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Berenberg Capital Markets Equity Research 10 for 13

Adnaan Ahmad
Analyst +44 20 3207 7851 adnaan.ahmad@berenberg.com

Jean Beaubois
Specialist Sales +44 20 3207 7835 jean.beaubois@berenberg.com 29 November 2012 Technology Hardware

Tammy Qiu
Analyst +44 20 3465 2673
tammy.qiu@berenberg.com

Daud Khan
Analyst +44 20 3465 2638
daud.khan@berenberg.com

Ali Khwaja
Analyst +44 20 3207 7852
ali.khwaja@berenberg.com

Sebastian Grabert
Analyst +44 20 3207 7834
sebastian.grabert@berenberg.com

For our disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) and our disclaimer please see the end of this document. Please note that the use of this research report is subject to the conditions and restrictions set forth in the disclosures and the disclaimer at the end of this document.

Table of contents
10 for 13 Prediction #1: Wireless semi industry goes through further consolidation and potential exits Prediction #2: Intel licenses ARMs Cortex technology Prediction #3: Samsung goes captive in modems Prediction #4: Apple launches a MacBook AIR with iOS functionality Prediction #5: Telco infrastructure industry will undergo further restructuring, exits and consolidation Prediction #6: Huawei signs an enterprise distribution agreement with IBM Prediction #7: Handset industry sees further exits, M&A and restructuring Prediction #8: Apple to launch tailored mini iPhone in mid2013 Prediction #9: Windows 8 and Windows Phone 8 stutter Prediction #10: Apple launches smart TVs in H213 What is working ARM Imagination Infineon STM MediaTek Samsung HTC Cisco Ericsson Juniper Alcatel-Lucent Hon Hai Catcher Foxconn Technology What is not working Motorola Solutions Apple RIM TPK Foxconn International ZTE Qualcomm Nokia Price target and valuation changes Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) Contacts: Investment Banking 4 8 10 11 12 13 15 16 18 20 22 23 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 37 38 39 40 41 42 43 44 45 46 53

Global Technology
Technology Hardware

10 for 13
We have already discussed our framework for global technology

hardware stocks over the past three years in our tech titans and battle of the ecosystems themed notes. We are not erring from these themes, and we still believe that street estimates do not take into account the earnings cliff effect when companies are structurally impaired.
ARM, Apple and Samsung remain our only Buy-rated stocks. We

Apple Buy Closing price: USD 589.5 PT:USD 800.00 26/11/2012 NASDAQ Close Samsung Buy
Closing price: KRW 1,404,000 PT:KRW 1,650,000

make no recommendation changes in this note. We keep our bearish view intact (16 Sell-rated stocks: Nokia, STM, Alcatel-Lucent, Imagination, Cisco, Juniper, MediaTek, HTC, Motorola Solutions, ZTE, Qualcomm, Ericsson, Foxconn Tech, Foxconn International, TPK and Research in Motion) and maintain our cautious views on Infineon, Hon Hai and Catcher (all Hold-rated). We have no idea if QE3 is going to lead to QE4, or how the sovereign debt crisis in Europe is going to play out in 2013, or whether China will hard or soft land, or whether the US will shift to a deficit reduction policy. There are just too many uncertainties and unknowns for even the best macro-professionals to predict. So we have stuck to what we know (or think we know!) our industry and its structural dynamics. And so we lay out 10 predictions for 2013.
Our intent in this note is to provide a framework for assessing which

stocks to back and which ones to avoid if our predictions are to bear fruit. For example, we highlight that Intel has big choices to make in the next 18 to 24 months if a) it continues along its current path to use its manufacturing advantage and financial arsenal to try to catch up with the ARM ecosystem, b) it licenses ARMs Cortex platform, leveraging this technology with its manufacturing capabilities to compete on more equal terms with Qualcomm and Nvidia in the mobile processor market, and/or c) it starts to offer its manufacturing advantage as a service i.e. become a foundry for third-party vendors. All three roads lead to a change in its margin profile, in our view, with option b) extremely positive for ARM.
We also discuss how we think 2013 will lead to further industry

