Ultratech Inc. 


Systems 

78% 

LicensesSpares 

0.3% 9% 


Services 

13% 

Key Customers 

Enterprises Consumers

Bhavin Shah 

(852) 2800-8538 


Ulvac, Inc. 


ULVAC, Inc. manufactures vacuum devices for industries such as semiconductor, electronics, chemical, 

pharmaceutical and food. The company's products include pumps, valves, gas analyzers, leak detectors, and 

surface profile measurement. 





Price (¥): 1,473 




Key Management: Hidenori Suwa; Kyuzo Nakamura; Hiroyuki Yamakawa No. of Employees: 6,872 


Supplying Equipment to Canon/Toshiba Revenues 239 241 233 237 



Net Profit 7 4 (4) (5) 






Gross Debt 69 65 81 81 




NA 

Europe 


1% 

North America 0.1% 

3% 

Asia 

42% 

Key Suppliers 

Japan 

54% 



20 April 2009 

Ulvac, Inc. 


Components 

Semiconductor 12% 

Production 

Equipment 

8% 

Other-Applied 

Vacuum 

Equipment 

9% 

Other-Parts & 

Supply 

20% 

Display & 

Electronic Device 

Production 

Equipment 

51% 

Key Customers 


NA 

453

Bhavin Shah 

(852) 2800-8538 


454 

Ushio, Inc. 


USHIO INC. manufactures lamps and optical equipment including projectors for movie theaters. The company 

produces halogen and Houdentou lamps for semiconductor and office automation equipment. Ushio has 

subsidiaries in the US, Canada, Germany, Hong Kong, the Netherlands, Singapore, South Korea, and Taiwan. 





Price (¥): 1,348 




Key Management: Shiro Sugata; Jiro Ushio; Akihiro Tanaka No. of Employees: 4,774 


NA Revenues 151 148 124 114 




Earnings per Share (¥) 120 113 37 42 






Owners’ Equity 170 161 156 158 



NA 

Asia 

23% 

Key Suppliers 

Europe 

5% 

Japan 

36% 

North America 

36% 



20 April 2009 

Ushio, Inc. 


Machinery for 

Industrial Uses & 

Other Business 

3% 

Light Source 

Application 

Products 

97% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Varian Semiconductor Equipment Associates, Inc. 


Varian Semiconductor Equipment Associates, Inc. designs, manufactures, markets, and services 

semiconductor processing equipment used in the fabrication of integrated circuits. The company supplies ion 

implantation systems used to manufacture semiconductor chips. 


Ticker: VSEA 



Price (US$): 19.01 




Key Management: Gary Dickerson; Robert Halliday; Robert Perlmutter No. of Employees: 1,545 


Revenues 731 1,055 834.1 327.4 

Gross Profit 312 490 396 117 


Net Profit 98 189 99 (43) 







Owners’ Equity 755 566 515 517 



North America 

22% 

Japan 

7% 

Europe 

8% 

Key Suppliers 

Brooks Automation ATMI 

MKS Instruments Buckley Systems 


Korea 

19% 


20 April 2009 

Taiwan 

31% 


Varian Semiconductor 



Foundry 

21% 

Logic 

23% 

Memory 

56% 

Key Customers 

Intel TSMC 

Elpida Samsung 

Hynix 

455

Bhavin Shah 

(852) 2800-8538 


456 

Yokogawa Electric Corporation 


Yokogawa Electric Corporation develops, manufactures, and markets information technology (IT) solutions, 

measuring and control equipment, semiconductors, and electronic components. The company's products 

include IT controllers, flowmeters, pressure transmitters, analyzers, data recorder, switching power supplies, 

and AC (alternating current) adaptors. 





Price (¥): 325 




Key Management: Isao Uchida; Shuzo Kaithori; Kazuhiko Kimura No. of Employees: 20,635 


NA Revenues 433 437 368 312 

Gross Profit 157 160 (3) (11) 


Net Profit 13 12 (44) (13) 




Research & Development Expenses NA NA NA NA 


Gross Debt 40 75 100 100 

Owners’ Equity 222 223 215 210 

Book Value per Share (¥) 891.1 856.7 649.5 625.4 


NA 


15% 

Key Suppliers 

North America 

8% 

Europe 

10% 

Asia 

21% 

Japan 

47% 



20 April 2009 


Yokogawa Electric 

Test & 

Measurement 

Business 

10% 

New & Other 

Businesses 

11% 

Industrial 

Automation & 

Control Business 

80% 

Key Customers 

Hyrix Samsung 



Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Semiconductors Materials 

FormFactor Inc ............................... 458 

MEMC Electronic Materials Inc...... 459 

Photronics Inc ................................ 460 

SOITEC ............................................ 461 

457

Bhavin Shah 

(852) 2800-8538 


458 

FormFactor Inc 


FormFactor Inc designs, develops and manufactures advanced semiconductor waferprobe cards. The 

company’s products are based on MicroSpring interconnect technology, which includes resilient spring-like 

contacts that are manufactured using micro-machining and scalable semiconductor-like wafer fabrication 

processes. 


Ticker: FORM 



Price (US$): 15.17 




Key Management: Igor Y Khandros; Jean Vernet No. of Employees: 940 


NA Revenues 369 462 210 152 



Net Profit 72 76 (74) (61) 










NA 

Japan 

44% 

Key Suppliers 

South KoreaEurope 

8% 5% 

North America 

22% 

Taiwan 

21% 

Source: Company, Bloomberg estimates. Share price is as of 12 March 2009. 


20 April 2009 

FormFactor Inc 


COMPANY WEBSITE Semiconductor Materials 

DRAM 

66% 

Flash 

18% 

Flip Chip 

15% 

Key Customers 

Intel Elpida 

Samsung Spirox 

Infineon

Bhavin Shah 

(852) 2800-8538 


MEMC Electronic Materials Inc. 


MEMC Electronic Materials, Inc. produces silicon wafers. The company's products are used in computers, 

telecommunications equipment, automobiles, consumer electronics products, industrial automation and control 

systems, and analytical and defense systems. MEMC operates manufacturing facilities in Italy, Japan, 

Malaysia, South Korea, Taiwan, and the United States. 


Ticker: WFR 

Analyst: Christopher Blansett 


Price (US$): 15.51 




Key Management: Ahmad Chatila; Ken Hannah; Mignon Cabrera No. of Employees: 4,600 


NA Revenues 1,541 1,922 2,005 1,000 

Gross Profit 693 1,000 1,005 271 


Net Profit 456 769 748 113 






Gross Debt 34 31 32 32 

Owners’ Equity 1,167 2,035 2,085 2,052 



NA 

United States 

24% 

Key Suppliers 

Europe 

10% 

Asia Pacific 

65% 



20 April 2009 


MEMC Electronic 

Silicon Wafers 

100% 

Key Customers 

Samsung Suntech 

Gintech 


459

Bhavin Shah 

(852) 2800-8538 


460 

Photronics Inc 


Photronics, Inc. manufactures photomasks, which are high precision quartz plates that contain microscopic 

images of electronic circuits. The company's products are used to transfer circuit patterns onto semiconductor 

wafers during the fabrication of integrated circuits. Photronics operates manufacturing facilities in Asia, Europe, 

and North America. 


Ticker: PLAB 







Key Management: Constantine Macricostas Deno; Sean Smith; Christopher Progler No. of Employees: 1,440 


NA Revenues 455 421 423 348 



Net Profit 29 25 (211) (29) 










Hoya 

North America 

23% 

Key Suppliers 

Europe 

16% 


20 April 2009 

Asia 

61% 


Photronics Inc 


Flat Panel 

Displays 

25% 

Integrated Circuits 

75% 

Key Customers 

Intel TSMC 

IBM Samsung 

Hynix 

COMPANY WEBSITE Semiconductor Materials

Bhavin Shah 

(852) 2800-8538 


SOITEC 


Silicon-On-Insulator Technologies (SOITEC) manufactures substrates used to produce semiconductors used in 

the microelectronics industry. The company uses its Smart Cut process to modify silicon to allow for more 

speed and less consumption of power. 

Country: France 

Ticker: SOIT.PA 



Price (€): 2.332 




Key Management: Dr. André-Jacques Auberton-Hervé; Paul Boudre; Iain Murray No. of Employees: 1,080 


NA Revenues 372.0 298.2 217.5 250.2 

Gross Profit 108.1 49.6 17.4 35.0 

Operating Profit 48.5 (8.2) (32.5) (15.9) 

Net Profit 46.2 (10.1) (26.9) (11.0) 

Earnings per Share (€) 0.54 (0.12) (0.32) (0.13) 





Gross Debt 131.5 105.3 77.4 57.4 

Owners’ Equity 533.3 514.1 517.1 513.6 



Asia 

20% 

USA 

26% 

Key Suppliers 

KONISHIYA NAMCO 

Daejoo Electronic JAPAN RADIO 

Europe 

54% 



20 April 2009 

SOITEC 


SOI Wafers 

(Silicon on 

insulator) 

100% 

Key Customers 

AMD Samsung 

Pantec LGE 


461

Bhavin Shah 

(852) 2800-8538 


462 


20 April 2009 

Components 

PC Handset Components .............. 463 

Display Components...................... 478 

Passive Components ..................... 485 

HDD Components........................... 496 

Optical Components ...................... 499 

Diversified Components ................ 503 

PCB Substrates .............................. 515 

Connectors ..................................... 530 

Power Supply.................................. 534 

Components

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

PC Handset Components 

AAC Acoustic ................................. 464 

Avermedia ....................................... 465 

BYD.................................................. 466 

Catcher Technology ....................... 467 

Cheng Uei Precision Industry Co...468 

DFI.................................................... 469 

Ichia Technologies ......................... 470 

Ju Teng International Holdings......471 

LG Innotek....................................... 472 

Logitech International SA .............. 473 

Merry Electronics ........................... 474 

Shin Zu Shing Co Ltd ..................... 475 

Silitech Technology Corp .............. 476 

Synaptics Incorporated.................. 477 

463

Bhavin Shah 

(852) 2800-8538 


464 

AAC Acoustic 


AAC Acoustic Technologies Holdings Inc. designs and manufactures miniature acoustic components, which are 

used in mobile handsets, MP3 players and other consumer handheld devices. 

Country: China 




Price (HK$): 3.15 




Key Management: Koh Boon Hwee; Pan Zhengmin "Benjamin"; Du Kuang-Yang No. of Employees: 13,339 

Business Alliances/Partnerships (Rmb in millions) FY06 FY07 FY08 FY09E 

NA Revenues 1,773 1,952 2,256 2,048 

Gross Profit 871 923 940 855 


Net Profit 571 551 590 513 

Earnings per Share (Rmb) 0.46 0.44 0.48 0.42 

Return on Equity (%) 31% 24% 21% 16% 


Research & Development Expenses 86 123 133 


Gross Debt 10 182 200 0 

Owners’ Equity 2,111 2,577 3,108 3,518 

Book Value per Share (Rmb) 1.7 2.1 2.5 2.9 


NA 

US 

28% 

Key Suppliers 

Rest of Asia 

5% 

Europe 

18% 

Greater China 

49% 



20 April 2009 

AAC Acoustic 


Headset 

13% 

Others 

16% 

MFD 

4% 

Receivers 

31% 

COMPANY WEBSITE PC Handset Components 

Speakers 

36% 

Key Customers 

Nokia Motorola 

Sony Ericcson Chinese brands 

Apple RIM

Bhavin Shah 

(852) 2800-8538 


Avermedia 


Avermedia Technologies Inc. designs and manufactures video peripherals for personal computers (PCs). The 

company's products include video window series, personal computer to television video converter series, video 

or overlaying and editing series, as well as digital video camera series. 





Price (NT$): 29.95 




Key Management: Kuo Chung Sung; Li Miao Sheng; Yang Rui Hsiang No. of Employees: 501 


NA Revenues 3,352.7 4,276.5 4,951.6 5,195.4 

Gross Profit 1,468.7 2,000.9 NA NA 


Net Profit 555.2 940.3 797.1 839.9 



Capital Spending (259.5) (148.0) NA NA 


Cash & Cash Equivalents 1,288.8 1,319.8 NA NA 


Owners’ Equity 3,179.6 3,847.3 NA NA 



NA 

Taiwan 

24% 

Key Suppliers 

Asia 

15% 

Oceania 

ROW 

1% 

1% 

Europe 

29% 


20 April 2009 

Americas 

30% 


Avermedia 


Digital 

Communication 

100% 

Key Customers 


NA 

465

Bhavin Shah 

(852) 2800-8538 


466 

BYD 


BYD Company Limited, through its subsidiaries, researches, develops, manufactures and sells batteries, which 

are used in mobile phones, cordless phones, power tools and other kinds of portable electronic devices. The 

company also manufactures and sells automobiles, battery-powered automobiles, bicycles, and molds. 





Price (HK$): 14.54 




Key Management: Wang Chuanfu; He Long; Lian Yubu No. of Employees: 120,000 


Warren Buffet's Mid American Energy Holdings Revenues 12,939 21,211 26,788 34,476 

has a 10% stake Gross Profit 2,738 4,248 5,219 6,376 


Net Profit 1,117 1,606 1,021 1,401 




Research & Development Expenses (371) (695) (1,163) (1,448) 


Gross Debt 5,737 8,124 9,162 12,121 

Owners’ Equity 5,292 10,708 11,286 13,875 



N/A 

US 

5% 

Europe 

7% 

Key Suppliers 

Others 

15% 

China 

73% 



20 April 2009 

BYD 


Autos 

32% 

Batteries 

23% 

Handset 

components 

45% 

Key Customers 


Sony Ericsson Chinese brands 

COMPANY WEBSITE PC Handset Components

Bhavin Shah 

(852) 2800-8538 



Catcher Technology 


Catcher Technology Co., Ltd. manufactures aluminum and magnesium die casting products, which are used in Ticker: 2474.TW 

notebook computers, cellular phones, and hard disk drive bases. 

Analyst: Gokul Hariharan 






Key Management: Shui Shu, Hung Tien-Chi No. of Employees: 36,640 


NA Revenues 15.1 18.1 19.1 17.4 

Gross Profit 7.9 8.7 7.7 6.2 


Net Profit 6.5 7.2 4.5 3.4 






Gross Debt 2.6 6.7 10.4 10.3 

Owners’ Equity 19.3 25.9 31.8 33.1 



Taiwan 

7% 

US 

4% 

Key Suppliers 

Mainly China Magnesium ingot suppliers 

Europe 

0.1% 

Asia 

89% 



20 April 2009 


Catcher Technology 

Consumer 

electronics 

24% 


Handset 

9% 

Others 

8% 

Notebook 

59% 

Key Customers 

Motorola Nokia 

Sony Ericsson Others 

467

Bhavin Shah 

(852) 2800-8538 


468 

Cheng Uei Precision Industry Co., Ltd. 


Cheng Uei Precision Industry Co., Ltd. (Foxlink) manufactures and markets connectors, cable assemblies and 

power packs, which are used in computer and communication industries. The company markets its products 

under the Foxlink brand name. 





Price (NT$): 41.2 




Key Management: Kuo Tai - Chiang No. of Employees: 1,358 


NA Revenues 43.3 44.6 48.7 43.7 



Net Profit 2.4 2.3 2.1 1.4 










NA 

Taiwan 

8% 

Americas 

42% 

Key Suppliers 

Others 

6% 


20 April 2009 

Asia 

43% 

Cheng Uei 



Power Modules 

7% 

Connectors 

10% 

Battery Pack 

15% 

Cable Assemblies 

26% 

Electronic 

products 

42% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



DFI Inc. manufactures motherboards and graphic cards. 

DFI 





Price (NT$): 34.4 




Key Management: Lu Yen Chi; Lu Yen Hsing; Huang Dao Cheng No. of Employees: 474 


NA Revenues 2,951.8 2,818.3 3,455.0 3,035.0 


Operating Profit 596.3 686.3 NA NA 

Net Profit 301.8 338.2 NA NA 










NA 

America 

31% 

Key Suppliers 

Europe 

15% 

Taiwan 

2% 


20 April 2009 

Asia, Australia 

and Africa 

52% 



Others 

0% 

Motherboards 

100% 

Key Customers 


DFI 

NA 

469

Bhavin Shah 

(852) 2800-8538 



Ichia Technologies 


Ichia Technologies, Inc. manufactures conductive silicone rubber keypads, single and double shot plastic Ticker: 2402.TW 

injected parts, and custom keyboard assemblies. The company also supplies metal dome, film in plastic (FIP) Analyst: Not Covered 

keymats, in mold labeling (IML) housing, two shot housing, and flexible printed circuit (FPC) boards. 


Price (NT$): 9.12 

470 




Key Management: Huang Chiu-Yong; Huang Li-Ling; Hsin-Ling Hsieh No. of Employees: 992 


NA Revenues 8,302 8,108 8,504 8,723 


Operating Profit 1,091 278 174 185 

Net Profit 944 371 291 345 










NA 

Europe 

13% 

America 

26% 

Key Suppliers 

Taiwan 

10% 


20 April 2009 

Asia 

52% 



Ichia Technologies 

Flexible Printed 

circuit board 

42% 

Keypads, Lens, 

Dome array 

58% 

Key Customers 

Motorola Philips 

Arima Nokia 

Siemens Compal Comm 


Bhavin Shah 

(852) 2800-8538 


Ju Teng International Holdings Limited 


Ju Teng International Holdings Ltd. manufactures semi-finished consumer goods. The company produces 

casings for notebook computers. Ju Teng’s manufacturing includes plastic-injection molding, spray painting, 

metal tooling and stamping, and assembly. 





Price (HK$): 2.3 




Key Management: Chen Li-Yu; Tsui Yung Kwok; Cheng Li-Yen No. of Employees: 32,000 

Business Alliances/Partnerships (HK$ in billions) FY06 FY07 FY08E FY09E 

With Wistron - JV in IMD casing Revenues 3.6 5.3 7.9 9.2 

Gross Profit 0.5 0.8 1.2 1.5 


Net Profit 0.2 0.4 0.6 0.9 

Earnings per Share (HK$) 0.20 0.41 0.65 0.91 


Capital Spending 

Research & Development Expenses 

0.5 0.3 0.3 0.6 


Gross Debt 0.8 0.8 0.9 0.8 

Owners’ Equity 1.6 2.2 2.8 3.6 

Book Value per Share (HK$) 1.59 2.18 2.80 3.67 


Key Suppliers 

Nichia for IMD film 

Taiwan 

5% 

China 

95% 



20 April 2009 

Ju Teng 


Notebook 

Computer 

Casings 

100% 

Key Customers 

Quanta Compal 

Inventec Wistron 

Asustek 


471

Bhavin Shah 

(852) 2800-8538 


472 

LG Innotek 


LG Innotek develops and produces cellular phone parts such as mini vibration motors, LCD modules, light 

emitting diode (LED), camera modules, and protection circuit modules. The company also manufactures liquid 

crystal displays (LCD) and plasma display panels (PDP) parts such as inverters, intelligent power modules, 

multi chip modules, and tuners. 


Ticker: 011070.KS 






Founded: NA; Listed: 2008 Fiscal Year End: December 

Key Management: Hur Young-Ho; Jeong Yong-Sun; Lee Kun-Jung No. of Employees: 2,131 


NA Revenues 1,070.6 1,321.4 1,415.6 1,502.1 



Net Profit 3.0 25.2 56.4 52.0 

Earnings per Share (Won) 352.0 2,920.0 5,561 4,705 





Gross Debt 75.7 44.5 65.1 NA 



NA 

Key Suppliers 


20 April 2009 


LG Innotek 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Logitech International SA 


Logitech International S.A. manufactures personal computer input devices. The company produces computer 

mice, which help the user move the cursor around the computer screen quickly; trackballs; game controllers; 

keyboards; PC video cameras; and multimedia speakers. Logitech sells its products worldwide. 


Ticker: LOGI 







Key Management: Gerald P Quindlen; Mark J Hawkins; Guerrino De Luca No. of Employees: 7,431 


NA Revenues 2,067 2,371 2,290 2,123 



Net Profit 230 231 149 145 










NA 

North America 

38% 

Key Suppliers 

Asia Pacific 

15% 


20 April 2009 

Europe 

47% 



Logitech International 

OEM 

13% 

Computer 

Peripherals 

87% 

Key Customers 


NA 

473

Bhavin Shah 

(852) 2800-8538 


474 

Merry Electronics 


Merry Electronics Co., Ltd. manufactures and markets acoustic products in the microphone business. The 

company's products include microphones, speakers, and telephone receivers for the multimedia industry. Merry 

Electronics markets its products under the brand name Merry. 





Price (NT$): 30.45 




Key Management: Liao Lu Li; Weu Wen Chieh; Tseng Chin Tang No. of Employees: 382 


NA Revenues 5,892 8,845 8,725 8,501 


Operating Profit 896 1,126 616 613 

Net Profit 754 896 567 493 










NA 

North America 

12% 

Taiwan 

13% 

Key Suppliers 

Europe 

17% 

Others 

0% 


20 April 2009 

Asia 

58% 



Merry Electronics 

Others 

Mobile Batteries 3% 

3% 

Bluetooth 

18% 

Microphone 

2% 

Speakers 

5% 

Handsfree 

69% 

Key Customers 


Sony Ericsson 


Bhavin Shah 

(852) 2800-8538 



Shin Zu Shing Co Ltd 


Shin Zu Shing Co., Ltd. develops and manufactures hinge assembly, springs, and stamping parts for 


communication, computer and consumer products. 



Price (NT$): 99.6 




Key Management: Lin Chi-Min; Lin Chung-He; Tsai Chen-Hao No. of Employees: 4,492 


NA Revenues 4.0 5.1 6.4 6.9 



Net Profit 0.9 1.2 1.2 1.2 










NA 

Key Suppliers 

America 

1% 

Others 

1% 

Asia 

99% 


20 April 2009 


Shin Zu Shing 


Others 

(Stamping,etc) 

Consumer 12% 

electronic hinge 

5% 

Monitor Hinge 

5% 

Notebook Hinge 

78% 

Key Customers 

Quanta Compal 

Hon Hai Funai 

Asustek Wistron 


475

Bhavin Shah 

(852) 2800-8538 


476 

Silitech Technology Corp 


Silitech Technology Corp. manufactures and markets keypads to be used in mobile phones, telephones, remote 

controls, calculators, and computer keyboards. The company also produces modules that integrate keypads 

and ICs (Integrated Circuits). 





Price (NT$): 55.9 




Key Management: Soong Kong-Yuan; Huang Yu-Ching; Wu Sheng-Yang No. of Employees: 612 


48.7% held by Lite-On Revenues 7.2 8.9 9.1 9.2 

Gross Profit 1.9 2.4 2.2 2.2 


Net Profit 1.0 1.3 1.1 1.0 






Gross Debt 0.7 1.2 1.4 1.4 

Owners’ Equity 3.4 4.2 4.8 5.1 



NA 

America 

15% 

Key Suppliers 

Europe, Middle East 

38% 

Rest of the w orld 

Taiwan 

8% 

1% 

Asia 

47% 



20 April 2009 


Silitech Technology 

Plastic and 

Rubber Molds 

100% 

Key Customers 


Sharp Sony Ericsson 

Others 


Bhavin Shah 

(852) 2800-8538 


Synaptics Incorporated 


Synaptics Incorporated develops custom-designed user interface solutions. The company's solutions enable 

people to interact with a variety of mobile computing and communications devices. Synaptics offers a touchsensitive 

pad that senses the position of a person's finger on its surface to provide screen navigation, cursor 

movement, and a platform of interactive input. 


Ticker: SYNA 



Price (US$): 24.73 




Key Management: Francis F Lee; Russell J Knittel; Thomas J Tiernan No. of Employees: 420 


Revenues 267 361 439 457 

Gross Profit 106 147 177 184 


Net Profit 27 31 46 46 






Gross Debt 1,625 125 96 96 

Owners’ Equity 208 114 179 225 



TSMC 

Taiwan 

15% 

Korea 

11% 

Key Suppliers 

Japan 

5% 

Others 

4% 

China 

65% 



20 April 2009 


Synaptics Incorporated 

Digital Lifestyle 

Products 

15% 

PC Market 

85% 

Key Customers 

Tier 1 Laptop OEMs LG 

Research in Motion Samsung 

Logitech Microsoft 


477

Bhavin Shah 

(852) 2800-8538 


478 


20 April 2009 

Display Components 

Ace Digitech.................................... 479 

Cheil Industries .............................. 480 

Kumho Electric ............................... 481 

LG Micron........................................ 482 

Technosemichem Co Ltd............... 483 

Wooree ETI Co Ltd ......................... 484

Bhavin Shah 

(852) 2800-8538 


Ace Digitech 


Ace Digitech Co., Ltd. develops and manufactures polarized light films for TFT-LCD panels. The company 

provides those products to liquid crystal display (LCD) manufacturers such as Samsung Electronics, Samsung 

SDI, and Hannstar. 



Analyst: Marcus Shin 






Key Management: Dong Hyun-Soo; Ahn Jae-Hyeon; Lim Myung-Soo No. of Employees: 417 

Business Alliances/Partnerships (Won in billions) FY06 FY07 FY08E FY09E 

Cheil Industries Revenues 78 112 343 500 

Gross Profit (4) (2) 39 52 

Operating Profit (21) (10) 19 19 

Net Profit (32) (17) 7 7 

Earnings per Share (Won) (1,492) (798) 290 300 

Return on Equity (%) (58) (40) 13 12 




Gross Debt 75 159 175 188 




Key Suppliers 

FujiFilm Konica 

Kuraray Nihon Gosei 

South Korea 

5% 

Others 

95% 



20 April 2009 

Ace Digitech 


Mobile panel 

polarizer 

17% 

IT panel 

polarizer 

83% 

Key Customers 

Samsung Hannstar 

BOE-OT 

COMPANY WEBSITE Display Components 

479

Bhavin Shah 

(852) 2800-8538 


480 

Cheil Industries 


Cheil has three distinct business divisions—chemicals, fashion, and ECM (electronic chemical materials). In 

FY07, its chemicals and fashion divisions represented 50% and 36% of annual sales of W3.1 trillion, 

respectively, while the ECM division accounted for 14%. Even though Cheil’s revenue is rather biased toward 

the chemicals division, each division’s contribution to profitability is relatively even with chemicals, fashion, and 

ECM contributing 39%, 36%, and 25%, respectively, to the FY07 OP of W224 billion. 









Key Management: Je Jin-Hoom; Ha Dong-Wook; Hwang Baek No. of Employees: 3,092 


NA Revenues 2,843.8 3,112.4 3,727.7 3,889.4 

Gross Profit 977.5 1,018.9 1,117.6 1,060.8 


Net Profit 157.8 151.3 157.6 135.1 

Earnings per Share (Won) 3,155.2 3,025.2 3,151.9 2,702.6 





Gross Debt 319.8 457.9 689.3 734.9 

Owners’ Equity 1,379.6 1,720.6 1,604.1 1,792.7 



Europe 

11% 

Key Suppliers 

Ace Digitech 

America 

7% 

Asia 

40% 

Others 

2% 

South Korea 

39% 



20 April 2009 

Cheil Industries 


Fashion 

31% 

Electronics - EMC 

22% 

Samsung 

Chemicals 

48% 

Key Customers 

COMPANY WEBSITE Display Components

Bhavin Shah 

(852) 2800-8538 


Kumho Electric 


Kumho Electric Inc. manufactures a wide range of lighting products such as automotive, fluorescent, and 

incandescent lamps. The company also produces backlights used in liquid crystal display (LCD) equipment and 

operates real estate leasing businesses. 

Country: Korea 








Key Management: Park Myung Koo; Park Young Koo; Kim Young Won No. of Employees: 522 


NA Revenues 281 262 218 254 



Net Profit 28 20 10 15 

Earnings per Share (Won) 4,780 3,451 1,631 2,128 







Book Value per Share (BVPS) 29,406 29,807 31,658 29,853 



78% 

Key Suppliers 

NEG (Japan) HM & SC 

Schott (Germany) 


20 April 2009 

South Korea 

22% 


Kumho Electric 


Lighting 

16% 

LCD Component 

84% 

Key Customers 

Samsung Hyundai HyDis 


481

Bhavin Shah 

(852) 2800-8538 


482 

LG Micron 


LG Micron Ltd. manufactures shadow masks used in color picture tubes and computer monitor lead frames. 

The company also produces lead frames used in semiconductor chips, photo masks used in flat display panels 

(FPD) and tape substrates. 









Key Management: Kim Ssang-Su; Heo Yeong-Ho; Lee Ju-Won No. of Employees: 2,218 


LG Electronics Revenues 767.4 395.9 775.1 960.8 



Net Profit 19.7 (38.8) (44.8) 24.4 

Earnings per Share (Won) 2,620 (5,175) (4,616) 2,691 

Return on Equity (%) 5.3 (10.9) (13.2) NA 

Capital Spending (242.5) (53.9) (108.5) (50) 



Gross Debt 437.2 406.1 493.0 NA 




ROW 

21% 

Key Suppliers 

Asai Glass Synapse 


20 April 2009 

South Korea 

79% 


LG Micron 


Shadow MaskOthers 

4% 1% 

Lead Frame 

7% 

PCB 

16% 

Photomask 

25% 

PRP 

29% 

Tape Substrate 

19% 

Key Customers 

LG Electronics LGD 

COMPANY WEBSITE Display Components

Bhavin Shah 

(852) 2800-8538 


Technosemichem Co Ltd 


Technosemichem Co., Ltd. manufactures, sells, and trades semiconductor-related chemicals. The company's 

products include a line of Chemical Vapor Deposition (CVD) such as tetraethyl ortho-silicate (TEOS) and 

etchants. Technosemichem also produces and distributes chemicals used in liquid crystal display (LCD) and 

fiber optics processing. 









Key Management: Chung Ji-Wan; Chung JI-Yeon; Lee Kun-Ju No. of Employees: 390 


NA Revenues 142 167 224 255 



Net Profit 25 26 19 24 

Earnings per Share (Won) 1,746 1,795 1,281 1,633 









NA 

Key Suppliers 

ROW 

87% 

South Korea 

13% 


20 April 2009 



Technosemichem Co 

Others 

28% 

TFT-LCD 

Etchants 

31% 

Semicondutor 

Etching 

41% 

Key Customers 


NA 

483

Bhavin Shah 

(852) 2800-8538 



Wooree ETI Co Ltd 


Wooree ETI Co., Ltd. manufactures Cold Cathode Fluorescent Lamp (CCFL) used as material for back-light Ticker: 082850.KQ 

unit of Thin Film Transistor-Liquid Crystal Display. The company also produces parts for lighting products. Analyst: Not Covered 

Wooree ETI is a subsidiary of Wooree Lighting. 



484 




Key Management: Yun Cheol-Ju; Kwon Kyung-Hwan; Lee Hak-Dong No. of Employees: 841 


NA Revenues 142.2 173.6 222.5 250.3 



Net Profit 18.9 15.3 20.0 21.4 

Earnings per Share (Won) 1,071 845 1,106 1,115 





Gross Debt 90.2 117.8 89.8 NA 




ROW 

4% 

Key Suppliers 

Heesung Electronics New Optics 

Wonwoo Precision 

South Korea 

96% 


20 April 2009 


Wooree ETI 



CCFL 

100% 

Key Customers 

LGD Hannstar Display 

BOE

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Passive Components 

AVX Corporation............................. 486 

Cyntec ............................................. 487 

Epcos AG ........................................ 488 

Murata Manufacturing Co. Ltd........489 

Nichicon Corporation..................... 490 

Nippon Chemi-Con Corporation.... 491 

Taiyo Yuden Co., Ltd...................... 492 

TXC Corp......................................... 493 

Vishay Intertechnology, Inc........... 494 

Yageo Corporation ......................... 495 

485

Bhavin Shah 

(852) 2800-8538 


486 

AVX Corporation 


AVX Corporation manufactures and supplies a variety of passive electronic components and related products. 

The company’s products include ceramic and tantalum capacitors, which are used in many electronic products 

to store, filter, or regulate electric energy. AVX’s customers include original equipment manufacturers in various 

industries. 


Ticker: AVX 



Price (US$): 8.84 



Founded: NA; Listed: 1995 Fiscal Year End: March 

Key Management: John S Gilbertson, C Marshall Jackson, Kurt P Cummings No. of Employees: 14,000 


NA Revenues 1,333 1,498 1,619 1,310 



Net Profit 82 154 149 104 










NA 

Europe 

22% 

Key Suppliers 

Americas 

34% 

Asia 

44% 


20 April 2009 

Source: Company, Bloomberg estimates (for FY09). Share price is as of 12 March 2009. 


AVX Corporation 

KED Resale 

31% 

Connectors 

6% 

Passive 

Components 

63% 

Key Customers 

COMPANY WEBSITE Passive Components 

NA

Bhavin Shah 

(852) 2800-8538 


Cyntec 


Cyntec Co., Ltd. develops and manufactures thin film technology products. The company’s products include 

chip resistors, resistor arrays, and temperature sensors. 





Price (NT$): 33.8 




Key Management: Liu Chun Tiao, Shih Wen Ching, Ding Tung Tsan No. of Employees: 627 

Business Alliances / Partnerships (NT$ in millions) FY06 FY07 FY08E FY09E 

NA Revenues 3,036 3,616 4,275 4,478 

Gross Profit 951 1,178 NA NA 

Operating Profit 588 761 NA NA 



Return on Equity (ROE) (%) 19.53 22.56 NA NA 








NA 

Taiwan 

12% 

Key Suppliers 

America 

22% 

ROW 

7% 


20 April 2009 

Asia 

58% 

Source: Company, Bloomberg estimates (FY08 and FY09). Share price is as of 12 March 2099. 


Cyntec 

Pow er Modules & 

Others 

21% 

Pt-RTD 

16% Passive 

Components 

62% 

Key Customers 


NA 

487

Bhavin Shah 

(852) 2800-8538 


488 

Epcos AG 


Epcos AG produces and supplies electronic components for the telecommunications, automotive, and 

consumer electronics industries. The company’s products include surface acoustic wave (SAW) devices, 

capacitors, thermistors, surge arrestors, ferrites and transformers, coaxial resonators, and electronic filters. 

Epcos markets its products worldwide. 


Ticker: EPCGn.DE 



Price (€): 19.47 




Key Management: Cerard Pegam, Joachim Zichlarz, Werner Faber No. of Employees: 21,200 

Business Alliances / Partnerships (€ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 1,309 1,439 1,477 1,352 



Net Profit 21 51 65 34 










NA 

Asia 

27% 

Key Suppliers 

Others 

7% 


30% 


20 April 2009 

Germany 

36% 



Epcos AG 

Surface Acoustic 

Wave 

27% 

Ceramic 

Components 

34% 

Capacitors 

39% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Murata Manufacturing Company, Ltd. 


Murata Manufacturing Company, Ltd. manufactures and sells ceramic applied electronic components. The 

company’s products include filters, capacitors, thermistors, resistors, noise suppression components, coils, 

piezoelectric sound components, power supplies, sensors, hybrid integrated circuit (IC), and microwave 

components. 





Price (¥): 3,840 




Key Management: Yasutaka Murata, Tsuneo Murata, Yoshitaka Fujita No. of Employees: 34,935 

Business Alliances / Partnerships (¥ in billions) FY07 FY08 FY09E FY10E 

NA Revenues 567 632 526 483 

Gross Profit 231 244 126 125 


Net Profit 71 77 1 (3) 




Research & Development Expense 39 42 47 44 


Gross Debt 13 18 14 14 

Owners’ Equity 823 844 837 812 



NA 

Asia and others 

58% 

Key Suppliers 

Japan 

23% 

The Americas 

8% 

Europe 

10% 



20 April 2009 


Murata Manufacturing 

Other Products 

18% 

Module Products 

13% 

Microw av e Dev ices 

22% 

Capacitors 

33% 

Piezoelectric 

Components 

14% 

Key Customers 

Nokia Intel 

Motorola 


489

Bhavin Shah 

(852) 2800-8538 



Nichicon Corporation 


Nichicon Corporation manufactures and markets various capacitors, including aluminum electrolytic capacitors, Ticker: 6996.T 

tantalum electrolytic capacitors, and plastic film capacitors. The company also makes hybrid integrated circuits Analyst: Shoji Sato 

(IC) and thermistors. 


