瑞信-亚太地区-半导体行业-亚太半导体行业2018年第4季度业绩展望：收益将重新调低-2019.1.17-82页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse 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.17 January 2019 Asia Pacific Equity Research Semiconductor Devices Asia Semiconductor Sector Research Analysts Randy Abrams,CFA 886 2 2715 6366 randy.abramscredit- Haas Liu 886 2 2715 6365 haas.liucredit- SECTOR FORECAST 4Q18 results outlook:earnings to reset lower Figure 1:Recent estimate and rating changes in our coverage Source:Company data,Credit Suisse estimates We summarise key themes ahead of results season for our semiconductor coverage and preview each of our covered companies in this report.4Q18 at the lower half of guidance for the Asian semis space.The semiconductor group reported 4Q18 sales at the lower end of guidance due to softness across iPhone and Android,data center,graphics and China demand along with efforts by the chain to deplete excess inventory.Slowdown triggering cuts across the group.We already cut 1Q19/2019 sales for TSMC,Vanguard,Hua Hong,Powertech and CHPT and in this preview lower ASE and Mediatek estimates.We believe the deceleration should continue in 1Q19 and drive a sub-seasonal quarter across foundry,back-end and fabless and still uncertain magnitude of 2Q pick-up due to a lull in product cycles/soft demand(smartphone,PC,data center,graphics),elevated inventory levels and still unresolved trade war issues.Key preview takeaways.Results trends include:(1)Taiwan tech 4Q18 monthly sales already slightly missed,outlooks soft into early 2019,(2)consumer tech demand hit by a gap in product cycles,(3)TSMC expectations trimmed for 1Q19 and may be flat to up slightly in 2019,(4)8”utilisation dipping in 1Q19 but managements still expecting a 2Q19 rebound,(5)back-end capex likely guided down modestly,(6)tech inventory 1-2 weeks high but trying to get drawn down,and(7)memory pricing hitting the steepest declines in 1Q19 on low season demand and pauses in smartphone(weak demand)and data center(trade war).Cyclical rebound from 2H19,product cycles should resume for 2020.On the product cycle lull and inventory correction,we recently downgraded Powertech and lowered TSMCs 2019 business outlook.We expect a weak start but see potential from later in 1H19 for cyclical semis in memory,equipment and small caps as guidance resets further and business bottoms,with sentiment improving late in 2019 from restocking demand in graphics as 7nm cards launch,mobile/IoT as 5G approaches and hyperscale rebounds as final assembly relocates from China.We expect Realtek and Hua Hong to be relatively resilient and post reset would revisit TSMC and ASE as the worst of the slowdown is factored in through results.Rating/EstimatesPriceTargetInvmentTargetFCF/EVP/EP/BROEDiv Yld Change17-Jan Local CurcyRatingupside2018 2019201820192018 201920182019FoundryTSMCLowered EPS221.0250.0OPFM13.1%6%6%16.214.73.43.122.3%22.4%VanguardLowered EPS58.057.0NTRL-1.7%6%7%16.114.93.23.220.7%21.6%Hua HongLowered EPS14.1219.00OPFM34.6%14%18%11.313.40.91.09.3%7.9%Packaging&testingASELowered EPS58.673.5OPFM25.4%14%4%11.49.81.31.211.3%12.5%PowertechLowered EPS68.180.0OPFM17.5%0%7%8.48.01.31.416.4%17.2%IC designMediaTekLowered EPS233.0290.0OPFM24.5%14%13%21.817.51.41.46.5%8.0%RealtekRaised EPS151.0160.0OPFM6.0%12%14%19.716.83.33.117.3%19.2%Semiconductor equipmentCHPTLowered EPS423.5440.0NTRL3.9%0%2%21.118.02.42.211.4%12.7%17 January 2019 Asia Semiconductor Sector 2 Focus charts and table Figure 2:Asian Semis valuation metrics Note Hua Hong 12”fab capex not yet included in the EV/FCF.Source:Company data,Thomson Reuters,Credit Suisse estimates Figure 3:Internet capex growth