rationalisation in wireless semiconductors, handsets and infrastructure. We have already seen signs of this with ZTE and AlcatelLucent paring back product and regional strategies in the infrastructure market, Texas Instruments de-emphasising applications processors and MediaTek acquiring M-Star; and in handsets, with Apple and Samsung combined accounting for over 100% of industry profits. Mid-term, Qualcomm (in wireless semis) and Ericsson and Huawei (in infrastructure) are the winners, but the journey there is going to be long and volatile with margin pain. In addition, Apple, Samsung and China Inc should continue to dominate the handset space in the next 18 months.
Finally, as we first stated in our Apple and Pairs (Part 2) note in mid-

(Old: KRW 1,450,000) 26/11/2012 Korea Stock Exchange Close ARM Holdings Buy Closing price: GBP 7.4 PT: GBP 10.0 (Old: GBP 7.2) 26/11/2012 London Close Infineon Hold Closing price: EUR 5.8 PT: EUR 6.0 26/11/2012 XETRA Close Hon Hai Hold Closing price: TWD 92.8 PT: TWD 80.0 26/11/2012 Taiwan Close Catcher Hold Closing price: TWD 144.5 PT: TWD 150.0 26/11/2012 Taiwan Close Qualcomm Sell Closing price: USD 62.5 PT: USD 50.0 26/11/2012 NASDAQ Close Imagination Sell Closing price: GBP 4.2 PT: GBP 3.6 (Old: GBP4.0) 26/11/2012 London Close Ericsson Sell Closing price: SEK 59.9 PT: SEK 51.0 (Old: SEK 53.0) 26/11/2012 Stockholm Close Cisco Sell Closing price: USD 19.1 PT: USD 14.0 26/11/2012 NASDAQ Close Motorola Solution Sell Closing price: USD 54.6 PT: USD 40.0 26/11/2012 New York Close MediaTek Sell Closing price: TWD 325.0 PT: TWD 210.0 26/11/2012 Taiwan Close Foxconn Tech Sell Closing price: TWD 99.5 PT: TWD 85.0 26/11/2012 Taiwan Close TPK Sell Closing price: TWD 436.5 PT: TWD 320.0 26/11/2012 Taiwan Close STMicro Sell Closing price: EUR 4.6 PT: EUR 3.5 26/11/2012 Paris Close ZTE Sell Closing price: HKD 11.5 PT: HKD 8.5 26/11/2012 Hong Kong Close Foxconn Intl Sell Closing price: HKD 4.0 PT: HKD 3.0 (Old: HKD 2.0) 26/11/2012 Hong Kong Close Juniper Sell Closing price: USD 16.8 PT: USD 14.0 26/11/2012 New York Close Alcatel-Lucent Sell Closing price: EUR 0.9 PT: EUR 0.7 26/11/2012 Paris Close HTC Sell Closing price: TWD 251.0 PT: TWD 150.0 26/11/2012 Taiwan Close RIMM Sell Closing price: USD 12.0 PT: USD 5.0 26/11/2012 NASDAQ Close Nokia Sell Closing price: EUR 2.7 PT: EUR 1.5 26/11/2012 Helsinki Close

2011, given our negative stance on most stocks in our coverage universe on an absolute basis, we highlight certain pair trades and their performance since inception and in the last quarter. We keep these trades on, and to date they have performed very well. In this note, we also assess, as always, what is working and what is not from a stock perspective. Our detailed, updated models for each company are available on request.

Rating System: Absolute

29 November 2012
Adnaan Ahmad
Analyst +44 20 3207 7851 adnaan.ahmad@berenberg.com

Jean Beaubois
Specialist Sales +44 20 3207 7835 jean.beaubois@berenberg.com
4

Global Technology
Technology Hardware

Pair between inception inceptionand and 23/11/2012 Pair trades-return trades-return between 23/11/2012
Long Incepted in Sep 2011: AAPL QCOM CSCO ERIC QCOM IFX ARM AAPL AAPL ERIC Incepted in Jun 2012: Samsung Samsung ARM TPK CATCHER HTC NOK IMG FIH TPK 47.1% -1.3% 61.4% -13.6% -46.1% HTC MTK JNPR ALU STM STM STM NOK RIMM ZTE 116.6% 10.9% 39.7% 49.2% 11.5% -3.7% 22.4% 86.8% 112.8% 31.6% Short Return