Price (¥): 685 

490 




Key Management: Ippei Takeda, Sachihiko Araki, Tatou Iwasa No. of Employees: 5,836 


NA Revenues 119 120 92 91 



Net Profit 4 1 (12) (10) 


Return on Equity (ROE) (%) 3.3 1.0 (11.0) (9.9) 








NA 

America 

6% 

Asia 

43% 

Key Suppliers 

Others 

5% 

Japan 

46% 



20 April 2009 


Nichicon Corporation 

Others 

Circuit products 

1% 

16% 

Other capacitors 

2% 

tantalum capacitors 

9% 

Capacitors for 

electric apparatus 

and pow er utilities 

12% 

Aluminum 

capacitors 

60% 

Key Customers 

MEI Sharp 

Denso 

COMPANY WEBSITE Passive Components

Bhavin Shah 

(852) 2800-8538 


Nippon Chemi-Con Corporation 


Nippon Chemi-Con Corporation manufactures and markets condensers, electronic components, and circuit 

products. The company’s products include aluminum electronic capacitors, tantalum electronic capacitors, 

ceramic capacitors, film capacitors, ceramic varistors, sensors, and connectors. 





Price (¥): 155 




Key Management: Ikuo Uchiyama, Yuzo Shibata, Junichi Suga No. of Employees: 7,278 


NA Revenues 135 143 112 103 



Net Profit 6 3 (14) (9) 






Gross Debt 46 44 57 62 




NA 

US 

7% 


57% 

Key Suppliers 

Europe 

9% Japan 

28% 



20 April 2009 


Nippon Chemi-Con 

Others 

Material 

Mechanical 3% 

5% 

Components 

3% 

Circuit Components 

8% 

Capacitors 

81% 

Key Customers 

Sony Hitachi 

MEI 


491

Bhavin Shah 

(852) 2800-8538 



Taiyo Yuden Co., Ltd. 


Taiyo Yuden Co., Ltd. manufactures and markets electronic components such as ceramic capacitors, inductors, Ticker: 6976.T 

hybrid integrated circuits (IC), and ferrite. The company’s products include power supplies, inverters, optical Analyst: Shoji Sato 

disks, filters, coils, and thermistors. 


Price (¥): 716 

492 




Key Management: Yoshiro Kanzaki, Masami Fukui, Shoichi Tosaka No. of Employees: 19,631 


NA Revenues 221 238 185 162 



Net Profit 13 11 (20) (12) 






Gross Debt 32 46 65 65 

Owners’ Equity 169 168 162 151 



NA 

North America 

8% 

Key Suppliers 

Europe Others 

5% 0.1% 

Asia 

57% 

Japan 

30% 



20 April 2009 


Taiyo Yuden 

Other Electronic 

Components 

6% 

Ferrite and Applied 

Products 

14% 

Modules 

20% 

Optical Media 

22% 

Capacitors 

38% 

Key Customers 

MEI Hitachi 

Sony 

COMPANY WEBSITE Passive Components

Bhavin Shah 

(852) 2800-8538 


TXC Corp 


TXC Corporation manufactures and markets dip and SMD (surface mount device) type quartz crystal units as 

well as oscillators used in computers, computer peripherals, and communication products. The company 

provides its products for domestic markets, and exports to the United States, other Asian countries, as well as 

Europe. 





Price (NT$): 28.9 




Key Management: Lin Chin-Bao "Paul", Hung Kuan-Wen "Vivien", Lin Wan-Hsing "Peter" No. of Employees: 1,056 


NA Revenues 5,239 6,261 7,623 7,976 

Gross Profit 1,502 1,917 2,062 2,099 

Operating Profit 996 1,268 1,128 1,155 

Net Profit 842 1,139 955 971 



Capital Spending (811) (1,104) (1,426) (629) 



Gross Debt 1,556 1,099 2,186 2,151 

Owners’ Equity 3,805 5,117 5,119 5,680 



Kyocera 

Taiwan 

20% 

Key Suppliers 

America 

Europe 

2% 

2% 

Asia 

77% 



20 April 2009 


TXC Corp 

Microelectronics 

15% 

Electronic 

Components - 

Quartz Crystal 

85% 

Key Customers 

HonHai Asustek 

CCI Seagate 

Quanta Inventec 

Motorola ITF 


493

Bhavin Shah 

(852) 2800-8538 


494 

Vishay Intertechnology, Inc. 


Vishay Intertechnology, Inc. manufactures a broad line of passive and discreet active electronic components, 

particularly resistors, capacitors, inductors, diodes, and transistors. The company’s products are utilized in 

computers, telephones, televisions, automobiles, household appliance, medical equipment, satellites, and 

military and aerospace equipment. 


Ticker: VSH 



Price (US$): 2.79 




Key Management: Gerald Paul, Lior Yahalomi, Ziv Shoshani No. of Employees: 24,800 


NA Revenues 2,581 2,833 2,822 1,960 



Net Profit 140 131 (1,731) (85) 


Return on Equity (ROE) (%) 5 4 (71) NA 








NA 

Other Europe 

11% 

United States 

16% 

Key Suppliers 

Israel 

9% 

Germany 

28% 


20 April 2009 

Asia 

37% 



Vishay Intertechnology 

Passive 

Components 

48% 


Product Sales 

52% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



Yageo Corporation 


Yageo Corporation manufactures resistors and related equipment. The company also produces thick-film Ticker: 2327.TW 

resistors, which are used in downstream electronics products, and high power thin-film resistors and chip Analyst: Not Covered 

resistors, which are used in aerospace, automobile, and precision electronics industries. Through its 


subsidiaries, Yageo also operates a consumer goods importing business. 

Price (NT$): 5.86 




Key Management: Chen Tie-Min "Pierre", Huang Chun-liang, Chang Chi-Wen No. of Employees: 2,425 


NA Revenues 10,892 11,183 18,816 17,192 



Net Profit 1,978 1,321 1,224 721 



Capital Spending (1,126) (782) NA NA 







NA 

Europe 

19% 

Key Suppliers 

ROW 

5% 

Other Asia-pacific 

55% 

Taiwan 

22% 


20 April 2009 

Source: Company, Bloomberg estimates (for FY08 and FY09). Share price is as of 12 March 2009. 


Yageo Corporation 

Electronic 

Resistorss 

30% 


Others 

9% 

MLCC 

61% 

Key Customers 

Diversified Client base 

Sales through distributors represent 

40% 

495

Bhavin Shah 

(852) 2800-8538 


496 


20 April 2009 

HDD Components 

Min Aik Technology Co., Ltd. ........ 497 

NHK Spring Co., Ltd....................... 498

Bhavin Shah 

(852) 2800-8538 


Min Aik Technology Co., Ltd. 


Min Aik Technology Co., Ltd. is a contract manufacturer of electronic components. The company's main 

products include crash stop assembly (CSA) and voice coil mechanism (VCM) products for hard disk drives. 

Min Aik also produces camera components. 





Price (NT$): 25.4 




Key Management: Hsieh Chin-Hsing; Lu Hong-Tao; Chen Yung-Chun No. of Employees: 633 


NA Revenues 9,759 12,915 13,171 NA 


Operating Profit 681 739 NA NA 


Earnings per Share (NT$) 4.59 3.76 4.13 NA 

Return on Equity (%) 29 22 NA NA 








NA 

Key Suppliers 

Taiwan 

Europe 

3% 

America 3% 

10% 

Asia 

84% 


20 April 2009 


Min Aik 


Crash Stop 

Other - Plastic 

Assembly 

Components for 

7% 

Camera 

7% 

HDD 

Components 

16% 

External Hard 

Drive 

20% 

Voice Coil 

Mechanism 

51% 

Key Customers 

Maxtor Western Digital 

COMPANY WEBSITE HDD Components 

497

Bhavin Shah 

(852) 2800-8538 



NHK Spring Co., Ltd. 


NHK Spring Co., Ltd. manufactures springs for automobiles and electronic equipment. The company's products Ticker: 5991.T 

are used for suspension, engine valves, seats, and hard disk drives (HDD). 



Price (¥): 301 

498 




Key Management: Kenji Sasaki; Takehiko Amaki; Katsuichi Ikeda No. of Employees: 12,965 


NA Revenues 428 485 440 399 



Net Profit 16 20 5 (5) 






Gross Debt 77 65 66 66 

Owners’ Equity 148 159 131 122 



NA 

Asia 

26% 

North America 

11% 

Key Suppliers 

Others 

1% 

Japan 

63% 



20 April 2009 

NHK Spring 


Precisions 

32% 

COMPANY WEBSITE HDD Components 

Others 

8% 

Springs 

22% 

Seats 

37% 

Key Customers 

Fuji Heavy Industries Honda 

Nissan

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Optical Components 

HOYA CORPORATION ................... 500 

Largan Precision ............................ 501 

Sunny Optical Technology ............ 502 

499

Bhavin Shah 

(852) 2800-8538 


500 

HOYA CORPORATION 


HOYA manufactures electro-optics products such as photomasks for semiconductors, optical glasses, magnetic 

memory disks, eyeglasses, contact lenses, laser equipment, and crystal products. The company develops 

information systems and operates staffing services. 





Price (¥): 1,793 




Key Management: Hiroshi Suzuki; Kenji Ema; Hiroshi Hamada No. of Employees: 37,758 


NA Revenues 390 482 452 378 

Gross Profit 193 219 189 150 


Net Profit 83 77 42 32 







Owners’ Equity 365 390 413 429 



NA 

North America 

12% 

Europe 

21% 

Key Suppliers 

Asia 

31% 

Rest of the world 

0.3% 

Japan 

37% 



20 April 2009 


HOYA CORPORATION 

Photonics Others 

Contact lenses 

10% 

2% 0.2% 

Eyeglasses 

24% 

Pentax 

26% 

Electro Optics 

39% 

Key Customers 

COMPANY WEBSITE Optical Components 

NA

Bhavin Shah 

(852) 2800-8538 


Largan Precision 


Largan Precision Co., Ltd. manufactures and markets optical lens modules and opto-electronic components. 

The company offers lenses for liquid crystal display (LCD) projectors, scanners, optical mice, digital still 

cameras (DSCs), digital versatile discs (DVDs), light emitting diodes (LEDs), and photography mobile phones. 





Price (NT$): 261.5 




Key Management: Lin Yao-Ying; Chen Shih-Ching; Chiu Tung-Chuan No. of Employees: 1,309 


NA Revenues 7.3 5.9 7.5 5.1 

Gross Profit 4.5 3.3 4.0 2.4 


Net Profit 3.9 2.6 1.7 2.7 






Gross Debt 0.3 0.1 0.0 0.0 

Owners’ Equity 9.2 10.1 11.9 12.0 



Taiwan 

Europe, Middle East 

3% 

8% 

Key Suppliers 

O-Film Vactronics 

Asia Pacific 

(ex cluding China) 

90% 



20 April 2009 


Largan Precision 

MFP 

Notebook Lens 

5% 

7% 

DSC 

9% 

Projector 

1% 

Others 

2% 

Mobile Phone 

Lens 

77% 

Key Customers 

Motorola Sony Ericsson 

Nokia Others 

COMPANY WEBSITE Optical Components 

501

Bhavin Shah 

(852) 2800-8538 


502 

Sunny Optical Technology 


Sunny Optical Technology Group Co., Limited designs and manufactures optical and optical related products. 

The company's products include glass/plastic lenses, prisms, mobile phone camera modules, microscopes, 

surveying instruments, and other analytical instruments. 





Price (HK$): 0.56 




Key Management: Wang Wengjiang; Ye Liaoning; Ho Francis No. of Employees: 8,364 

Business Alliances/Partnerships (Rmb in millions) FY06 FY07 FY08E FY09E 

NM Revenues 901 1,382 1,320 1,602 

Gross Profit 248 377 285 343 


Net Profit 117 226 101 129 







Owners’ Equity 355 1,289 1,359 1,475 



NA 

Others 

Japan 8% 

9% 

Hong Kong 

30% 

Key Suppliers 

PRC 

54% 



20 April 2009 


Sunny Optical 

Optoelectronic 

products 

43% 

Optical 

Instruments 

11% 

Optical 

Components 

45% 

Key Customers 

Panasonic Konica-Minolta 

Samsung Olympus 

COMPANY WEBSITE Optical Components

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Diversified Components 

Alps Electric Co., Ltd. .................... 504 

Foxconn Technology ..................... 505 

Funai Electric Co., Ltd.................... 506 

Huan Hsin Holdings Ltd................. 507 

Lite-On Technology Corporation .. 508 

Mitsumi Electric Co., Ltd................ 509 

Nidec Corporation .......................... 510 

NOK Corp. ....................................... 511 

Samsung Electro-Mechanics Co....512 

TDK Corporation............................. 513 

Tyco Electronics............................. 514 

503

Bhavin Shah 

(852) 2800-8538 



Alps Electric Co., Ltd. 


Alps Electric Co., Ltd. manufactures and markets electronic parts used for car electronics, computer peripheral Ticker: 6770.T 

equipment, and communications and broadcasting-related equipment. The company's products include Analyst: Shoji Sato 

printers, switches, ceramic trimmer capacitors, sensors, transceiver units for cellular phones, floppy disks, Rating: Neutral 

drives, and magnetic heads. 

Price (¥): 277 

504 




Key Management: Masataka Kataoka; Takahide Sato; Yozo Yasuoka No. of Employees: 40,531 


NA Revenues 708 693 540 454 



Net Profit 5 4 (53) (32) 






Gross Debt 105 73 98 98 

Owners’ Equity 294 280 208 192 

Book Value per Share (¥) 1,616 1,602 1,217 998 


NA 

Asia-Ex Japan 

28% 

Key Suppliers 

Europe 

21% 

Others 

0.4% 

US 

14% 

Japan 

36% 



20 April 2009 

Alps Electric 


Logistics and Others 

12% 

Audio Products 

33% 

Automotiv e 

Equipment 

14% 

Components 

14% 


9% 

Peripherals 

19% 

Key Customers 

Samsung Sony 

Denso 

COMPANY WEBSITE Diversified Components

Bhavin Shah 

(852) 2800-8538 



Foxconn Technology 


Foxconn Technology Co Ltd manufactures and markets OEM (Original Equipment Manufacturing) desktop Ticker: 2354.TW 

computers and color monitors. 



Price (NT$): 80.3 




Key Management: Hsien-Sheng Pai; En-You Lin; Chun-Rong Chang No. of Employees: 64,326 


Hon-Hai's subsidiary Revenues 79.0 135.1 162.0 176.0 

Gross Profit 9.6 13.7 14.5 11.8 


Net Profit 6.4 9.0 7.0 5.2 






Gross Debt 10.4 30.6 29.2 30.8 

Owners’ Equity 28.5 49.3 37.8 35.6 



USA 

3% 

Key Suppliers 

Mainly China Magnesium ingot suppliers 

Asia 

97% 



20 April 2009 


Foxconn Technology 

Light Metal 

22% 

PC 

13% 

Game Console 

65% 

Key Customers 

Broad exposure to 

notebook PC names Motorola 

Apple Epson 

Nokia Sony Ericsson 

Nintendo In-focus 

Coretronics 

COMPANY WEBSITE Diversified Components 

505

Bhavin Shah 

(852) 2800-8538 


506 

Funai Electric Co., Ltd. 


Funai Electric Co., Ltd. manufactures and sells audio-visual equipment such as television sets, videocassette 

recorders (VCRs), and DVD (Digital Versatile Disc) players. The company also produces computer peripherals 

such as inkjet printers and CD-R/RW (Recordable/Rewritable) drives. Funai has its subsidiaries in the US, 

China, Thailand, Germany, Mexico, and Malaysia. 





Price (¥): 2,345 




Key Management: Tetsuro Funai No. of Employees: 2,628 


NA Revenues 396.7 277.1 308.1 300.5 

Gross Profit 68.2 45.3 46.4 47.0 

Operating Profit 20.8 (2.4) 1.3 4.0 

Net Profit (3.6) (5.4) (19.0) 4.1 

Earnings per Share (¥) (107.5) (157.7) (556.9) 119.7 

Return on Equity (%) (1.9) (3.1) (12.9) 2.9 




Gross Debt 13.6 14.3 14.3 14.3 

Owners’ Equity 187.0 157.9 137.2 139.6 



NA 

Europe 

17% 

Japan 

10% 

Key Suppliers 

Asia 

4% 

Others 

2% 

North America 

67% 



20 April 2009 

Funai Electric 


Information 

Equipment 

23% 

DX Anthena & 

others 

7% 

Audiovisual 

Devices 

70% 

Key Customers 

Wal-Mart Philips 

Hitachi Infocus 

Sharp Lexmark 


Bhavin Shah 

(852) 2800-8538 


Huan Hsin Holdings Ltd 


Huan Hsin Holdings Limited manufactures and supplies electronic and electrical products and components to 

original equipment manufacturers (OEMs). The group's operations also include wire and cable, mold, molded 

plastic products and finished products assembly, metal stamping, printed circuit boards (PCBs), and surface 

mount technology (SMT) assembly. 


Ticker: HUAN.SI 



Price (S$): 0.23 




Key Management: Hsu Hung Chun; Hsu Cheng Chien; Chang Shih Hsing No. of Employees: 12,974 

Business Alliances/Partnerships (S$ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 958 958 983 982 


Operating Profit 44 44 (12) NA 

Net Profit 33 33 (18) (2) 

Earnings per Share (S$) 0.08 0.08 (0.04) (0.00) 







Book Value per Share (S$) 0.78 0.85 0.86 0.84 

NA 

NA 

Key Suppliers 


20 April 2009 


Huan Hsin 


Wire, Cable and 

related 

5% 

Mould, Moulded 

plastic 

95% 

Key Customers 


NA 

507

Bhavin Shah 

(852) 2800-8538 


508 

Lite-On Technology Corporation 


Lite-On Technology Corp. manufactures and markets a wide range of computer components and peripheral 

equipment. The company's products include motherboards, modems, MP3 players, scanners, and optical 

storage devices. 





Price (NT$): 22.8 




Key Management: Ten Kuang-Chung; Chu Kuan-Cheng; Soong Kong Yuan No. of Employees: 78,308 


Perlos Revenues 166.7 184.5 145.8 100.9 

Gross Profit 20.9 18.1 15.8 12.6 


Net Profit 8.2 8.3 5.9 5.2 






Gross Debt 6.0 21.1 11.6 11.7 

Owners’ Equity 67.1 61.6 60.4 60.8 



Asia 

39% 

Others 

2% 

Key Suppliers 

All major Component makers (MLCC, 

PCB, and Controller) 

Taiwan 

1% 

Europe 

27% 

US 

32% 



20 April 2009 


Lite-On Technology 

Enclosure 

14% 

Others 

20% 

LED 

10% Imaging 

20% 


36% 

Key Customers 

Dell HP 

Lexmark Motorola 

IBM NEC 

HTC 


Bhavin Shah 

(852) 2800-8538 


Mitsumi Electric Co., Ltd. 


Mitsumi Electric Company, Ltd. manufactures and markets electronic parts, PC peripheral units and devices. 

The company's products include ICs, CD-ROM drives, keyboards, remote control units, coils, filters, connectors, 

switches, and transformers. 





Price (¥): 1,243 




Key Management: Shigeru Moribe, Kazuie Hirose, Nobuhiro Horiguchi No. of Employees: 12,214 


NA Revenues 281.9 301.9 246.5 250.0 

Gross Profit 41.0 48.5 34.0 33.2 


Net Profit 11.4 24.4 8.5 10.3 






Gross Debt 18.6 9.9 7.4 7.4 

Owners’ Equity 120.1 141.7 126.7 131.7 



NA 

Asia 

37% 

Key Suppliers 

North America 

Europe 

1% 

3% 

Japan 

59% 



20 April 2009 

Mitsumi Electric 


Power Supplies 

14% 

Hi-Frequency 

15% 

Informationcommunication 

Semiconductor 

9% 14% 

Optical 

12% 

Mechanical 

35% 

Key Customers 


NA 

509

Bhavin Shah 

(852) 2800-8538 



Nidec Corporation 


Nidec Corporation manufactures small precision motors and mid-size motors for electronic devices such as Ticker: 6594.OS 

hard disk drives, floppy disk drives, CD-ROMs/DVDs, automatic doors, photocopiers, and printers. The 


company also produces DC fans and machinery. Nidec supplies IBM, Fujitsu, and other computer and 


electronic equipment manufacturers. 

Price (¥): 4,090 

510 




Key Management: Shigenobu Nagamori; Hiroshi Kobe; Yasunobu Toriyama No. of Employees: 95,443 


NA Revenues 630 742 642 618 

Gross Profit 143 158 141 134 


Net Profit 40 41 36 32 






Gross Debt 114 101 77 80 

Owners’ Equity 305 320 368 397 



NA 

North America 

4% 

Key Suppliers 

Asia 

62% 

Others 

7% Japan 

28% 



20 April 2009 


Nidec Corporation 

Electronic and 

optical components 

21% 

HDD motors 

27% 

Machinery and 

others 

DC brushless 

14% 

motors 

Mid-size brushless 

12% 

Other small Fan motors 

DC motors 

precision motors 6% 

11% 

4% 

Key Customers 

Samsung Seagate 

Western Digital 


Bhavin Shah 

(852) 2800-8538 


NOK Corp. 


Nok Corporation manufactures oil seals and industrial rubber products for automobiles. The company also 

produces electronic equipment used for cellular phones and PCs. NOK has production facilities in Taiwan and 

Thailand. 





Price (¥): 676 




Key Management: Masato Tsuru; Yoshiro Takashima; Kunihiko Soga No. of Employees: 35,104 


NA Revenues 480 526 470 400 



Net Profit 25 26 (5) (18) 






Gross Debt 50 59 98 98 

Owners’ Equity 280 298 245 225 



NA 

Asia 

38% 

Key Suppliers 

Others 

6% 

Japan 

57% 



20 April 2009 

NOK Corp. 


Flex ible boards 

37% 

Roll Others 

8% 3% 


Sealing 

52% 

Key Customers 

Honda Nissan 

Toyota Seagate 

511

Bhavin Shah 

(852) 2800-8538 


512 

Samsung Electro-Mechanics Co. Ltd. 


Samsung Electro-Mechanics Co., Ltd. manufactures a variety of electronic components used in computers, 

audio and video products, industrial electronics, and telecommunications equipment. The company’s products 

include multi-layer boards and capacitors, optical pick ups, deflection yokes (DY), keyboards, speakers, and 

light emitting diode (LED) products 









Key Management: Lee Hyung-do; Kang Ho-Moon No. of Employees: 12,153 


Samsung Revenues 3,177.2 3,519.0 4,284.5 4,444.8 

Gross Profit 621.0 691.3 735.0 545.6 


Net Profit 97.7 112.8 48.1 (12.3) 

Earnings per Share (Won) 1,308 1,510 644 (164) 





Gross Debt 1,000.3 1,000.3 1,031.0 1,012.2 

Owners’ Equity 2,058.1 2,058.1 2,003.1 1,956.9 



NA 

America 

9% 

Asia 

27% 

Key Suppliers 

Europe 

6% 

South Korea 

58% 



20 April 2009 


Samsung Electro-Mechanics 

P&M-Vibrating 

Motor 

17% 

Wireless Service- 

Bluetooth 

15% 

OS-ISM 

15% 

LCR-MLCC 

18% 

Main Board-HDI 

34% 

Key Customers 

Samsung Intel 

HP Motorola 

M Kor 


Bhavin Shah 

(852) 2800-8538 


TDK Corporation 


TDK Corporation manufactures electronics components such as magnetic tapes and ferrite cores. The 

company also sells power supplies, inductors, transformers, ceramic capacitors, magnets, LAN (Local Area 

Network) components, sensors, and semiconductors. TDK markets its products worldwide. 





Price (¥): 3,330 




Key Management: Hajime Sawabe; Takehiro Kamigama; Seiji Enami No. of Employees: 65,243 


NA Revenues 862 866 746 780 

Gross Profit 239 231 114 138 


Net Profit 70 71 (42) 6 

Earnings per Share (¥) 529 551 (325) 47 





Gross Debt 4 9 230 230 

Owners’ Equity 763 717 718 708 



NA 


61% 

Key Suppliers 

Japan 

15% 

Americas 

11% 

Europe 

13% 



20 April 2009 


TDK Corporation 

Recording dev ices 

30% 

Others 

14% 

Electronic materials 

17% 

Electronic dev ices 

20% 

Key Customers 

Samsung Motorola 

MEI 


513

Bhavin Shah 

(852) 2800-8538 


514 

Tyco Electronics 


Tyco Electronics Ltd. manufactures electronic components. The company produces connectors, relays and 

circuit breakers, active and passive fiber-optic components, wireless products, power components, resistors 

and inductors, motors, and other products. 


Ticker: TEL 



Price (US$): 9.07 




Key Management: Thomas J Lynch; Frederic M Poses No. of Employees: 96,000 


NA Revenues 12,300 12,959 14,834 10,270 



Net Profit 1,193 (554) 1,782 253 

Earnings per Share (US$) NA (1.1) 3.7 0.6 

Return on Equity (%) 11 (4.9) 15.9 0.4 



Cash & Cash Equivalents 469 936 1,086 NA 



Book Value per Share (US$) NA 22.9 23.9 22.5 


NA 

APAC 

27% 

Key Suppliers 


3% 

US 

31% 


20 April 2009 

EMEA 

37% 



Tyco Electronics 

Undersea 

Telecommunication 

8% 

Network solutions 

15% 

Others 

3% 

Electronic 

components 

74% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

PCB Substrates 

Austria Technologie & Systemtechnik AG..........516 

Compeq Manufacturing Co., Ltd....................... ..517 

Daeduck Electronics .............................................518 

Ibiden Co., Ltd.......................................................519 

Kinsus Interconnect Technology Corporation....520 

Nan Ya PCB...........................................................521 

NGK Spark Plug Co., Ltd. .....................................522 

Phoenix Precision Technology Corporation........523 

Shinko Electric Industries Co., Ltd........................524 

Taiflex Scientific Co., Ltd.......................................525 

Topoint Technology Co., Ltd.................................526 

Tripod Technology Corp........................................527 

TTM Technologies, Inc...........................................528 

Unimicron Technology Corp. ................................529 

515

Bhavin Shah 

(852) 2800-8538 


516 

Austria Technologie & Systemtechnik AG 


Austria Technologie & Systemtechnik AG manufactures electronic components. The company produces circuit 

boards primarily for various mobile telecommunication devices including cellular telephones, hand-held 

computers, personal data assistants, camcorders and portable global positioning systems. AT&S also produces 

circuit boards for the computer, automobile and medical industries. 

Country: Austria 

Ticker: ATSV.DE 

Analyst: Rod Hall, CFA 


Price (€): 2.68 




Key Management: Herald Sommerer, Steen Ejlkskov Hansen, Heinz Moitzi No. of Employees: 6,374 

Business Alliances / Partnerships (€ in millions) FY07 FY08 FY09E FY10E 

Revenues 467 486 453 411 







Research & Development Expense - - - - 

Cash & Cash Equivalents 24 12 (2) 29 

Gross Debt 138 169 205 205 

Owners’ Equity 221 226 231 238 



NA 

Asia 

42% 

Key Suppliers 

Other 

11% 

Austria 

4% 

Canada 

9% 

Germany 

23% 

Hungary 

11% 



20 April 2009 


Austria Technologie 

Industry/Medical 

26% 

Automotive 

11% 

Other 

3% 

Telecommunications 

61% 

Key Customers 

COMPANY WEBSITE PCB Substrates 

NA

Bhavin Shah 

(852) 2800-8538 


Compeq Manufacturing Co., Ltd. 


Compeq Manufacturing Co., Ltd. manufactures and markets multi-layer and double-sided printed circuit boards. 

The company also trades electronic parts. Compeq sells its products in Taiwan and exports to the United 

States, other Asian countries, and Europe. 





Price (NT$): 5.83 




Key Management: Wu Chien, Lu Hsueh-Shun, Wu I-Meng No. of Employees: 4,378 


NA Revenues 22,952 21,757 23,326 NA 


Operating Profit 1,918 216 NA NA 

Net Profit 1,315 695 147 NA 










NA 

Taiwan 

12% 

US 

15% 

Key Suppliers 

America ex-US 

Europe 2% 

10% 


20 April 2009 

North & South 

Eastern Asia 

61% 



Compeq Manufacturing 

Others 

4% 

Printed circuit 

board 

96% 

Key Customers 

BenQ Compal Comm 

Motorola 


517

Bhavin Shah 

(852) 2800-8538 



Daeduck Electronics 


Daeduck Electronics specializes in manufacturing printed circuit boards (PCBs) used in cellular phones, Ticker: 008060.KS 

camcorders, notebook computers, and handheld computers. The company’s products include multi-layer, Analyst: Not Covered 

carbon contact, and controlled impedance PCBs. Daeduck Electronics supplies its products to 


telecommunication and electronic industries internationally. 

Price (W): 3,330 

518 




Key Management: Kim Young - Jae, Jang Hong - Eun, Kim Chung - Sik No. of Employees: 642 

Business Alliances / Partnerships (W in billions) FY06 FY07 FY08 FY09E 

NA Revenues 334.8 318.6 336.4 330.8 



Net Profit 4.1 12.3 (67.1) 7.8 

Earnings per Share (W) 95.0 303.0 (1,682.0) 171.3 



Research & Development Expense NA NA NA NA 




Book Value per Share (W) 7,175 8,343 6,565 5,619 



17% 

Canada 

2% 

US 

5% 

Key Suppliers 

Doosan Electronics LG Chemical 

Daiyo Ink OR Chem 


20 April 2009 

South Korea 

77% 



Daeduck Electroncis 

Printed Circuit 

Board 

100% 

Key Customers 

Samsung NorTel 

Hynix 

COMPANY WEBSITE PCB Substrates

Bhavin Shah 

(852) 2800-8538 


Ibiden Co., Ltd. 


Ibiden Co., Ltd. develops, produces, and markets ceramics, housing materials, and electronics. The company’s 

products include printed circuit boards (PCB), graphite specialties, integrated circuit (IC) packages, ceramic 

fibers, melamine decorative high-pressure laminates, and pre-cut structural materials. 





Price (¥): 2,130 




Key Management: Yoshifumi Iwata, Hiroki Takenaka, Yoshitugu Aoyama No. of Employees: 13,148 


NA Revenues 399 414 300 303 



Net Profit 48 46 (5) 6 

Earnings per Share (¥) 324 309 (35) 40 





Gross Debt 18 14 29 29 

Owners’ Equity 276 299 300 299 

Book Value per Share ((¥) 1,712 1,952 2,034 2,032 


NA 

EU 

22% 

North America 

11% 

Key Suppliers 

Others 

5% 

Asia 

30% 

Japan 

32% 



20 April 2009 


Ibiden Co., Ltd. 

Others 

Construction 9% 

3% 

Housing Materials 

14% 

Ceramic 

18% 

Electronic 

Substances 

58% 

Key Customers 

Intel Peugot 

AMD Nokia 


519

Bhavin Shah 

(852) 2800-8538 


520 

Kinsus Interconnect Technology Corporation 


Kinsus Interconnect Technology Corporation manufactures BGA (ball grid array) boards. The company’s 

products include PBGA (plastic BGA), MCM (multi chip module) BGA, mini BGA, TEBGA (thermal enhanced 

BGA), and flip chip substrate boards. 









Key Management: Tong Tsu-Hsien, Kuo Ming-Tung, Lu ching No. of Employees: 2,473 


NA Revenues 11,914 12,989 12,215 9,095 


Operating Profit 3,921 3,787 NA 1,255 

Net Profit 3,920 3,868 2,198 1,327 









Key Suppliers 

Ajinomoto Mitsubishi 

Hitachi 


20 April 2009 



Kinsus Interconnect 

Other 

1% 

IC Package 

Substrates 

99% 

Key Customers 

Qualcomm Altera 

Xilinx 


Bhavin Shah 

(852) 2800-8538 


Nan Ya PCB 


Nan Ya PCB manufactures and markets printed circuit boards (PCBs) and integrated circuit (IC) substrates. 









Key Management: Chin-Jen Wu, Chia-Fang Chang, Lee Yu- Ching No. of Employees: 5,904 


Revenues 36.4 38.7 38.5 32.6 

Gross Profit 11.7 9.3 7.9 4.4 


Net Profit 10.2 8.5 6.8 3.8 



Capital Spending 0.4 (2.1) (3.3) (3.8) 



Gross Debt 1.1 0.0 0.0 0.0 

Owners’ Equity 40.4 38.5 35.9 33.6 



Europe ROW 

North America 4% 2% 

4% 

Key Suppliers 

NanYa Plastic Top Point 

Ajinomoto Semitool 

Asia 

90% 

Source: Company, J.P. Morgan estimates. Share price is as of 12 April 2009. 


20 April 2009 


Nan Ya PCB 

PCB 

26% 

Flip Chip 

56% BGA/CSP 

18% 

Key Customers 

Intel NVIDIA 

ATI (AMD) Apple 

NGK 


521

Bhavin Shah 

(852) 2800-8538 


522 

NGK Spark Plug Co., Ltd. 


NGK Spark Plug Co., Ltd. manufactures and markets spark plugs for automobiles, motorcycles, agricultural 

machinery, ships, and aircraft. The company also makes ceramic products for semiconductor and 

telecommunication equipment. 





Price (¥): 839 




Key Management: Nori Kato, Genjiro Hashimoto, Naomiki Kato No. of Employees: 11,181 


NA Revenues 344.9 345.6 292.5 275.5 

Gross Profit 96.3 83.3 39.1 45.2 

Operating Profit 52.4 35.0 (6.4) 0.7 

Net Profit 34.1 22.1 (12.5) 1.1 

Earnings per Share (¥) 146.4 95.8 (54.4) 4.8 





Gross Debt 31.6 40.7 40.1 40.1 

Owners’ Equity 289.0 288.3 248.4 243.8 



NA 

Europe 

20% 

Key Suppliers 

ROW 

13% 

North America 

25% 

Japan 

43% 



20 April 2009 


NGK Spark 

Comm Media 

Components and 

Technical 

ceramics 

38% 

Others 

2% 

Automotive 

Components 

61% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Phoenix Precision Technology Corporation 


Phoenix Precision Technology Corporation manufactures and markets ball grid array (BGA) boards. The 

company’s products include PBGA (plastic BGA), MCM (multi chip module) BGA, mini BGA, metal core BGA, 

cavity down BGA and flip chip BGA boards. 





Price (NT$): 10.05 




Key Management: Yang Yanquing, Willian J Amelio, Wong Wai Ming No. of Employees: 2,845 

Business Alliances / Partnerships (NT$ in millions) FY06 FY07 

SPIL Revenues 13,079 12,553 

Gross Profit 3,989 2,649 

Operating Profit 3,172 1,715 

Net Profit 2,645 1,247 

Earnings per Share (NT$) 3.80 1.74 

Return on Equity (ROE) (%) 25.53 11.00 

Capital Spending (3,767) (2,594) 

Research & Development Expense 295 327 

Cash & Cash Equivalents 2,298 1,481 

Gross Debt 5,488 6,191 

Owners’ Equity 11,270 11,403 



Taiwan 

30% 

Korea 

20% 

Key Suppliers 

Ajinomoto Semitool 

Top Point 



20 April 2009 

USA, EUR & 

Others 

50% 


Phoenix Precision 

Computer 

54% 

Consumer 

14% 

Communication 

32% 

Key Customers 

ATI (AMD) SPIL 

VIA Qualcomm 

NVIDIA ASE 

SiS 


523

Bhavin Shah 

(852) 2800-8538 


524 

Shinko Electric Industries Co., Ltd. 


