亞太地區(qū)電子元件行業(yè)-臺(tái)灣PCB行業(yè)：長(zhǎng)期優(yōu)惠ABF基板價(jià)格-2021.7.29-34正式版

29July2021

Focustablesandcharts

Figure2:KeychangesonTWsubstratecompanies

Source:Companydata,CreditSuisseestimates

Figure3:Topsuppliers’aggregateunitcapacityin2023Elikelytobe2.4x2019’slevel.Kinsus&AT&Sthemostaggressive

index(x)

2019

2020

2021E

2022E

2023E

Ibiden

1.0

1.3

1.5

1.8

2.2

Shinko

1.0

1.2

1.5

1.7

2.1

Unimicron

1.0

1.2

1.4

1.6

1.9

NYPCB

1.0

1.1

1.3

1.4

1.7

Kinsus

1.0

1.3

1.7

2.3

3.0

AT&S

1.0

1.9

2.3

3.9

5.6

Sub-total

1.0

1.3

1.5

1.9

2.4

Source:Companydata,CreditSuisseestimates

Figure4:ABFsubstratesplayers’customermix

Unimicron

NYPCB

Kinsus

Ibiden

Shinko

SEMCO

ABFsales%

30%

47%

25%

42%

45%

5%

BTsales%

18%

29%

50%

0%

8%

11%

Intel

o

o

o

o

AMD

o

o

o

o

o

nVidia

o

o

o

o

o

Apple

o

o

o

Xilinx

o

o

BRCM

o

o

Source:Companydata,CreditSuisseestimates

Figure5:Industrycapex-to-salesratiohigherthanpriorcycle

CAPEX(total)

CAPEX/Sales(total)

4,000

30%

28.3%

3,500

25%

3,000

18.9%

20%

2,500

2,000

15%

1,500

10%

1,000

500

5%

0

0%

2004

2005

2006

2007

2008

2019

2020

2021E2022E2023E

Source:Companydata,CreditSuisseestimates

Figure7:Revenuepercapex

Revenuepercapex

2004-07

2019-23E

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Ibiden Shinko Unimicron NYPCB Kinsus AT&S

Figure6:Keysuppliers’US$mncapexforevery1mnunitexpansion

US$mncapex/1mnunits

80

70

60

50

40

30

20

10

0

Ibiden

ShinkoUnimicronNYPCB

Kinsus

AT&S

Total

Source:Companydata,CreditSuisseestimates

Figure8:Peercomparison(EPSCAGRvs.P/E)

120%

105%

CAGR

90%

75%

EPS

60%

2020-23

45%

30%

15%

0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

P/22E(x)

Unimicron

NYPCB

Kinsus

Ibiden

Shinko

AT&S*

TSMC

UMC

Vanguard

Globalwafers

ASE

Powertech

Fastprint*

Shennan

Source:Companydata,CreditSuisseestimates Source:Companydata,CreditSuisseestimates

TaiwanPCBSector 2

29July2021

LongerfavourableABFsubstratepricing

WeraiseFY21-23EPSestimatesonUnimicron/NYPCB/Kinsus,factoringinlongerfavourableABFsubstratepricing(old:until1H22vs.new:until1H23)duetolonger-than-expectedredesignedefforts,strongerEuropeanEVramp,andrelationshipchangesbetweensubstratesandICdesignhouses(toprotectdownsiderisksvs.previouscycle[2004-2007]).Targetprices,accordingly,areraisedtoNT$175/NT$408/NT$198,basedon22x/21x/20xFY22EEPS,respectively,reflectingtheirscoresforindustryposition,financialperformance,valuationandESG.Ontheotherhand,westillexpectrisingrisksonBTfrom2022,duetogrowingredesignedactivitiesinbothAiP(tolowerlayercountsorflexiblePCBsolutions)andPBGA(toQFN),andSamsung’sflagshipAPshiftingtoInFo(likely2023E).