Pair between 03/09/2012 03/09/2012 and 23/11/2012 Pair trades-return trades-return between and 23/11/2012
Long AAPL QCOM CSCO ERIC QCOM IFX ARM AAPL AAPL ERIC Samsung Samsung ARM TPK CATCHER Short HTC MTK JNPR ALU STM STM STM NOK RIMM ZTE HTC NOK IMG FIH TPK Return -9.1% 5.4% 4.8% 0.0% 2.7% 10.2% 39.5% -35.8% -90.8% -19.3% 24.2% -2.5% 70.7% -56.8% -13.3%

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Berenberg versus consensus estimates Berenberg versus consensus estimates


2013 EPS Companies Berenberg Est. Consensus -0.04 4.86 -0.06 49.79 -1.30 0.18 0.08 0.18 14.42 0.68 3.67 1.96 1.11 4.30 18.45 13.04 9.30 40.85 8.89 0.00 13.70 178,814 Delta Berenberg Est. -164% -34% -41% 3% -26% -4% -47% 22% -51% -53% -12% -1% -21% -1% -33% -3% -9% -8% -22% -108% -12% 12% 0.03 4.20 0.00 63.70 -0.89 0.33 0.19 0.25 5.20 0.37 3.55 1.99 1.10 4.54 11.93 13.58 9.63 37.25 6.87 -0.01 13.06 217,239 Nokia -0.11 Ericsson 3.22 Alcatel Lucent -0.09 Apple 51.06 Research in Motion -1.64 Infineon 0.17 STMicro 0.04 ARM 0.21 HTC 7.06 ZTE 0.32 Motorola Solution 3.22 Cisco 1.94 Juniper 0.88 Qualcomm 4.25 Mediatek 12.27 Catcher 12.69 Hon Hai 8.50 TPK Holdings 37.58 Foxconn Technology 6.94 Foxconn International Holding -0.01 Imagination 12.12 Samsung Electronics 200,766 Source: Berenberg estimates, Bloomberg for consensus Source: Berenberg estimates, Bloomberg for consensus 2014 EPS Consensus 0.12 5.89 0.04 58.94 -0.57 0.34 0.34 0.21 15.60 0.81 4.41 2.10 1.30 4.76 22.28 13.71 10.67 42.97 10.15 0.01 17.00 196,702 Delta -76% -29% -100% 8% -56% -2% -43% 17% -67% -54% -20% -5% -15% -5% -46% -1% -10% -13% -32% -197% -23% 10%

Change in EPS estimates


Change in EPS estimates 2013 EPS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 ARM Holdings (GB) Qualcomm (US$) Apple (US$) Alcatel Lucent () ZTE (HK$) Ericsson (SEK) Infineon () HTC (NT$) Motorola Solutions(US$) Juniper (US$) STMicro () RIM (US$) Cisco (US$) Mediatek (NT$) Nokia () Catcher (NT$) Hon Hai (NT$) TPK Holdings (NT$) Foxconn Technology (NT$) Foxconn International Holding (US$) Imagination (GBP) Samsung (KRW) NEW 0.21 4.25 51.1 -0.09 0.32 3.22 0.17 7.06 3.22 0.88 0.04 -1.64 1.94 12.27 -0.11 12.69 8.50 37.58 6.94 -0.01 12.12 200,766 OLD 0.19 4.06 55.9 0.03 0.44 4.16 0.43 10.4 3.11 0.93 0.04 -1.72 1.91 13.35 -0.12 14.10 7.47 35.75 6.30 -0.02 12.35 169,256 2014 EPS NEW 0.25 4.54 63.7 0.00 0.37 4.20 0.33 5.20 3.55 1.10 0.19 -0.89 1.99 11.93 0.03 13.58 9.63 37.25 6.87 -0.01 13.06 217,239 OLD 0.23 3.94 64.5 0.03 0.23 4.56 0.49 8.00 3.46 0.96 0.05 -1.86 1.80 11.64 -0.12 15.04 8.40 26.06 6.76 -0.02 13.63 182,398