Shinko Electric Industries Co., Ltd. designs, manufactures, and markets advanced electronic materials such as 

semiconductor packages, including leadframes, and PLP(plastics laminated packages). The company markets 

its products worldwide through a network of sales offices in places such as the Philippines, Germany, and Hong 

Kong. 





Price (¥): 877 




Key Management: Mamoru Kuroiwa, Fumio Kuraishi, Akira Fujimoto No. of Employees: 4,970 


NA Revenues 206 215 142 130 



Net Profit 19 11 (6) (5) 







Owners’ Equity 134 143 137 132 

Book Value per Share (¥) 931 1,027 1,038 996 


NA 

Key Suppliers 

America 

12% 

Asia 

47% 

Others 

2% 

Japan 

39% 



20 April 2009 


Shinko Electric 

Hermetic Seal Parts 

9% 

IC Package 

76% 

IC Lead Frame 

15% 

Key Customers 

Intel AMD 

TI 


Bhavin Shah 

(852) 2800-8538 


Taiflex Scientific Co., Ltd. 


Taiflex Scientific Co., Ltd. manufactures and markets flexible copper clad laminates (FCCL) and cover layers 

(CL). The company’s products are mainly used for flexible printed circuit (FPC) board manufacturing. 





Price (NT$): 17.25 




Key Management: Sun Da-Wen, Chen Ming-Li No. of Employees: 395 


NA Revenues 2,712 3,043 3,216 3,314 



Net Profit 370 308 255 225 










Key Suppliers 

Taiwan Dupont 

Asia 

33% 


20 April 2009 

Taiwan 

67% 



Taiflex Scientific 


CL 

37% 

Other 

20% 

Flexium 

FCCL 

43% 

Key Customers 

525

Bhavin Shah 

(852) 2800-8538 


526 

Topoint Technology Co., Ltd. 


Topoint Technology Co., Ltd. develops, manufactures, and markets drills, routers, and slot drills for precision 

equipment. 





Price (NT$): 21.3 




Key Management: Li Hsu-Ting, Chiang Chen-Wen, Wang Chia-Hung No. of Employees: 308 


NA Revenues 1,563 2,140 1,973 1,536 



Net Profit 365 515 281 183 










NA 

Asia 

46.3% 

Key Suppliers 

Europe 

0.3% 


20 April 2009 

Taiwan 

53.4% 



Topoint Technology 

Other Cutting Tools 

14% 

Drills for PCB 

86% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Tripod Technology Corp 


Tripod Technology Corp. designs, manufactures, and markets double and multi layers printed circuit boards 

(PCBs). The company also produces industrial automatic machinery as well as POS (point of sale) electronic 

cashiers. 





Price (NT$): 43.4 




Key Management: Wang Ching Chun, Hu Ching Hsiu, Chiang Yang Yang No. of Employees: 18,613 


NA Revenues 20,588 27,342 30,332 26,063 

Gross Profit 4,829 6,189 5,467 3,632 


Net Profit 3,052 4,003 2,811 1,257 



Capital Spending (3,564) (8,781) (3,422) 0 


Cash & Cash Equivalents 1,264 624 6,466 7,641 

Gross Debt 2,420 4,726 9,946 7,582 

Owners’ Equity 9,865 13,411 15,650 14,408 



Domestic 

20% 

Europe, America 

5% 

Key Suppliers 

Tripod Overseas 

Others 

8% 

Asia 

67% 



20 April 2009 


Tripod Technology 


Substrate 

4% 

PCB 

96% 

Key Customers 

Kingston Samsung 

Qimonda 

527

Bhavin Shah 

(852) 2800-8538 


528 

TTM Technologies, Inc. 


TTM Technologies, Inc. is an independent provider of time-critical, one-stop manufacturing services for printed 

circuit boards. The circuit boards serve as a foundation for electronic products such as routers, switches, 

servers, memory modules, and cellular base stations. The company’s customers include original equipment 

manufacturers and electronic manufacturing services companies. 


Ticker: TTMI 



Price (US$): 4.73 




Key Management: Kenton K Alder, Steven W Richards, Shane S Whiteside No. of Employees: 3,609 


NA Revenues 369 669 681 607 



Net Profit 35 35 (35) 20 


Return on Equity (ROE) (%) 13 11 (11) 10 








NA 

China 

13% 

Key Suppliers 

Other 

9% 

Malaysia 

5% 


20 April 2009 

USA 

74% 



TTM Technologies 

Commercial 

Assembly 

17% 

PCB Manufacturing 

83% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Unimicron Technology Corp. 


Unimicron Technology Corp. manufactures and markets double-sided and multi-layer printed circuit boards. 

The company also provides integrated circuits (IC) burning and testing services. 





Price (NT$): 17.7 




Key Management: Tseng Tzu Chang, Cheng Chen Hua, Chiang Shu Sheng No. of Employees: 17,836 


NA Revenues 37,907.8 47,280.2 45,676.0 NA 


Operating Profit 5,620.3 7,236.3 NA NA 

Net Profit 4,490.6 5,765.0 2,515.0 NA 

Earnings per Share (NT$) 3.545 4.651 2.22 NA 


Capital Spending (7,485.7) (10,198.4) NA NA 

Research & Development Expense 556.1 642.9 NA NA 


Gross Debt 11,012.4 12,618.2 NA NA 




Domestic 

15% 

America 

7% 

Others 

12% 

Key Suppliers 

Unimicron Trading Circuitech 

Asia 

66% 



20 April 2009 


Unimicron Technology 

Substrate CSP 

23% 

Others/ Flex PCB 

Substrate FC 2% 

5% 


PCB 

25% 

HDI 

45% 

Key Customers 


529

Bhavin Shah 

(852) 2800-8538 


530 


20 April 2009 

Connectors 

Amphenol Corp............................... 531 

Hirose Electric Co, Ltd. .................. 532 

Molex Inc ......................................... 533

Bhavin Shah 

(852) 2800-8538 


Amphenol Corp 


Amphenol Corporation designs, manufactures, and markets electrical, electronic and fiber optic connectors, 

interconnect systems, and coaxial and flat-ribbon cable. The company's products are used in a variety of 

industries, including telephone, wireless, and data communications systems, cable television systems, and 

commercial and military aerospace electronics. 


Ticker: APH 



Price (US$): 26.88 




Key Management: R Adam Norwitt; Diana G Reaerdon; Gary A anderson No. of Employees: 30,000 


NA Revenues 2,471 2,851 3,236 2,732 

Gross Profit 788 930 1,049 NA 


Net Profit 256 353 419 303 







Owners’ Equity 903 1,265 1,349 NA 



NA 

Other loacations 

47% 

Key Suppliers 


20 April 2009 

China 

17% 

United States 

36% 


Amphenol Corp 


Cable Products 

9% 

Interconnect 

Products 

91% 

Key Customers 

COMPANY WEBSITE Connectors 

NA 

531

Bhavin Shah 

(852) 2800-8538 


532 

Hirose Electric Co, Ltd. 


Hirose Electric Co., Ltd. develops and sells electronic equipment, specializing in connectors. The company's 

products include circulars, rectangulars, ribbon cables, printed circuit boards, integrated circuits, PC cards, 

nylon boards, and board connectors. 





Price (¥): 8,190 




Key Management: Tatsuro Nakamura; Sakae Kushita; Mitsugu Sugino No. of Employees: 4,613 


NA Revenues 115 118 90 80 










Owners’ Equity 240 237 229 228 



NA 

Asia 

43% 

Key Suppliers 

Europe 

7% 

Others 

1% 

America 

5% 

Japan 

45% 



20 April 2009 

Hirose Electric 


Connectors 

100% 

Key Customers 

Nokia Samsung 

Motorola 

COMPANY WEBSITE Connectors

Bhavin Shah 

(852) 2800-8538 


Molex Inc 


Molex Incorporated manufactures electronic, electrical, and fiber-optic interconnection products and systems, 

switches, value-added assemblies, and application tooling. The company sells to original equipment 

manufacturers in industries that include automotive, computer, computer peripheral, business equipment, 

telecommunications, consumer products, and premise wiring. 


Ticker: MOLX 



Price (US$): 11.64 




Key Management: Martin P Slark; David D Johnson; Liam Mccarthy No. of Employees: 32,160 


NA Revenues 3,266 3,328 2,571 2,309 



Net Profit 241 215 70 88 


Return on Equity (%) 10 8 1 (0) 

Capital Spending (446) (218) (1,887) (200) 







NA 

Key Suppliers 

Europe 

19% 

Americas 

27% 


20 April 2009 

Asia Pacific North 

54% 


Molex Inc 


Custom & Electrical 

32% 

Transportation 

11% 

Connector 

57% 

Key Customers 

COMPANY WEBSITE Connectors 

NA 

533

Bhavin Shah 

(852) 2800-8538 


534 


20 April 2009 


Cosel................................................ 535 

Delta Electronics Inc. ..................... 536 

International Rectifier..................... 537

Bhavin Shah 

(852) 2800-8538 


Cosel 


COSEL CO., LTD. designs, manufactures and markets industry use switching power supply products. The 

company's products also include on-board type, unit type, rugged printed circuit board (PCB) type, and power 

module type. COSEL sells its products through special agents. 





Price (¥): 840 




Key Management: Hisaharu Ame; Toshimichi Machino No. of Employees: 439 

Business Alliances/Partnerships (¥ in billions) FY06 FY07 FY08 FY09E 

NA Revenues 21.7 23.3 22.7 17.5 



Net Profit 3.9 4.0 3.4 1.5 










NA 

North America 

12% 

Europe 

Asia & other 

5% 

10% 

Key Suppliers 


20 April 2009 

Japan 

73% 


Cosel 

Source: Company, Consensus estimates from Bloomberg (FY09E). Share price is as of 12 March 2009. 

On-Board Pow er 

Supply 

33% 

Noise Filter 

1% 

Unit Pow er Supply 

66% 

Key Customers 

COMPANY WEBSITE Power Supply 

NA 

535

Bhavin Shah 

(852) 2800-8538 



Delta Electronics Inc. 


Delta Electronics Inc. manufactures power supplies and video display products. The company's products Ticker: 2308.TW 

include switching power supplies, telecom power systems, uninterrupted power supply (UPS), variable speed Analyst: Gokul Hariharan 

alternating current (AC) monitor drives, high resolution color monitors, and projectors. Delta also manufactures Rating: Neutral 

magnetics and networking components. 

Price (NT$): 54.5 

536 




Key Management: Hai Ing Jiunn (Vancey); Chu Chin-Yuan (Roger); Ke Tsu-Hsing No. of Employees: 67,700 


NA Revenues 105.2 130.6 142.6 125.7 

Gross Profit 22.5 27.4 25.5 21.0 


Net Profit 11.3 15.1 10.3 8.6 






Gross Debt 3.4 4.0 7.1 0.0 

Owners’ Equity 49.8 59.8 58.3 65.4 



Rest of America 

NE Asia 

Others 2% 

3% 

6% 

Europe 

10% 

USA 

14% 

SE Asia 

16% 

Key Suppliers 

All major Component makers (MLCC, 

PCB, and Controller) 


20 April 2009 

Taiwan 

51% 

Source: Company reports, J.P. Morgan estimates. Share price is as of 12 March 2009. 


Delta Electronics 

Others 

Industrial 14% 

Automation 

4% 

Digital Projectors 

4% 

Components 

18% 


60% 

Key Customers 

Dell IBM 

Alcatel-Lucent HP 

COMPANY WEBSITE Power Supply

Bhavin Shah 

(852) 2800-8538 


International Rectifier Country: United States 


International Rectifier designs, manufactures and markets power semiconductors, including a metal oxide 

semiconductor field effect transistor called a MOSFET. The company's products include power integrated 

circuits and advanced circuit devices, power systems, and power components. International Rectifier's products 

are sold worldwide. 

Ticker: IRF 



Price (US$): 12.89 




Key Management: Richard J Dahl; Oleg Khaykin; Ilan Daskal No. of Employees: 5,100 


NA Revenues 1,015 1,202 985 707 



Net Profit 37 78 (63) (56) 










NA 

Europe 

21% 

United States 

28% 

Key Suppliers 


20 April 2009 

Asia 

51% 


International Rectifier 

Source: Company reports, Consensus estimates from Bloomberg (FY09E). Share price is as of 12 March 2009. 

Enterprise Pow er 

10% 

Aerospace & 

Defence 

16% 

Others 

15% 

Energy -Sav ing 

Products 

21% 

Diversified 

Pow er Management 

Dev ices 

38% 

Key Customers 

COMPANY WEBSITE Power Supply 

537

Bhavin Shah 

(852) 2800-8538 


538 


20 April 2009 

Display 

Display Panels ................................ 539 

LED .................................................. 549 

Display Monitors............................. 554 

Display

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Display Panels 

AU Optronics .................................. 540 

Chi Mei Optoelectronics ................ 541 

Chunghwa Picture Tubes Ltd........ 542 

Digitech Systems............................ 543 

HannStar Display Corp. ................. 544 

Innolux Display Corporation ......... 545 

LG Display....................................... 546 

Samsung SDI .................................. 547 

Wintek Corporation ........................ 548 

539

Bhavin Shah 

(852) 2800-8538 


540 

AU Optronics 


AU Optronics Corp. manufactures and markets thin film transistor-liquid crystal displays (TFT-LCDs). The 

company sells its products in Taiwan and exports worldwide. 



Analyst: Liang-Chun Lin 






Key Management: Chen Lai-Juh; Lee Kun-Yao; Andy Yang No. of Employees: 20,808 


Revenues 293.1 480.2 423.9 262.4 

Gross Profit 29.9 86.2 55.3 (52.7) 


Net Profit 9.1 56.4 21.3 (73.2) 






Gross Debt 225.0 177.7 162.8 176.7 

Owners’ Equity 231.1 300.8 299.3 223.2 



Europe 

9% 

Taiwan 

36% 

Key Suppliers 

Corning Merck 

Novatek Nitto Denko 

Other 

7% 

Asia 

48% 



20 April 2009 

AU Optronics 


TFT-LCDs 

100% 

Key Customers 

Samsung HP 

BenQ Dell 

Philips Sony 

COMPANY WEBSITE Display Panels

Bhavin Shah 

(852) 2800-8538 


Chi Mei Optoelectronics 


Chi Mei Optoelectronics Corp. develops, manufactures, and markets thin film transistor liquid crystal display 

(TFT-LCD) panels and color filters. The company sells its products worldwide. 





Price (NT$): 12.15 




Key Management: Liao Ching-Siang "Frank"; Ho Jau-Yang; Wu Biing-Seng No. of Employees: 18,156 


Revenues 187.1 301.3 313.3 209.3 

Gross Profit 21.6 63.0 33.6 (47.1) 


Net Profit 3.0 35.7 (6.5) (71.0) 






Gross Debt 154.4 170.6 290.2 261.7 

Owners’ Equity 188.3 220.6 201.9 130.9 



Europe 

13% 

Key Suppliers 

Asahi Himax 

Americas 

9% 

Taiwan 

33% 

ROW 

3% 

Asia 

42% 



20 April 2009 

Chi Mei 


Others 

0.1% 

TFT-LCDs 

99.9% 

Key Customers 

Westin House Funai 

Acer Samsung 

HP 

COMPANY WEBSITE Display Panels 

541

Bhavin Shah 

(852) 2800-8538 


542 

Chunghwa Picture Tubes Ltd. 


Chunghwa Picture Tubes., Ltd. manufactures cathode ray tubes (CRTs) for monitors and televisions (TVs), 

monochrome TV grade gun parts, mono display grade gun parts, deflection yokes (DYs), as well as liquid 

crystal displays (LCDs). 





Price (NT$): 2.9 




Key Management: Lin Wei-Shan; Chiu Chuang-I "KAY"; Wu Chun-Yi "James" No. of Employees: 8,848 


Hitachi Revenues 126.6 159.4 121.0 79.7 

Sharp Gross Profit 0.1 24.4 NA NA 

Matsushita Operating Profit (10.0) 12.7 (7.1) (28.4) 

Net Profit (14.0) 8.7 (9.2) (28.2) 

Earnings per Share (NT$) (1.7) 1.0 (1.0) (2.9) 

Return on Equity (%) (15.9) 9.6 0.6 17.6 








Others 

Taiwan 7% 

7% 

America 

7% 

Europe 

10% 

Key Suppliers 

Chunghwa P.T(Labuan) Ltd. 


20 April 2009 

SE Asia 

69% 



Chunghwa Picture 

CRT 

9.7% 

TFT-LCD 

Division 

90.3% 

Key Customers 

Tatung Information K-tronics, Inc. 

Technology(JiangSu) 

Co. 


Bhavin Shah 

(852) 2800-8538 


Digitech Systems 


Digitech Systems Co. Ltd. specializes in manufacturing touchscreen displays for computer-based systems. The 

company also produces touch panels, touch controllers, and touch monitors for PDA, navigation and ATM 

applications. 








Founded: ; Listed: 2007 Fiscal Year End: December 

Key Management: Lee Hwan-Yong "Tommy"; Kang Min-Ku; Jeong Yeong-Jin; Ko Yeong-Ha No. of Employees: 178 


NA Revenues 25.3 42.0 44.5 85.9 



Net Profit 8.2 12.6 11.8 19.3 

Earnings per Share (Won) 768 1,029 874 1,425 









NA 

Key Suppliers 

ROW 

4% 

South Korea 

96% 


20 April 2009 



Digitech Systems 

Touchscreens 

100% 

Key Customers 


NA 

543

Bhavin Shah 

(852) 2800-8538 


544 

HannStar Display Corp. 


HannStar Display Corporation designs, manufactures, and markets thin film transistor liquid crystal display 

(TFT-LCD). 





Price (NT$): 4.25 




Key Management: Chiao You-Chi; Chou Ding-Hui; Chang Li-Chieh No. of Employees: 3,500 


NA Revenues 65.3 78.4 66.6 25.2 

Gross Profit (1.3) 13.8 NA NA 

Operating Profit (5.8) 10.0 NA (14.4) 

Net Profit (4.9) 14.4 (6.4) (13.3) 

Earnings per Share (NT$) (0.9) 2.7 NA (2.5) 

Return on Equity (%) (8.8) 23.6 NA (18.2) 








NA 

Key Suppliers 

North America 

8% 

Europe 

10% 


20 April 2009 

Asia 

82% 



HannStar Display 

Others 

5% 

TFT-LCD Panels 

95% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Innolux Display Corporation 


Innolux Display Corporation manufactures TFT-LCD, LCD models and LCD monitors. The company also 

provides research, development, manufacturing and retails business. 





Price (NT$): 31.2 




Key Management: Hsing-Chien Tuan, Thomas Hsu, Ting-Chen (Jeff) Hsu No. of Employees: 3,610 


NA Revenues 105,679 157,171 160,007 138,970 

Gross Profit 8,785 22,374 12,058 (3,296) 

Operating Profit 4,639 17,078 5,604 (9,543) 

Net Profit 2,825 16,147 5,225 (9,635) 




Research & Development Expenses 1,668 1,780 (1,925) (1,783) 


Gross Debt 34,178 22,199 23,551 25,115 

Owners’ Equity 35,852 95,302 96,546 85,995 



America 

31% 

Europe 

18% 

Key Suppliers 

Corning Novatek 

Nitto Denko 

ROW 

1% 

Taiwan 

10% 

Asia 

41% 



20 April 2009 

Innolux Display 


LCD Module & 

Monitor 

100% 

Key Customers 

Dell HP 


545

Bhavin Shah 

(852) 2800-8538 


546 

LG Display 


LG Display Co Ltd develops and manufactures digital display products. The company's products include thin 

film transistor-liquid crystal displays (TFT-LCD) for notebook and desktop computer monitors, TVs, mobile 

phones, and medical equipment. 









Key Management: Kwon Young-Soo; Jung Ho-Young; Ron Wirahadiraksa No. of Employees: 18,055 


LG Electronics Revenues 10,624.2 14,352.0 16,264.0 15,556.2 

Philips Gross Profit (308.1) 2,237.2 2,647.4 411.5 

Paju Electric Glass Operating Profit (879.0) 1,504.2 1,735.9 (645.8) 

Net Profit (769.3) 1,344.0 1,086.4 (471.4) 

Earnings per Share (Won) (2,150.0) 3,756.0 3,036.2 (1,317.5) 

Return on Equity (%) (10.56) 17.71 12.42 (5.34) 

Capital Spending 2,867.3 930.9 3,868.2 2,000.0 


Cash & Cash Equivalents 954.4 1,981.4 3,227.4 1,767.0 

Gross Debt 4,120.7 3,405.7 3,978.9 2,637.0 

Owners’ Equity 6,889.7 8,289.5 9,198.8 8,467.4 



South Korea 

7% 

Key Suppliers 

Paju Electric Glass Samsung Corning 

Heesung LG Chem 

Others 

93% 



20 April 2009 

LG Display 


TFT - LCD 

100% 

Key Customers 

LG Electronics Philips 

Dell HP 

IBM Toshiba 


Bhavin Shah 

(852) 2800-8538 


Samsung SDI 


Samsung SDI Co., Ltd. specializes in manufacturing cathode ray tubes (CRTs) for televisions and computer 

monitors. The company also produces liquid crystal display (LCD) components and rechargeable batteries for 

cellular phones and personal digital assistants (PDAs). 









Key Management: Kim Soon-Taek, Lee Jung-Hwa, Kim Jae-Wook No. of Employees: 10,404 


Samsung Revenues 6,650.1 5,149.1 6,249.6 4,784.5 

Gross Profit 958.2 279.6 814.5 630.7 

Operating Profit 130.2 (572.6) 68.8 37.2 

Net Profit 90.7 (592.2) 38.8 57.2 

Earnings per Share (Won) 1,951 (12,739) 835 1,230 

Return on Equity (%) 1.91 (12.41) 0.82 1.19 

Capital Spending 1,258.1 338.6 (74.4) 508.9 


Cash & Cash Equivalents 945.7 817.8 1,280.4 1,098.4 

Gross Debt 836.0 1,025.6 1,032.6 841.1 

Owners’ Equity 4,796.3 4,747.2 4,769.3 4,837.4 



South Korea 

65% 

America 

2% 

Key Suppliers 

Cheil industrial HanChang Corp 

Hanuk Techno 

Glass 

Asia 

23% 

Europe 

9% 



20 April 2009 

Samsung SDI 


Secondary 

Battery 

17% 

LCD 

24% 

CPT,CDT,PDP 

59% 

Key Customers 

Samsung Nokia 

HP Asustek 

Philips Motorola 

Dell Proview 


547

Bhavin Shah 

(852) 2800-8538 



Wintek Corporation 


Wintek Corp. develops, designs, manufactures and markets liquid crystal displays (LCDs) and liquid crystal Ticker: 2384.TW 

modules (LCMs). The company also sells and manufactures portable games, calculators, and indium tin oxide Analyst: Not Covered 

(ITO) glass. 


Price (NT$): 12.2 

548 




Key Management: Huang Hsien-Hsiung "Hyley"; Hsu Chen-Chang; Wu Chen-Ming No. of Employees: 5,090 


NA Revenues 33.7 31.6 NA NA 


Operating Profit 2.4 0.9 (0.3) 0.8 

Net Profit 2.3 0.6 (2.0) (1.1) 










Europe 

9% 

Key Suppliers 

Solomon Systech Nichia 

Sitronix 

Other 

3% 

Taiwan 

2% 


20 April 2009 

Asia 

85% 



Wintek Corporation 

Liquid Crystal 

Modules 

100% 

Key Customers 



Bhavin Shah 

(852) 2800-8538 



20 April 2009 

LED 

Bright LED Electronics Corp. ........ 550 

Epistar Corporation........................ 551 

Everlight Electronics Co., Ltd. ...... 552 

Seoul Semiconductor Co., Ltd ...... 553 

549

Bhavin Shah 

(852) 2800-8538 


550 

Bright LED Electronics Corp. 


Bright LED Electronics Corp. manufactures and markets light-emitting diode (LED) lamps and LED displays. 

The Company's products are used in consumer electronic products, vehicles, office equipment, and multimedia 

displays. 





Price (NT$): 29.5 




Key Management: Liao Tsung-Ren; Lee Sheng-Hsin; Yi Tse-Hsu No. of Employees: 118 


NA Revenues 2,751 3,564 3,854 3,191 



Net Profit 322 557 291 270 










Taiwan 

19% 

Key Suppliers 

Opto Tech Epistar 

Tyntek 


7% 


20 April 2009 

Asia 

74% 

Source: Company, Bloomberg estimates (for FY09E). Share price is as of 12 March 2009. 

Bright LED 


Non Light Emitting 

Diodes 

30% 

Special Projects- 

Traffic Lights & 

displays 

5% 

Other LED 

modules 

1% 

Light Emitting 

Diodes 

64% 

Key Customers 

HP LG 

Samsung Bird 

COMPANY WEBSITE LED

Bhavin Shah 

(852) 2800-8538 



Epistar Corporation 


Epistar Corporation manufactures and markets high brightness light emitting diode (LED) chips and epitaxial Ticker: 2448.TW 

wafers. The company’s products include AlGaInP, InGaN and AlGaAs LED chips and wafers. Epistar sells its Analyst: Liang-Chun Lin 

products in Taiwan and exports worldwide. 


Price (NT$): 49.9 




Key Management: Lee Biing-Jye; Yeh Yin-Fu; Chou Ming-Chun No. of Employees: 3,118 


Revenues 6,290 10,206 10,321 8,008 

Gross Profit 1,919 3,259 1,698 1,130 

Operating Profit 1,151 2,111 352 (129) 

Net Profit 1,240 2,094 79 (128) 




Research & Development Expenses 211 357 (484) (433) 


Gross Debt 2,340 2,092 3,003 2,763 

Owners’ Equity 8,645 23,652 22,084 21,900 



Taiwan 

48% 

Key Suppliers 

Mitsubishi Chemical Dowa 

Kyocera 

Other 

3% 

Asia 

50% 



20 April 2009 


Epistar Corporation 

Epi Wafers 

3% 

LED Chips 

97% 

Key Customers 

Everlight Lite-On 

Sharp Citizen 

COMPANY WEBSITE LED 

551

Bhavin Shah 

(852) 2800-8538 


552 

Everlight Electronics Co., Ltd. 


Everlight Electronics Co., Ltd. manufactures and markets optoelectronic components. The company’s main 

products are surface mount devices light emitting diodes (LEDs), super bright LED lamps, special purpose 

LEDs, dot matrix displays, photo transistors, and infrared LEDs. 









Key Management: Robert Yeh; Liu Bang-Yen; Barry Wu No. of Employees: 1,770 


Revenues 7,949 9,853 11,043 9,608 

Gross Profit 2,576 3,032 2,928 2,012 


Net Profit 1,892 2,210 1,448 854 



Capital Spending (396) (919) (2,554) (1,238) 


Cash & Cash Equivalents 4,355 4,280 1,764 852 

Gross Debt 1,343 2,925 3,156 2,760 

Owners’ Equity 8,349 10,259 9,835 9,782 



Europe 

23% 

Key Suppliers 

Epistar Osram 

Lumiled 

America 

5% 

Asia 

72% 



20 April 2009 


Everlight Electronics 


Others 

16% 

LED 

84% 

Key Customers 

Nokia Sony-Ericsson 

Motorola

Bhavin Shah 

(852) 2800-8538 


Seoul Semiconductor Co., Ltd 


Seoul Semiconductor Co., Ltd. manufactures parts for electronic products. The company's products include 

light emitting diode (LED) custom display, LED dot matrix, LED back light, photo diode, photo transistor, LED IR 

lamp, LED display with controller, and LED array. 





Price (W): 27,500 




Key Management: Lee Chung-Hoon; Kim Hwa-Ja No. of Employees: 984 

Business Alliances/Partnerships (Won in billions) FY06 FY07 FY08E FY09E 

NA Revenues 184 250 286 333 




Earnings per Share (Won) 203 348 186 293 






Owners’ Equity 106 182 187 200 


NA 

Key Suppliers 



20 April 2009 


Seoul Semiconductor 

LED Product 

3.5% 

CREE (US) 

LED 

Manufacturing 

96.5% 

Key Customers 


553

Bhavin Shah 

(852) 2800-8538 


554 


20 April 2009 

Display Monitors 

Qisda Corporation.......................... 555 

TPV Technology Ltd....................... 556

Bhavin Shah 

(852) 2800-8538 



Qisda Corporation 


Qisda Corporation manufactures and markets computer peripherals, communication, and consumer electronic Ticker: 2352.TW 

products. The company also provides consulting and technical services. The main products are multi-media Analyst: Not Covered 

displays, keyboards, scanners, mobile phones, and compact disk read only memory (CD-ROM) drives. 






Key Management: Lee Kun-Yao; Wang Tan-Ju; Hsiung Hui No. of Employees: 1,782 


NA Revenues 227.2 167.4 132.2 102.4 


Operating Profit (27.8) (3.8) NA (0.3) 

Net Profit (27.6) 4.8 (3.1) (3.6) 

Earnings per Share (NT$) (16.6) 2.9 (1.7) (2.1) 

Return on Equity (%) 86.4 22.0 NA (9.7) 








Asia 

23% 

Key Suppliers 

AU Optronics 

TaiwanOther 

4% 3% 

America 

35% 


20 April 2009 

Europe 

36% 



Qisda Corporation 

Digital Media 

Products 

13% 

Communication & 

Network Products 

3% 

Information & 

Computing 

Products 

84% 

Key Customers 

COMPANY WEBSITE Display Monitors 

NA 

555

Bhavin Shah 

(852) 2800-8538 



TPV Technology Ltd 


TPV Technology Limited, through its subsidiaries, manufactures, designs, and sells CRT-based and LCD- Ticker: 0903.HK 

based computer monitors. The company's products are sold under the brand names AOC, Envision, and Analyst: Charles Guo 

Amark. 


Price (HK$): 2.23 

556 




Key Management: Jason Hsuan; Houng Yu-Te No. of Employees: 29,627 


Philips is the largest shareholder. Revenues 7,176 8,455 9,247 7,431 

Second largest holder is Great Wall Tech, part of Gross Profit 376 391 428 348 

the China CEC group. Operating Profit 208 250 153 153 

CMO owns 7% and is a strategic partner Net Profit 162 190 107 113 






Gross Debt 416 788 534 580 

Owners’ Equity 1,099 1,240 1,376 1,455 



S. America 

6% 

Key Suppliers 

AU Optronics CMO 

LGD 

Others 

18% 

China 

26% 

N. America 

27% 

Europe 

23% 



20 April 2009 

TPV Technology 


LCD TVs 

22% 

Others 

CRT Monitors 2% 

2% 

LCD Monitors 

74% 

Key Customers 

Phillips Dell 

HP Sony 

COMPANY WEBSITE Display Monitors

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

EMS/ODM 

Handset EMS/ODM ......................... 558 

PC ODM ........................................... 563 

Diversified EMS .............................. 570 

EMS/ODM 

557

Bhavin Shah 

(852) 2800-8538 


558 


20 April 2009 

Handset EMS/ODM 

BYD Electronic ............................... 559 

Compal Communications, Inc. ...... 560 

Elcoteq ............................................ 561 

Foxconn Int'l Holdings ................... 562

Bhavin Shah 

(852) 2800-8538 


BYD Electronic 


BYD Electronic (International) Co., Ltd. researches, develops, manufactures and sells rechargeable batteries, 

liquid crystal display (LCD) and other electronic products. 





Price (HK$): 2.66 




Key Management: Wang Chuanfu; Li Ke; Zhu Ai-Yun No. of Employees: 37,500 


Subsidiary of BYD Revenues 3,044 5,767 8,555 9,220 

Gross Profit 952 1,528 1,710 1,526 


Net Profit 731 1,093 766 912 



Capital Spending (740) (1,024) (1,753) (800) 



Gross Debt 233 1,297 14 0 

Owners’ Equity 861 4,892 5,838 6,687 



N/A 

US 

17% 

Key Suppliers 

India 

14% 

Europe 

18% 

Rest of Asia 

2% 

PRC 

50% 



20 April 2009 

BYD Electronic 


COMPANY WEBSITE Handset EMS/ODM 

Handsets 

100% 

Key Customers 


Chinese brands 

559

Bhavin Shah 

(852) 2800-8538 


560 

Compal Communications, Inc. 


Compal Communications, Inc. manufactures telecommunications equipment. The company produces cellular 

telephones for original equipment manufacturers. 





Price (NT$): 25.7 




Key Management: Chen Rui-Tsung "Ray"; Lee Nan-Hsiung; Chen Chao-Cheng No. of Employees: 1,821 


More than 50% owned by Compal Revenues 71,667 48,692 36,183 36,340 

It is the handset arm of Compal group Gross Profit 7,870 5,333 NA NA 

Operating Profit 5,296 2,914 NA 378 

Net Profit 5,236 3,958 1,329 1,319 










Toppoly 

Key Suppliers 

ROWTaiwan 

6% 2% 

America 

92% 


20 April 2009 



Compal Communications 

Mobile Phones 

100% 

Key Customers 

Motorola Others 

COMPANY WEBSITE Handset EMS/ODM

Bhavin Shah 

(852) 2800-8538 


Elcoteq 


Elcoteq SE offers electronics manufacturing services focusing on communications technology products. The 

company designs or partially designs products such as mobile telephones and wireless modules. Elcoteq also 

makes and services base-station antennas, amplifiers, and other network equipment. The company 

manufactures worldwide and markets to equipment manufacturers. 

Country: Finland 

Ticker: ELQAV.HE 



Price (€): 1 




Key Management: Antti Piippo; Juha Toivola; Martti Ahtisaari No. of Employees: 18,830 


NA Revenues 4,284 4,043 3,443 2,979 


Operating Profit 44 (46) (7) 3 

Net Profit 12 (108) (66) (34) 

Earnings per Share (€) 0.4 (3.4) (2.2) (1.1) 


Capital Spending NA NA NA (62) 

Research & Development Expenses NA NA 2 NA 






NA 

Asia-Pacific 

28% 

Key Suppliers 

Americas 

21% 


20 April 2009 

Europe 

51% 


Elcoteq 


Communication 

network 

21% 

Terminal 

Products 

79% 

Key Customers 

Nokia Thomson Multimedia 

Marconi Sony Ericsson 

RIM Siemens 

COMPANY WEBSITE Handset EMS/ODM 

561

Bhavin Shah 

(852) 2800-8538 


562 

Foxconn Int'l Holdings 


Foxconn International Holdings Ltd is a vertically integrated manufacturing services provider for the handset 

industry worldwide. The company's manufacturing services include designing and manufacturing precision tools 

and molds, product development, and manufacturing of components. 





Price (HK$): 2.32 




Key Management: Chin Wai Leung "Samuel"; Dai Feng-shuh "Ben"; Timo Harju No. of Employees: 108,.237 


72.5% held by Hon Hai Revenues 10,382 10,732 9,271 8,512 

Gross Profit 972 984 642 635 


Net Profit 718 721 121 213 


Return on Equity (%) 37% 25% 4% 5% 



Cash & Cash Equivalents 665 1,544 839 1,946 

Gross Debt 140 978 478 886 

Owners’ Equity 2,369 3,309 3,421 3,979 



N/A 

America 

31% 

Key Suppliers 

Europe 

16% 

Asia 

53% 



20 April 2009 


Foxconn Int'l Holdings 

Handset system 

44% 

ODM 

7% 

Others 

4% 

Handset Module 

45% 

Key Customers 


Sony Ericsson China brands 

COMPANY WEBSITE Handset EMS/ODM

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

PC ODM 

Compal Electronics, Inc................. 564 

Gigabyte Technology Co., Ltd....... 565 

Inventec Co., Ltd............................. 566 

Micro-Star International Co., Ltd... 567 

Quanta Computer Inc. .................... 568 

Wistron Corporation....................... 569 

563

Bhavin Shah 

(852) 2800-8538 


564 

Compal Electronics, Inc. 