may slow in 2019 Figure 4:China back-end capex/sales dropping Source:Company data,Credit Suisse research Source:USTR.GOV,Credit Suisse research Figure 5:China smartphones may trough in 1H19 Figure 6:8”utilization still relatively resilient Source:Company data,Credit Suisse research Source:Company data,Credit Suisse research Market CapPriceTargetInvmentTarget52 WeekFCF/EVP/EP/BROEDiv Yld US$mn17-Jan Local CurcyRatingupsidehigh/low20182019201820192018201920182019FoundryTSMC185,899221.0250.0OPFM13.1%208.0-266.06%6%16.317.03.43.222.3%19.8%UMC4,45411.310.8UPFM-4.0%10.5-18.721%25%12.913.40.60.65.0%4.7%SMIC4,2806.596.60NTRL0.2%5.99-11.86-17%-14%50.714,673.50.80.81.6%0.0%Vanguard Semi3,10058.057.0NTRL-1.7%49.5-83.16%5%16.215.23.23.220.5%20.9%Hua Hong Semi2,02214.1219.00OPFM34.6%12.40-29.7512%16%10.812.60.91.09.7%8.5%Total197,7345%7%16.417.22.82.719.2%18.0%Packaging&testingASE8,07558.673.5OPFM25.4%55.0-80.3-1%3%11.410.61.31.211.3%11.6%Powertech1,71968.180.0NTRL17.5%63.8-97.0-1%10%8.510.21.31.216.0%12.5%Amkor1,7677.47.2NTRL-2.3%5.7-11.52%8%14.812.21.00.96.9%7.7%Kingpak287179.0157.0OPFM-12.3%108.5-280.04%3%19.417.07.46.333.5%40.0%Inari1,0371.31.6OPFM19.4%1.2-2.53%5%15.019.14.03.729.3%20.3%Total12,8861%6%12.512.01.21.214.4%10.1%IC designMediaTek Inc.11,838233.0290.0OPFM24.5%202.0-362.08%11%21.117.41.41.46.6%7.9%Realtek Semiconductor2,485151.0160.0OPFM6.0%105.0-151.011%10%17.415.13.53.220.0%22.1%eMemory656267.0315.0OPFM18.0%186.5-437.53%4%34.728.110.19.628.7%35.0%WPG Holdings Ltd2,19538.140.0NTRL5.1%35.6-47.311%-5%9.29.51.21.214.1%12.6%Total17,1758%5%17.915.71.51.57.6%8.7%Semiconductor equipmentCHPT450423.5440.0NTRL3.9%387.0-1190.0-1%1%19.919.32.32.111.7%11.3%Globalwafers3,851271.5345.0OPFM27.1%200.5-621.012%13%8.87.92.72.435.6%33.3%ASM Pacific4,00875.372.0NTRL-4.3%64.0-120.710%5%12.012.22.62.323.0%20.1%Total9,1977%6%11.711.12.62.323.0%20.1%0%2%4%6%8%10%12%14%16%18%20%$0$3,000$6,000$9,000$12,000$15,000$18,000$21,000$24,000$27,000$30,0002006200720082009201020112012201320142015201620172018E2019EGlobal Players CapexGlobal Players SalesCapex/SalesGlobal back-end players sales and capex(US$mn)Global back-end players capex/sales106129136151112 11311911782104 102 1038391103108-30%-20%-10%0%10%20%30%40%50%(120)(80)(40)-40 80 120 160 2001Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q194Q19China smartphone shipmentYoY(%)China smartphoneshipment(mn units)China smartphone YoY growth(%)0%10%20%30%40%50%60%70%80%90%100%-3,000 6,000 9,000 12,000 15,000 18,000 21,0001997199819992000200120022003200420052006200720082009201020112012201320142015201620172018E2019EUtilization(%)Wafer shipped/quarter(Kpcs)Total capacity/quarterUtilization(%)Kpcs 17 January 2019 Asia Semiconductor Sector 3 Table of contents Focus charts and table 2 4Q18 results outlook:earnings to reset lower 5 Earnings revisions ahead of the 1Q19 results season.6 4Q18 below consensus,1Q19 street coming down.8 TSMC expectations coming down into results.9 Excess inventory coupled with trade war uncertainty triggering some depletion drag on wafer builds.10 Data center decelerating from a strong year.11 TSMC to reaffirm its technology roadmap.12 8”foundry supply easing in the near term.13 Memory pricing to see the cycles deepest decline in 1Q19 on demand uncertainty and high inventory.14 Back-end to also see slower growth,short lead times should allow order pick-up as demand stabilises.15 Back-end capex may stay low in a slow environment.15 China smartphones continue declining,may at least trough in 1H19.16 Valuations pulled back to reasonable levels on the mixed tech outlook and slightly higher macro caution.17 Semiconductor correction already 40-50%,not quite GFC levels,but fundamentals still much different.19 Taiwan Semiconductor Manufacturing(2330.TW/2330 TT)21 Deeper pullback before the next rebound 21 Focus charts and tables:TSMC.22 United Microelectronics(2303.TW/2303 TT)24 Focus charts and tables:UMC.25 Semiconductor Manufacturing International Corp.