Whathaschanged:(1)TheredesignedeffortsforABFsubstrateshavebeentakinglongerthanexpectedduetothepandemicvsBT;(2)capacityreadinessismoreimportantthantechnologyreadinessinthecurrenttightsupplyenvironment,whichgivesTaiwan’ssupplychainroomtogainmarketshare;(3)fasterEuropeanEVramp(hardware-focused)hasalsoconsumedmorecapacitythanexpected;and(4)bettercommitmentsfromcustomerstoprotectdownsiderisksfromaggressivecapacity,butthisisalsolikelytocapmarginslightofthepreviouscycle.

Whatwilldriveamarketsharereshuffle?

Webelievethatcapacityreadinessisplayingamoreimportantroleformarketsharereshuffleinthecurrenttightsupplyenvironment.However,inthemediumterm,suppliersalsoneedtoshowR&Dcommitmenttobetteraddressthechipletdemand.Itisalsoimportantforsupplierstoseecustomerbasediversity,soastoprotectthedownsiderisksfromtheiraggressivecapexplans.

Record-highcapex-to-salesratio,despitepartiallymitigatedbylong-termcontracts

Westillseethesector’srecord-highcapex-to-salesratioasoneofthekeyrisks.Wenotethataggregatecapex-to-salesforIbiden,Shinko,Unimicron,NYPCB,KinsusandAT&Sreached28.3%in2021E,muchhigherthanthepreviouscyclepeakof18.9%.Whileonemayarguethat2021capexincludeslong-termpurchasingorders,the2020-22Eaveragecapex-to-salesratiois24.2%,stillhigherthanthepreviouscycle’speak.

Weunderstandthattheriskfromrecordhighcapex-to-salesratioscanbemitigatedthroughLTcontracts,givenstructuralrelationshipchangesbetweenICsubstratesandICdesignhouses.OurcheckssuggestthatmultiplelargecustomershavesignedLTcontractswithkeysupplierstosecureABFsubstratesupply.Thismayincludepricecommitment(inarange),volumecommitmentandequipmentprepayment,etc.Thisshouldalsoprovidedownsideprotectiontothesector’srecord-highcapex-to-salesratio.

Autoconsumptionunderestimated

Themarketstartedtoseetechnologychangeinpower,computing,andradar&connectivityforautomotive,withFC-BGAopportunitiesfoundincarcomputingandADAS.WhileADASonlyrequires29x29mmdesign,vs.standard35x35mmdesign,autocomputingcouldrepresentdecentgrowthopportunitiesforFC-BGA,asEuropeanautomakers’solutionsareveryhardwaredriven,vs.Tesla’ssoftware-drivensolution.WhetherEuropeanautomakerswillshifttoalesshardware-heavymodelremainstobeseen,buttheircurrentacceleratingEVrampprovidesanadditionalgrowthdrivertotheABFsubstratessector.

Stockcalls:UpgradeUnimicron

WetakeamoreconstructiveviewonUnimicronbyupgradingthestockfromNeutraltoanOUTPERFORM,givenlongerfavourableABFsubstratepricing,anditsaggressivecapacityexpansionprotectingitspartnershipswithamorepremiumanddiversifiedcustomerbase.WestayNEUTRALonNYPCB,givenitslackofR&Dinvestmentsandrelativelysmallercapacityexpansion.WealsostayNEUTRALonKinsus,givenrisingBTrisks,itsyieldrateuncertaintieswithnewCPUcustomers,andpotentialstrategychangepostchairmanchange.