Compal Electronics Inc. manufactures and markets notebook computers and color monitors. The company also 

produces liquid crystal displays and other computer-related products. Compal Electronics exports its products 

to the United States, Europe, and Asia. 





Price (NT$): 22.85 




Key Management: Hsu Sheng-Hsiung, Lu Ch'ing Hsiung, Chen Rui-Tsung No. of Employees: 43,331 


NA Revenues 310.7 449.6 443.5 400.7 

Gross Profit 17.5 26.1 28.7 24.2 


Net Profit 8.7 13.7 12.7 8.3 






Gross Debt 22.1 21.3 19.7 23.3 

Owners’ Equity 71.2 78.2 76.6 80.1 



Asia 

21% 

America 

31% 

Key Suppliers 

Major PC component makers 

Other 

2% 

Europe 

46% 



20 April 2009 


Compal Electronics, 

TV 

6% 

Others 

2% 

Notebook 

Computer 

Casings 

Key Customers 

Dell Acer 

Toshiba HP 

Lenovo 

COMPANY WEBSITE PC ODM

Bhavin Shah 

(852) 2800-8538 


Gigabyte Technology Co., Ltd. 


Gigabyte Technology Co., Ltd. manufactures and markets computer motherboards and other peripheral 

products. 





Price (NT$): 16.8 




Key Management: Yeh Pei-Cheng, Liu Ming-Hsiung, Chen Chun-Yin No. of Employees: 2,100 


NA Revenues 46,699 51,937 49,660 46,022 


Operating Profit (389) 1,269 2,032 1,757 

Net Profit 195 1,325 1,643 1,699 




Research & Development Expense 1,299 1,616 NA NA 





Geographical Mix (2Q08) 

NA 

Europe Others 

4% 1% 

North America 

7% 

Asia 

32% 

Key Suppliers 


20 April 2009 

Taiwan 

56% 


Product Mix (2Q08) 

Gigabyte Technology 

Motherboards 

22% 

Other Computer 

Products 

34% 

Barebone 

Systems 

3% 

Peripheral PC 

Boards 

42% 

Key Customers 

COMPANY WEBSITE PC ODM 

NA 

565

Bhavin Shah 

(852) 2800-8538 


566 

Inventec Co., Ltd. 


Inventec Co., Ltd. manufactures and markets computers and electronic word processing products. The 

company’s products include notebook computers, desktop computers, workstations, scientific graphic 

calculators, and electronic dictionaries. Inventec markets its products under the brand name “Besta”. 





Price (NT$): 12.15 




Key Management: Yeh Kuo-I, Lee Shin-Chin “Richard”, Wang Chih-Cheng No. of Employees: 4,043 


NA Revenues 257,066 262,295 248,058 256,682 



Net Profit 5,639 5,638 5,092 4,877 



Capital Spending (302) (2,301) (4,800) (6,000) 






Geographical Mix (2Q08) 

Taiwan 

21% 

Key Suppliers 

Intel Fujitsu 

AU Optronics CMO 

Elpida Mitsumi 

AMD Hitachi 

Panasonic Simplo 

Asia 

19% 

ROW 

5% 

America 

23% 


20 April 2009 

Europe 

32% 


Product Mix (2Q08) 

Inventec Co., Ltd. 

Computer 

Peripheral 

Products 

23% 

Computer & 

Server Product 

Manufacturing 

77% 

Key Customers 

HP Acer 

NEC Toshiba 

FujitsuFujitsu 

Siemens 


Bhavin Shah 

(852) 2800-8538 


Micro-Star International Co., Ltd. 


Micro-Star International Co., Ltd. manufactures and markets motherboards and video graphic accelerate (VGA) 

cards. The company exports its products to Europe, North America, and other Asian countries. 





Price (NT$): 15.7 




Key Management: Hsu Hsiang, Lu Chi Long No. of Employees: 2,300 

Business Alliances / Partnerships (NT$ in Millions) FY06 FY07 FY08E FY09E 

NA Revenues 80,745 96,215 101,421 104,698 



Net Profit 1,247 2,913 2,685 2,546 










NA 

America 

22% 

Key Suppliers 

Taiwan 

4% 

Others 

2% 

Asia 

34% 


20 April 2009 

Europe 

38% 

Source: Company, Bloomberg estimates (for FY08 and FY09). Share price is as of 12 March, 2009. 


Micro-Star International 

Interface Card 

24% 

Motherboard 

26% 


NA 

Others 

50% 

Key Customers 

567

Bhavin Shah 

(852) 2800-8538 


568 

Quanta Computer Inc. 


Quanta Computer Inc. manufactures and markets notebook computers and related peripheral equipment. 









Key Management: Lam Pai-Li, Li Du-Rong, Leung Tzu-Chen No. of Employees: 63,250 


NA Revenues 487.9 758.5 808.7 811.7 

Gross Profit 29.7 37.9 42.4 40.5 


Net Profit 13.0 18.4 21.9 19.7 






Gross Debt 48.2 43.5 86.1 106.6 

Owners’ Equity 72.4 87.4 94.8 101.6 



Europe, Middle 

East 

32% 

Key Suppliers 

Major PC component makers 

Asia Other 

15% 3% 

Americas 

50% 



20 April 2009 


Quanta Computer Inc. 

iPod 

2% 

Others 

6% 

Notebook 

Computer 

Casings 

92% 

Key Customers 

Dell Acer 

Sony HP 

Apple 


Bhavin Shah 

(852) 2800-8538 



Wistron Corporation 


Wistron Corporation manufactures and markets notebook computers, personal computers, and other related Ticker: 3231.TW 

information products. 



Price (NT$): 31.6 




Key Management: Lin Hsien-Ming, Lin Chin-Tsai, Huang Po-Tuan No. of Employees: 36,815 


Ju Teng - JV for IMD casings Revenues 221.1 286.8 430.4 450.1 

Gross Profit 14.7 18.4 24.5 23.8 


Net Profit 5.3 6.6 7.0 6.2 






Gross Debt 2.9 10.1 24.0 22.9 

Owners’ Equity 28.7 32.7 37.6 43.1 



Europe 

24% 

Americas 

27% 

Key Suppliers 

Major PC components makers 

Taiwan 

2% 

Other 

47% 



20 April 2009 


Wistron Corporation 

Others 

Handheld 4% 

LCD TV 5% 

4% 

Server 

14% 

Desktop 

6% 

Notebook 

Computer 

Casings 

67% 

Key Customers 

Dell Acer 

HP Lenovo 

Sony 


569

Bhavin Shah 

(852) 2800-8538 


570 


20 April 2009 

Diversified EMS 

Ability Enterprise...............................571 

Benchmark Electronics Inc. .............572 

Celestica Inc. .....................................573 

Flextronics International...................574 

Hi-P International Limited.................575 

Hon Hai Precision..............................576 

Jabil Circuit........................................577 

Mitac International Corporation .......578 

Plexus Corp. ......................................579 

Sanmina-SCI Corporation.................580 

SMART Modular Tech Inc .................581 

Universal Scientific Industrial (USI)..582 

Venture Corporation Limited............583

Bhavin Shah 

(852) 2800-8538 




Ability Enterprise Co., Ltd. sells office automation equipment, information products, office furniture, and 

telecommunications equipment. The company’s products include copiers, fax machines, printers, monitors, 

notebook computers, card printers, projectors, and digital cameras. Ability Enterprise operates as a product 

distributor of Canon. 





Price (NT$): 26.7 




Key Management: Tseng Ming-Ren; Wang Su Yi; Tung Tsi-Hsien No. of Employees: 610 

Business Alliances/Partnerships (NT$ in billions) FY06 FY07 

NA Revenues 26.8 37.0 

Gross Profit 2.6 4.5 

Operating Profit 1.1 2.8 

Net Profit 0.9 2.1 

Earnings per Share (NT$) 2.4 5.4 

Return on Equity (%) 9.3 24.2 

Capital Spending (1.3) 0.2 

Research & Development Expenses 0.3 0.4 

Cash & Cash Equivalents 2.8 2.7 

Gross Debt 3.0 2.6 

Owners’ Equity 6.1 6.6 



Others 

30% 

Key Suppliers 

All major DSC component makers 

Source: Company. Share price is as of 12 March 2009. 

Korea 

15% 


20 April 2009 

Japan 

55% 



COMPANY WEBSITE Diversified EMS 

Others 

4% 

DSC 

96% 

Key Customers 

Casio Nikon 

Fujifilm Samsung 

571

Bhavin Shah 

(852) 2800-8538 


572 

Benchmark Electronics Inc. 


Benchmark Electronics, Inc. provides contract electronics manufacturing and design services. The company 

serves original equipment manufacturers of medical devices, industrial control equipment, testing and 

instrumentation products, and telecommunications equipment. Benchmark also offers product design, printed 

circuit board layout, prototyping and test development services. 


Ticker: BHE 



Price (US$): 10.1 




Key Management: Cary Tze Fu; Donald F Adam; Steven A Barton No. of Employees: 10,522 


NA Revenues 2,907 2,916 2,590 2,208 



Net Profit 112 93 (136) 56 


Return on Equity (%) 12 8 (12) 5 





Owners’ Equity 985 1,289 1,056 NA 



NA 

Asia 

32% 

Key Suppliers 

Europe 

9% 



20 April 2009 

Americas 

59% 


Benchmark Electronics 

Test & 

Instrumentation 

Medical Devices 4% 

14% 

Industrial Control 

Equipment 

16% 


18% 

Computers 

48% 

Key Customers 


COMPANY WEBSITE Diversified EMS

Bhavin Shah 

(852) 2800-8538 


Celestica Inc. 


Celestica Inc. designs and manufactures electronic components. The company's products and services include 

design, prototyping, printed circuit assembly, full system assembly, power converters, memory packages and 

repair services. Celestica markets its products and services to original equipment manufacturers, primarily in 

the computer and communications sectors. 


Ticker: CLS 



Price (US$): 3.01 




Key Management: Craig Howard Muhlhauser; Elizabeth L Delbianco; John Peri No. of Employees: 46,000 


NA Revenues 8,812 8,070 7,678 6,482 



Net Profit (151) (14) (721) 85 


Return on Equity (%) (7) (1) (41) 8 



Cash & Cash Equivalents 804 1,117 1,201 NA 





NA 

Mexico 

14% 

Thailand 

17% 

Key Suppliers 

Canada 

12% 

China 

18% 


20 April 2009 

Other Countries 

39% 


Celestica Inc. 



14% 

Industrial, 

Aerospace & 

Defence 

7% 

Storage 

10% 

Servers 

19% 

Consumer 

22% 

Enterprise 


28% 

Key Customers 

Cisco Sun Micro 


573

Bhavin Shah 

(852) 2800-8538 


574 

Flextronics International 


Flextronics International Ltd. provides electronics manufacturing services. The company's customers include 

original equipment manufacturers in the telecommunications, networking, computer, consumer electronics, and 

medical device industries. 


Ticker: FLEX 



Price (US$): 2.43 




Key Management: Michael Mcnamara; Paul Read; H Raymond Bingham No. of Employees: 162,000 


NA Revenues 18,854 27,558 31,426 25,976 



Net Profit 509 (639) 607 253 

Earnings per Share (US$) 0.9 (0.9) 0.7 0.4 

Return on Equity (%) 9 (9) 16 13 








NA 

Key Suppliers 

Europe 

16% 

Americas 

33% 


20 April 2009 

Asia 

51% 



Flextronics International 


EMS 

100% 

Key Customers 

Sony-Ericsson Motorola 

Nokia

Bhavin Shah 

(852) 2800-8538 


Hi-P International Limited 


Hi-P International Limited is an integrated contract manufacturing services provider. The company specializes 

in precision plastic injection molding, mold design and fabrication, assembly, ancillary value-added services and 

precision metal stamping, The company also provides turnkey contract manufacturing services. 


Ticker: HIPI.SI 



Price (S$): 0.385 




Key Management: Yao Hsiao Tung; Samuel Yuen; Wong Huey Fang No. of Employees: 13,500 


NA Revenues 839.1 976.6 1,077.1 914.5 



Net Profit 57.5 60.0 102.3 78.6 

Earnings per Share (S$) 0.060 0.070 0.120 0.083 





Gross Debt 25.4 34.3 5.7 NA 




NA 

China 

24% 

Singapore 

1% 

Malaysia 

2% 

Key Suppliers 

Europe 

34% 

Rest of Asia 

2% 


20 April 2009 

USA 

36% 



Hi-P International 

Plastic Injection 

40% 

Mold Design 

2% 


Assembly 

58% 

Key Customers 

Motorola Gillette Group(P&G) 

575

Bhavin Shah 

(852) 2800-8538 



Hon Hai Precision 


Hon Hai Precision Industry Co., Ltd. (Foxconn) manufactures and markets personal computer (PC) connectors, Ticker: 2317.TW 

and cable assemblies used in desktop PCs and PC servers. 



Price (NT$): 68.5 

576 



Founded: 1974; Listed: Fiscal Year End: December 

Key Management: Guo, Terry; Huang Te-Tsai No. of Employees: 602,000 


NA Revenues 1,320 1,703 1,950 1,813 

Gross Profit 128.9 167.5 170.8 144.9 


Net Profit 59.9 77.7 55.1 40.8 






Gross Debt 69.3 133.2 128.2 109.8 

Owners’ Equity 263.2 350.7 361.2 408.2 



Europe 

23% 

Asia Pacific 

38% 

Taiwan 

1% 

All major PC 

Key Suppliers 

Pan-International 

component makers Industrial 

Foxconn Innolux 

America 

38% 



20 April 2009 

Hon Hai 


Consumer 

electronics incl all 

Apple 

28% 

Handsets 

12% 

Others 

5% 

Networking 

12% 

Computing and 

Enterprise 

38% 

Connectors and 

components 

5% 

Key Customers 

Dell Acer 

HP Lenovo 

Sony Apple 

Cisco 


Bhavin Shah 

(852) 2800-8538 


Jabil Circuit 


Jabil Circuit, Inc. is an electronic manufacturing services provider for international electronics companies in the 

communications, personal computer, peripheral, consumer, and automotive markets. The company offers 

circuit design, board design from schematic, prototype assembly, volume board assembly, system assembly, 

repair, and warranty services. 


Ticker: JBL 



Price (US$): 3.54 




Key Management: Timothy L Main; Forbes I J Alexander; Mark T Mondello No. of Employees: 61,000 


NA Revenues 12,291 12,780 12,129 12,686 



Net Profit 73 134 132 162 


Return on Equity (%) 3 5 (13) NA 








NA 

Malaysia 

8% 

Mexico 

16% 

Key Suppliers 

HungaryPoland 

6% 8% 

Other 

20% 

China 

22% 


20 April 2009 

United States 

20% 

Jabil Circuit 




EMS 

100% 

Key Customers 

Nokia Phillips 

577

Bhavin Shah 

(852) 2800-8538 


578 

Mitac International Corporation 


Mitac International Corporation manufactures and markets desktop computers, laptop computers, monitors, and 

computer peripherals. 





Price (NT$): 13.15 




Key Management: Ho Chi-Wu; Tsai Feng-Tsz No. of Employees: 1,468 


NA Revenues 91,697 90,220 70,297 70,525 


Operating Profit 5,653 4,907 851 689 

Net Profit 5,383 5,648 2,231 1,996 










NA 

Asia Pacific 

25% 

Key Suppliers 

Europe 

36% 

Taiwan 

1% 


20 April 2009 

North America 

38% 



Mitac International 

Computer and 

Related Products 

100% 

Key Customers 


Medion

Bhavin Shah 

(852) 2800-8538 


Plexus Corp. 


Plexus Corp. provides products realization services to original equipment manufacturers in the high-end 

computer, medical, industrial, telecommunications, and transportation electronics industries. The company 

offers product development and design services, material procurement and management, prototyping, 

assembly, testing, manufacturing, final system box build, and distribution. 


Ticker: PLXS 



Price (US$): 12.88 




Key Management: Dean A Foate; George W Setton; Michael T Verstegen No. of Employees: 7,900 


NA Revenues 1,461 1,546 1,842 1,653 



Net Profit 100 66 84 45 










NA 

Asia 

33% 

Key Suppliers 

Mexico 

4% 

Europe 

3% 


20 April 2009 

USA 

60% 


Plexus Corp. 


Defense/Security 

9% 

Industrial/ 

Commercial 

13% 

Wireless 


Medical 

24% 

10% 

Networking 

44% 

Key Customers 

Juniper Networks GE 


579

Bhavin Shah 

(852) 2800-8538 


580 

Sanmina-SCI Corporation 


Sanmina-SCI Corporation provides electronics contract manufacturing services to customers located around 

the world. The company offers its customers expertise in new product introduction, manufacturing, and design 

and fabrication of complex interconnect products. Sanmina-SCI specializes in circuit fabrication, system 

assembly, integration, and high-end enclosures and cabling. 


Ticker: SANM 



Price (US$): 0.25 




Key Management: Jure Sola; Daid L White; Hari Pillai No. of Employees: 45,610 


NA Revenues 10,955 7,138 7,202 5,446 



Net Profit (142) (1,135) (486) 6 


Return on Equity (%) (6) (66) (52) 0.35 




Gross Debt 1,607 1,588 1,482 NA 

Owners’ Equity 2,271 1,173 696 NA 



NA 

Domestic 

30% 

Key Suppliers 


20 April 2009 

International 

70% 



Sanmina-SCI Corporation 


EMS 

100% 

Key Customers 

HP IBM 

Lenovo

Bhavin Shah 

(852) 2800-8538 


SMART Modular Tech Inc 


Smart Modular Technologies (WWH), Inc. designs and manufactures value added subsystems for computing, 

networking, communications, printer, and storage manufacturers. The company produces memory modules, 

embedded computing and TFT-LCD display products, and offers design, manufacturing, testing, and logistics 

services. 


Ticker: SMOD 



Price (US$): 1.39 




Key Management: Iain Mackenzie; Barry Zwarenstein: Alan Marten No. of Employees: 1,466 


NA Revenues 707 845 670 521 













NA 

Asia 

15% 

Key Suppliers 

Europe 

10% 

Other North & 

Latin America 

19% 


20 April 2009 

USA 

56% 


SMART Modular 


Product Related 

Logistics 

6% 

Electronic 

Subsystem 

94% 

Key Customers 

HP Cisco 


581

Bhavin Shah 

(852) 2800-8538 


582 

Universal Scientific Industrial (USI) 


Universal Scientific Industrial Co., Ltd. manufactures and markets electronic components. The company's main 

components are thick film resistors, frequency parts, wireless local area network (LAN) cards, automotive parts, 

motherboards for personal computers, and fax control boards. Universal Scientific also provides hybrid and 

electronics packaging services. 









Key Management: Chang Hung-Pen "Richard"; Liu Hsiao-Ming "Samuel"; Wei Chen-Yen No. of Employees: 3,004 


NA Revenues 53,212 65,124 68,515 681,110 



Net Profit 1,377 1,868 1,463 1,182 










NA 

Taiwan 

21% 

Key Suppliers 

Europe&Africa 

9% 

Asia 

35% 


20 April 2009 

America 

36% 



Universal Scientific 

Others 

34% 

Netw ork Storage & 

Serv ers 

19% 

Computer & 

Peripherals 

47% 

Key Customers 

IBM Symbol 

CMO Apple 


Bhavin Shah 

(852) 2800-8538 


Venture Corporation Limited 


Venture Corporation Limited provides contract manufacturing services to electronics companies worldwide. The 

company also provides manufacturing, design, engineering, customization, and logistic services. Venture 

Corporation trades and manufactures electronics and computer-related products, develops and markets color 

imaging products for label printing. 


Ticker: VENM.SI 



Price (S$): 4.21 




Key Management: Wong Ngit Liong; Tan Kian Seng; Han Jok Kwang No. of Employees: 11,453 


NA Revenues 3,125 3,873 3784 3072 



Net Profit 241 303 167 167 

Earnings per Share (S$) 0.88 1.10 0.61 0.67 


Capital Spending NA NA (33) (37) 







Asia Pacific 

42% 

US & others 

3% 

Singapore 

55% 


NA 

Key Suppliers 


20 April 2009 


Venture Corporation 

Test & 

Measurement/ 

Medical/ Others 

14% 

RSS/ Industrial 

Products 

20% 

Printing & 

Imaging 

28% 

Computer 

Peripherals 

17% 

Networking & 

Communication 

21% 

Key Customers 

HP IBM 

Xerox Agilent 

Iomega 


583

Bhavin Shah 

(852) 2800-8538 


584 


20 April 2009 

Storage 

Brocade Communications ............. 585 

EMC Corporation............................ 586 

Emulex Corporation ....................... 587 

NetApp............................................. 588 

QLogic Corporation........................ 589 

Quantum Corporation .................... 590 

HDD.................................................. 591 

Optical Disc..................................... 594 

Storage

Bhavin Shah 

(852) 2800-8538 


Brocade Communications 


Brocade Communications Systems, Inc. provides switching solutions for storage area networks (SAN). The 

company’s switching solutions utilize the fiber channel interconnect protocol. Brocade’s family of SilkWorm 

switches enables a company to manage growth of its data storage requirements, improve the data transfer 

performance, and increase the size of its SAN. 


Ticker: BRCD 

Analyst: Mark Moskowitz 


Price (US$): 2.79 




Key Management: Michael Klayko; Richard Deranleau; David L. House No. of Employees: 3,950 


NA Revenues 751 1,237 2,112 1,895 

Gross Profit 445 661 1,321 1,104 


Net Profit 68 77 285 129 





Cash & Cash Equivalents 542 656 1,703 309 

Gross Debt 16 206 1,024 1,272 

Owners’ Equity 616 1,267 2,396 1,677 



International 

37% 

Key Suppliers 

ASICs LSI Logic 

Optical 

Transceivers Finisar 

US 

63% 



20 April 2009 


The Server edge 

& Storage 

16% 

Brocade Communications 

Other 

10% 

Data Center Infra 

74% 

EMC 

Key Customers 

IBM 

NetApp Sun Micro 

HP Dell 

Hitachi Data 

Fujitsu-Siemens Systems 

COMPANY WEBSITE Storage 

585

Bhavin Shah 

(852) 2800-8538 


586 

EMC Corporation 


EMC Corporation provides enterprise storage systems, software, networks, and services. The company's 

products store, retrieve, manage, protect, and share information from all major computing environments, 

including UNIX, Windows NT, and mainframe platforms. EMC operates offices around the world. 


Ticker: EMC 



Price (US$): 10.96 




Key Management: David I. Goulden; William J. Teuber Jr.; Joseph M. Tucci No. of Employees: 42,100 


NA Revenues 11,155 13,230 14,876 14,575 

Gross Profit 5,913 7,211 8,222 7,954 


Net Profit 1,228 1,666 1,612 1,474 






Gross Debt 3,450 3,450 3,450 3,450 

Owners’ Equity 10,326 12,710 13,042 15,058 



NA 


East & Africa 

31% 

Key Suppliers 

Latin America 

5% 

Asia 

11% 

US 

54% 



20 April 2009 


EMC Corporation 

RSA Information 

Content Security 

management 4% 

5% 

Vmware Wirtual 

13% 

Information 

Storage 

78% 

Key Customers 

Selling directly and indirectly to many 

vertical markets 

COMPANY WEBSITE Storage

Bhavin Shah 

(852) 2800-8538 



Emulex Corporation 


Emulex Corporation designs, develops, and supplies a line of fibre channel host adapters, hubs, application- Ticker: ELX 

specific integrated circuits (ASICs), and software products. The company's products enhance access to and Analyst: Mark Moskowitz 

storage of electronic data and applications. Emulex's products are based on internally-developed ASIC 


technology and are deployable across a variety of operating systems. 

Price (US$): 5.32 




Key Management: James M. McCluney; Mike Rockenbach; Paul F. Folino No. of Employees: 806 


NA Revenues 403 470 488 381 

Gross Profit 239 275 329 251 


Net Profit 40 29 (7) 13 







Owners’ Equity 557 582 576 551 



Pacific Rim 

26% 

Europe & ROW 

34% 

Key Suppliers 

Optical 

Finisar 

Transceivers 

LSI Logic ASICs 

US 

40% 



20 April 2009 


Emulex Corporation 

Embedded 

storage 

28% 

Intelligent 

Networking 

0.2% 

Host Server 

Prods 

72% 

Key Customers 

IBM HP 

EMC 


587

Bhavin Shah 

(852) 2800-8538 


588 

NetApp 


NetApp, Inc. delivers unified storage solutions for data-intensive enterprises. The company's storage solutions 

include specialized hardware, software, and services that provide storage management for open network 

environments. NetApp serves enterprises, government agencies, and universities worldwide. 


Ticker: NTAP 



Price (US$): 14.99 



Founded: 1992; Listed: 1995 Fiscal Year End: April 

Key Management: Steve Gomo; Daniel J. Warmenhoven; Thomas Georgens No. of Employees: 7,645 


NA Revenues 2,066 2,804 3,303 3,508 

Gross Profit 1,256 1,705 2,050 2,130 


Net Profit 266 298 455 339 






Gross Debt 304 95 173 1,431 

Owners’ Equity 1,923 1,989 1,700 1,668 



NA 

International 

47% 

Key suppliers 

US 

53% 



20 April 2009 


NetApp 

Network Data 

Storage Device 

100% 

Key customers 




Bhavin Shah 

(852) 2800-8538 



QLogic Corporation 


QLogic Corp. supplies high performance storage networking solutions and networking infrastructure solutions, Ticker: QLGC 

which are sold primarily to original equipment manufacturers and distributors. The company produces host bus Analyst: Mark Moskowitz 

adapters and fibre channel switches, including core, blade and stackable switches. QLogic also supplies Rating: Underweight 

enclosure management and baseboard management products. 

Price (US$): 9.99 




Key Management: H. K. Desai; Simon Biddiscombe; Scott Genereux No. of Employees: 933 


NA Revenues 494 587 598 638 

Gross Profit 350 395 409 440 


Net Profit 284 105 96 109 







Owners’ Equity 859 875 666 622 



Asia 

19% 


East & Africa 

24% 

Key Suppliers 

LSI Logic Finisar 

Samsung 

ROW 

6% 

US 

51% 



20 April 2009 


QLogic Corporation 

Silicon Products 

and Others 

13% 

Network Products 

17% 

Host Products 

70% 

Key Customers 

IBM HP 



589

Bhavin Shah 

(852) 2800-8538 



Quantum Corporation 


Quantum Corporation designs and manufactures storage products. The company sells a variety of storage Ticker: QTM 

products to original equipment manufacturers and distribution customers worldwide. Storage products include Analyst: Not Covered 

DLTtape drives, DLTtape media cartridges, and tape libraries. 


Price (US$): 0.37 




Key Management: Richard Belluzzo; Jon W Gacek; William C Britts No. of Employees: 2,050 


NA Revenues 1,016.2 975.7 826.5 754.5 



Net Profit (64.1) (60.2) 43.5 53.8 


Return on Equity (%) (14.0) (23.9) NA NA 




Gross Debt NA NA 




590 

Europe 

27% 

APAC 

7% 

Key Suppliers 

Jabil Mitsumi 


20 April 2009 

Americas 

66% 



Quantum Corporation 

Storage Care 

Services 

16% 

Tape media 

10% 

Storage Products 

73% 

Key Customers 

HP Dell 


Bhavin Shah 

(852) 2800-8538 



20 April 2009 

HDD 

Seagate Technology Inc ................ 592 

Western Digital Corporation.......... 593 

591

Bhavin Shah 

(852) 2800-8538 


592 

Seagate Technology Inc 


Seagate Technology designs, manufactures, and markets rigid disc drives for enterprise, personal computer, 

and consumer electronics applications. 


Ticker: STX 



Price (US$): 3.88 




Key Management: Stephen J. Luczo; Patrick J. O'Malley; Robert Whitmore No. of Employees: 54,000 


NA Revenues 9,206 11,360 12,708 8,945 

Gross Profit 2,137 2,185 3,252 1,367 

Operating Profit 878 643 1,684 (52) 

Net Profit 840 913 1,262 (789) 



Capital Spending (1,008) (906) (930) (644) 



Gross Debt 970 2,063 2,030 2,334 

Owners’ Equity 5,212 4,737 4,586 3,664 



Singapore 

39% 

Key Suppliers 

Nidec Hutchinson 

NHK Spring Agere 

Hoya Minebea 

TDK STMicro 

Marvell 

Others 

2% 

US 

31% 

Netherlands 

29% 



20 April 2009 


Seagate Technology 

Rigid Disc Drive 

100% 

Key Customers 

HP OEMs 

Distribution Retail 

COMPANY WEBSITE HDD

Bhavin Shah 

(852) 2800-8538 


Western Digital Corporation 


Western Digital Corporation designs and manufactures hard drives for desktop computers and home 

entertainment applications. 


Ticker: WDC 



Price (US$): 17.19 




Key Management: Thomas E. Pardun; John F. Coyne; Timothy M. Leyden No. of Employees: 50,072 


NA Revenues 4,341 5,468 8,074 6,730 

Gross Profit 829 900 1,738 1,104 

Operating Profit 366 415 1,071 423 

Net Profit 395 564 867 360 





Cash & Cash Equivalents 699 907 1,104 1,504 

Gross Debt 44 22 509 504 

Owners’ Equity 1,157 1,716 2,696 2,923 




East & Africa 

29% 

Others 

5% 

Key Suppliers 

Alps Showa Denko 

Fuji Electric STMicro 

TDK Marvell 

IBM 

US 

24% 

Asia 

41% 



20 April 2009 



Hard Drive 

Solutions 

100% 

Key Customers 

Dell OEMs 

Distribution Retail 

COMPANY WEBSITE HDD 

593

Bhavin Shah 

(852) 2800-8538 


594 


20 April 2009 

Optical Disc 

Moser Baer...................................... 595 

Quanta Storage............................... 596

Bhavin Shah 

(852) 2800-8538 


Moser Baer 


Moser Baer India Limited manufactures computer and electronic accessories. The company's products include 

computer floppy disks, digital versatile disks, and recordable compact disks. Moser Baer specializes in the 

European and North American markets. Recently, the company has ventured into solar energy, entertainment 

and IT peripherals & consumer electronics. 

Country: India 

Ticker: MOSR.BO 

Analyst: Nishit Jasani 


Price (Rs): 41.3 




Key Management: Deepak Puri; Yogesh Mathur; R Sampath No. of Employees: 6,784 

Business Alliances/Partnerships (Rs in millions) FY07 FY08 FY09E FY10E 

Philips - for optical disc technology Revenues 19,840.0 20,700.0 30,412.0 35,795.0 

HP- for lightscribe Gross Profit 1,380.0 (949.0) (1,170.0) 947.0 

Imation - for disc technology Operating Profit 1,380.0 (949.0) (1,171.0) 948.0 

Net Profit 781.0 (1,977.0) (2,254.0) 1,031.0 

Earnings per Share (Rs) 5.3 (11.9) (13.4) 6.1 

Return on Equity (%) 4.00 (10.50) (13.20) 6.20 

Capital Spending 6,548.0 9,138.0 3,853.0 5,802.0 


Cash & Cash Equivalents 2,697.0 8,210.0 8,204.0 13,148.0 

Gross Debt 18,502.0 31,842.0 39,842.0 43,842.0 

Owners’ Equity 20,471.0 22,008.0 19,754.0 20,785.0 

Book Value per Share (Rs) 121.9 130.8 117.4 123.5 


Outside India 

72% 

Key Suppliers 

GE Plastics Bayer 

Mitsubishi 

Chemicals Philips 

India 

28% 



20 April 2009 


Moser Baer 

Solar Products 

9% 

Storage Media 

Products 

91% 

Key Customers 

Imation HP 

Memorax Philips 

Maxell 

COMPANY WEBSITE Optical Disc 

595

Bhavin Shah 

(852) 2800-8538 


596 



Quanta Storage Inc. manufactures and markets slim optical storage products, such as compact disk-read only 

memory (CD-ROM), digital versatile disk-read only memory (DVD-ROM), compact disc rewritable (CD-RW), 

and rewritable DVD. 





Price (NT$): 28.6 




Key Management: Lam Pai-Li "Barry"; Chien Chen-Chieh; He Shi-Chi No. of Employees: 335 


NA Revenues 9,740.0 14,957.0 NA NA 


Operating Profit 577.0 852.0 NA NA 

Net Profit 1,068.0 1,388.0 1,146.0 1,128.0 


Return on Equity (%) 18.2 20.3 NA NA 

Capital Spending 55,920.0 4,410.0 NA NA 



Gross Debt 1,493.9 1,080.0 NA NA 




Europe 

5% 

Key Suppliers 

Philips Mediatek 

Americas 

4% 

Asia 

91% 


20 April 2009 




Others 

DVD Player 

3% 

1% 

DVD Parts 

96% 

Key Customers 

Notebook OEM through Quanta Corp 

COMPANY WEBSITE Optical Disc

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

OEM 

Handset OEM .................................. 598 

PC OEM ........................................... 604 

Consumer Electronics ................... 611 

Diversified IT................................... 623 

OEM 

597

Bhavin Shah 

(852) 2800-8538 


598 


20 April 2009 

Handset OEM 

High Tech Computer Corp............. 599 

Motorola, Inc. .................................. 600 

Nokia................................................ 601 

Palm Inc........................................... 602 

Research in Motion Ltd.................. 603

Bhavin Shah 

(852) 2800-8538 


High Tech Computer Corp. 


High Tech Computer (HTC) is a leading manufacturer of Windows Mobile PDA phones and smartphones. It is 

also the first to launch a phone based on the Google Android platform. The company’s business model 

transformed from an ODM to an own-brand one in early-2006. Its main markets are Europe, North America, and 

Asia. 









Key Management: Cher Wang (Hsueh-Hung), Peter Chou (Yung-Ming), Hui-Ming Cheng No. of Employees: 8,285 


Google Revenues 106,141 118,581 153,208 152,445 

Microsoft Gross Profit 34,916 40,666 50,915 45,828 

T-Mobile Operating Profit 26,721 31,024 29,755 27,607 

Net Profit 19,451 23,260 28,219 25,315 



Capital Spending 1,047 1,488 1,192 1,800 



Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 42,572 56,076 57,712 64,439 



Asia and other 

markets 

18.3% 

Europe 

39.7% 

Key Suppliers 

Qualcomm Microsoft 

TI Siemens 

Cypress Samsung 

Anadigics Epson 

Atmel 


20 April 2009 

America 

42% 



High Tech Computer 

9% 

PDA 

2% 

Wireless handset 

OBM 

89% 

Key Customers 

T-Mobile Vodafone 

Verizon Sprint 

Orange 

COMPANY WEBSITE Handset OEM 

599

Bhavin Shah 

(852) 2800-8538 


600 

Motorola, Inc. 


Motorola, Inc. provides integrated communications solutions and embedded electronic solutions. The company 

offers software-enhanced wireless telephones, two-way radios, messaging, and satellite communications 

products and systems, as well as networking and Internet-access products. Customers include consumers, 

network operators, and commercial, government, and industrial customers. 