(0981.HK/981 HK)27 Focus charts and tables:SMIC.28 Vanguard International Semiconductor(5347.TWO/5347 TT)30 Focus charts and tables:Vanguard.31 Hua Hong Semiconductor Limited (1347.HK/1347 HK)33 Focus charts and tables:Hua Hong.34 ASE Industrial Holdings(3711.TW/3711 TT)36 Focus charts and table:ASE.37 17 January 2019 Asia Semiconductor Sector 4 Powertech Technology(6239.TW/6239 TT)39 Focus charts and table:Powertech.40 Amkor Technology Inc.(AMKR)42 Focus charts and tables:Amkor.43 Kingpak Technology(6238.TWO/6238 TT)45 Focus charts and table:Kingpak.46 Inari Amertron(INAR.KL/INRI MK)48 Chunghwa Precision(6510.TWO/6510 TT)51 Focus charts and tables:Chunghwa Precision.52 Globalwafers(6488.TWO/6488 TT)54 Focus charts and table.55 MediaTek Inc.(2454.TW/2454 TT)57 Focus charts and tables:Mediatek.58 Realtek Semiconductor(2379.TW/2379 TT)60 Focus charts and tables:Realtek.61 eMemory(3529.TWO/3529 TT)63 Focus charts and table:eMemory.64 WPG Holdings Ltd(3702.TW/3702 TT)66 Focus charts and tables:WPG.67 17 January 2019 Asia Semiconductor Sector 5 4Q18 results outlook:earnings to reset lower The Asian semiconductor sector companies will likely reflect a more conservative outlook and sentiment in upcoming results.Taiwan tech sales in 4Q18 were reported slightly below street and guidance and still trending softer into 1Q19.The slower business 4Q18 was triggered by a slowdown in tech components and semiconductor production from the iPhone order cuts,high memory inventory,continued server adjustments,excess graphics channel digestion and muted demand for automotive/industrial applications.Figure 7:Our semiconductor coverage tracked to the mid-lower-end of guidance in 4Q18 NT$in millions,unless otherwise stated Source:Company data,the BLOOMBERG PROFESSIONAL service consensus,Credit Suisse estimates We expect a conservative tone to the 1Q19 outlook to start the year with low order visibility for most of the companies into 2019 and in particular for 1Q19 with an uncertain magnitude of post CNY recovery for many companies.A number of companies are still taking a conservative view on the trade war resolution,and are seeing cautious orders from customers and maintaining plans to shift some production out of China impacted by potential tariffs.A more complete deal and easing of trade tensions could trigger some mild rush orders as the supply chain takes some relief although a transition period for product cycles in graphics and smartphones may limit magnitude of upside this year.For 1H19,we believe the worse-than-expected semiconductor business outlook should be dampened by several factors:(1)Slower data center and compute production.Data center is seeing a combined impact from e-commerce tax and a gaming crackdown in China,production slowdown to shift some production for US gear outside China,and seasonal decline also from a high base as capex/sales has increased as investment for growth has outpaced the hyperscale companies sales momentum over the past couple of years.In addition,the graphic demand is also slowing and supply chain is working down excess inventory ahead of new product launches due to data center investment slowdown and wind down of cryptocurrency demand as pricing stabilises at below breakeven levels.