TaiwanPCBSector

WeraiseourFY21-23EPSestimatesforUnimicron/NYPCB/Kinsus,factoringinlongerfavourableABFsubstratepricingduetolonger-than-expectedredesignedefforts,strongerEuropeanEVramp,andrelationshipchangesbetweensubstratesandICdesignhouses

3

29July2021

LongerfavourableABFsubstratepricing

WeraiseFY21-23EPSestimatesonUnimicron/NYPCB/Kinsus,factoringinlongerfavourableABFsubstratepricing(old:until1H22vs.new:until1H23)duetolonger-than-expectedredesignedefforts,strongerEuropeanEVramp,andrelationshipchangesbetweensubstratesandICdesignhouses(toprotectdownsiderisksvs.previouscycle[2004-2007]).Targetprices,accordingly,areraisedtoNT$175/NT$408/NT$198,basedon22x/21x/20xFY22EEPS,respectively,reflectingtheirscoresforindustryposition,financialperformance,valuationandESG.Ontheotherhand,westillexpectrisingrisksonBTfrom2022,duetogrowingredesignedactivitiesinbothAiP(tolowerlayercountsorflexiblePCBsolutions)andPBGA(toQFN),andSamsung’sflagshipAPshiftingtoInFo(likely2023E).WeneverthelesstakeamoreconstructiveviewonUnimicronbyupgradingthestockfromNeutraltoanOUTPERFORM,givenlongerfavourableABFsubstratepricing,anditsaggressivecapacityexpansionprotectingitspartnershipswithamorepremiumanddiversifiedcustomerbase.WestayNEUTRALonNYPCB,givenitslackofR&Dinvestmentsandrelativelysmallercapacityexpansion.WealsostayNEUTRALonKinsus,givenrisingBTrisks,itsyieldrateuncertaintieswithnewCPUcustomers,andpotentialstrategychangepostchairmanchange.

Figure9:Substratepeercomparisontable

Ticker

Company

ABFsales%(20)

LatestQOPM

OPMYoY(bp)

P/B(X)

21'capex

3037.TW

Unimicron

30%

8.5%

242

4.02

doubleYoY

8046.TW

NYPCB

47%

16.0%

1,102

6.85

up40%+

3189.TW

Kinsus

25%

12.4%

618

3.11

tripleYoY

4062.T

Ibiden

39%

12.0%

379

2.48

doubleYoY

6967.T

Shinko

43%

16.1%

828

3.13

up40-50%

ATSV.VI

AT&S

n/a

4.6%

449

1.93

up25-45%

*Kinsus&Unimicronhavereported2Q21results;restofthecompaniesin1Q21data

Source:CreditSuisseestimates

Whathaschanged?

Ourearlierconcernsonthesectorprimarilycamefrom:

Thesector’saggressivecapacityexpansion,withthecapex-to-salesratiosurgingto28-29%in2021E,vs.thepreviouscyclepeak’s18-19%.

WewereconcernedthatTaiwansuppliers,beingaggressiveoncapacityexpansionbutlaggingintechnology,couldsufferfromloweryieldrates.

Wewereoftheviewthatthelaunchofnext-generationAiP(whichmanagestolowerAiPlayersfrom14Lcurrentlyto“8L+6L”)couldgiveABFsubstrateuserssecondthoughtsaboutcomingupwithsimilarredesignedstructuresthatwouldincreasetheirfinaloutput.

Webelievethatsiliconsubstrates,insteadofABFsubstrates,willlikelybeabettersolutionforhigh-endapplications,i.e.,HPC,AIanddatacentre,whichisdifferentfromthemarket’sbullishviewonongoinglayercountincrease(to20L)andareasizeexpansion(to100x100mm)forABFsubstrates;

Thesector’sprofitabilityislightofthepreviouscycle,butvaluationsarehigherthanthepreviouscycle.Thismakesitsrisk-rewardlessattractiveandtherefore,westaysidewaysonthesector.

However,wenotethat:

WeraiseFY21-23EPSestimatesonUnimicron/NYPCB/Kinsus,factoringinlongerfavourableABFsubstratepricingduetolonger-than-expectedredesignedefforts,strongerEuropeanEVramp,andrelationshipchanges

betweensubstratesandICdesignhouses.