Ticker: MOT 







Key Management: Gregory Q Brown, Sanjay K Jha, Edward J Fitzpatrick No. of Employees: 64,000 


NA Revenues 42,847 36,622 30,146 24,726 

Gross Profit 12,772 10,435 9,001 7,736 

Operating Profit 4,066 529 243 19 

Net Profit 2,833 747 246 54 






Gross Debt 2,704 4,323 4,184 4,184 

Owners’ Equity 17,114 15,447 9,525 9,401 



NA 

Other Nations 

36% 

Key Suppliers 

United Kingdom 

Brazil 

3% 

5% 

China 

7% 


20 April 2009 

United States 

49% 


Motorola, Inc. 


Enterprise 

Mobility Solutions 

27% 

Home and 

Networks Mobility 

33% 

Mobile Devices 

40% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Nokia 


Nokia is a player in the mobile industry. The company manufactures a range of mobile devices with services 

and software that enable people to experience music, navigation, video, television, imaging, games, business 

mobility and more. Nokia also provides equipment, solutions and services for communications networks. 

Country: Finland 

Ticker: NOK1V.HE 



Price (€): 8.63 




Key Management: Olli-Pekka Kallasvo, Richard A Simonson, Jorma Joakko Ollila (chairman) No. of Employees: 128,445 

Business Alliances / Partnerships (€ in billions) FY06 FY07 FY08 FY09E 

NA Revenues 51.2 54.0 50.7 42.7 

Gross Profit 13.4 17.8 17.8 14.0 


Net Profit 4.2 5.8 5.1 2.3 






Gross Debt 0.3 1.3 5.4 5.4 

Owners’ Equity 12.0 14.8 14.2 14.1 



North America 

5% 

Latin America 

11% 

Asia-Pacific 

25% 

China 

9% 

Key Suppliers 

All major handset component makers 


20 April 2009 

Europe 

37% 

Middle East & 

Africs 

13% 



Nokia 

Netw ork equipment 

30% 

Navteq 

1% 

Handsets 

69% 

Key Customers 


NA 

601

Bhavin Shah 

(852) 2800-8538 


602 

Palm Inc. 


Palm provides mobile computing products through Internet, retail, reseller, and wireless operator channels 

throughout the world. The company also sells its products through its own retail and online stores. Its products 

include smartphones, mobile managers, handheld computers, and software and accessories. 


Ticker: PALM 



Price (US$): 7.86 




Key Management: Johnathan Rubinstein, Edward T Colligan, Douglas C Jeffries No. of Employees: 1,050 

Business Alliances / Partnerships (US$ in millions) FY07 FY08 FY09E FY10E 

AT&T Wireless Revenues 1,561 1,319 721 567 

Cingular Gross Profit 575 402 160 148 

Sprint Operating Profit 100 (60) (247) (106) 

T-Mobile Net Profit 56 (111) (768) (400) 

Verizon Earnings per Share (US$) 0.5 (1.0) (6.9) (3.4) 

Orange (Europe) Return on Equity (%) 7.2 (5.5) (204.0) 24.6 



Cash & Cash Equivalents 128 177 140 (7) 

Gross Debt 0 398 388 384 

Owners’ Equity 1,062 367 (160) (550) 

Book Value per Share (US$) 10.2 2.8 (1.0) (3.0) 


Others 

21% 

Key Suppliers 

Intel Sony 

TI Sharp 


20 April 2009 

United States 

79% 


Palm Inc. 


Smartphones 

85% 

Handheld 

Computers 

15% 

Key Customers 

Ingram Micro Tech Data 

COMPANY WEBSITE Handset OEM

Bhavin Shah 

(852) 2800-8538 


Research in Motion Ltd. 


Research In Motion Limited (RIM) designs, manufactures, and markets wireless solutions for the global mobile 

communications market. The company provides platforms and solutions for access to e-mail, phone, SMS 

messaging, Internet, and Intranet-based applications. 


Ticker: RIMM 

Analyst: Ehud Gelblum 


Price (CAD): 52.3 



Founded: 1984; Listed: 1998 Fiscal Year End: February 

Key Management: Michael Lazaridis, James L Balsillie No. of Employees: 8,387 


NA Revenues 3,037 6,009 11,065 13,693 

Gross Profit 1,658 3,081 5,097 5,818 


Net Profit 632 1,294 1,974 2,022 


Return on Equity (%) 28.2 40.3 35.3% 25.1% 

Capital Spending (254) (352) (834) (1,091) 


Cash & Cash Equivalents 677.1 1,184.4 835.5 2,592.0 


Owners’ Equity 2,484 3,934 7,928 10,051 



NA 

Key Suppliers 

UK 

8% 

Other 

26% 

Canada 

7% 


20 April 2009 

US 

59% 



Research in Motion 

Software 

4% 

Services 

14% 

Other 

2% 

Blackberry 

Smartphone 

79% 

Key Customers 


NA 

603

Bhavin Shah 

(852) 2800-8538 


604 


20 April 2009 

PC OEM 

Acer Inc. .......................................... 605 

Apple Inc. ........................................ 606 

ASUSTek Computer Inc. ................ 607 

Dell Inc............................................. 608 

Hewlett-Packard.............................. 609 

Lenovo Group Limited ................... 610

Bhavin Shah 

(852) 2800-8538 


Acer Inc. 


Acer Inc. manufactures and distributes semiconductor products, personal computers, computer peripherals, 

multimedia products, and computer software. The company also provides maintenance and repair services to 

customers. In addition, Acer Inc. operates a real estate business. The company markets its products under the 

Acer brand name. 





Price (NT$): 46.7 




Key management: Gianfranco Lanci; Chan Hao "Howard"; Wang Chen-Tang No. of Employees: 6,893 


NA Revenues 369.1 462.1 548.0 493.7 

Gross Profit 38.9 47.4 56.0 46.9 


Net Profit 8.5 10.6 11.8 10.8 



Capital Spending 2.2 (3.1) (0.3) (0.01) 



Gross Debt 7.8 22.2 18.7 15.9 

Owners’ Equity 75.6 76.8 80.6 82.5 



North America 

28% 

Asia Pacific 

13% 

Others 

6% 

Key Suppliers 

All Major PC Component Makers 


20 April 2009 

Europe 

53% 



Acer Inc 

COMPANY WEBSITE PC OEM 

Display 

14% 

DT 

17% 

Others 

4% 

NB 

65% 

Key Customers 

Own Brand (100%) 

605

Bhavin Shah 

(852) 2800-8538 


606 

Apple Inc. 


Apple Inc. designs, manufactures, and markets personal computers and related personal computing and 

communicating solutions. The company’s products are sold primarily to education, creative, consumer, and 

business customers. Apple provides its proprietary desktop and notebook computers, operating system, 

applications, music players, and online music store. 


Ticker: AAPL 



Price (US$): 96.35 




Key Management: Steven Paul Jobs; Peter Oppenheimer; Timothy D. Cook No. of Employees: 32,000 


NA Revenues 19,315 24,006 32,479 32,975 

Gross Profit 5,598 8,154 11,145 10,891 


Net Profit 1,989 3,496 4,834 4,270 



Capital Spending (657) (735) (1,091) (1,046) 

Research & Development Expenses 712 782 1,109 1,215 



Owners’ Equity 9,984 14,532 21,030 25,703 



NA 

Retail (US, 

Canada, Japan, 

UK) 

19% 

Others 

8% 

Key Suppliers 

Europe 

23% 

Japan 

5% 


20 April 2009 

US 

45% 



Apple Inc. 

Peripherals and 

other hardware 

iPhone 5% 

Software. Service 6% 

& Others 

7% 

Other Music 

related products 

10% 

iPod 

28% 

Macintosh 

44% 

Key Customers 



COMPANY WEBSITE PC OEM

Bhavin Shah 

(852) 2800-8538 


ASUSTek Computer Inc. 


ASUSTek Computer Inc. manufactures and markets computer motherboards, interface cards, notebook 

computers, and other related products. 





Price (NT$): 34.3 




Key management: Shen, Zhen-Lai (Jerry); Chang David , Shih Chung-Tang No. of Employees: 120,562 


Pegatron (ODM) was spun off from Asus Revenues 553.8 755.4 735.8 533.3 

Asus holds 100% stake in Pegatron Gross Profit 54.4 74.8 76.2 48.7 


Net Profit 19.0 27.6 15.9 7.8 






Gross Debt 17.6 24.2 23.8 16.8 

Owners’ Equity 143.2 181.3 182.4 182.4 



Asia 

36% 

Others 

11% 

Key suppliers 



20 April 2009 

Europe 

53% 



ASUSTek Computer 

Handheld 

2% 

MB/Cards 

21% 


Others 

11% 

Eee PC 

19% 

NB 

47% 

Key customers 

Own brand (100%) 

607

Bhavin Shah 

(852) 2800-8538 


608 

Dell Inc. 


Dell Inc. provides products and services required for customers worldwide to build their information-technology 

and internet infrastructures. The company sells personal computers, servers, storage systems, and other 

technology products and services. Dell serves consumers and businesses in the Americas, Europe, the Middle 

East, Africa, and the Asia Pacific region. 


Ticker: DELL 



Price (US$): 9.44 




Key Management: Michael S. Dell; Brian T. Gladden; Jeffrey W. Clarke No. of Employees: 76,500 


NA Revenues 57,420 61,133 61,101 51,181 

Gross Profit 9,516 11,671 11,091 9,020 


Net Profit 2,583 2,947 2,612 1,968 






Gross Debt 757 587 2,011 2,011 

Owners’ Equity 4,328 3,735 4,271 5,293 



NA 


East & Africa 

25% 

Asia 

14% 

Key Suppliers 


20 April 2009 

US 

61% 



Dell Inc. 

Servers and 

Networking 

11% 

Software & 

Peripherals 

16% 

Enhanced 

Services 

9% 

Storage 

4% 

Desktop PCs 

32% 


Mobility 

29% 

Key Customers 

Direct and indirect sales

Bhavin Shah 

(852) 2800-8538 


Hewlett-Packard 


Hewlett-Packard provides imaging and printing systems, computing systems, and information technology 

services for business and home. The company's products include laser and inkjet printers, scanners, copiers 

and faxes, personal computers, workstations, storage solutions, and other computing and printing systems. 

Hewlett-Packard sells its products worldwide. 


Ticker: HPQ 



Price (US$): 29.34 




Key Management: Mark V. Hurd; Catherine A. Lesjak; Peter J. Bocian No. of Employees: 321,000 


NA Revenues 112,368 126,292 135,184 113,583 

Gross Profit 24,931 28,686 30,827 26,068 


Net Profit 6,781 8,827 9,945 9,099 






Gross Debt 8,285 11,508 17,852 20,462 

Owners’ Equity 45,952 47,103 38,942 43,312 



NA 

US 

31% 

Key Suppliers 


20 April 2009 

International 

69% 



Hewlett-Packard 

Imaging and 

Printing 

25% 

Personal Systems 

35% 

HP Financial 

services 

2% 

Corporate 

Investments 

1% 

Tech Solutions 

37% 

Key Customers 




609

Bhavin Shah 

(852) 2800-8538 


610 

Lenovo Group Limited 


Lenovo Group Limited, through its subsidiaries, sells and manufactures Lenovo brand personal computers and 

handheld devices. The company also provides internet services and IT (information technology) services, and 

has a contract manufacturing business. 





Price (US$): 1.53 




Key Management: Willian J Amelio; Wong Wai Ming; Yang Yanquing No. of Employees: 23,871 


With IBM - Allowed to use IBM name for select Revenues 16,694 15,154 12,454 12,077 

products for five years (after its acquisition of Gross Profit 2,513 1,807 1,393 1,378 

IBM's PC division in April 2005) Operating Profit 464 (139) (36) 110 

Net Profit 448 (136) (33) 76 

Earnings per Share (US$) 0.052 (0.015) (0.004) 0.008 

Return on Equity (%) 32 (9) (3) 5 




Gross Debt 526 523 523 523 

Owners’ Equity 1,613 1,351 1,319 1,366 



Asia Pacific 

(excluding China) 

10% 


East 

20% 

Americas 

25% 

Key Suppliers 



20 April 2009 

Greater China 

45% 



Lenovo Group 

Computer 

Peripherals 

1% 

Personal 

Computer 

99% 

Key Customers 

Own brand 100% 

COMPANY WEBSITE PC OEM

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Consumer Electronics 

Canon, Inc. ...................................... 612 

Casio Computer Co., Ltd. .............. 613 

Citizen Holdings Co., Ltd. .............. 614 

LG Electronics ................................ 615 

Panasonic Corporation .................. 616 

Pioneer Corporation....................... 617 

Royal Philips Electronics............... 618 

Sanyo Electric Co., Ltd. ................. 619 

Sharp Corp...................................... 620 

Sony................................................. 621 

Tandberg ASA ................................ 622 

611

Bhavin Shah 

(852) 2800-8538 


612 

Canon, Inc. 


Canon Inc. (Canon) is a professional and consumer imaging solutions company and a patent-holder of digital 

imaging technologies. Its products include networked multifunction devices, digital and analog copiers, 

computer peripherals, facsimile machines, image filing systems, camcorders, cameras and lenses, 

semiconductor, and broadcast and medical equipment. 





Price (¥): 2,280 




Key Management: Fujio Mitarai, Toshizo Tanaka, Tsuneji Uchida No. of Employees: 1,42,491 

Business Alliances / Partnerships (¥ in billions) FY06 FY07 FY08 FY09E 

NA Revenues 4,157 4,481 4,094 3,413 

Gross Profit 2,060 2,247 1,938 1,346 


Net Profit 455 488 309 77 






Gross Debt 31 27 14 14 

Owners’ Equity 2,987 2,922 2,660 2,645 



NA 


17% 

Japan 

21% 

Key Suppliers 

Americas 

28% 


20 April 2009 

Europe 

34% 

Source: Company reports, J.P. Morgan estimates. Note: Share price is as of 12 March 2009. 


Canon, Inc. 

Cameras 

25% 

Optical & other 

products 

10% 

Business 

Machines 

65% 

Key Customers 

Hewlett Packard Canon OEM LBP 

COMPANY WEBSITE Consumer Electronics

Bhavin Shah 

(852) 2800-8538 


Casio Computer Co., Ltd. 


Casio Computer Co., Ltd. (Casio Computer) manufactures watches and desktop calculators. The company also 

makes television sets, word processors, personal computers, digital cameras, and electronic musical 

instruments. Casio Computer exports its products to North America, Europe, and Asia. 





Price (¥): 750 




Key Management: Toshio Kashio, Kazuo Kashio, Yukio Kashio No. of Employees: 12,803 


NA Revenues 621 623 533 461 

Gross Profit 184 170 133 104 


Net Profit 25 12 5 (3) 






Gross Debt 42 21 11 11 

Owners’ Equity 224 223 219 206 



NA 

Asia 

13% 

Europe 

17% 

Key Suppliers 

Other 

7% 

North America 

20% 


20 April 2009 

Japan 

44% 



Casio Computer 

Other Factory 

Electronic Automation,Molds 

Devices 4% 

Information 6% 

Equipment 

8% 

Watches 

16% 

Consumer 

Products 

36% 

Mobile Network 

Solutions 

30% 

Key Customers 

COMPANY WEBSITE Consumer Electronics 

NA 

613

Bhavin Shah 

(852) 2800-8538 


614 

Citizen Holdings Co., Ltd. 


Citizen Holdings Co., Ltd. (Citizen) produces and sells watches and machine tools. The company specializes in 

the production of wrist watches, information equipment, electronic equipment, and industrial machinery and 

equipment. Citizen also sells jewelry and fashion glasses. 





Price (¥): 368 




Key Management: Mitsuyuki Kanamori, Toshio Koga, Osamu Yamada No. of Employees: 21,721 


NA Revenues 336 337 305 260 



Net Profit 7 12 (19) (5) 







Owners’ Equity 253 242 242 235 



NA 

America 

16% 

Key Suppliers 


Europe 

3% 

11% 

Asia 

31% 


20 April 2009 

Japan 

39% 



Citizen Holdings 

Industrial 

Machinery 

11% 

Other- Jewelry, 

Auto Parts 

9% 

Electronic Device 

31% 

Electronic 

Products 

7% 

Watches & Clocks 

43% 

Key Customers 

Nokia NEC 

Citizen Watch Philips 

Seiko Epson Motorola 

COMPANY WEBSITE Consumer Electronics

Bhavin Shah 

(852) 2800-8538 




LG Electronics Inc. (LGE) manufactures and markets digital display equipment and home appliances, including 

personal computers, CD-ROMs, televisions, washers, air conditioners, and microwaves. The company also 

produces telecommunications equipment such as handsets. 





Price (W): 82,000 




Key Management: Nam Yong, Lee Hee-Gook, Baek Woon-Hyun No. of Employees: 28,397 

Business Alliances / Partnerships (Won in billions) FY06 FY07 FY08 FY09E 

LGD 

LG Micron 

Revenues 

Gross Profit 

23,170.7 

5,443.3 

23,501.9 

5,162.1 

27,638.5 

6,442.6 

26,170.1 

4,505.0 

Operating Profit 534.9 564.6 1,226.7 (412.3) 

Net Profit 212.7 1,222.4 483.0 (459.6) 

Earnings per Share (W) 1,314.0 7,550.9 2,988.5 (2,840.2) 



Research & Development Expenses 788.1 957.9 (414.1) (352.9) 

Cash & Cash Equivalents 510.3 532.4 1,228.8 335.5 

Gross Debt 2,472.4 2,047.6 2,255.8 2,482.3 

Owners’ Equity 6,139.2 7,209.5 8,276.6 7,678.5 

Book Value per Share (W) 37,935.1 44,275.3 51,142.5 47,447.0 


Europe 

12% 

Asia 

24% 

Key Suppliers 

LGD LG Micron 

Others 

4% 

Americas 

31% 

South Korea 

29% 


20 April 2009 




Digital Display 

32% 

Digital Media 

9% 

Mobile 

Telecommunicatio 

n 

32% 

Digital Appliance 

27% 

Key Customers 

Verizon Hutchison 

Home Depot Sprint 

Sony Sears 


615

Bhavin Shah 

(852) 2800-8538 


616 

Panasonic Corporation 


Panasonic Corporation manufactures electric and electronic products. The company produces home 

appliances, audio and video, computer peripherals, telecommunications, industrial equipment, and electronic 

parts. It has associated companies around the world. 





Price (¥): 1,031 




Key Management: Kunio Nakamura, Makoto Uenoyama, Fumio Ohtsubo No. of Employees: 305,828 


NA Revenues 9,108.2 9,068.9 7,813.0 7,230.0 

Gross Profit 2,713.8 2,691.7 2,045.0 1,852.0 


Net Profit 217.2 281.9 (375.0) (96.8) 






Gross Debt 450.0 388.6 907.3 1,429.8 

Owners’ Equity 3,916.7 3,742.3 2,809.7 2,627.6 



NA 

Others 

23% 

Europe 

13% 

America 

14% 

Key Suppliers 


20 April 2009 

Japan 

50% 



Panasonic Corporation 

MEW/Pana home 

20% 

Device 

11% 

JVC 

2% 

Other 

7% 

Appliance 

12% 

Digital AVC 

Network 

47% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Pioneer Corporation Country: Japan 


Pioneer Corporation manufactures and sells audio and video equipment for household, industrial, and 

automobile use. The company produces and sells visual and music software and media such as DVDs and 

CDs. It also licenses its patented technologies for optical disk to other businesses. 




Price (¥): 87 




Key Management: Susumu Kotani, Hideki Okayasu, Hajime Ishizuka No. of Employees: 42,775 


NA Revenues 797.1 774.5 560.0 420.8 

Gross Profit 182.7 172.6 66.0 71.2 


Net Profit (6.8) (18.0) (131.2) (76.0) 






Gross Debt 104.6 100.5 160.5 200.5 

Owners’ Equity 268.1 247.4 103.1 27.1 

Book Value per Share (¥) 1,537.2 1,206.8 502.8 132.0 


NA 

Other 

27% 

Europe 

22% 

Key Suppliers 


20 April 2009 

Japan 

28% 

North America 

23% 



Pioneer Corporation 

Home Electronics 

44% 

Others 

10% 

Car Electronics 

46% 

Key Customers 


NA 

617

Bhavin Shah 

(852) 2800-8538 


618 

Royal Philips Electronics 


Koninklijke (Royal) Philips Electronics N.V. manufactures medical systems, domestic appliances, consumer 

electronics, and lighting. The company produces imaging, ultrasound and healthcare informatics equipment, 

shaving and beauty and health and wellness products, displays, peripherals, and lamps and luminaries, and 

offers medical transcription services. 


Ticker: PHG.AS 

Analyst: Andreas Willi 


Price (€): 12.25 




Key Management: Gerard Kleisterlee, Pierre-Jean Sivignon, Gottfried Dutiné No. of Employees: 121,398 


LGD for sourcing of screens Revenues 26,976 26,793 26,392 24,722 

Funai for US consumer electronics Gross Profit 8,295 9,200 8,495 8,411 

Operating Profit 1,183 1,848 317 967 

Net Profit 5,383 4,164 (186) 585 






Gross Debt 3,878 3,563 4,158 4,158 

Owners’ Equity 21,974 20,287 16,243 16,182 



Emerging 

Markets 

32% 

Other Mature 

Markets 

5% 

Key Suppliers 

Intermagnetics Gen Analogic 

Photon Dynamics Virage Logic 

TSMC Benchmark 

Modem Media Trikon Tech 

LTX FSI Int’l 

Flextronics Jabil 

Altera 

North America 

29% 


20 April 2009 


34% 



Royal Philips 

Consumer 

Lifestyle 

42% 

I&EB 

1% 

GMS 

1% 

Healthcare 

29% 


Lighting 

28% 

Key Customers 

Arrow Electronics Ericsson 

Sony Sanmina-SCI 

Avnet Flextronics 

General Motors Siemens

Bhavin Shah 

(852) 2800-8538 


Sanyo Electric Co., Ltd. 


Sanyo Electric Co., Ltd. (Sanyo) manufactures electrical appliances and equipment for household and industrial 

use. The company’s products include household appliances, audio/video equipment, semiconductor products, 

and batteries. Sanyo’s industrial equipment includes vending machines and commercial-use kitchen 

appliances. 





Price (¥): 132 




Key Management: Seiichiro Sano, Koichi Maeda, Kazuhiko Suruta No. of Employees: 99,875 


NA Revenues 1,883 2,018 1,918 1,775 



Net Profit (45) 29 (8) (14) 

Earnings per Share (¥) (72.7) 4.7 (2.7) (8.3) 

Return on Equity (%) (78.38) 286.3 (4.0) (3.8) 






Book Value per Share (¥) 6.5 4.3 NA NA 


NA 

North America 

13% 

Europe 

11% 

Key Suppliers 

Rest of World 

3% 

Asia 

34% 


20 April 2009 

Japan 

39% 


Sanyo Electric 

Source: Company reports, Consensus estimates from Bloomberg (FY09E and FY10E). Note: Share price is as of 12 March 2009. 

Commercial 

13% 

Consumer 

Electronics 

36% 

Others 

5% 

Components 

46% 

Key Customers 


NA 

619

Bhavin Shah 

(852) 2800-8538 


620 

Sharp Corp. 


Sharp Corporation manufactures consumer and industrial electronics. Its products are audio-visual, 

communication, home appliances, and electronic parts including flash memory and integrated circuits. Sharp 

operates its business worldwide. 





Price (¥): 706 




Key Management: Katsuhiko Machida, Toshishige Hamano, Mikio Katayama No. of Employees: 53,708 


NA Revenues 3,127.8 3,417.7 2,887.0 3,113.3 

Gross Profit 706.5 755.0 524.3 490.3 


Net Profit 101.7 101.9 (95.7) (87.0) 

Earnings per Share (EPS) 93.2 92.6 (86.98) (79.0) 





Gross Debt 487.1 660.1 760.1 960.1 

Owners’ Equity 1,172.3 1,231.6 1,105.1 1,001.6 

Book Value per Share (BVPS) 1,074.6 1,119.1 1,004.1 910.1 


NA 

Asia 

16% 

USA 

17% 

Key Suppliers 

Europe 

4% 

Others 

3% 


20 April 2009 

Japan 

60% 



Sharp Corp. 

Electronic 

Components 

34% 

Consumer/Inform 

ation products 

66% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Sony 


Sony Corporation manufactures audio, video, game, communication, key device and information technology 

products for the consumer and professional markets. The company’s other businesses include music, pictures, 

computer entertainment, and online businesses. 





Price (¥): 1,735 




Key Management: Howard Stringer, Nobuyuki Oneda No. of Employees: 180,500 


NA Revenues 8,295.7 8,871.4 7,701.9 6,951.0 

Gross Profit 2,406.1 2,682.2 2,007.2 1,936.5 


Net Profit 126.3 369.4 (180.8) (142.3) 





Cash & Cash Equivalents 799.9 1,086.4 692.4 741.8 

Gross Debt 1,096.5 1,084.2 1,084.2 1,384.2 

Owners’ Equity 3,370.7 3,465.1 3,232.0 3,037.3 



NA 

Europe 

25% 

Key Suppliers 

Others 

22% 

Japan 

26% 

USA 

27% 


20 April 2009 


Sony 


Fin. Services 

8% 

Pictures 

12% 

Others 

4% 

Games 

12% Electronics 

65% 

Key Customers 


NA 

621

Bhavin Shah 

(852) 2800-8538 


622 

Tandberg ASA 


Tandberg ASA develops and markets video conferencing solutions. The company sells products for group 

video conferencing and application-specific systems. The product line includes compact units for small groups 

and larger systems for meeting rooms. Tandberg offer installation, training, and maintenance services to its 

customers. The company operates worldwide. 

Country: Norway 

Ticker: TAA.OL 



Price (NOK): 90.4 




Key Management: Jan Christian Opsahl, Amund Skarholt, Fredrik Halvorsen No. of Employees: 1,243 


HP Revenues 419.7 630.5 808.8 894.5 

Microsoft Gross Profit 282.8 418.8 533.9 NA 

IBM Operating Profit 81.8 146.1 176.7 188.5 

Nortel Net Profit 61.1 102.4 140.8 144.0 

Cisco Earnings per Share (US$) 0.520 0.930 1.250 1.275 

Avaya Return on Equity (%) 23.4 30.9 30.0 25.6 

Capital Spending 34.3 42.8 NA 42.0 







NA 

EMEA 

37% 

Key Suppliers 

APAC 

11% 


20 April 2009 

Americas 

52% 


Tandberg ASA 

Source: Company reports, Consensus estimates from Bloomberg (FY09E). Note: Share price is as of 12 March 2009. 

Network products 

19% 

Endpoints 

15% 

Value Added 

Services 

66% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Diversified IT 

Advantech ....................................... 624 

Fuji Electric Holdings Co., Ltd....... 625 

Fujitsu, Limited............................... 626 

Hitachi, Ltd...................................... 627 

International Business Machines.. 628 

Mitsubishi Electric Corporation .... 629 

National Instruments...................... 630 

Oki Electric Industry Co., Ltd. ....... 631 

Omron Corporation ........................ 632 

Samsung Electronics ..................... 633 

Siemens........................................... 634 

Sun Microsystems.......................... 635 

Toshiba Corporation ...................... 636 

Xerox Corporation.......................... 637 

623

Bhavin Shah 

(852) 2800-8538 


624 

Advantech 


Advantech Co., Ltd. manufactures and markets embedded personal computers (PC), network computing 

products, industrial automation products, and panel PCs. 









Key Management: NA No. of Employees: 1,360 


NA Revenues 14,702.4 16,084.4 17,381.0 14,437.0 


Operating Profit 3,092.2 3,195.1 2,854.0 1,717.0 

Net Profit 2,406.7 2,487.8 2,702.5 2,036.0 




Research & Development Expense 816.7 1,121.2 NA NA 






NA 

Europe 

19% 

Taiwan 

10% 

Asia 

28% 

Key Suppliers 


20 April 2009 

North America 

43% 


Advantech 

Source: Company, J.P. Morgan, Bloomberg estimates (FY08 and FY09). Share price is as of 12 March 2009. 

Desktop 

Computer 

17% 

Industrial 

Automation 

21% 

Embedded 

Computing 

22% 

Others - 

Networking 

1% 

Industrial 

Computer 

39% 

Key Customers 

COMPANY WEBSITE Diversified IT 

NA

Bhavin Shah 

(852) 2800-8538 


Fuji Electric Holdings Co., Ltd. 


Fuji Electric Holdings Co., Ltd. manufactures electric machinery and electronic devices. The company’s 

products include automatic vending machines, factory automation equipment, and power supplies, as well as 

information and electronic components such as power semiconductors and integrated circuits (ICs). 





Price (¥): 81 




Key Management: Haruo Ito, Katsushi Nakayama, Michihiro Kitazawa No. of Employees: 25,634 


NA Revenues 908.1 922.2 760.0 690.9 

Gross Profit 199.2 191.3 138.0 156.9 


Net Profit 23.1 16.8 (70.0) (10.6) 






Gross Debt 231.9 260.7 276.7 281.7 

Owners’ Equity 274.9 254.4 150.6 133.0 



NA 

Key Suppliers 

Europe 

Asia North America 

1% 

4% 

1% 

China 

5% 

Japan 

89% 



20 April 2009 


Fuji Electric 

Retail Systems 

17% 

Device 


20% 

FA Components 

and Systems 

21% 

Electric Systems 

44% 

Key Customers 

Samsung Seagate 



625

Bhavin Shah 

(852) 2800-8538 


626 

Fujitsu, Limited 


Fujitsu Limited manufactures semiconductor, computer, and communication equipment. The company provides 

comprehensive information technology, network and telecommunication solutions, and internet services. 





Price (¥): 334 




Key Management: Michiyoshi Mazuka, Kazuhiko Kato, Kuniaki Nozoe No. of Employees: 167,374 


NA Revenues 5,100.2 5,330.9 4,701.0 4,453.0 

Gross Profit 1,318.5 1,435.0 1,308.0 1,382.0 


Net Profit 102.4 48.1 (52.0) 18.6 






Gross Debt 745.8 887.3 807.3 727.3 

Owners’ Equity 969.6 948.2 871.2 864.8 



NA 

EMEA 

14% 

APAC & China 

16% 

Key Suppliers 

Americas 

9% 

Japan 

80% 



20 April 2009 


Fujitsu, Limited 

Device Solutions 

15% 

Ubiquitous 

Solurions 

22% 

Others 

1% 


Solutions 

62% 

Key Customers 

Toyota Mizuho Financial 

Group NTT Group 

COMPANY WEBSITE Diversified IT

Bhavin Shah 

(852) 2800-8538 


Hitachi, Ltd. 


Hitachi, Ltd. manufactures communications and electronic equipment, heavy electrical and industrial machinery, 

and consumer electronics. The company’s diverse product line ranges from nuclear power systems to kitchen 

appliances. Hitachi also operates subsidiaries in the wire and cable, metal, and chemical industries. 





Price ((¥)): 248 




Key Management: Etsuhiko Shoyama, Toyoaki Nakamura, Kazuo Furukawa No. of Employees: 347,810 


NA Revenues 10,247.9 11,226.7 10,043.9 9,522.8 

Gross Profit 2,159.5 2,322.5 2,087.2 2,149.7 


Net Profit (32.8) (58.1) (702.8) (130.3) 



Capital Spending 1,048.5 969.0 950.0 950.0 



Gross Debt 2,687.5 2,531.5 2,531.5 2,531.5 

Owners’ Equity 2,442.8 2,170.6 1,365.0 1,270.7 



NA 

Americas 

9% 

Asia 

13% 

Key Suppliers 

Europe 

5% 

Others 

1% 

Japan 

72% 



20 April 2009 


Hitachi, Ltd. 

Electromic 

Devices 

11% 

Logistics 

11% 

High functional 

materials 

14% 

Firewall/Security/ 

VPN 

21% 

Info & Telecom 

21% 

Key Customers 


NA 

627

Bhavin Shah 

(852) 2800-8538 


628 

International Business Machines 


International Business Machines Corporation (IBM) provides computer solutions through the use of advanced 

information technology. The company’s solutions include technologies, systems, products, services, software, 

and financing. IBM offers its products through its global sales and distribution organization, as well as through a 

variety of third-party distributors and resellers. 


Ticker: IBM 



Price (US$): 90.4 




Key Management: Samuel J. Palmisano, Mark Loughridge, Robert C. Weber No. of Employees: 398,455 


NA Revenues 91,424 98,786 103,630 98,256 

Gross Profit 38,295 41,729 45,660 43,488 


Net Profit 9,492 10,418 12,335 12,242 




Research & Development Expense 6,107 6,153 6,336 5,991 


Gross Debt 22,682 35,274 33,926 33,033 

Owners’ Equity 28,507 28,469 13,465 17,616 



NA 

Asia 

20% 


East & Africa 

36% 

Key Suppliers 

OEM 

3% 

US 

41% 



20 April 2009 


International Business 

Other Revenue & 

Global Financing Adj 

2% 1% 

System & Tech 

19% 

Software 

21% 

Global Services 

57% 

Key Customers 




Bhavin Shah 

(852) 2800-8538 


Mitsubishi Electric Corporation 


Mitsubishi Electric Corporation develops, manufactures, and markets electronic equipment. The company's 

products include industrial machinery, heavy electric machinery, data communications systems, electronic 

devices, and consumer electronics. 





Price (¥): 361 




Key Management: Tamotsu Nomakuchi; Yukihiro Sato; Setsuhiro Shimomura No. of Employees: 105,651 


NA Revenues 3,855.7 4,049.8 3,704.0 3,530.0 

Gross Profit 1,024.4 1,092.6 902.0 850.2 


Net Profit 123.1 158.0 22.5 (7.6) 

Earnings per Share (¥) 57.3 73.6 10.5 (3.5) 





Gross Debt 641.1 550.8 700.8 700.8 

Owners’ Equity 1,059.2 1,031.4 908.9 887.3 



NA 

Europe 

7% 

Asia 

11% 

Key Suppliers 

NA 

6% 

Other 

1% 

Japan 

75% 



20 April 2009 


Mitsubishi Electric 

Electrical Devices 

Info 

4% 

Communication 

16% 

Home Appliances 

21% 

Mitsubishi 

Energy & Electric 

sys. 

22% 

Industrial 

Automation 

22% 

Key Customers 


629

Bhavin Shah 

(852) 2800-8538 



National Instruments 


National Instruments Corporation supplies computer-based instrumentation hardware and software products for Ticker: NATI 

engineers and scientists. The company provides flexible application software and modular hardware that users Analyst: Mark Moskowitz 

combine with computers, networks, and the Internet to create computer-based measurement and automation Rating: Overweight 

systems. 

Price (US$): 16.85 

630 




Key Management: James J. Truchard, Ph.D.; Alexander M. Davern; Peter Zogas Jr. No. of Employees: 5,157 


NA Revenues 660 740 821 700 

Gross Profit 490 562 621 527 


Net Profit 73 107 85 28 







Owners’ Equity 597 661 664 682 



NA 

Asia 

24% 

Key Suppliers 

Europe 

33% 

US 

43% 



20 April 2009 


National Instruments 

Measurement 

S/w & H/w 

100% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Oki Electric Industry Co., Ltd. 


Oki Electric Industry Company, Limited, develops, produces, and sells a broad range of communication and 

information related equipment. The company's products include personal computers (PCs), PC peripheral 

equipment, and electronic devices such as semiconductors and automated teller machines (ATMs). Oki Electric 

Industry also provides installation and maintenance services. 