(2)Weaker-than-expected iPhone cycle:Apple and its supply chain already cut the production plan and pre-cautioned the business downside through 4Q18 due to weaker-than-expected demand for the new iPhone cycle.We expect the order cut from mid 4Q18 to drag business in 1Q19 especially for semiconductor supply chain while downstream companies have reflected the softness started from 4Q18.We also lowered our expectations for iPhone shipments for 2018/19 to 206/187 mn units,reflecting a 6%YoY decline.4Q-18 Actual4Q-18 CS%4Q18 CS4Q18 Actual QoQ4Q18 CS QoQ4Q18 Street QoQ4Q-18 GuideTracking Guidance1Q19 QoQ(CS)1Q19 QoQ(Street)TSMC289,770289,640100.0%11.3%11.3%12.4%Up 10.6%to 11.8%QoQ(NT$)Midpoint-13.9%-13.1%UMC35,51736,04198.5%-9.8%-8.5%-9.3%Down 8-10%QoQ in NT$Low-end-4.5%1.6%Vanguard 7,7057,705100.0%-0.6%-0.6%0.6%Down 1.9%to up 3.2%QoQLower half-10.1%-6.5%Foundries332,992333,38799.9%8.3%8.3%9.3%Lower half-12.8%-11.3%ASE IC ATM64,12763,671100.7%-3.3%-4.0%N/ADown 4%QoQ for IC ATMIn line-11.0%N/AASE Consol.114,028116,68397.7%6.0%8.4%15.6%Slightly below-20.9%-5.9%Powertech16,64016,448101.2%-9.0%-10.0%-3.1%Decline low single digits QoQBelow-12.9%-4.7%Kingpak538537100.3%-6.1%-6.3%-4.8%Decline mid single digits QoQIn line0.6%N/ABack-end131,206133,66898.2%4.3%4.3%3.2%Slightly below-19.4%-11.3%Mediatek60,89260,831100.1%-9.2%-9.2%-6.6%Down 4%to 12%QoQLower half-8.6%-12.9%Realtek11,94211,942100.0%-1.2%-1.2%-5.5%Down mid single digits QoQAbove-5.5%-1.1%WPG131,817135,32697.4%-12.3%-10.0%-10.0%Down 8.2-12.2%QoQIn line-7.3%-7.7%IC Design204,650208,09998.3%-10.8%-10.8%-7.5%In line-7.9%-9.0%CHPT721721100.0%-22.3%-22.3%-22.3%Down 14-35%QoQIn line-10.0%12.4%Semi equipment721721100.0%-22.3%-22.3%-22.3%In line-10.0%12.4%Total669,569675,87499.1%0.9%0.9%2.3%In line-12.5%-10.6%4Q18 sales for semiconductor group is in line but should see worse than seasonal decline in 1Q19 Growth headwinds now more broad based across applications along with high supply chain inventory levels 17 January 2019 Asia Semiconductor Sector 6(3)China smartphone softness through year-end:China smartphone demand was down 15%YoY in 2018.We expect the demand to further decline by mid-teens QoQ in 1Q19 and stabilise at that lower level,putting full-year shipment down 4%YoY in 2019.We believe the soft sell-through is due to already high penetration and prolonged replacement cycle during the late stages of the 4G ramp.(4)More conservative demand from automotive/industrial applications:Suppliers are moderating orders to reflect a potential demand impact from the trade war between the US and China and now reducing inventory following the aggressive builds in the past ten quarters.(5)Unsettled trade issues and slowing China demand:The US postponed implementation of a tariff increase from 10%to 25%on US$200 bn worth of goods from China in early December to allow further negotiations.Mixed signals rotating between progress and stalemate on structural issues have kept up the uncertainty and limited both new project investments and supply chain willingness to be aggressive on procurement.The uncertainty is contributing to macro weakness in China which has impacted domestic automotive,data center hardware and smartphone shipments.(6)Elevated supply chain and component inventory:Inventory at both the chip level and hardware stayed high in 3Q18 on slower demand late in the quarter and some early procurement ahead of tariff implementation.Companies are now less aggressive on procurement with tightness easing,pricing coming off and tariff issues unresolved.Earnings revisions ahead of the 1Q19 results season We have already trimmed estimates in the past few weeks on TSMC,Vanguard,Hua Hong,Powertech and Chunghwa Precision,with the only upward revision from Realtek due to better de