Capacityreadinessisplayingamoreimportantroleforsuppliers’marketsharereshuffleatthecurrentstage.WhileTaiwansuppliersarestilllaggingbehindJapanpeersintermsofleading-edgetechnology,i.e.,EMIB,webelievecapacityreadiness,insteadoftechnologyreadiness,ismoreimportantforcustomersinthecurrenttightsupplyenvironment.Taiwansuppliers’closerrelationshipswithfoundriesandgreaterflexibilityincapacityexpansionforawidercustomerbasealsohelpthemgainmarketsharefasterintheearlycycle.

TaiwanPCBSector

4

29July2021

Customers’increasingcommitmenttoprotectdownsiderisksfromaggressivecapex,butalsotoremovetheprofitupside.Weremainconcernedabouttherecord-highcapex-to-salesratiosfortopsubstratesuppliers.Wealsounderstandthattheriskfromrecordhighcapex-to-salesratioscanbemitigatedthroughLTcontracts,givenstructuralrelationshipchangesbetweenICsubstratesandICdesignhouses.OurcheckssuggestthatmultiplelargecustomershavesignedLTcontractswithkeysupplierstosecureABFsubstratesupply.Theformmayincludepricecommitment(inarange),volumecommitmentandequipmentprepayment,etc.Thisshouldprovidedownsideprotectiontothesector’srecord-highcapex-to-salesratio.

RedesignedeffortsaretakinglongerinABFsubstratesduetopandemic,comparedtoBT(i.e.,AiP).Westillexpectnext-generationAiPdesignwiththechangefromthecurrently14Lstructureto“8L+6L”tobeannouncedin3Q21.Intheory,lowerlayercountsmeanhigheryieldratesandhigherfinaloutputbasedonthesametotalcapacity.Previously,wehadexpectedtheAiPredesigntogiveABFsubstrateuserssecondthoughts(i.e.,toseekforalternativesolutionsinsteadofpursuinglayercountincrease).However,ourconversationswithkeysupplierssuggestthatABFredesignedeffortsaretakinglongerthanexpected,asthepandemicmakesengineeringactivitiesdifficulttobeconductedfacetofaceintermsofbothdesignhousesandsubstrates.ThepandemicalsomakesitdifficulttounifytheKPIbetweensourcing(togetsupplyassoonaspossible,regardlessofperformance)andR&D(togetthebestsolution,regardlessoftime).Ontheotherhand,AiPredesignedactivitiesstartedbeforetheCOVID-19outbreak,whichgavebothsidestimetoworkonasolution.

ABFsubstratesremainamorecost-effectivewaytoaddressEV/WFHdemand,vs.siliconsubstrates.Westillbelievethefasteradoptionof3Dpackagingcouldshiftsomevalueawayfromorganicsubstratestosiliconsubstrates,butthehigherproductioncosts(still3-5xhighercurrently)couldlimit3Dpackagingadoptioninthehighend,i.e.,HPC,AI,anddatacentres.Asaresult,organicsubstratesremainamorecost-effectivesolutionforapplicationsincludingPC,server,networkingandADASinEV,whichstillaccountsforthemajorityoforganicsubstratedemand.

TaiwanPCBSector

5

29July2021

Whatwilldriveamarketsharereshuffle?

Asaresult,wetakeafreshlookatthesector.Iftherisksofredesignarelowinthenext12months,downsidefromaggressivecapexcanbemitigatedbycustomers’increasingcommitments,andsiliconsubstrateskeepingtheirpresenceinveryhigh-endandcost-insensitiveapplications,whichwouldhelpcompaniestostandoutinthesector.

Webelievethatcapacityreadinessisplayingamoreimportantroleformarketsharereshuffleinthecurrenttightsupplyenvironment.However,inthemediumterm,suppliersalsoneedtoshowR&Dcommitmenttobetteraddressthechipletdemand.Itisalsoimportantforsupplierstoseecustomerbasediversity,soastoprotectthedownsiderisksfromtheiraggressivecapexplans.