Price (¥): 55 




Key Management: Katsumasa Shinozuka; Naoki Sato No. of Employees: 22,640 


NA Revenues 718.8 719.7 555.0 458.5 

Gross Profit 157.9 162.9 165.5 174.0 

Operating Profit (5.4) 6.2 0.5 9.0 

Net Profit (36.4) 0.6 (48.0) 1.0 

Earnings per Share (¥) (53.3) 0.8 (70.3) 1.5 

Return on Equity (%) -30.0% 0.5% (67.9) 2.1 




Gross Debt 268.3 247.4 167.4 167.4 

Owners’ Equity 109.4 94.7 46.7 47.7 



NA 

Overseas 

29% 

Key Suppliers 

Domestic 

71% 



20 April 2009 


Oki Electric 

Semiconductor 

20% 

Printer 

26% 

Others 

5% 

Info Comm. 

49% 

Key Customers 


NA 

631

Bhavin Shah 

(852) 2800-8538 


632 

Omron Corporation Country: Japan 


Omron Corporation manufactures electronic components, equipment and systems used for factory automation. 

The company provides products and services in a variety of fields including industrial automation, electronic 

components, automotive electronics, social systems such as ticket gate machines and traffic control, and 

healthcare. 




Price (¥): 1,048 




Key Management: Yoshio Tateishi No. of Employees: 35,426 


NA Revenues 736.7 763.0 630.5 515.0 

Gross Profit 284.2 293.3 221.8 164.0 


Net Profit 38.3 42.4 0.2 (8.4) 


Return on Equity (%) 10.3% 11.3% 5.5% 5.5% 




Gross Debt 21.5 19.3 25.0 25.0 

Owners’ Equity 382.8 368.5 365.7 354.3 



NA 

Others 

48% 

Key Suppliers 

Japan 

52% 



20 April 2009 


Omron Corporation 

Firewall/Security/ 

VPN 

21% 

Health Care 

1% 

Printer/Calculator 

7% 

Electronic 

Components 

22% 

Others 

0.4% 

Industrial 

Automation 

46% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



Samsung Electronics 


Samsung Electronics Co., Ltd. manufactures a wide range of consumer and industrial electronic equipment and Ticker: 005930.KS 

products such as semiconductors, TFT-LCD panels, handsets, televisions, and home appliances. 



Price (Won): 536000 




Key Management: Lee Yoon-Woo; Choi Doh-Seok;; Lee Ki-Tae No. of Employees: 86,977 


Sony (S-LCD) Revenues 58,972.8 63,176.0 72,952.6 73,847.1 

Samsung SDI Gross Profit 16,613.0 16,329.4 17,567.5 10,893.4 

SEMCO Operating Profit 6,933.9 5,942.9 4,129.2 (788.8) 

Net Profit 7,926.1 7,425.0 5,528.1 503.0 

Earnings per Share (Won) 46,299.2 43,372.2 32,291.9 2,938.2 


Capital Spending 9,850.9 8,013.7 11,665.6 5,234.3 

Research & Development Expenses 2,987.3 2,842.9 3,282.9 3,323.1 


Gross Debt 87.3 89.1 112.8 112.8 

Owners’ Equity 45,260.6 51,560.6 58,037.9 57,444.8 



NA 

South Korea 

19% 

Americas 

14% 

Key Suppliers 

Europe 

20% 

Africa 

1% 

Asia 

47% 



20 April 2009 


Samsung Electronics 

TFT - LCD 

25% 

Digital Media 

4% 


25% 


36% 

Key Customers 

Dell IBM 

HP Sony 

Apple Sprint 


633

Bhavin Shah 

(852) 2800-8538 


634 

Siemens 


Siemens AG manufactures a wide range of industrial and consumer products. The company builds locomotives, 

traffic control systems, automotive electronics, and engineers electrical power plants. Siemens also provides 

building control systems and medical equipment. The company operates worldwide. 


Ticker: SIEGn.F 

Analyst: Andreas Willi 


Price (€): 44.37 




Key Management: Peter Löscher; Joe Kaeser; Barbara Kux No. of Employees: 425,000 


Bosch for household appliances (JV) Revenues 87,325 72,448 78,897 83,750 

Nokia for Communication Equipment (JV) Gross Profit 24,174 20,876 25,061 27,187 

Voith for Hydro Power (JV) Operating Profit 3,871 5,109 7,693 9,928 

Areva for Nuclear Power Net Profit 3,087 3,677 5,188 6,864 



Capital Spending 3,970 3,751 3,223 3,129 



Gross Debt 15,574 15,497 11,998 11,273 

Owners’ Equity 29,473 28,996 41,072 45,617 



Asia, Australia, 

Middle East 

21% 

Americas 

26% 

Key Suppliers 

STMicro Infineon 

Alcoa Lumberg 

Europe, C.I.S., 

Africa 

53% 



20 April 2009 


Siemens 

Industry 

46% 

Financial 

Services 

1% 

Other operations 

3% 

Real Estate 

2% 

Energy 

28% 

Healthcare 

14% 

IT Solutions and 

Services 

6% 

Key Customers 

Telecom Italia China Telecom 

France Telecom Deutsche Telecom 

SBC Daimler Chrysler 


Bhavin Shah 

(852) 2800-8538 





Sun Microsystems, Inc. provides products, services, and support solutions for building and maintaining network Ticker: JAVA 

computing environments. The company sells scalable computer systems, high-speed microprocessors, and a Analyst: Mark Moskowitz 

complete line of high-performance software for operating network computing equipment and storage products. Rating: Underweight 

Sun also provides support, education, and professional services. 

Price (US$): 4.67 




Key Management: Jonathan I. Schwartz; Michael E. Lehman; Scott G. McNealy No. of Employees: 33,556 


NA Revenues 13,068 13,873 13,880 12,389 

Gross Profit 5,629 6,265 6,455 5,133 

Operating Profit (456) 406 666 (136) 

Net Profit (864) 473 620 (125) 

Earnings per Share (US$) (1.00) 0.52 0.75 (0.17) 





Gross Debt 1,078 1,265 1,265 1,263 

Owners’ Equity 6,344 7,179 5,588 3,661 



NA 

APAC 

18% 

EMEA 

38% 

Key Suppliers 

US 

45% 



20 April 2009 




Service 

38% 

Product 

62% 

Key Customers 



635

Bhavin Shah 

(852) 2800-8538 


636 

Toshiba Corporation Country: Japan 


Toshiba Corporation manufactures electrical and electronic products. The company's products include personal 

computers, storage devices, medical electronic equipment, and telecommunications systems. 




Price (¥): 231 




Key Management: Tadashi Okamura; Fumoi Muraoka; Atsutoshi Nishida No. of Employees: 197,718 


NA Revenues 7,116.4 7,668.1 6,723.4 7,028.5 

Gross Profit 1,804.2 1,668.1 1,172.9 1,408.6 


Net Profit 137.4 127.4 (257.1) (46.4) 






Gross Debt 1,158.5 1,261.0 1,461.0 1,561.0 

Owners’ Equity 1,108.3 1,022.3 572.0 500.6 



NA 

USA 

10% 

Asia 

18% 

Key Suppliers 

Europe 

8% 

Others 

1% 

Japan 

63% 



20 April 2009 


Toshiba Corporation 

Home Appliances 

10% 

Social 


28% 

Others 

5% 

Digital Products 

36% 

Electronic 

Devices 

21% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



Xerox Corporation 


Xerox Corporation develops, manufactures, markets, services, and finances a range of document processing Ticker: XRX 

products and services for use in offices around the world. The company also, through subsidiaries, provides Analyst: Mark Moskowitz 

network management, consulting, design, and integration services for medium and large companies. 


Price (US$): 4.99 




Key Management: Anne M. Mulcahy; Lawrence A. Zimmerman; James Firestone No. of Employees: 57,100 


NA Revenues 15,895 17,228 17,608 16,142 

Gross Profit 6,459 6,951 6,894 6,268 


Net Profit 1,210 1,136 720 833 






Gross Debt 7,145 7,464 8,384 8,179 

Owners’ Equity 7,080 8,588 6,238 5,091 



NA 

Europe 

34% 

Others 

14% 

Key Suppliers 

US 

52% 



20 April 2009 


Xerox Corporation 

Production 

30% 


Others 

14% 

Office 

56% 

Key Customers 



637

Bhavin Shah 

(852) 2800-8538 


638 


20 April 2009 

Solar 

Ascent Solar Technologies, Inc. ... 639 

Energy Conversion Devices, Inc... 640 

Evergreen Solar Incorporated ....... 641 

First Solar, Inc. ............................... 642 

Motech Industries Inc..................... 643 

Q-Cells SE ....................................... 644 

Renewable Energy Corporation 

ASA.................................................. 645 

SolarWorld AG................................ 646 

SunPower Corporation .................. 647 

Suntech Power Holdings Co., Ltd. 648 

Solar

Bhavin Shah 

(852) 2800-8538 


Ascent Solar Technologies, Inc. 


Ascent Solar Technologies, Inc. researches flexible photovoltaic products suitable for outer space and nearspace 

applications. 


Ticker: ASTI 







Key Management: Mohan S. Misra, Mr. Bruce Berkoff, Ashutosh Misra No. of Employees: 57 


NA Revenues 0.0 1.0 1.5 3.8 

Gross Profit 0.0 1.0 1.3 0.8 

Operating Profit (3.4) (7.9) (15.0) (21.3) 

Net Profit (4.2) (6.5) (13.9) (19.3) 


Return on Equity (ROE) (%) NA (21.9) (12.2) 0.6 


Research & Development Expense (0.3) 4.0 9.3 12.9 


Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 10.9 49.0 125.0 192.0 


NA 

Key Suppliers 

Source: Company, J.P. Morgan estimates. Share price is as of 12 March, 2009. 


20 April 2009 


Ascent Solar 

Solar Module 

100% 

Key Customers 

COMPANY WEBSITE Solar 

NA 

639

Bhavin Shah 

(852) 2800-8538 


640 

Energy Conversion Devices, Inc. 


Energy Conversion Devices, Inc. manufactures and sells thin-film solar laminates that convert sunlight to 

energy using the proprietary technology. The company also develops other alternative technologies, including 

non-volatile digital memory for a variety of applications including cell phones, digital cameras and personal 

computers. 


Ticker: ENER 



Price (US$): 17.67 




Key Management: Mark Morelli, Harry W Zike No. of Employees: 1,090 


NA Revenues 102.4 113.6 255.9 347.6 


Operating Profit (27.2) (36.8) 6.5 41.3 

Net Profit (18.6) (25.2) 3.9 37.3 


Return on Equity (ROE) (%) (5.4) (4.8) 0.7 6.0 


Research & Development Expense 34.9 19.8 9.9 NA 


Gross Debt 26.2 26.7 343.2 NA 




Asia Pacific 

(excluding China) 

13% 


East 

22% 

Key Suppliers 


Americas 

28% 


20 April 2009 

Greater China 

37% 

Source: Company, Bloomberg estimates (for FY09). Share price is as of 12 March, 2009. 


Energy Conversion 

Computer 

Peripherals 

1% 

Personal 

Computer 

99% 

Key Customers 

Enterprises Consumers 

COMPANY WEBSITE Solar

Bhavin Shah 

(852) 2800-8538 


Evergreen Solar Incorporated 


Evergreen Solar, Inc. develops, manufactures, and markets solar power cells, panels, and systems that provide 

environmentally clean electric power throughout the world. The company’s solar power products draw electricity 

from solar cells, which are semiconductor devices that convert the sun's energy into electricity. 


Ticker: ESLR 



Price (US$): 1.21 




Key Management: Richard M. Feldt, Rodolfo Archbold, Michael El-Hillow No. of Employees: 330 


NA Revenues 103 70 112 344 



Net Profit (27) (17) (54) (17) 


Return on Equity (ROE) (%) (114.9) (16.9) (41.4) (13.1) 



Cash & Cash Equivalents 49 141 178 (123) 

Gross Debt 90 90 374 374 




NA 

Europe 

41% 

Key Suppliers 

Asia 

5% 

Others 

1% 

North America 

53% 



20 April 2009 


Evergreen Solar 

Royalties 

15% 

Solar Panels 

85% 

Key Customers 


NA 

641

Bhavin Shah 

(852) 2800-8538 


642 

First Solar, Inc. 


First Solar, Inc. designs and manufactures solar modules. The company uses a thin film semiconductor 

technology to manufacture electricity-producing solar modules. 


Ticker: FSLR 



Price (US$): 126.5 




Key Management: Michael J. Ahearn, Bruce Sohn, Jens Meyerhoff No. of Employees: 3,524 


NA Revenues 135 504 1,246 1,851 

Gross Profit 54 251 678 874 


Net Profit 4 158 348 497 






Gross Debt 81 108 - - 

Owners’ Equity 411 1,097 1,513 2,084 



NA 

Key Suppliers 

Others 

26% 

Germany 

74% 



20 April 2009 


First Solar, 

Solar Modules 

100% 

Key Customers 

Blitzstrom Colexon 

Coenergy Juwi Solar 

Phoenix 


Bhavin Shah 

(852) 2800-8538 



Motech Industries Inc. 


Motech Industries Inc. manufactures and markets solar cells as well as testing and measuring instruments. Ticker: 6244.TWO 



Price (NT$): 72.6 




Key Management: Tsuo Yuan- Huai, Norman Shen , Cheng Chuan- Hai No. of Employees: 1,298 


Revenues 8,099 15,578 23,880 27,530 

Gross Profit 2,474 2,991 3,645 2,782 


Net Profit 2,258 2,442 2,423 1,740 



Capital Spending (1,791) (820) (2,384) (2,041) 



Gross Debt 2,621 2,881 3,319 5,350 

Owners’ Equity 5,560 13,413 15,340 15,576 



America 

14% 

Taiwan 

10% 

Asia 

34% 

Key Suppliers 

Scanwafer Deutsche Solar 

Renesola LDK 

ROW 

2% 

Europe 

39% 



20 April 2009 


Motech Industries 

Others 

1% 

Solar Cells 

99% 

Key Customers 

Aleo Atersa 

Siliken Tenesol 

Solar Glass 


643

Bhavin Shah 

(852) 2800-8538 


644 

Q-Cells SE 


Q-Cells SE develops, produces, and sells mono- and polycrystalline, silicon-based solar cells. 


Ticker: QCEG.F 



Price (€): 11.99 




Key Management: Charles Anton Milner, Hartmut Schuening, Gerhard Rauter No. of Employees: 2,325 


NA Revenues 539.5 858.9 1,251.3 1,431.1 

Gross Profit 191.3 324.4 387.8 406.5 


Net Profit 97.1 109.9 138.0 59.1 






Gross Debt 27.5 429.5 445.8 755.4 

Owners’ Equity 440.0 1,833.8 2,051.4 2,130.5 




15% 

Key Suppliers 

REC LDK Solar 

PV Crystalox 

North AmericaOthers 

6% 0.4% 

Africa 

6% 

Asia 

9% 

Rest of European 

Union 

25% 

Germany 

39% 



20 April 2009 


Q-Cells AG 

New 


Project Business 0.4% 

5% 

Core Business 

(Cr-Si solar cells) 

95% 

Key Customers 

Solon Aleo Solar 

Siliken Atersa 

Tenesol 


Bhavin Shah 

(852) 2800-8538 


Renewable Energy Corporation ASA 


Renewable Energy Corporation ASA offers services concerning renewable energy sources. The company 

specializes in solar energy solutions. 

Country: Norway 

Ticker: REC.OL 



Price (Nkr): 46.95 




Key Management: Erik Thorsen , John Andersen, Jr., Bjørn Brenna No. of Employees: 2,350 

Business Alliances / Partnerships (NKr in millions) FY06 FY07 FY08 FY09E 

NA Revenues 4,334 6,642 8,191 12,378 

Gross Profit 3,527 5,331 6,179 8,710 


Net Profit 458 1,333 3,064 1,902 

Earnings per Share (Nkr) 1.03 2.70 6.20 3.85 




Cash & Cash Equivalents 7,276 5,795 497 2,204 

Gross Debt 2,644 3,123 7,203 13,540 

Owners’ Equity 10,637 11,757 16,512 18,415 

Book Value per Share (Nkr) 24.01 23.78 33.41 37.25 


NA 

Other Countries 

Asia (ex. Japan) 3% 

11% 

Japan 

24% 

Key Suppliers 

USA 

9% 

Germany 

35% 

Europe 

(excluding 

Germany) 

19% 



20 April 2009 


Renewable Energy 

Solar Cell/Module 

35% 

Other 

8% 

Polysilicon 

22% 

Solar Wafer 

35% 

Key Customers 

Q-Cells Motech 

Suntech Sumco 

BP Solar Sharp 


645

Bhavin Shah 

(852) 2800-8538 


646 

SolarWorld AG 


SolarWorld AG develops and produces solar technologies. The company produces silicon wafers and 

manufactures solar cells, and complete solar modules and components used to generate solar energy. 

Solarworld also recycles silicon and by-products from solar energy. 


Ticker: SWVG.DE 



Price (€): 13.5 




Key Management: Frank H. Asbeck, Mr. Philipp Koecke, Mr. Boris Klebensberger No. of Employees: 1,738 

Business Alliances / Partnerships (£ in millions) FY06 FY07 FY08 FY09E 

NA Revenues 509.1 689.6 917.0 1,068.9 

Gross Profit 206.2 355.9 469.9 466.3 


Net Profit 129.1 110.9 142.3 133.1 




Research & Development Expense 14.0 19.5 


Gross Debt 163.5 641.2 762.2 796.9 

Owners’ Equity 597.3 691.5 831.7 949.1 



USA 

11% 

Asia 

10% 


26% 

Key Suppliers 

Hemlock DC Chemical 

Others 

2% 

Germany 

51% 



20 April 2009 


SolarWorld AG 

Trade 

75% 

Solar Wafer 

23% 

Solar Cells 

2% 

Key Customers 

Solar Semiconductor 

Pvt. Ltd 


Canadian 

Solar

Bhavin Shah 

(852) 2800-8538 


SunPower Corporation 


SunPower Corporation is an integrated solar products and services company that designs, manufactures and 

markets high-performance solar electric power technologies. 


Ticker: SPWRA 



Price (US$): 23.1 




Key Management: Thomas H Werener, Dennis V Arriola, Peter Aschenbrenner No. of Employees: 5,400 


NA Revenues 237 776 1,435 1,200 

Gross Profit 56 186 397 288 


Net Profit 36 103 195 101 






Gross Debt 0 425 478 478 

Owners’ Equity 489 864 1,021 1,115 



NA 

Key Suppliers 

Asia 

3% 

Europe 

63% 

Others 

5% 

North America 

29% 



20 April 2009 


SunPower Corporation 

Components 

43% 


NA 

Systems 

57% 

Key Customers 

647

Bhavin Shah 

(852) 2800-8538 


648 

Suntech Power Holdings Co., Ltd. 


Suntech Power Holdings Co., Ltd. designs, develops, manufactures and market a variety of photovoltaic (PV) 

cells and modules. 


Ticker: STP 



Price (US$): 6.82 




Key Management: Shi Zhengrong, Zhang Yi "Amy", Johnson Chiang No. of Employees: 6,784 


Revenues 599 1,348 1,924 2,342 

Gross Profit 149 274 343 318 


Net Profit 106 171 111 103 






Gross Debt 308 842 1,626 1,690 

Owners’ Equity 671 906 1,106 1,304 



China Others 

USA 

6% 

2% 3% 

Key Suppliers 

Deutsche Solar AG MEMC 

REC Hoku Materials 

LDK Shanghai Comtec 

Sunlight Group 

Europe 

89% 



20 April 2009 


Suntech Power 

Photovoltaic 

Photovoltaic Cells System 

1% Integration 

0.2% 

Photovoltaic 

Modules 

98% 

Key Customers 

Conergy AG IBC Solar 

AG 

IbeSolar Energia S.A Atersa 

Solarworld AG 


Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Printers and Imaging 

Dai Nippon Printing Co., Ltd.......... 650 

Eastman Kodak............................... 651 

FUJIFILM Holdings Corporation.... 652 

Konica Minolta Holdings, Inc. ....... 653 

Lexmark International, Inc. ............ 654 

Nikon Corporation.......................... 655 

Olympus .......................................... 656 

Ricoh Co., Ltd. ................................ 657 

Samsung Techwin Co., Ltd............ 658 

Seiko Epson Corporation .............. 659 

Toppan Printing Co., Ltd................ 660 

Printers and Imaging 

649

Bhavin Shah 

(852) 2800-8538 


650 

Dai Nippon Printing Co., Ltd. 


Dai Nippon Printing Co., Ltd. offers printing services for commercial and industrial use. The printing items 

include information media such as books, periodicals, and text books, wrapping paper and containers, 

stationeries, and advertising medium. The company provides design and production services as well. Dai 

Nippon Printing also produces soft drinks including Coca-Cola. 



Analyst: Nobuhito Owaki 


Price (¥): 803 




Key Management: Yoshitoshi Kitajima, Koichi Takanami, Satoshi Saruwatari No. of Employees: 40,104 


NA Revenues 1,558 1,616 1,610 1,620 









Gross Debt 69 80 63 103 

Owners’ Equity 1,099 1,040 1,026 1,012 



NA 

Asia 

11% 

Key Suppliers 

Others 

5% 

Japan 

84% 



20 April 2009 


Dai Nippon 

Electronics 

16% 

Lifestyle and 

industry 

34% 

Cold Beverages 

4% Information/ 

Communication 

45% 

Key Customers 

SHARP IPS-Alpha 

BDE SVA 

COMPANY WEBSITE Printers & Imaging

Bhavin Shah 

(852) 2800-8538 


Eastman Kodak 


Eastman Kodak Company develops, manufactures, and markets imaging products. The company provides 

professional and consumer digital cameras, laser images for radiologists, and photographic films for 

professionals and amateurs. Kodak also provides digital services for cinematographers, document scanners, 

aerial images, digital printers for commercial customers, and flat panel displays. 


Ticker: EK 



Price (US$): 2.78 




Key Management: Antonio M Perez, Philip J Faraci, Frank S Sklarsy No. of Employees: 24,400 


NA Revenues 10,568 10,301 9,416 7,750 


Operating Profit (60) 313 (681) (65) 

Net Profit (601) 676 (442) (461) 

Earnings per Share (US$) (2.1) 2.4 (1.6) (0.4) 

Return on Equity (ROE) (%) (32.8) 30.6 (22.2) (13.6) 




Gross Debt 2,778 1,597 1,303 NA 




NA 

Asia pacific 

16% 

Key Suppliers 

Canada & Latin 

America 

10% 

EMEA 

33% 


20 April 2009 

United States 

41% 



Eastman Kodak 

Film & 

Photofinishing 

System 

32% 

Consumer Digital 

Imaging 

33% 

Graphic 


35% 

Key Customers 

COMPANY WEBSITE Printers & Imaging 

NA 

651

Bhavin Shah 

(852) 2800-8538 


652 

FUJIFILM Holdings Corporation 


FUJIFILM Holdings Corporation develops, sells and services imaging, information, and document solutions. Its 

products include color films, digital cameras, photofinishing products and equipment. The group also 

manufactures medical and graphic art use equipment and materials, FPD materials, and optical devices, and 

provides services on office copy machines, printers, and related equipment. 





Price (¥): 1,800 




Key Management: Shigetaka Komori, Toshio Takahashi, Shinpei Ikenoue No. of Employees: 78,228 


NA Revenues 2,783 2,847 2,430 2,034 

Gross Profit 1,144 1,154 1,120 960 


Net Profit 34 104 10 (89) 






Gross Debt 374 370 330 330 

Owners’ Equity 1,977 1,922 1,777 1,604 



NA 

Americas 

19% 

Europe 

15% 

Asia & rest of the 

world 

23% 

Key Suppliers 

Japan 

44% 



20 April 2009 


FUJIFILM Holdings 

Imaging Solutions 

17% 

Information 

Solutions 

39% 

Document 

Solutions 

44% 

Key Customers 


Xerox

Bhavin Shah 

(852) 2800-8538 


Konica Minolta Holdings, Inc. 


Konica Minolta Holdings, Inc. manufactures photo films for medical, printing, office, and general use. The 

company also manufactures copiers, personal computer peripherals, cameras, lenses, photographic paper, and 

chemicals for darkroom use. 





Price (¥): 789 




Key Management: Yoshikatsu Ohta, Fumio Iwai, Hiroshi Ishiko No. of Employees: 38,359 


NA Revenues 1,028 1,072 953 798 

Gross Profit 495 531 505 525 


Net Profit 73 69 17 18 






Gross Debt 154 156 125 120 

Owner’s Equity 356 417 425 429 



NA 

Asia & Other 

24% 

North America 

24% 

Key Suppliers 

Europe 

27% 

Japan 

26% 



20 April 2009 


Konica Minolta 

Other- Industrial 

Inkjets,etc Sensing 

Medical & 2% 1% 

Graphic Imaging 

14% 

Optics 

18% 

Business 


66% 

Key Customers 


NA 

653

Bhavin Shah 

(852) 2800-8538 


654 

Lexmark International, Inc. 


Lexmark International, Inc. develops, manufactures, and supplies printing products. The company’s products 

include laser inkjet and dot matrix printers and associated supplies. Lexmark’s products are sold to the office 

and home markets in countries around the world. 


Ticker: LXK 



Price (US$): 16.91 




Key Management: Paul J. Curlander, John W. Gamble Jr., Paul A. Rooke No. of Employees: 14,000 


NA Revenues 5,108 4,974 4,528 3,863 

Gross Profit 1,646 1,564 1,577 1,257 


Net Profit 338 301 316 175 






Gross Debt 150 150 655 649 

Owners’ Equity 1,035 1,278 812 742 



NA 

Others 

20% 


East & Africa 

38% 

Key Suppliers 

US 

41% 



20 April 2009 


Lexmark International 

Printer 

26% 

Others 

5% 

Laser & Inkjet 

Supplies 

69% 

Key Customers 




Bhavin Shah 

(852) 2800-8538 


Nikon Corporation Country: Japan 


Nikon Corporation manufactures and sells cameras, lenses, semiconductor-related equipment, eyeglasses, 

microscopes, and measuring instruments. 




Price (¥): 921 




Key Management: Michio Kariya, Ichiro Terato, Kazuo Ushida No. of Employees: 25,208 


NA Revenues 823 956 860 724 

Gross Profit 328 404 320 245 


Net Profit 55 75 21 (13) 






Gross Debt 36 27 33 33 

Owner’s Equity 348 393 382 349 



NA 

Key Suppliers 

Japan 

20% 

Europe 

23% 


2% 

Asia/ Oceania 

28% 

North America 

27% 



20 April 2009 


Nikon Corporation 

Prcision 

Equipment 

26% 

measuring 

instrumentsOther 

5% 2% 

Imaging Products 

67% 

Key Customers 

Japanese 

Samsung 

Semiconductor Makers 

AMD Intel 


655

Bhavin Shah 

(852) 2800-8538 


656 

Olympus 


Olympus manufactures optoelectronic products. The company’s products include cameras, video sets, 

endoscopes for medicine and industrial use, microscopes, analytical equipment, office communication systems, 

laser- optical scanners, and ionic printers. 





Price (¥): 1,326 




Key Management: Tsuyoshi Kikukawa, Masaaki Terada, Hideo Yamada No. of Employees: 38,435 


NA Revenues 1,062 1,129 963 821 

Gross Profit 450 509 434 390 


Net Profit 48 58 (46) (23) 






Gross Debt 322 551 523 523 

Owners’ Equity 334 356 301 187 

Book Value per Share ((¥)) 1,236 1,319 824 732 


NA 

Europe 

26% 

Key Suppliers 


Asia 

3% 

12% 

Japan 

33% 

North America 

27% 



20 April 2009 


Olympus 

Life Science 

12% 

Information & 

Communication 

18% 

Other 

7% 

Imaging Systems 

22% 

Medical Systems 

40% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Ricoh Co., Ltd. 


Ricoh Company, Ltd. manufactures and markets office automation equipment, electronic devices, and 

photographic instruments. The company’s diverse product line includes facsimiles, image scanners, printers, 

digital cameras, and personal computers, as well as a full range of analog, digital, and color copiers. Ricoh 

operates with a network of sales offices and tie-ups worldwide. 





Price (¥): 945 




Key Management: Shiro Kondo, Zenji Miura, Masamitsu Sakurai No. of Employees: 87,093 


NA Revenues 2,069 2,220 2,153 2,146 

Gross Profit 862 928 852 810 


Net Profit 112 106 35 22 






Gross Debt 416 384 384 384 

Owners’ Equity 1,071 1,080 1,123 1,107 

Book Value per Share (¥)) 1,468 1,482 1,541 1,533 


NA 

The Americas 

24% 

Key Suppliers 


5% 

Europe 

25% 

Japan 

46% 



20 April 2009 


Ricoh Co., Ltd. 

Other- Financial 

Services, 

Distribution, 

Digital Cameras 

7% 

Industrial 

Products 

6% 

Office Solutions 

88% 

Key Customers 


NA 

657

Bhavin Shah 

(852) 2800-8538 


658 

Samsung Techwin Co., Ltd. 


Samsung Techwin Co., Ltd. manufactures optical and digital imaging products and semiconductor equipment 

including leadframes, chip mounters, and wire bonders. The company also produces a line of aircraft and 

industrial engines, howitzers, cannons, armored combat engineering vehicles, and combat multi purposed 

excavators. 





Price (W): 40,750 




Key Management: Lee Joong-Koo, Oh Chang-Suk, Shin Man-Yong No. of Employees: 5,082 

Business Alliances / Partnerships (Won in billions) FY06 FY07 FY08E FY09E 

NA Revenues 2,869 3,243 3,670 4,322 

Gross Profit 371 450 470 565 


Net Profit 158 203 158 183 

Earnings per Share (W) 2,050 2,638 2,046 2,378 





Gross Debt 82 59 28 26 

Owners’ Equity 848 1,027 1,162 1,315 

Book Value per Share (W) 11,008 13,331 15,095 17,083 


Europe 

6% 

Asia 

16% 

Key Suppliers 

Sony Samsung 

America 

3% 

South Korea 

75% 



20 April 2009 


Samsung Techwin 

Military vehicle 

11% 

Aircraft engine & 

industrial 

generator 

17% 

Optical digital 

system & 

semiconductor 

componenets 

72% 

Key Customers 

Samsung KAI 

Ministry of Defense 


Bhavin Shah 

(852) 2800-8538 


Seiko Epson Corporation 


Seiko Epson Corporation manufactures communications equipment, electronic devices, and precision products. 

The company’s products include printers, scanners, liquid crystal projectors, semiconductors, quartz devices, 

and watches. 





Price (¥): 1,117 




Key Management: Seiji Hanaoka, Yasuo Hattori, Minoru Usui No. of Employees: 93,279 


NA Revenues 1,416 1,348 1,138 993 

Gross Profit 357 368 286 235 


Net Profit (7) 19 (100) (18) 

Earnings per Share (¥) (36) 97 (509) (92) 

Return on Equity (ROE) (%) (1.5) 4.2 (25.8) (5.9) 




Gross Debt 405 342 259 259 

Owners’ Equity 447 459 317 296 



NA 

The Americas 

21% 

Europe 

25% 

Key Suppliers 

Japan 

32% 

Asia & Oceania 

22% 



20 April 2009 


Seiko Epson 

Electronic 

Devices 

24% 

Precision 

Products 

7% 

Other 

0.3% 

Information 

Related Eqipment 

69% 

Key Customers 



659

Bhavin Shah 

(852) 2800-8538 


660 

Toppan Printing Co., Ltd. 


Toppan Printing Co., Ltd. is a printing company that provides commercial and publication printing services. The 

company also prints securities paper, packaging products, and electronic related products such as photomasks 

and color filters. Toppan Printing also produces inks and operates a text book publication business. 



Analyst: Nobuhito Owaki 


Price (¥): 562 




Key Management: Naoki Adachi, Yoshio Sakamura, Ryuzo Yabe No. of Employees: 49,634 


NA Revenues 1,558 1,670 1,630 1,600 



Net Profit 26 39 (8) 5 






Gross Debt 360 290 77 65 

Owners’ Equity 918 940 918 909 



Key Suppliers 

Tokyo-Ink CF resist 

Asia 

8% 

Others 

3% 

Japan 

89% 



20 April 2009 


Toppan Printing 

Electronics 

18% 

Living 

environment 

25% 

Info network 

55% 

Key Customers 

Sharp AU Optronics 

CPT 


Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Applied Technologies 

AVTech ............................................ 662 

Cogent Systems ............................. 663 

Digital Theater Systems, Inc.......... 664 

Garmin Ltd. ..................................... 665 

Nice Systems .................................. 666 

Plantronics Inc................................ 667 

Trimble Navigation ......................... 668 

Applied Technologies 

661

Bhavin Shah 

(852) 2800-8538 


662 

AVTech 


AVTech manufactures security CCTV (closed circuit television) systems under the brand name AV TECH. The 

company also distributes ICs (integrated circuits) and other semiconductor components. 





Price (NT$): 85.7 




Key Management: Chen Shih Chung, Wu Cheng Mou, Tien Cheng Ping No. of Employees: 324 


NA Revenues 4,013 4,300 4,178 3,671 



Net Profit 802 1,084 1,029 1,231 








Book Value per Share ((NT$) 36.9 41.5 42.2 48.6 


NA 

America 

15% 

Taiwan 

16% 

Key Suppliers 

Others 

4% 

Europe 

22% 


20 April 2009 

Asia 

42% 



AVTech 

Electronic 

Components 

26% 

Security Systems 

74% 

Key Customers 

COMPANY WEBSITE Applied Technologies 

NA

Bhavin Shah 

(852) 2800-8538 


Cogent Systems 


Cogent Systems provides automated fingerprint identification systems and other fingerprint biometric solutions 

to governments, law enforcement agencies, and other organizations worldwide. 


Ticker: COGT 



Price (US$): 11.55 




Key Management: Ming Hsieh, Paul Kim, Michael Hollowich No. of Employees: 365 


Northrop Grumman Revenues 102 106 126 140 

Lockheed Martin Gross Profit 58 65 81 87 

HP Operating Profit 28 25 53 44 

IBM Net Profit 30 29 45 35 

Oracle Earnings per Share (US$) 0.3 0.3 0.5 0.4 

SAIC Return on Equity (ROE) (%) 6.3 5.7 8.8 6.5 

CSC Capital Spending (1.5) (2.3) (4.8) (5.1) 



Gross Debt 0.0 0.0 0.0 0.0 

Owners’ Equity 491 510 519 559 



NA 

Key Suppliers 

Europe 

2% 

Asia 

3% 

Other 

2% 

Americas 

94% 

Source: Company, J.P. Morgan estimates. Share price is as of March 12, 2009. 


20 April 2009 


Cogent Systems 

Maintainance & 

Services 

11% 

Product 

Revenues 

89% 

Key Customers 

U.S. DHS U.S. DoD 

State & Local Govt International 

Govt. 


663

Bhavin Shah 

(852) 2800-8538 


664 

Digital Theater Systems, Inc. 


Digital Theater Systems, Inc. is a provider of digital multi-channel audio technology, products, and services for 

entertainment markets worldwide. The company uses the technology in more than two speakers at once, 

targeted toward motion picture, home theater, and other consumer markets. 


Ticker: DTSI 



Price (US$): 16.85 

Market Cap (US$M): 293 



Key Management: Daniel E Slusser, Jon E Kirchner, Melvin L Flanigan No. of Employees: 193 


Revenues 50.0 53.1 60.2 63.3 

Gross Profit 48.0 51.8 59.1 61.7 


Net Profit 3.0 (20.4) 11.4 8.9 

Earnings per Share (US$) 0.16 (1.13) 0.63 0.50 

Return on Equity (ROE) (%) 0.51 (3.72) 2.31 1.72 




Gross Debt 0.0 0.0 3.8 0.0 

Owners’ Equity 154 121 125 134 



NA 

Key Suppliers 

United States 

9% 

Others 

15% 

South Korea 

21% 

Source: Company, J.P. Morgan estimates. 