Capacityreadiness

Capacitycommitment,insteadoftechnologyreadiness,appearstobethekeydriverfororderwinsinthecurrenttightsupplyenvironment.Basedonourchecks,thetopsuppliers’aggregateunitcapacityin2023Eislikelytobe2.4x2019’slevel(subjecttoShinko’scapacityplan).Ofthis,smallerplayers,i.e.,KinsusandAT&S,arethemostaggressiveplayers,aimingtoexpandtheir2023Ecapacityto3xand5.6xtheirrespectivecapacityin2019.Kinsusaimstogainmarketshareinthemarket,throughitsmoreaggressivecapacityexpansion(from8mnunits/monthin4Q19to40mnunits/monthin1H23E).AT&Sofficiallystatedthatitaimstoadvanceitspositiontoaglobaltop-3ABFsupplierin2025E,frombeingfifth.

Existingindustryleadersarealsotryingtodefendtheirmarketsharebutaretakingalessaggressiveapproachwithmostoftheexpansionbeing“subsidised”bycustomersindifferentformfactors.UnimicronaimstomaintainitslargestsupplierpositioninABFsubstratesbytakingabroaderengagementwithmultiplecustomersincludingIntel,AMD,nVidia,Xilinx,Apple,etc.IbidenandShinkobothhaveexpandedcapacityaggressivelysince2019,mainlyforIntel’sEMIB.However,Ibideninthelatestexpansionplan(￥180bninadditionalinvestmentswith40%capacityexpansionin2HFY3/24)alsostateditwouldaddressmulti-customers’demand.

NYPCB,ontheotherhand,isadoptingadifferentstrategywithaless-aggressivecapacityexpansionplan(10-15%YoY/year)andfocusingmoreonspotpricinginthecurrenttightsupplyenvironment.ThecompanyneverthelessstatedthatitmightconsidertotakingaLTcontractwithcustomers,ifsupply-demandismorebalanced(or2023EinNYPCB’sview).

TherearealsosomesmallersupplierswithevenmoreambitiousexpansionplansonICsubstrates.ShennanCircuitannouncedatwo-phaseprojectaimingat200mnunitsofFC-BGAand3mnofpanelRF/FC-CSPsubstrateseveryyear.ZDTiscommittedtoUS$800mninvestmentsinICsubstrates,withABFcapacityrampfrom2023.

Thetopsuppliers’aggregateunitcapacityin2023Eislikelytobe2.4x2019’s.Ofthis,smallerplayers,i.e.,KinsusandAT&Sarethemostaggressiveplayers,aimingtoexpandtheir2023Ecapacityto3xand5.6xtheirrespectivecapacityin2019

Figure10:Topsuppliers’aggregate2023Eunitcapacitylikely

Figure11:AT&Stargetingatop-3ABFpositionin2025E

tobe2.4x2019’slevel.Kinsus&AT&Sarethemostaggressive

index(x)

2019

2020

2021E

2022E

2023E

Ibiden

1.0

1.3

1.5

1.8

2.2

Shinko

1.0

1.2

1.5

1.7

2.1

Unimicron

1.0

1.2

1.4

1.6

1.9

NYPCB

1.0

1.1

1.3

1.4

1.7

Kinsus

1.0

1.3

1.7

2.3

3.0

AT&S

1.0

1.9

2.3

3.9

5.6

Sub-total

1.0

1.3

1.5

1.9

2.4

Source:Companydata,CreditSuisseestimates Source:Companydata,CreditSuisseestimates

TaiwanPCBSector 6

29July2021

R&Dcommitment

Besidescapacitycommitment,webelievethatR&Dcommitmentcouldalsoplayanimportantroleinmarketsharereshuffle,giventhewholeargumentoftheABFsubstrateupcycleisdrivenbydesignupgradetohigherdensity,higherlayercountandbiggerareasize,inordertomeetchipletdemand.

Wenotethatindustryleaders,i.e.,IbidenandUnimicronspent4-5%oftheirrevenueintoR&D,whileR&DspendingforAT&SandKinsusismuchhigherat10%and~8%,respectively.WebelievethatKinsus’higherR&DspendingcouldreflectitsearlyengagementinAiPandHBM(bothareBTsubstrates)andrecentteamreshuffletosupportitsaggressiveABFcapacityexpansion.

Ontheotherhand,NYPCBhasneverdisclosedR&Dspendingsincelisting,butitstotaloperatingexpenseonlyaccountedfor4%ofrevenue.InthecaseofUnimicronandKinsus,R&Disabout40-50%oftheiroperatingexpense.Assumingsimilarratios,thiswouldimplyNYPCB’sR&Dexpensewouldbe~2%ofrevenue.WebelievethatalowerR&DcommitmentmightcapNYPCB’sgrowthopportunitytomorematuretechnology,iftheABFsubstrategrowthopportunityismainlydrivenbytechnologyupgradeandtightercooperationwithfoundry/backend.Thismightbeoneofthereasonswhythecompanyislessinterestedinforminganystrategicpartnershipswithcustomers,vspeers.

Customerbasediversity

Webelievethatcustomerbasediversityisalsoimportant,asthisnotonlymitigatesonesinglecustomer’svolatilitybutalsodemonstratesthesupplier’stechnologycapability.WenotethatUnimicronsuppliestomostcustomers,includingIntelandApple.ThecustomerbasesforNYPCBandKinsusaresomewhatsimilar,asbothdonotserveIntelandApplebutbothhaveexposuretobasestation(NYPCBforHuaweiandKinsusforXilinx)andGPU(nVidia).

Ifwelookattheirtopcustomerrevenuecontributionsin2020,NYPCBhasthehighestconcentrationintopcustomers(19%),followedbyUnimicron(17%)andKinsus(12%ofex-contactlensrevenue).Webelievethatthedifferenceprobablyalsoreflectseachcompany’smixbetweenABFandBT,becauseBTiswidelyadoptedinvarious(matureandadvanced)applicationsandcustomers,whileABFismoretiedtohigh-endapplications,suchasCPU/GPU/ASIC/FPGA.

WebelievethatR&Dcommitmentcouldalsoplayanimportantroleinmarketsharereshuffle,giventhewholeargumentoftheABFsubstrateupcycleisdrivenbydesignupgradetohigherdensity,higherlayercountandbiggerareasize,inordertomeetchipletdemand.

Unimicronsuppliestomostcustomers,includingIntelandApple.ThecustomerbasesforNYPCBandKinsusaresomewhatsimilar,asbothdonotserveIntelandApple,butbothhaveexposuretobasestationandGPU

Figure12:Keysuppliers’R&D%spending(2020)–NYPCBlaggingbehindfoundry/OSAT/peers

R&D-to-sales

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

Figure13:ABFsubstrateplayers’customermix

Unimicron

NYPCB

Kinsus

Ibiden

Shinko

SEMCO

ABFsales%

30%

47%

25%

42%

45%

5%

BTsales%

18%

29%

50%

0%

8%

11%

Intel

o

o

o

o

AMD

o

o

o

o

o

nVidia

o

o

o

o

o

Apple

o

o

o

Xilinx

o

o

BRCM

o

o

Source:Companydata,CreditSuisseestimates

Source:Companydata,CreditSuisse

TaiwanPCBSector

7

29July2021

Record-highcapex-to-salesratio,despitepartiallymitigatedbylong-termcontracts

Westillseethesector’srecord-highcapex-to-salesratioasoneofthekeyrisks.Wenotethataggregatecapex-to-salesforIbiden,Shinko,Unimicron,NYPCB,KinsusandAT&Sreached28.3%in2021E,muchhigherthanthepreviouscyclepeakof18.9%.Whileonemayarguethat2021capexincludeslong-termpurchasingorders(tosecureequipmentsupplyaheadofpeers’),the2020-22Eaveragecapex-to-salesratiois24.2%,stillhigherthanthepreviouscycle’speak.