Taiwan 

3% 


20 April 2009 

Japan 

52% 


Digital Theater 

Others 

83% 

High-Definition 

Products 

17% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Garmin Ltd. 


Garmin Ltd. provides navigation, communication, and information devices, most of which are enabled by the 

global positioning system (GPS) technology. The company designs, develops, manufactures, and markets 

hand-held, portable, and fixed mount GPS-enabled products and other navigation, communications, and 

information products under the Garmin brand name. 


Ticker: GRMN 



Price (US$): 20.14 




Key Management: Min H Kao, Clifton A Pemble, Kevin S Rauckman No. of Employees: 8,919 


Revenues 1,774 3,180 3,494 3,278 

Gross Profit 882 1,463 1,554 1,315 


Net Profit 514 855 733 514 







Owners’ Equity 1,558 2,351 2,226 2,740 



NA 

Europe 

29% 

Asia 

4% 

Key Suppliers 

North America 

67% 



20 April 2009 


Garmin Ltd. 

Aviation 

9% 

Auto/Mobile 

73% 

Outdoor/Fitness 

12% 

Marine 

6% 

Key Customers 


NA 

665

Bhavin Shah 

(852) 2800-8538 


666 

Nice Systems 


Nice Systems offers multimedia digital recording solutions for professional uses. The company’s products 

digitally record telephone calls and allow users to search for and retrieve them. NICE’s products are used in 

contact centers, financial institutions, air traffic control sites, and government markets. 

Country: Israel 

Ticker: NICE 



Price (US$): 24.53 




Key Management: Ron Gutler, Haim Shani, Dafna Gruber No. of Employees: 2,172 


Revenues 410 517 624 654 

Gross Profit 235 311 385 405 


Net Profit 22 37 39 61 






Gross Debt 12 17 20 20 

Owners’ Equity 570 904 971 1,062 



NA 

EMEA 

29% 

APAC 

14% 

Key Suppliers 

Actimize 

2% 

Americas 

55% 



20 April 2009 


Nice Systems 

Public Safety & 

Security Sector 

24% 

Operational Risk 

Management 

2% 

Enterprise 

Interaction 

Solution 

74% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Plantronics Inc. 


Plantronics, Inc. designs, manufactures, and markets lightweight communication headsets and headset 

accessories and services. The company also manufactures and markets specialty telephone products, such as 

amplified telephone headsets and specialty telephones for hearing-impaired users, noise-cancelling headsets 

for use in high-noise environments. 


Ticker: PLT 



Price (US$): 9.34 




Key Management: Marvin Tseu, Kenneth Kannappan, Barbara V Scherer No. of Employees: 5,000 


Revenues 800 856 751 697 

Gross Profit 309 349 292 264 


Net Profit 50 68 (67) 27 







Owners’ Equity 497 579 471 502 



NA 

Canada & Others 

Asia Pacific & 7% 

LATAM 

7% 

EMEA 

25% 

Key Suppliers 

United States 

61% 



20 April 2009 


Plantronics Inc. 

Headphones & 

PC Audio Others 

5% 3% 

Docking Audio 

7% 

Gaming & 

Computer 

4% 

Mobile 

20% 

Office & Contact 

Center 

61% 

Key Customers 


NA 

667

Bhavin Shah 

(852) 2800-8538 



Trimble Navigation 


Trimble Navigation Limited designs, manufactures, and markets electronic products, enabled by the global Ticker: TRMB 

positioning system technology, that determines precise geographic location. The company’s products are Analyst: Paul Coster, CFA 

integrated systems for collecting, analyzing, and displaying position data in forms optimized for specific end- Rating: Underweight 

user applications. 

Price (US$): 14.21 

668 




Key Management: Steven W Berglund, Rajat Bahri, James Anthony Kirkland No. of Employees: 3,940 


Revenues 940 1,222 1,329 1,198 

Gross Profit 461 613 649 563 


Net Profit 104 117 141 90 






Gross Debt 0 61 152 152 

Owners’ Equity 748 1,109 1,144 1,234 



NA 

Others 

13% 

Asia Pacific 

14% 

Key Suppliers 

Europe 

25% 

United States 

49% 



20 April 2009 


Trimble Navigation 

Mobile Solutions 

13% 

Field Solutions 

23% 

Advanced 

Devices 

9% 

Engg & 

Construction 

56% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Automobiles Electronics 

Alpine Electronics .......................... 670 

Clarion ............................................. 671 

Automobiles Electronics 

669

Bhavin Shah 

(852) 2800-8538 



Alpine Electronics 


Alpine Electronics, Inc. makes car audio equipment and car navigation systems. The company also 


manufactures information and communication equipment and electronic units. 



Price (¥): 604 

670 




Key Management: Seizo Ishiguro; Hitoshi Kajiwara; Takumi Sato No. of Employees: 12,455 


NA Revenues 265.1 252.1 197.4 156.9 



Net Profit 5.7 3.6 (5.0) (11.1) 










NA 

Japan 

13% 

Key Suppliers 

Asia 

11% 

North America 

36% 

Others 

1% 


20 April 2009 

Europe 

39% 



Alpine Electronics 

Audio Products 

49% 

Information & 

Comm Equipment 

51% 

Key Customers 

Toyota Daimler Chrylser 

Honda Ford 

Aisin AW BMW 

COMPANY WEBSITE Automobile Electronics

Bhavin Shah 

(852) 2800-8538 


Clarion 


Clarion Co., Ltd. mainly manufactures and sells car audio equipment (under the brand name of Addzest) and 

car navigation systems. The company also produces karaoke equipment, auto PC, and other audio-related 

equipment. 





Price (¥): 40 




Key Management: Tatsuhiko Izumi; Yutaka Wakamori No. of Employees: 11,678 


NA Revenues 181.0 246.8 184 166.45 


Operating Profit 3.1 5.5 (14) (15) 

Net Profit (0.8) 1.4 (23) (17) 

Earnings per Share (¥) (2.78) 4.88 (79.80) (61.40) 

Return on Equity (%) (2.29) 4.18 NA NA 

Capital Spending (6.1) (6.9) (11) (7) 





Book Value per Share (¥) 120.6 113.1 NA NA 


NA 

Europe 

15% 

Americas 

23% 

Key Suppliers 

Others 

7% 


20 April 2009 

Japan 

55% 

Clarion 



Other 

13% 

Car Audio, Visual 

Equipment 

87% 

Key Customers 

Nissan Suzuki 

PSA 

COMPANY WEBSITE Automobile Electronics 

671

Bhavin Shah 

(852) 2800-8538 


672 


20 April 2009 

Telecom Equipment 

ADC Telecommunications ............. 673 

ADTRAN, Inc ................................... 674 

ADVA AG Optical Networking ....... 675 

Alcatel-Lucent SA........................... 676 

ARRIS Group .................................. 677 

Aruba Networks, Inc....................... 678 

Centron Telecom ............................ 679 

CIENA Corp..................................... 680 

Cisco Systems Inc.......................... 681 

CommScope ................................... 682 

D-Link Corporation......................... 683 

Ericsson .......................................... 684 

F5 Networks, Inc............................. 685 

Infinera Corporation ....................... 686 

JDSU Inc.......................................... 687 

Juniper Networks ........................... 688 

Kyocera Corp.................................. 689 

NEC Corporation ............................ 690 

Powerwave Technologies.............. 691 

ShoreTel, Inc................................... 692 

Sonus Networks ............................. 693 

Spirent Communications Plc......... 694 

Starent Networks, Corp.................. 695 

Tellabs ............................................. 696 

TomTom NV .................................... 697 

ZTE Corp ......................................... 698 

Telecom Equipment

Bhavin Shah 

(852) 2800-8538 


ADC Telecommunications 


ADC Telecommunications, Inc. supplies voice, video, and data systems for telephone, cable television, Internet, 

broadcast, wireless, and private networks. The company’s systems enable local access and high-speed 

transmission of communications services from providers to consumers and businesses over fiber optic, copper, 

coaxial, and wireless media. 


Ticker: ADCT 

Analyst: Steven J. O'Brien 


Price (US$): 3.55 




Key Management: Robert E Switz, James G Mathews, John A Blanchard III No. of Employees: 10,600 


NA Revenues 1,281.9 1,276.7 1,456.4 1,075.7 

Gross Profit 413.0 451.5 506.8 344.3 


Net Profit 108.1 147.6 135.4 4.6 






Gross Debt 401.6 401.2 653.3 652.3 

Owners’ Equity 873.5 1,007.6 914.2 361.7 



NA 

Asia Pacific 

13% 

Key Suppliers 

Germany 

Americas 

4% 

7% 

Africa 

17% 


20 April 2009 

US 

59% 



ADC Telecommunications 

Network Solutions 

12% 

Professional 

Services 

13% 

Connectivity 

76% 

Key Customers 

Verizon AT&T 

Bell South Qwest 

Deutsche Telekom 

COMPANY WEBSITE Telecom Equipment 

673

Bhavin Shah 

(852) 2800-8538 


674 

ADTRAN, Inc 


ADTRAN designs, develops, manufactures, markets, and services a variety of high-speed digital transmission 

products. The company’s products are used by telephone companies and corporate end-users to implement 

advanced digital data services over existing telephone networks. ADTRAN also offers a line of multiplexers, 

which provide modular flexibility. 


Ticker: ADTN 



Price (US$): 15.44 




Key Management: Thomas R Stanton , James E Matthews , James D Wilson Jr No. of Employees: 1,606 


NA Revenues 473 477 501 482 

Gross Profit 279 283 299 287 


Net Profit 86 82 85 82 






Gross Debt 49 49 48 48 

Owners’ Equity 436 378 376 428 



NA 

Key Suppliers 

International 

6% 


20 April 2009 

United States 

94% 



ADTRAN, Inc 

Enterprise 

Networks 

22% 

Carrier Networks 

78% 

Key Customers 

AT&T Sprint 

Verizon ALLTEL 

COMPANY WEBSITE Telecom Equipment

Bhavin Shah 

(852) 2800-8538 


ADVA AG Optical Networking 


ADVA AG Optical Networking designs, develops, and manufactures optical networking products. The 

company’s products include wave length division multiplexing (WDM) communications systems, high-speed 

fiber optic converters, EDFA modules, and all-optical switches. Its products are used in high-speed centralized 

data storage and disaster recovery. 


Ticker: ADAG.DE 



Price (€): 0.91 




Key Management: Brian Portiva, Jaswir Singh, Juergen Hans Josten No. of Employees: 1,042 


NA Revenues 193 251 218 216 



Net Profit 2 2 (1) (5) 

Earnings per Share (€) 0.06 0.04 (0.02) (0.11) 





Gross Debt 30 36 33 28 




NA 

Americas 

30% 

Key Suppliers 

Asia Pacific 

6% 

Germany 

15% 

EMEA 

49% 


20 April 2009 



ADVA AG 

Carrier Ethernet 

11% 

Metro WDM 

equipment (Carrier 

& Enterprise) 

89% 

Key Customers 


NA 

675

Bhavin Shah 

(852) 2800-8538 



Alcatel-Lucent SA 

Country: France 

Alcatel-Lucent manufactures telecommunications equipment and offers telecommunications services. The Ticker: ALUA.PA 

company’s telecommunications equipment and services enable its customers to send or receive virtually any Analyst: Rod Hall, CFA 

type of voice or data transmission. Alcatel-Lucent designs and builds public and private networks, 


communications systems and software, and data networking systems. 

Price (€): 1.034 

676 




Key Management: Ben Verwaayen, Andy Williams, Michael Rechier No. of Employees: 76,410 

Business Alliances / Partnerships (€ in billions) FY06 FY07 FY08 FY09E 

Revenues 18.3 17.8 17.0 15.4 

Gross Profit 6.8 6.0 5.8 5.1 


Net Profit 1.4 1.4 0.5 0.1 






Gross Debt 6.1 5.0 5.1 4.3 

Owners’ Equity 16.4 11.7 5.2 5.9 



NA 

Latin America 

4% 

North America 

38% 

Key Suppliers 

Others 

5% 

EMEA 

28% 


20 April 2009 

Asia Pacific 

26% 



Alcatel-Lucent SA 

Serv ices 

20% 

Enterprise 

9% 


Other 

2% 

Carrier 

68% 

Key Customers 

Sprint Nextel China Unicom

Bhavin Shah 

(852) 2800-8538 


ARRIS Group 


Arris Group Inc. is a global communications technology company, specializing in the design and engineering of 

broadband local access networks. The company develops, manufactures, and supplies optical transmission, 

cable telephony and Internet access, outside plant construction, and maintenance equipment for cable system 

operators. 


Ticker: ARRS 



Price (US$): 7.13 




Key Management: Robert J Stanzione, David B Potts, Ronald M Coppock No. of Employees: 1,838 


NA Revenues 892 992 1,145 1,090 

Gross Profit 253 276 394 398 


Net Profit 114 89 97 101 






Gross Debt 276 312 276 276 

Owners’ Equity 595 1,026 862 927 



NA 

International 

29% 

Key Suppliers 


20 April 2009 

Domestic 

71% 


ARRIS Group 


Media & 


Access, Systems 

Transport & 5% 

Supplies 

23% 

Broadband 


Systems 

2% 

Comcast 

Key Customers 

Time Warner 


Adelphia 

Cox 

Communications Communications 

Liberty Media Charter 


677

Bhavin Shah 

(852) 2800-8538 



Aruba Networks, Inc. 


Aruba Networks provides enterprise mobility solutions, which enable secure access to data, voice, and video Ticker: ARUN 

applications across wireless and wireline enterprise networks. 



Price (US$): 3 

678 




Key Management: Dominic P Orr, Steffan Tomlinson, Keerti Melkote No. of Employees: 541 


Alcatel-Lucent Revenues 127 178 190 198 

Gross Profit 84 123 130 133 

Operating Profit (4) 1 1 4 

Net Profit (2) 4 2 5 

Earnings per Share (US$) -0.06 0.04 0.03 0.06 






Owners’ Equity 112 131 132 140 



Asia Pacific 

11% 

EMEA 

18% 

Others 

4% 


20 April 2009 

United States 

67% 


Key Suppliers 

NA Aruba Networks, 



Service 

15% 

Ratable 

2% 

Product 

83% 

Key Customers 

Microsoft Google 

The US Air Force SAP 

Ohio State Univ

Bhavin Shah 

(852) 2800-8538 


Centron Telecom 


Centron Telecom International provides wireless coverage solutions to wireless operators in China. 





Price (HK$): 0.63 




Key Management: Dai Guoliang, Dai Guoyu, Ng Wai Kee No. of Employees: 997 

Business Alliances / Partnerships (Rmb in millions) FY06 FY07 FY08E FY09E 

Revenues 553 843 964 1,213 

Gross Profit 206 282 271 339 


Net Profit 134 220 133 164 







Owners’ Equity 293 975 1046 1211 



NA 

Key Suppliers 

China 

100% 


20 April 2009 



Centron Telecom 

DTV 

5% 

OEM 

2% 

Telecom 

Equipment 

93% 

Key Customers 

China Mobile China Telecom 

China Unicom ZTE 

Huawei 


679

Bhavin Shah 

(852) 2800-8538 


680 

CIENA Corp 


Ciena Corporation develops and markets communications network platforms and software, and offers 

professional services. The company’s broadband access, data and optical networking platforms, software tools, 

and global network services support worldwide telecom and cable/MSO services providers, and enterprise and 

government networks. 


Ticker: CIEN 



Price (US$): 7.28 




Key Management: Gary B Smith, James E Moylan Jr., Arthur D Smith No. of Employees: 2,203 


NA Revenues 564 780 903 646 

Gross Profit 260 364 463 290 


Net Profit 26 137 129 (33) 





Cash & Cash Equivalents 849 1,714 917 896 

Gross Debt 842 800 798 798 

Owners’ Equity 754 850 999 936 



NA 

International 

34% 

Key Suppliers 


20 April 2009 

United States 

66% 


CIENA Corp 


Global Network 

Services (GNS) 

12% 

Carrier Ethernet 

Service Delivery 

4% 

World Wide 

Packets 

3% 

Optical Service 

Delivery 

81% 

Key Customers 

Quest 

AT&T 


BT Verizon 

Sprint Nextel Corp 


Bhavin Shah 

(852) 2800-8538 



Cisco Systems Inc. 


Cisco supplies data networking products for the Internet. The company’s Internet Protocol-based networking Ticker: CSCO 

solutions are installed at corporations, public institutions and telecommunication companies worldwide. Its Analyst: Ehud A. Gelblum, PhD 

solutions transport data, voice, and video within buildings, across campuses, and around the world. 


Price (US$): 15.51 




Key Management: John T Chambers, Frank A Calderoni, Susan L Bostrom No. of Employees: 66,129 


NA Revenues 34,922 39,540 35,636 31,972 

Gross Profit 22,635 25,727 22,813 20,149 


Net Profit 8,374 9,423 7,251 5,625 






Gross Debt 6,408 6,893 10,348 10,348 

Owners’ Equity 31,480 34,353 42,020 45,091 



Emerging 

Markets 

11% 

Asia Pacific 

11% 

European 

Markets 

21% 

Japan 

3% 

Key Suppliers 

Xilinx PMC-Sierra 

ON Semi Cypress Semi 

Freescale Semi Broadcom 

Marvell Altera 

Lattice Semi Integrated Circuit 

Systems 


20 April 2009 

United States & 

Canada 

54% 



Cisco Systems 

Service 

16% 

Advanced 


24% 

Others 

6% 

Networking 

Products 

54% 

Key Customers 

No single customer accounts for more 

than 10% of revenues 


681

Bhavin Shah 

(852) 2800-8538 


682 

CommScope 


CommScope designs, manufactures, and markets coaxial cables and other high-performance electronic and 

fiber optic cable products primarily for communication applications. It also provides premise wiring for local 

area networks. CommScope sells its products throughout the world. In June 2007, the company announced 

the transformational acquisition of Andrew Corporation for US$2.6 billion, which closed in December 2007. 


Ticker: CTV 

Analyst: Kimberly A. Watkins, CFA 


Price (US$): 9.15 




Key Management: Frank M Drendel, Jearld L Leonhardt, Brian D Garrett No. of Employees: 15,000 


NA Revenues 1,624 1,931 4,017 3,290 

Gross Profit 444 589 1,133 799 


Net Profit 126 218 281 128 






Gross Debt 284 2,596 2,042 1,406 

Owners’ Equity 739 1,280 1,008 1,136 



NA 


9% 

APAC 

16% 

EMEA 

28% 

Key Suppliers 


20 April 2009 

United States 

47% 


CommScope 


Wireless Network 

Solutions (WNS) 

17% 

Broadband 

15% 

Enterprise 

22% 

Antenna, Cable & 

Cabinets (ACCG) 

46% 

Key Customers 

Nokia-Siemens Alcatel-Lucent 

Anixter Ericsson 


Bhavin Shah 

(852) 2800-8538 



D-Link Corporation 


D-Link manufactures network system equipment and parts. Its main products are network interface cards, Ticker: 2332.TW 

portable local area network (LAN) adapters, LAN interconnectors, hubs, switches, internetworking devices, Analyst: Erica CY Chen 

peripheral servers, and computer software. The company markets its products under the D-Link brand. 


Price (NT$): 19.7 




Key Management: Tsao An-Pang, Chen Rui-Hsu, Lee Chung-Wang No. of Employees: 488 


Alpha Networks Revenues 29,861 33,230 33,019 28,418 

Alliance with Cameo for WLAN products Gross Profit 10,068 11,386 10,665 7,788 


Net Profit 1,940 2,940 1,221 314 



Capital Spending (168) (38) 280 (34) 



Gross Debt 639 429 117 117 

Owners’ Equity 14,943 15,469 12,536 12,938 



Emerging Market 

& Asia Pacific 

58% 

Key Suppliers 

Alpha Networks Cameo 


20 April 2009 

North America 

21% 

European Union 

22% 



D-Link Corporation 

Digital Home 

11% 

Broadband 

17% 


Others 

4% 

W Lan 

40% 

Switch 

28% 

Key Customers 

Branded OEM firm that sells to retail 

channels and through Telco tenders 

683

Bhavin Shah 

(852) 2800-8538 


684 

Ericsson 


Telefonaktiebolaget LM Ericsson develops and manufactures products for wired and mobile communications in 

public and private networks. The company produces mobile telephones through its Sony Ericsson joint venture. 

Ericsson manufactures and installs wired and wireless communications systems, wireless microwave links, call 

center equipment, microelectronics, and radar systems. 

Country: Sweden 

Ticker: ERICb.ST 



Price (US$): 9.08 



Founded: 1926; Listed: 1983 Fiscal Year End December 

Key Management: Carl-Henric Svanberg, Hans Erik Vestberg, Michael Treschow (Chairman) No. of Employees 78,750 

Business Alliances / Partnerships (SEK in billions) FY06 FY07 FY08 FY09E 

NA Revenues 179.8 187.8 207.9 205.3 

Gross Profit 74.9 73.7 75.5 71.4 


Net Profit 26.2 21.8 15.1 10.3 

Earnings per Share (SEK) 8.28 6.85 4.75 3.24 





Gross Debt 14.6 27.2 30.5 28.5 

Owners’ Equity 120.1 134.1 140.8 141.7 

Book Value per Share (SEK) 38.10 42.49 44.63 45.07 


NA 

Asia Pacific 

30% 

Latin America 

11% 

North America 

9% 

Key Suppliers 


20 April 2009 


25% 

Cent/East 

Europe, Mid- 

East, Africa 

25% 



Ericsson 

Professional 

services 

24% 

Multimedia 

9% 

Networks 

68% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


F5 Networks, Inc 


F5 Networks provides integrated Internet traffic management solutions, designed to improve the availability and 

performance of mission-critical Internet-based servers and applications. The company’s software-based 

solutions manage, control, and optimize Internet traffic and content. Its solutions automatically deliver Internet 

content for service providers and e-businesses. 


Ticker: FFIV 



Price (US$): 20.6 




Key Management: John McAdam, Andrew Reinland, Karl D Triebes No. of Employees: 1,694 


NA Revenues 394 526 650 673 

Gross Profit 308 410 506 531 


Net Profit 84 123 121 126 







Owners’ Equity 616 771 718 698 



NA 

Japan 

9% 

Key Suppliers 

EMEA 

21% 

Asia Pac 

12% 


20 April 2009 

Domestic 

58% 



F5 Networks, 

Service & 

Support 

32% 

Acopia 

3% 

SSL VPN 

(FirePass) 

4% 

Application 

Delivery 

Networking (L4- 

7) 

61% 

Key Customers 

F5 sells its products and services to 

enterprise customers (through distributors 

such as Ingram Micro, value-added 

resellers, and systems integrators). Its 

customer base includes financial services, 

manufacturing, transportation and mobile 

telecommunications. 


685

Bhavin Shah 

(852) 2800-8538 



Infinera Corporation 


Infinera Corporation manufactures digital optical telecommunications equipment. It uses photonic integrated Ticker: INFN 

circuits to create digital optical networks. The company markets its products to carriers, data service providers, Analyst: Ehud A. Gelblum, PhD 

and cable operators. 


Price (US$): 7.14 

686 




Key Management: Jagdeep Singh, Drew Perkins, David F. Welch, Ph.D. No. of Employees: 937 


NA Revenues 146 309 353 306 

Gross Profit 24 127 151 128 

Operating Profit (47) 17 9 (41) 

Net Profit (49) 24 14 (38) 

Earnings per Share (US$) -8.78 0.38 0.15 -0.40 









NA 

Key Suppliers 

International 

21% 


20 April 2009 

United States 

79% 



Infinera Corporation 

Long-Haul 

DWDM 

100% 

Key Customers 

Level 3 Communications XO 

Global Crossing Cox 

Qwest Communications 


Bhavin Shah 

(852) 2800-8538 


JDSU Inc. 


JDS Uniphase Corporation provides communications test and measurement solutions and optical products for 

telecommunications service providers, cable operators, and network equipment manufacturers. The company 

also provides optical solutions for medical/environmental instrumentation, semiconductor processing, display, 

brand authentication, aerospace and defense, and decorative applications. 


Ticker: JDSU 



Price (US$): 2.89 




Key Management: Thomas H Waechter, David W Vellequette, David Gudmundson No. of Employees: 7,100 


NA Revenues 1,397 1,531 1,297 1,167 

Gross Profit 526 655 555 503 


Net Profit 64 107 34 20 






Gross Debt 808 508 325 325 

Owners’ Equity 1,736 1,817 996 1,016 



NA 

Key Suppliers 

Asia 

19% 

Europe 

29% 


20 April 2009 

North America 

52% 


JDSU Inc. 



Test & 

Measurement 

(Acterna) 

46% 

Commerical 

Lasers 

6% 

Optical 


Products 

34% 

Advanced Optical 

Tech 

13% 

Key Customers 

NT Ciena 

ALU AT&T 

BT Verizon 


687

Bhavin Shah 

(852) 2800-8538 


688 

Juniper Networks 


Juniper Networks provides Internet infrastructure solutions for Internet service providers and other 

telecommunications service providers. The company delivers next generation Internet backbone routers that 

are designed for service provider networks. 


Ticker: JNPR 



Price (US$): 14.77 




Key Management: Kevin R Johnson, Robyn M Denholm, Pradeep S Sindhu No. of Employees: 7,014 


NA Revenues 2,303 2,836 3,572 3,292 

Gross Profit 1,564 1,926 2,424 2,170 


Net Profit 438 504 651 447 






Gross Debt 399 399 0 0 

Owners’ Equity 6,115 5,354 5,901 6,232 



NA 

Key Suppliers 

Asia Pac 

20% 

Europe 

30% 


20 April 2009 

Americas 

50% 



Juniper Networks 

Service Layer 

Tech Service 

7% 

Service Layer 

Tech Product 

17% 


Service 

12% Infrastructure 

Product 

64% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Kyocera Corp. 


Kyocera Corporation (Kyocera) manufactures electronic equipment and components. The company’s products 

include telecommunication equipment, information equipment, optical equipment, ceramic products, 

semiconductor parts, chips, hybrid integrated circuits, thermal printheads, image sensors, liquid crystal displays, 

and connectors. Kyocera operates worldwide. 





Price (¥): 6,010 




Key Management: Noboru Nakamura, Yuzo Yamamura, Naoyuki Morita No. of Employees: 67,626 


NA Revenues 1,284 1,290 1,109 1,027 

Gross Profit 383 407 262 204 


Net Profit 107 107 21 (6) 






Gross Debt 28 19 22 22 

Owners’ Equity 1,515 1,451 1,325 1,295 



NA 

Asia 

17% 

Europe 

18% 

Key Suppliers 

Others 

6% 

US 

18% 


20 April 2009 

Japan 

41% 


Kyocera Corp. 


Information 

Equipment 

20% 

Others 

13% 

Telecom Equipment 

14% 

Fine ceramics parts 

6% 

Semiconductor parts 

13% 

Electrical dev ice 

and components 

22% 

Fine Ceramic 

applied material 

15% 

Key Customers 

KDDI Sharp 

Sony Wilcom 


689

Bhavin Shah 

(852) 2800-8538 


690 

NEC Corporation 


NEC Corporation (NEC) manufactures and markets computers, telecommunication equipment, electronic 

devices, semiconductors, and software. The company’s products include printers, modems, cellular phones, 

plasma display panels (PDP), network systems, memory, integrated circuits (IC), thin film transistor-liquid 

crystal display (TFT-LCD), and printed circuit boards (PCB). NEC operates worldwide. 





Price (¥): 231 




Key Management: Hajime Sasaki, Takao Ono, Kaoru Yano No. of Employees: 152,922 


NA Revenues 4,652.6 4,617.2 4,260.0 3,943.4 

Gross Profit 1,410.2 1,474.3 1,267.0 1,278.6 


Net Profit 9.1 22.7 (291.0) (106.4) 






Gross Debt 859.3 804.0 1,204.0 1,204.0 

Owners’ Equity 1,038.9 1,004.2 663.2 542.9 



NA 

Key Suppliers 

Others 

23% 


20 April 2009 

Japan 

77% 



NEC Corporation 

Electron Devices 

15% 

Others 

10% 

Mobile/Personnel 

23% 

IT/Network 

52% 

Key Customers 

MitsuiSumitomo 

NTT Group Financial 


Bhavin Shah 

(852) 2800-8538 


Powerwave Technologies 


Powerwave Technologies, Inc. designs, manufactures, and markets wireless communications products. The 

company’s products include antennas, boosters, combiners, filters, radio frequency power amplifiers, 

repeaters, tower-mounted amplifiers, and advanced coverage solutions. 


Ticker: PWAV 

Analyst: Kimberly A. Watkins, CFA 


Price (US$): 0.27 




Key Management: Ronald J Buschur, Kevin Michaels, Carl Neun No. of Employees: 2,483 


NA Revenues 741 780 890 735 

Gross Profit 146 142 198 157 

Operating Profit (24) (71) 12 8 

Net Profit (17) (66) 13 (2) 


Return on Equity (%) (2.5) (12.0) 2.3 3.5 




Gross Debt 330 364 306 306 

Owners’ Equity 650 379 (20) (29) 

Book Value per Share (US$) 5.1 2.9 (0.2) (0.2) 


NA 

EMEA 

34% 

Key Suppliers 

Asia 

34% 


20 April 2009 

Americas 

32% 



Powerwave Technologies 

Base station 

systems 

64% 

Coverage 

systems 

10% 

Antenna systems 

26% 

Key Customers 

Ericsson AT&T 

Alcatel-Lucent Nokia-Siemens 


691

Bhavin Shah 

(852) 2800-8538 


692 

ShoreTel, Inc. 


ShoreTel provides Internet protocol telecommunications systems for enterprises. The company’s systems are 

based on distributed software architecture and switch-based hardware platforms, which enable multi-site 

enterprises to be served by a single telecommunications system. 


Ticker: SHOR 



Price (US$): 4.59 




Key Management: John W. Combs, Michael E Healy, Ed Basart No. of Employees: 365 


NA Revenues 98 129 139 152 










Owners’ Equity (32) 113 115 120 



NA 

Key Suppliers 

Europe 

5% 

North America 

95% 


20 April 2009 


ShoreTel, Inc. 



Service 

14% 

NA 

Product 

86% 

Key Customers

Bhavin Shah 

(852) 2800-8538 


Sonus Networks 


Sonus Networks provides voice infrastructure products. The company’s hardware and software enable 

customers to deploy an integrated, packet-based network carrying both voice and data traffic. Sonus Networks 

markets and sells its products to service providers, including long distance carriers, wholesale carriers, Internet 

service providers, and cable operators. 


Ticker: SONS 

Analyst: Steven J. O'Brien 


Price (US$): 1.64 




Key Management: Richard N Nottenburg, Richard J Gaynor, Hassan M Ahmed No. of Employees: 991 


NA Revenues 279.5 320.3 313.1 233.4 

Gross Profit 180.1 195.4 187.2 135.6 


Net Profit 54.2 27.1 9.7 (4.9) 






Gross Debt 2.0 3.1 3.2 3.2 

Owners’ Equity 432.5 493.6 406.4 399.4 



NA 

EMEA 

14% 

Other 

2% 

Key Suppliers 

Other Asia Pacific 

Japan 

2% 

9% 


20 April 2009 

US 

73% 



Sonus Networks 


infrastructure- 

Services 

29% 


infrastructure- 

Product 

71% 

Key Customers 

Carphone 

AT&T Wireless Warehouse 

Global Crossing KDDI 

Level 3 Motorola 

Qwest T-Systems 

Verizon 


693

Bhavin Shah 

(852) 2800-8538 


694 

Spirent Communications Plc 


Spirent Communications provides electronic solutions for the technology industry, including businesses in the 

telecommunications and medical sectors. The group specializes in telecommunications testing systems, 

including computer software and hardware systems, cable management systems, and transmitters. It operates 

in the Americas, Europe and Asia Pacific. 


Ticker: SPT.L 



Price (GBP): 46.5 




Key Management: Edward J Bramson; William J Burns No. of Employees: 1,661 

Business Alliances/Partnerships (GBP in milllions) FY06 FY07 FY08 FY09E 

Partnerships with Cortechs, Empowered 

networks, Paralink Networks, tComlabs, Toyao 

Corporation, Anue Systems, Imperfect networks, 

NetworkFX communications, Objective 

Revenues 259 237 258 269 



Net Profit 109 18 75 39 

Concepts, SST Inc, Sifos Tech Earnings per Share (GBP) 0.12 0.02 0.10 0.07 





Gross Debt NA NA 0 NA 


Book Value per Share (GBP) 0.2 0.2 0.3 0.3 


NA 

ROW 

26% 

Key Suppliers 

Europe 

18% 


20 April 2009 

North America 

56% 



Spirent Communications 

Serv ice Assurance 

15% 

Sy stems 

14% 

Performance 

Analy sis 

71% 

Key Customers 

Cisco BT 

SBC Samsung 

Verizon Huawei 

Microsoft 


Bhavin Shah 

(852) 2800-8538 


Starent Networks, Corp. 


Starent Networks Corporation provides network infrastructure solutions that enable mobile operators to deliver 

multimedia services to their subscribers. 


Ticker: STAR 



Price (US$): 17.36 




Key Management: Ashraf M. Dahod; Pierre Kahhale; Vijay Kathuria No. of Employees: 774 


NA Revenues 94 146 254 315 

Gross Profit 67 108 200 236 









Owners’ Equity (106) 255 338 354 



NA 

Key Suppliers 

International 

10% 

United States 

90% 



20 April 2009 

Starent Networks 



Service 

15% 

Product 

85% 

Key Customers 

KDDI SKT 

Sprint Verizon 

695

Bhavin Shah 

(852) 2800-8538 


696 

Tellabs 


Tellabs, Inc. designs, manufactures, markets, and services voice, data, and video transport and network access 

systems. The company’s products are used worldwide by public telephone companies, long-distance carriers, 

alternate service providers, cellular service providers, cable operators, government agencies, utilities, and 

business end-users. 


Ticker: TLAB 



Price (US$): 4.07 




Key Management: Robert W Pullen; Timothy J Wiggins; James M Sheehan No. of Employees: 3,228 


NA Revenues 2,041 1,913 1,729 1,516 

Gross Profit 940 680 666 635 


Net Profit 258 104 102 92 







Owners’ Equity 2,938 2,913 1,847 1,903 



NA 

International 

32% 

Key Suppliers 

United States 

68% 



20 April 2009 

Tellabs 


Services and 

Solutions 

13% 

Broadband 

Products 

53% 

Transport 

Products 

34% 

Key Customers 

Verizon AT&T 

Sprint 


Bhavin Shah 

(852) 2800-8538 


TomTom NV 


TomTom NV markets personal navigation products for consumers. The company offers the TomTom GO series 

of integrated navigation products, combining a GPS receiver, screen and software in one device. TomTom 

further provides navigation software that can be used in mobile electronic devices such as PDAs and 

smartphones. 


Ticker: TOM2.AS 



Price (€): 3.09 




Key Management: Harold Goddijn; Marina M Wyatt; Alain Auguste De Taeye (Member-Msmg board) No. of Employees: 4,000 


Revenues 1,364 1,737 1,674 1,445 

Gross Profit 579 764 781 696 


Net Profit 222 317 185 26 






Gross Debt 0 0 1,388 1,218 

Owners’ Equity 551 1,352 513 536 



NA 

North America 

26% 

Key Suppliers 

Other 

4% 

Europe 

71% 



20 April 2009 

TomTom NV 


Other 

5% 

PDA/Smartphones 

Solutions 

1% 


Toyota 

PNDs 

93% 

Key Customers 

697

Bhavin Shah 

(852) 2800-8538 


698 

ZTE Corp 


ZTE Corporation develops and markets switches, access servers, videoconferencing systems, mobile 

communication systems, data communication devices, and optical communication devices. The company also 

offers networking solutions for set-up, refurbishment and optimization of networks. 





Price (HK$): 26.8 




Key Management: Hou Wei Gui, Yin Yi Ming, Xie Weiliang No. of Employees: 48,261 

Business Alliances / Partnerships (Rmb in millions) FY06 FY07 FY08 FY09E 

NA Revenues 23,215 34,777 44,293 58,402 

Gross Profit 7,849 11,362 14,382 18,798 


Net Profit 767 1,252 1,660 2,243 



Capital Spending (1,116) (1,481) (1,230) (602) 



Gross Debt 2,625 6,489 6,957 8,959 

Owners’ Equity 10,764 12,137 14,250 15,914 



NA 

Africa 

19% 

Key Suppliers 

Others 

16% 

Asia (ex China) 

29% 


20 April 2009 

China 

36% 



ZTE Corp 

Wireless 

Communication 

40% 

systems and 

others 

12% 

Handsets 

22% 

Optical/Data 


18% 

Wireline switch 

7% 

Key Customers 

Hutchison 

Whampoa France telecom 

Telstra TIM 

China Mobile China Telecom 

Vodafone 


Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Distribution 

Arrow Electronics Inc..................... 700 

Avnet, Inc ........................................ 701 

HCL Infosystems ............................ 702 

Ingram Micro................................... 703 

Mellanox Technologies, Ltd. ......... 704 

Opnext ............................................. 705 

Synnex............................................. 706 

Tech Data Corporation................... 707 

Voltaire ............................................ 708 

Distribution 

699

Bhavin Shah 

(852) 2800-8538 



Arrow Electronics Inc. 


Arrow Electronics, Inc. distributes electronic components and computer products to industrial and commercial Ticker: ARW 

customers. The company distributes a variety of products including computer systems, peripherals, software, Analyst: Not Covered 

and mass storage products to original equipment manufacturers and commercial customers worldwide. 


Price (US$): 17.43 




Key Management: William E Mitchell; Paul J Reilly; Michael J Long No. of Employees: 12,700 


NA Revenues 13,577 15,985 16,761 13,754 



Net Profit 388 408 (614) 206 


Return on Equity (%) 14 12 (20) 4 




Gross Debt 1,240 1,236 1,287 NA 




NA 

700 

Key Suppliers 

Asia/Pacific 

18% 

EMEASA 

32% 


20 April 2009 

North America 

50% 



Arrow Electronics 

Computer 

Products 

33% 

Electronic 

Components 

68% 

Key Customers 

COMPANY WEBSITE Distribution 

NA

Bhavin Shah 

(852) 2800-8538 


Avnet, Inc 


Avnet, Inc. distributes computer products and semiconductors, as well as interconnect, passive, and 

electromechanical components. The company markets, inventories, and adds value to these products and 

provides supply-chain integration, engineering design, and technical services. Avnet serves customers in 

countries around the world. 


Ticker: AVT 



Price (US$): 16.86 



Founded: 1955; Listed: NA Fiscal Year End: June 

Key Management: Roy A Vallee; Raymond Sadowski; Richard P Hamada No. of Employees: 12,800 


NA Revenues 15,681 17,953 16,056 14,883 



Net Profit 393 499 304 272 










NA 

Key Suppliers 

Asia/Pacific 

19% 

EME 

32% 


20 April 2009 

Americas 

50% 

AVT US 




Solutions 

47% 

Electronics 

Marketing 

53% 

Key Customers 


NA 

701

Bhavin Shah 

(852) 2800-8538 


702 



HCL Infosystems Limited manufactures computer systems and specializes in the provision of IT solutions and 

related services. The company provides a variety of services, including IT consultancy, software development, 

system integration, SAP consultancy, system support, network implementation and facilities management. 

Country: India 

Ticker: HCLI.BO 

Analyst: Manoj Singla, CFA 


Price (Rs): 68.65 



Founded: 1976; Listed: NA Fiscal Year End: June 

Key Management: Ajai Chowdhry; Sandeep Kanwar; J.V. Ramamurthy No. of Employees: 5,753 

Business Alliances/Partnerships (Rs in millions) FY07 FY08 FY09E FY10E 

Oracle Revenues 118,555 126,100 126,227 136,990 

Nokia Gross Profit 8,694 10,511 10,526 11,247 

Toshiba Operating Profit 3,886 4,227 3,829 3,986 

Bull Net Profit 3,157 3,000 2,413 2,711 

Intel Earnings per Share (Rs) 18.68 17.60 14.10 15.84 

AMD Return on Equity (%) 40.50 32.00 21.70 20.60 

Sun Microsystems Capital Spending (677) (372) (274) (160) 



Gross Debt 2,359 3,545 2,855 2,855 

Owners’ Equity 8,597 10,162 12,033 14,282 

Book Value per Share (Rs) 50.87 59.52 70.31 83.45 


NA 

Key Suppliers 

India 

100% 



20 April 2009 



Telecom 

73% 

Computer 

Systems 

27% 

Key Customers 


NA

Bhavin Shah 

(852) 2800-8538 


Ingram Micro 


Ingram Micro Inc. is a wholesale distributor of Information Technology (IT) products and services. The company 

also markets computer hardware, networking equipment, and software products. Ingram Micro provides supply 

chain optimization services to suppliers and reseller customers. 


Ticker: IM 



Price (US$): 11.28 




Key Management: Dale R Laurance; Alain Monie; Gregory mark Emile Spierkel No. of Employees: 14,500 


NA Revenues 31,357 35,047 34,362 28,118 



Net Profit 266 276 (395) 159 










NA 

Asia-pacific 

20% 

Key Suppliers 

Europe 

34% 

Latin America 

5% 


20 April 2009 

North America 

41% 


Ingram Micro 

Key Customers 

Samsung LGE 

Pantec 


703

Bhavin Shah 

(852) 2800-8538 


704 

Mellanox Technologies, Ltd. 


Mellanox Technologies Ltd. designs and develops semiconductor-based, high-performance interconnect 

products. The company's products facilitate data transmission between servers and storage systems through 

communications infrastructure equipment. 


Ticker: MLNX 



Price (US$): 7.81 




Key Management: Eyal Waldman; Michael Gray; Shai Cohen No. of Employees: 228 


NA Revenues 49 84 107 101 




Earnings per Share (US$) - 0.76 0.72 0.24 







Book Value per Share (US$) - 5.38 6.12 6.52 


NA 

Asia 

15% 

Key Suppliers 

Europe 

13% 

Israel 

19% 

North America 

53% 



20 April 2009 


Mellanox Technologies 

InfiniBand 


100% 

Key Customers 

Cisco Silverstorm 

Voltaire NTAP 

ECI Isilon 

Linux Network GE Fanuc 

COMPANY WEBSITE Distribution

Bhavin Shah 

(852) 2800-8538 


Opnext 


Opnext, Inc. designs and manufactures optical modules and components for telecommunications and data 

communications networks. 


Ticker: OPXT 







Key Management: Harry Bosco; Michael Chan; Gilles Bouchard No. of Employees: 438 


NA Revenues 223 283 317 312 



Net Profit 4 20 (18) (58) 

Earnings per Share (US$) 0.07 0.31 -0.26 -0.64 






Owners’ Equity 291 323 276 215 



NA 

Europe 

23% 

Japan 

13% 

Key Suppliers 

Asia Pacific 

6% 

United States 

58% 



20 April 2009 

Opnext 


< 10 Gbps 

9% 

10 Gbps & Above 

69% 

Information & 

Industrial, 6% 

Optical 

Subsystems 

(Stratalight) 

16% 

Key Customers 


NA 

705

Bhavin Shah 

(852) 2800-8538 


706 

Synnex 


Synnex Technology International Corporation markets personal computers, computer peripherals, multi-media 

products, network products, computer application software, electronic parts, and telecommunication products. 









Key Management: Du Shu-Wu "Evans"; Hu Chia-Lung No. of Employees: 1,489 


NA Revenues 142,332 171,034 197,878 227,910 

Gross Profit 6,849 8,143 8,475 9,686 


Net Profit 2,660 3,802 3,625 4,466 



Capital Spending (685) (175) (483) (1,200) 



Gross Debt 8,111 11,331 14,708 16,318 

Owners’ Equity 23,500 27,093 28,327 31,227 



NA 

Other Overseas 

12% 

HK & China 

63% 

Key Suppliers 

Taiwan 

25% 



20 April 2009 

Synnex 


IC Components 

16% 


Telecom 

13% 

IT 

71% 

Key Customers 

Samsung Pantec 

LGE

Bhavin Shah 

(852) 2800-8538 


Tech Data Corporation 


Ultra Clean Holdings, Inc. develops and supplies critical subsystems for the semiconductor capital equipment 

industry, focusing on gas delivery systems. These gas delivery systems enable the precise delivery of specialty 

gases used in a majority of the key steps in the semiconductor manufacturing process. 


Ticker: TECD 



Price (US$): 19.58 



Founded: ; Listed: 1986 Fiscal Year End: January 

Key Management: Robert M Dutkowsky; Steven A Raymund; Jeffery P Howells No. of Employees: 8,300 


NA Revenues 21,440 23,423 24,080 20,015 



Net Profit (97) 108 124 85 

Earnings per Share (US$) (1.8) 2.0 2.4 1.7 

Return on Equity (%) (5.6) 6.0 6.8 NA 








NA 

Americas 

47% 

Key Suppliers 


20 April 2009 

Europe 

53% 


Tech Data 



Distribution 

100% 

Key Customers 

Samsung LGE 

Pantec 


707

Bhavin Shah 

(852) 2800-8538 


708 

Voltaire 


Voltaire Limited designs and develops server and storage switching and software solutions that enable grid 

computing within the data center. 

Country: Israel 

Ticker: VOLT 



Price (US$): 2.43 




Key Management: Ronnie Kenneth; Koby Segal; Patrick Guay No. of Employees: 174 





Net Profit (11) (28) (5) (9) 


Return on Equity (%) NA (45.6) (8.3) (14.9) 





Owners’ Equity (58) 62 60 57 



NA 

APAC & Japan 

12% 

Europe 

36% 

Key Suppliers 

North America 

53% 



20 April 2009 

Voltaire 


Professional 

Services 

Software 

3% 

3% 

Adaptor Card 

20% 

Grid Switch Edge 

24% 

Grid Switch 

Director 

51% 

Key Customers 

IBM Sun 

HP SGI 

COMPANY WEBSITE Distribution

Bhavin Shah 

(852) 2800-8538 


Company index 

A 

AAC Acoustic (464) 

Ability Enterprise (571) 

Ace Digitech (479) 

Acer Inc. (605) 

ADC Telecommunications (673) 

ADTRAN, Inc (674) 

ADVA AG Optical Networking (675) 

Advanced Energy (426) 

Advanced Micro Devices (349) 

Advanced Semiconductor Engineering (418) 

Advantech (624) 

Advantest Corporation (427) 

Agilent Technologies (428) 

AIXTRON AG (429) 

Alcatel-Lucent SA (676) 

Alpine Electronics (670) 

Alps Electric Co., Ltd. (504) 

Altera (380) 

Amkor Technology, Inc. (419) 

Amphenol Corp (531) 

Analog Devices (350) 

Apple Inc. (606) 

Applied Materials, Inc (430) 

Applied Microcircuits (381) 

Arm Holdings Plc (382) 

ARRIS Group (677) 

Arrow Electronics Inc. (700) 

Aruba Networks, Inc. (678) 

Ascent Solar Technologies, Inc. (639) 

ASM International N.V. (431) 

ASM Pacific (432) 

ASML (433) 

ASUSTek Computer Inc. (607) 

Atheros Communications Inc. (383) 

ATMI Inc (434) 

AU Optronics (540) 

Austria Technologie & Systemtechnik AG (516) 

Avermedia (465) 

Avnet, Inc (701) 

AVTech (662) 

AVX Corporation (486) 

B 

Benchmark Electronics Inc. (572) 

Bright LED Electronics Corp. (550) 

Broadcom Corporation (384) 

Brocade Communications (585) 

Brooks-Automation (435) 


20 April 2009 

BYD (466) 

BYD Electronic (559) 

C 

Cabot Microelectronics Corporation (436) 

Cambridge Silicon Radio (385) 

Canon, Inc. (612) 

Casio Computer Co., Ltd. (613) 

Catcher Technology (467) 

Cavium Networks (386) 

Celestica Inc. (573) 

Centron Telecom (679) 

Chartered Semiconductor Manufacturing Ltd (413) 

Cheil Industries (480) 

Cheng Uei Precision Industry Co., Ltd. (468) 

Chi Mei Optoelectronics (541) 

Chunghwa Picture Tubes Ltd. (542) 

CIENA Corp (680) 

Cisco Systems Inc. (681) 

Citizen Holdings Co., Ltd. (614) 

Clarion (671) 

Cogent Systems (663) 

CommScope (682) 

Compal Communications, Inc. (560) 

Compal Electronics, Inc. (564) 

Compeq Manufacturing Co., Ltd. (517) 

Corning (387) 

Cosel (535) 

Cymer, Inc. (437) 

Cyntec (487) 

Cypress Semiconductor (388) 

D 

Daeduck Electronics (518) 

Dai Nippon Printing Co., Ltd. (650) 

DAINIPPON SCREEN MFG. CO., LTD. (438) 

Dell Inc. (608) 

Delta Electronics Inc. (536) 

DFI (469) 

Digital Theater Systems, Inc. (664) 

Digitech Systems (543) 

Disco Corp. (439) 

D-Link Corporation (683) 

E 

Eastman Kodak (651) 

Elan Microelectronic Corp (389) 

Elcoteq (561) 

Elpida Memory, Inc. (373) 

EMC Corporation (586) 

Emulex Corporation (587) 

Energy Conversion Devices, Inc. (640) 

709

Bhavin Shah 

(852) 2800-8538 


Entegris Inc. (440) 

Epcos AG (488) 

Epistar Corporation (551) 

Ericsson (684) 

Evergreen Solar Incorporated (641) 

Everlight Electronics Co., Ltd. (552) 

F 

F5 Networks, Inc (685) 

Fairchild Semiconductor (351) 

First Solar, Inc. (642) 

Flextronics International (574) 

FormFactor Inc (458) 

Foxconn Int'l Holdings (562) 

Foxconn Technology (505) 

Fuji Electric Holdings Co., Ltd. (625) 

FUJIFILM Holdings Corporation (652) 

Fujitsu, Limited (626) 

Funai Electric Co., Ltd. (506) 

G 

Garmin Ltd. (665) 

Gigabyte Technology Co., Ltd. (565) 

Greatek Electronics Inc (390) 

H 

HannStar Display Corp. (544) 

HCL Infosystems (702) 

Hewlett-Packard (609) 

High Tech Computer Corp. (599) 

Himax Technologies, Inc. (391) 

Hi-P International Limited (575) 

Hirose Electric Co, Ltd. (532) 

Hitachi, Ltd. (627) 

Hon Hai Precision (576) 

HOYA CORPORATION (500) 

Huan Hsin Holdings Ltd (507) 

Hynix Semiconductor (374) 

I 

Ibiden Co., Ltd. (519) 

Ichia Technologies (470) 

Infineon Technologies AG (352) 

Infinera Corporation (686) 

Ingram Micro (703) 

Innolux Display Corporation (545) 

Inotera Memories, Inc. (375) 

Integrated Device Technology (353) 

Intel Corp (354) 

International Business Machines (628) 

International Rectifier (537) 

Intersil Corporation (355) 

Inventec Co., Ltd. (566) 

710 


20 April 2009 

J 

Jabil Circuit (577) 

JDSU Inc. (687) 

Ju Teng International Holdings Limited (471) 

Juniper Networks (688) 

Jusung Engineering Co Ltd (441) 

K 

Kinsus Interconnect Technology Corporation (520) 

KLA-Tencor Corp (442) 

Konica Minolta Holdings, Inc. (653) 

Kumho Electric (481) 

Kyocera Corp. (689) 

L 

Lam Research (443) 

Largan Precision (501) 

Lattice Semiconductor (392) 

Lenovo Group Limited (610) 

Lexmark International, Inc. (654) 

LG Display (546) 

LG Electronics (615) 

LG Innotek (472) 

LG Micron (482) 

Linear Technology (356) 

Lite-On Technology Corporation (508) 

Logitech International SA (473) 

LSI Corporation (357) 

M 

Marvell Technology Group (393) 

Mattson Technology (444) 

Maxim Integrated Products (358) 

MediaTek Inc. (394) 

Melexis (359) 

Mellanox Technologies, Ltd. (704) 

MEMC Electronic Materials Inc. (459) 

Merry Electronics (474) 

Microchip Technology (360) 

Micron Technology (376) 

Microsemi Corporation (395) 

Micro-Star International Co., Ltd. (567) 

Min Aik Technology Co., Ltd. (497) 

Mitac International Corporation (578) 

Mitsubishi Electric Corporation (629) 

Mitsumi Electric Co., Ltd. (509) 

MKS Instruments, Inc. (445) 

Molex Inc (533) 

Moser Baer (595) 

Motech Industries Inc. (643) 

Motorola, Inc. (600) 

Murata Manufacturing Company, Ltd. (489)

Bhavin Shah 

(852) 2800-8538 


N 

Nan Ya PCB (521) 

Nanya Tech. Corp. (361) 

National Instruments (630) 

National Semiconductor (362) 

NEC Corporation (690) 

NEC Electronics Corporation (363) 

NetApp (588) 

NGK Spark Plug Co., Ltd. (522) 

NHK Spring Co., Ltd. (498) 

Nice Systems (666) 

Nichicon Corporation (490) 

Nidec Corporation (510) 

Nikon Corporation (655) 

Nippon Chemi-Con Corporation (491) 

NOK Corp. (511) 

Nokia (601) 

Novatek Microelectronics Corp. Ltd. (396) 

Novatel Wireless (397) 

Novellus Systems (446) 

NVIDIA Corporation (398) 

O 

Oki Electric Industry Co., Ltd. (631) 

Olympus (656) 

OmniVision Technologies (399) 

Omron Corporation (632) 

ON Semiconductor Corporation (364) 

Opnext (705) 

P 

Palm Inc. (602) 

Panasonic Corporation (616) 

Phoenix Precision Technology Corporation (523) 

Photronics Inc (460) 

Pioneer Corporation (617) 

Plantronics Inc. (667) 

Plexus Corp. (579) 

PMC-Sierra Inc (400) 

Powerchip Semiconductor Corp. (377) 

Powertech Technology Inc (420) 

Powerwave Technologies (691) 

ProMos Technologies Inc. (378) 

Q 

Q-Cells SE (644) 

Qisda Corporation (555) 

QLogic Corporation (589) 

QUALCOMM Inc (401) 

Quanta Computer Inc. (568) 

Quanta Storage (596) 

Quantum Corporation (590) 


20 April 2009 

R 

Renewable Energy Corporation ASA (645) 

Research in Motion Ltd. (603) 

RF Micro Devices (402) 

Richtek Technology Corporation (403) 

Ricoh Co., Ltd. (657) 

Rohm Co., Ltd. (365) 

Royal Philips Electronics (618) 

S 

Samsung Electro-Mechanics Co. Ltd. (512) 

Samsung Electronics (633) 

Samsung SDI (547) 

Samsung Techwin Co., Ltd. (658) 

SanDisk Corp (366) 

Sanken Electric Co., Ltd. (367) 

Sanmina-SCI Corporation (580) 

Sanyo Electric Co., Ltd. (619) 

Seagate Technology Inc (592) 

Seiko Epson Corporation (659) 

Semtech Corporation (368) 

Seoul Semiconductor Co., Ltd (553) 

Sharp Corp. (620) 

Shimadzu Corporation (447) 

Shin Zu Shing Co Ltd (475) 

Shinko Electric Industries Co., Ltd. (524) 

ShoreTel, Inc. (692) 

Siemens (634) 

Sierra Wireless Inc. (404) 

Silicon Integrated Systems Corp. (405) 

Siliconware Precision Industries Co., Ltd. (421) 

Silitech Technology Corp (476) 

SMART Modular Tech Inc (581) 

SOITEC (461) 

SolarWorld AG (646) 

Sonus Networks (693) 

Sony (621) 

Spirent Communications Plc (694) 

Starent Networks, Corp. (695) 

STATS ChipPAC Ltd (422) 

STMicroelectronics (369) 

Sun Microsystems (635) 

Sunny Optical Technology (502) 

Sunplus Technology (406) 

SunPower Corporation (647) 

Suntech Power Holdings Co., Ltd. (648) 

Synaptics Incorporated (477) 

Synnex (706) 

T 

Taiflex Scientific Co., Ltd. (525) 

Taiwan Semiconductor Manufacturing Company (414) 

711

Bhavin Shah 

(852) 2800-8538 


Taiyo Yuden Co., Ltd. (492) 

Tandberg ASA (622) 

TDK Corporation (513) 

Tech Data Corporation (707) 

Technosemichem Co Ltd (483) 

Tellabs (696) 

Teradyne, Inc (448) 

Texas Instruments Inc. (370) 

Tokyo Electron, Ltd. (449) 

Tokyo Seimitsu Co., Ltd. (450) 

TomTom NV (697) 

Topoint Technology Co., Ltd. (526) 

Toppan Printing Co., Ltd. (660) 

Toshiba Corporation (636) 

TPV Technology Ltd (556) 

Trimble Navigation (668) 

Tripod Technology Corp (527) 

TriQuint Semiconductor (407) 

TTM Technologies, Inc. (528) 

TXC Corp (493) 

Tyco Electronics (514) 

U 

Ultra Clean Holdings (451) 

Ultratech Inc. (452) 

Ulvac, Inc. (453) 

UMC (415) 

Unimicron Technology Corp. (529) 

Unisem (M) Berhad (423) 

Universal Scientific Industrial (USI) (582) 

Ushio, Inc. (454) 

712 


20 April 2009 

V 

Vanguard International Semiconductor Corporation (416) 

Varian Semiconductor Equipment Associates, Inc. (455) 

Venture Corporation Limited (583) 

Verigy Ltd. (424) 

Via Technologies (408) 

Vishay Intertechnology, Inc. (494) 

Voltaire (708) 

W 

Western Digital Corporation (593) 

Winbond (371) 

Wintek Corporation (548) 

Wistron Corporation (569) 

Wolfson Microelectronics Plc (409) 

Wooree ETI Co Ltd (484) 

X 

Xerox Corporation (637) 

Xilinx (410) 

Y 

Yageo Corporation (495) 

Yokogawa Electric Corporation (456) 

Z 

Zoran Corp (411) 

ZTE Corp (698)

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

Analyst Certification: 

The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily 

responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with 

respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report 

accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research 

analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the 

research analyst(s) in this report. 

Important Disclosures 

1. Gartner: All statements in this report attributable to Gartner represent J.P. Morgan's interpretation of data, research opinion or 

viewpoints published as part of a syndicated subscription service by Gartner, Inc., and have not been reviewed by Gartner. Each 

Gartner publication speaks as of its original publication date (and not as of the date of this report. The opinions expressed in Gartner 

publications are not representations of fact, and are subject to change without notice. 

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: 

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the 

average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve 

months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) 

coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of 

the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector 

and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe. 

Coverage Universe: Bhavin Shah: Advanced Semiconductor Engineering (ASE) (2311.TW), Chartered Semiconductor 

(Singapore) (CSMF.SI), Chartered Semiconductor (US) (CHRT), HTC Corp (2498.TW), SPIL (Siliconware Precision 

Industries) (2325.TW), TSMC (2330.TW), UMC (2303.TW) 

J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2009 

Overweight Neutral Underweight 

(buy) (hold) (sell) 

JPM Global Equity Research Coverage 35% 46% 19% 

IB clients* 54% 54% 42% 

JPMSI Equity Research Coverage 35% 51% 14% 

IB clients* 75% 73% 57% 

*Percentage of investment banking clients in each rating category. 

For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold 

rating category; and our Underweight rating falls into a sell rating category. 

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on 

any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on 

the front of this note or your J.P. Morgan representative. 

Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon 

various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which 

include revenues from, among other business units, Institutional Equities and Investment Banking. 

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US 

affiliates of JPMSI, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMSI, 

and may not be subject to NASD Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public 

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Other Disclosures 

J.P. Morgan is the global brand name for J.P. Morgan Securities Inc. (JPMSI) and its non-US affiliates worldwide. 

713

Bhavin Shah 

(852) 2800-8538 


714 


20 April 2009 

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party or outside New Zealand without the prior written consent of JPMSAL.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan 

Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any 

disclosures relative to JPMSI and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is as 

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solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual 

client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to 

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mentioned herein. JPMSI distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic 

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publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home 

jurisdiction unless governing law permits otherwise. 

“Other Disclosures” last revised January 30, 2009. 

715

Bhavin Shah 

(852) 2800-8538 


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20 April 2009 

J.P. Morgan Global Tech Team List 

Last Name First Name Last Phone Email Region Legal Entity 

Blansett Christopher (1-415) 315 6708 christopher.r.blansett@jpmchase.com United States J.P. Morgan Securities Inc. 

Chou Cynthia (886-2) 2725-9898 cynthia.hy.chou@jpmorgan.com Asia J.P. Morgan Securities (Taiwan) Limited 

Coster Paul (1-212) 622-6425 paul.coster@jpmorgan.com United States J.P. Morgan Securities Inc. 

Danely Chris (1-415) 315-6774 chris.b.danely@jpmorgan.com United States J.P. Morgan Securities Inc. 

Deshpande 

Dyas 

Sandeep 

Luke 

(44-20) 7325 0456 

(44-20) 77428016 


luke.j.dyas@jpmorgan.com 

Europe 

United States 



Funada Miho (81-3) 5545-8630 miho.funada@jpmorgan.com Japan JPMorgan Securities Japan Co., Ltd. 

Gelblum Ehud (1-212) 622-6457 ehud.gelblum@jpmorgan.com United States J.P. Morgan Securities Inc. 

Guo Charles (852) 2800-8532 charles.x.guo@jpmorgan.com Asia J.P. Morgan Securities (Asia Pacific) Limited 

Gupta Malvika (44-20) 7742-0939 malvika.x.gupta@jpmorgan.com Europe J.P. Morgan Securities Ltd. 

Hall Rod (44-20) 7325 7437 rod.b.hall@jpmorgan.com Europe J.P. Morgan Securities Ltd. 

Hariharan Gokul (886-2) 2725 9869 gokul.hariharan@jpmorgan.com Asia J.P. Morgan Securities (Taiwan) Limited 

Hayami Masashi (81-3) 6736-8606 masashi.x.hayami@jpmorgan.com Japan JPMorgan Securities Japan Co., Ltd. 

Hong Winnie (886-2) 2725-9899 winnie.wy.hong@jpmorgan.com Asia J.P. Morgan Securities (Taiwan) Limited 

Izumi Yoshiharu (81-3) 5545-8637 yoshiharu.izumi@jpmorgan.com Japan JPMorgan Securities Japan Co., Ltd. 

Jasani Nishit (91-22) 6639-3008 nishit.x.jasani@jpmorgan.com Asia J.P. Morgan India Private Limited 

Kwock Alvin (852) 2800 8533 alvin.yl.kwock@jpmorgan.com Asia J.P. Morgan Securities (Asia Pacific) Limited 

Liao Patrick (886-2) 2725-9874 patrick.kh.liao@jpmorgan.com Asia J.P. Morgan Securities (Taiwan) Limited 

Lin Liang-Chun (886-2) 2725 9863 liang.c.lin@jpmorgan.com Asia J.P. Morgan Securities (Taiwan) Limited 

Luscri Anthony (1-415) 315-6702 Anthony.s.luscri@jpmorgan.com United States J.P. Morgan Securities Inc. 

Ma Christopher (852) 2800-8564 christopher.x.ma@jpmorgan.com Asia J.P. Morgan Securities (Asia Pacific) Limited 

Meyer Lee (1- 212) 622-2528 lee.m.meyer@jpmchase.com United States J.P. Morgan Securities Inc. 

Moriyama Hisashi (81-3) 6736-8601 hisashi.moriyama@jpmorgan.com Japan JPMorgan Securities Japan Co., Ltd. 

Moskowitz Mark (1-415) 315-6704 mark.a.moskowitz@jpmorgan.com United States J.P. Morgan Securities Inc. 

Nathamuni Venk (1-415) 315-6783 venkatesh.r.nathamuni@jpmorgan.com United States J.P. Morgan Securities Inc. 

O'brien Steve (1- 212)-622-6554 steven.obrien@jpmorgan.com United States J.P. Morgan Securities Inc. 

Pan Felix (886-2) 2725-9871 felix.x.pan@jpmorgan.com Asia J.P. Morgan Securities (Taiwan) Limited 

Park JJ (82-2) 758-5717 jj.park@jpmorgan.com Asia J.P. Morgan Securities (Far East) Ltd, Seoul Branch 

Sato 

Shah 

Shoji 

Bhavin 

(81-3) 5545-8661 

(852) 2800-8538 

shoji.sato@jpmorgan.com 


Japan 

Asia 

JPMorgan Securities Japan Co., Ltd. 


Shin Marcus (82-2) 758-5712 Marcus.j.shin@jpmorgan.com Asia J.P. Morgan Securities (Far East) Ltd, Seoul Branch 

Singla Manoj (91-22) 6639-3017 manoj.singla@jpmorgan.com Asia J.P. Morgan India Private Limited / 

(44-20) 7325-1191 


Watkins Kim (1-415) 315-6724 kimberly.a.watkins@jpmorgan.com United States J.P. Morgan Securities Inc. 

Webster Shawn (1-415) 315-6723 shawn.r.webster@jpmorgan.com United States J.P. Morgan Securities Inc. 

Software team 

Auty 

Cohen 

DiFucci 

Hafner 

Sterling 

David 

John 

David 

(1-212) 622-6389 

(1- 212)-622-5338 

(1-212) 622-2341 

(1-212) 622-4071 

sterling.auty@jpmorgan.com 

david.e.cohen@jpmorgan.com 

john.s.difucci@jpmorgan.com 

david.l.hafner@jpmorgan.com 

United States 

United States 

United States 

United States 





Hong 

Huang 

Angela 

Tien-tsin 

(82-2) 758-5719 

(1-212) 622-6632 

angela.s.hong@jpmorgan.com 

tien-tsin.huang@jpmorgan.com 

Korea 

United States 

J.P. Morgan Securities (Far East) Ltd, Seoul Branch 


Jasani Nishit (91-22) 6639-3008 nishit.x.jasani@jpmorgan.com Asia J.P. Morgan India Private Limited 

Kalia Saket (1-212)-622-6477 saket.kalia@jpmorgan.com United States J.P. Morgan Securities Inc. 

Madhur 

Peter 

Shah 

Sandeep 

John 

Bhavin 

(1-212) 622-5612 

(44-20) 7325-7144 

(852) 2800-8538 

sandeep.x.madhur@jpmchase.com 

john.m.peter@jpmorgan.com 


United States 

United States 

Asia 




Singla Manoj (91-22) 6639-3017 manoj.singla@jpmorgan.com Asia J.P. Morgan India Private Limited / 

Smith Reginald 

(44-20) 7325-1191 

(1-212) 622-6743 reginald.l.smith@jpmorgan.com United States 



Wei 

Ye 

Dick 

Lauren 

(852) 2800-8535 

(1-212) 622-6102 

dick.x.wei@jpmorgan.com 

lauren.c.ye@jpmorgan.com 

Asia 

United States 


J.P. Morgan Securities Inc.

Bhavin Shah 

(852) 2800-8538 



20 April 2009 

J.P. Morgan Global Tech Hardware Team 

Global Sector Components, ODM, EMS & 

Consumer Electronics 

Computing Semiconductors Telecom Equipment – Wireless Telecom Equipment – Wireline and 

Data Networking 

Coordinators: Bhavin Shah Logic: Chris Danely Bhavin Shah Ehud Gelblum 

Memory, Display: JJ Park 

Americas Americas Americas Americas Americas 

United States Paul Coster, CFA United States Mark Moskowitz United States Chris Danely United States Ehud Gelblum United States Ehud Gelblum 

Anthony Luscri Venk Nathamuni Kim Watkins, CFA Kim Watkins, CFA 

Christopher Blansett Steve O'Brien Steve O'Brien 

Shawn Webster 

EMEA EMEA EMEA EMEA EMEA 

Sandeep Deshpande Rod Hall Rod Hall 

Malvika Gupta Malvika Gupta 

Asia Pacific Asia Pacific Asia Pacific Asia Pacific Asia Pacific 

Sector Sales Japan Shoji Sato Taiwan Alvin Kwock Pan Asia Bhavin Shah Pan Asia Bhavin Shah Japan Yoshiharu Izumi 

Yoshiharu Izumi Christopher Ma Masashi Hayami 

US- Peter J McGough Masashi Hayami Gokul Hariharan Taiwan Patrick Liao Taiwan Alvin Kwock Shoji Sato 

Felix Pan Cynthia Chou Christopher Ma 

Global - Luke Dyas South Korea Marcus Shin Alvin Kwock 

HK/China Charles Guo Christopher Ma HK/China Charles Guo 

Asia - Lee Meyer Greater China Alvin Kwock Liang-Chun Lin 

Christopher Ma Japan Yoshiharu Izumi Winnie Hong South Korea JJ Park 

Gokul Hariharan Masashi Hayami Marcus Shin 

Felix Pan Shoji Sato South Korea JJ Park 

Marcus Shin Japan Yoshiharu Izumi 

India Nishit Jasani India Manoj Singla Masashi Hayami 

Japan Yoshiharu Izumi Shoji Sato 

Masashi Hayami 

Hisashi Moriyama 

Hirotaka Wada 

717

Bhavin Shah 

(852) 2800-8538 


Alvin Kwock 

Notebook; Handsets; Fabless 

(852) 2800-8533 


Charles Guo 

China Technology; Handsets 

(852) 2800-8532 


Chris Danely 


(1-415) 315-6774 

chris.b.danely@jpmorgan.com 


20 April 2009 

Christopher Blansett 

Solar 

(1-415) 315 6708 

christopher.r.blansett@jpmchase.com 

Ehud Gelblum 

Telecom Equipment – Wireline and Data 

Networking 

(1-212) 622-6457 

ehud.gelblum@jpmorgan.com 

Eiji Maeda 

Games 

(81-3) 6736-8672 

eiji.maeda@jpmorgan.com 

Gokul Hariharan 

PC; EMS; Components 

(886-2) 2725-9869 


Hisashi Moriyama 

Precision Instruments; Semiconductor 

Equipment 

(81-3) 6736-8601 

hisashi.moriyama@jpmorgan.com 

JJ Park 

Semiconductors; Memory; TFT LCD 

(82-2) 758-5717 


Bhavin Shah 

Global/ Regional Sector Head 

(852) 2800-8538 


Liang-Chun Lin 

TFT LCD; LED; Solar 

(886-2) 2725-9863 


Mark Moscowitz 

IT Hardware and Imaging 

(1-415) 315-6704 


Patrick Liao 

Foundry; Backend; IC Design 

(886-2) 2725-9874 


Rod Hall, CFA 

Communication Equipment 

(44-20) 7325 7437 

rod.b.hall@jpmorgan.com 

Sandeep Deshpande 

Semiconductors; Solar 

(44-20) 7325 0456 


Shawn Webster 


(1-415) 315 6723 

shwan.r.webster@jpmorgan.com 

Shoji Sato 

Components 

(81-3) 6736-8661 

shoji.sato@jpmorgan.com 


Industrial & Consumer Electronics; Memory 

(81-3) 6736-8637 

yoshiharu.izumi@jpmorgan.com

Tech Hardware Supply Chain - Gazhoo

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