Weunderstandthattheriskfromrecordhighcapex-to-salesratioscanbemitigatedthroughLTcontracts,givenstructuralrelationshipchangesbetweenICsubstratesandICdesignhouses.OurcheckssuggestthatmultiplelargecustomershavesignedLTcontractswithkeysupplierstosecureABFsubstratesupply.Thismayincludepricecommitment(inarange),volumecommitmentandequipmentprepayment,etc.Thisshouldalsoprovidedownsideprotectiontothesector’srecord-highcapex-to-salesratio.

Capexspendingvaryingbybusinessmodel

Basedontheannouncedcapexin2019-22forkeysuppliers,dividedbytheirexpectedcapacitygrowth,averagecapexforevery1mnunitcapacityisaboutUS$50-60mn.TheoutliersareNYPCB(higherthanaverage)andAT&S(lowerthanaverage).WebelievethatNYPCB’shigher-than-industry-averagecapexreflectsitsreluctanceinsigninganyLTcontractswithcustomers.ForAT&S,weunderstandthatthecompanyonlyannouncedFY21/22capexupto630mneuroswith1.7bnineuroinvestmentsinMalaysiafor2021-26E,soFY22/23capexisnotclear.Itswell-belowindustry-averagecapexcouldalsoreflectitshigherconcentrationwithtopcustomers.

Figure14:Industrycapex-to-salesratiohigherthanpriorcycle

CAPEX(total)

CAPEX/Sales(total)

4,000

30%

28.3%

3,500

25%

3,000

18.9%

20%

2,500

2,000

15%

1,500

10%

1,000

5%

500

0

0%

2004 2005200620072008201920202021E2022E2023E

Source:Companydata,CreditSuisseestimates

Figure15:Keysuppliers’US$mncapexforevery1mnunitexpansion

US$mncapex/1mnunits

80

70

60

50

40

30

20

10

0

Ibiden Shinko Unimicron NYPCB Kinsus AT&S Total

Source:Companydata,CreditSuisseestimates

Profitabilitymightnotrecovertopriorcyclepeakwithconsignment

Theflipsideoftheconsignedbusinessmodelisthattheindustry’sprofitabilitymightnotrecovertoitspriorcyclepeak,asbothcostsandprofitsareco-sharedbetweensubstratesuppliersandtheircustomers.Wenotethatconsensusestimatesalsoassumefallingrevenuegeneratedbyeachdollarcapexspendinginthiscycle,comparedtopreviouscycles.TheoutlierisKinsus;Streetestimatesseemtoimplyhigherrevenuepercapexinthiscycle,whichlooksoptimistic,giventhat:(1)KinsusisalsowillingtotakeLTcontractswithafewkeycustomersinthiscycle;and(2)Kinsus’ABFsubstrateexposureismuchhigherinthiscycle(25%in2020),vsthe

TaiwanPCBSector

8

29July2021

previouscycle(<5%)andABFsubstratesintheoryshouldbeamorecapex-intensivebusinesscomparedtothatofBTsubstrates.Moreover,wenotethattheimpliedrevenuegeneratedbyeveryUS$1capexforKinsusisalso60-70%higherthantheindustryaverageinthiscycle.WhileweunderstandthedifferencecouldbeduetoitslackofexposuretoIntel’sEMIB,webelievethatthegapremainstoowidetobejustified.

Figure16:Revenuepercapexcomparison

Revenuepercapex

2004-07

2019-23E

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Ibiden Shinko Unimicron NYPCB Kinsus AT&S

Source:Companydata,CreditSuisseestimates

Figure17:Peercomparison(EPSCAGRvs.P/E)

120%

105%

CAGR

90%

75%

EPS

60%

2020-23

45%

30%

15%

0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

P/22E(x)

Unimicron

NYPCB

Kinsus

Ibiden

Shinko

AT&S*

TSMC

UMC

Vanguard

Globalwafers

ASE

Powertech

Fastprint*

Shennan

Source:Companydata,CreditSuisseestimates

TaiwanPCBSector

9

29July2021

Autoconsumptionunderestimated

3DpackagingtotakesomevalueawayfromABFsubstratesinthehigh-end

Westillseethatfasteradoptionof3Dpackagingcouldshiftsomevalueawayfromorganicsubstratestosiliconsubstrates.ThisputsABFsubstrateopportunitieslikelyon2.5D-minusorbelowpackaging,i.e.,FanOut(FO),InFoonSubstrates,orEMIB.Whilethedesignfor2.5DorabovepackagingmaystillrequireICsubstrates,thedesignofsubstratesisrelativelysimplewithmajorityofthefunctionshiftingtoSiliconinterposer.AccordingtoCSTSMCanalyst,R.Abrams,heexpectedTSMCtogrowitsrevenueinthebackendbusinessthroughwideradoptionofitsInFoforhigh-endmobiles,CoWoSforhigh-performancecomputingapplications,andnewSoIC3Dstackingwhichshouldbeinvolumein2022withtrialingwithApple,AMDandIntel.

Nevertheless,weacknowledgethatsiliconsubstrates’higherproductioncosts(still3-5xhighercurrently)couldlimit3Dpackagingadoptioninhigh-end,i.e.,HPC,AIanddatacentres.Asaresult,organicsubstratesremainamorecost-effectivesolutionforapplicationsincludingPC,servers,networkingandADASinEV,whichstillaccountsforthemajorityoforganicsubstratedemand.

Figure18:Substrateopportunities(mostlyon2.5Dbelow)andchallenges

2.1D

2.1D

2.1D

2.5D

3DICTSV+2.5Dinterposer

Example

InFo/FO

InFo/FOonsubstrate

EMIB

CoWoS/Foveros

SoIC

Siliconinterposer

small

small

o

o

Substrates

o

o

o

simplesubstrateorPCB

simplesubstrateorPCB

Cost*

2

3

3

4

5

Performance*

2

3

4

4

5

Note:forcostandperformancescalefrom1(lowest)to5(highest)

Source:Companydata,CreditSuisseestimates

Growingsiliconvalueinautomotive

AccordingtoASEKH(coveredbyR.Abrams),itshippedover300mnunitsforautomotivebusinessin2020.Ofthis,86%waswirebond,5%wasWLCSP,and9%wasFC.Initsautomotivebusiness,ADASwasthebiggestcontributor(32%),followedbyinfotainment(25%),EV/HEV(16%),powertrain(13%)andothers.ThecompanyexpectsthesemidollarvaluetogrowfromUS$38.48bnin2020toUS$65.17bnin2025E(oran11%CAGR).ByapplicationADAS,infotainment,andEV/HEVareexpectedtodeliverCAGRsof17%/11%/29%over2020-25E,respectively.Byproduct,analogIC,discretes,SoC,andmemoryICareexpectedtoseethebiggestincreases.

Hardware-drivenmodelforEuropeanEV,vsSoftware-drivenmodelforTesla

Themarketstartedtoseetechnologychangeinpower,computing,andradar&connectivityforautomotive,withFC-BGAopportunitiesfoundincarcomputingandADAS.WhileADASonlyrequires29x29mmdesign,vs.standard35x35mmdesign,autocomputingcouldrepresentdecentgrowthopportunitiesforFC-BGA,asEuropeanautomakers’solutionsareveryhardwaredriven(i.e.,MercedesBenz’sEQSEVfeatureseightCPUsperEV),vs.Tesla’ssoftware-drivensolution(i.e.,twocustomerTeslaSoCinHW3.0,from“3nVidiaSoC/GPU+1InfineonMCU”inHW2.5).WhetherEuropeanautomakerswillshifttoa