Source: Berenberg estimates, Company Data

Global Technology
Technology Hardware

Stock selection order of preference


Stock selection - order of preference
Company Rating PT Price* % Implied P/E 2013E upside/ downside 1 1.1 1.2 2 2.1 2.2 3 3.1 3.2 4 4.1 4.2 5 5.1 5.2 6 6.1 6.2 Qualcomm ($) 7 7.1 7.2 8 8.1 8.2 9 9.1 Ericsson (SEK) Sell To From 51.0 53.0 59.9 -15% 12.3 Buys - 23 Holds - 8 Sells - 7 Imagination() Sell To From 3.6 4.0 4.2 -14% 30.6 Buys - 9 Holds - 6 Sells - 4 Sell 50.0 62.5 -20% Catcher (TWD) Hold 150.0 144.5 4% 10.9 Buys - 11 Holds - 14 Sells - 3 Hon Hai (NT$) Hold 80.0 92.8 -14% 9.9 Infineon () Hold 6.0 5.8 3% 30.1 Buys - 11 Holds - 19 Sells - 6 Buys - 20 Holds - 6 Sells - 3 ARM Holdings () Buy To From 10.0 7.2 7.4 35% 42.4 Buys - 17 Holds - 8 Sells - 5 Samsung (KRW) Buy To From 1650000.0 1450000.0 1404000.0 18% 8.1 Buys - 47 Holds - 0 Sells - 1 Apple ($) Buy 800.0 589.5 36% 9.7 Buys - 55 Holds - 6 Sells - 2 Consensus Investment thesis

iPhone5 drive earnings momentum in the next six months


Gross margins bottom in near term as greater iPhone mix and better iPad yields iPAD units to grow to 75m in FY 2013 or 25% of addressable market (Netbook/Notebooks). Duopoly smartphone position with AAPL at mid/highend Subsidise low-end with high-end profits Leverage captive components and differentiate around displays Royalty rate to increase given Cortex platform mix. Smartphone/tablet volumes drive PD royalties Expansion into Networking and Server markets Intel becomes irrelevant Pure macro play dependent on Eurozone situation Quality end market exposure with secular growth. Qimonda overhang persists 45% of revenues from Apple and over 75% of Hon Hai's growth from Apple. Apple won't subsidise forever Apple concentration a double-edge sword Potential MacBook share loss to Foxconn tech HTC, RIMM and Dell exposure a concern Not concerned in short term on light metal casing TAM for chips less than what analysts believe given captive market (AAPL, Samsung and Huawei) Mediatek aggressive at low-end BRCM, NVDA, Intel et al fight-back for share Move to dual and multi core GPUs positive for royalty rate Apple position is stable for the foreseeable future Competition from Nvidia, QCOM, ARM, BRCM and Vivante holds back major market share shift. Gross margin pressure to remain in 2013 LTE cycle could be cannibalised by WiFi investment mid-term. Chinese vendors to get lion's share of China 4G deals. Gross margins to come under mid-term pressure given mix and now pricehas competition. Huawei 20K Enterprise employees - focus on Emerging markets and Europe initially Government business to face challenges given catch up spend fall off in next 12 months. Enterprise biz under pressure given retail capex concerns 3G in China an opportunity but also a threat from Qualcomm on price 2G competition tough: Spreadtrum, RDA and both coming out with smartphone products Apple casing opportunity is positive But 60% of revenues from Nintendo Do not see Game console market as structural grower In-cell technology should replace glass on glass in midterm. Apple (55% of TPK revs) is likely to go down this path in the next 18 months Difficult to see a a long-term solution for the wireless asset MEMS technology could face comp pressure from InvenSense Spread in too many end markets with customers under pressure (Nokia/HP) exposure Margin pressure in handset business from Chinese OEMs such as Huawei Accounting questions as DSOs remain elevated even with greater handset mix Headwinds for Nokia, Motorola and Sony Nokia may outsource more assembly to Foxconn but that is in price Increased competition in Edge routing from mobile vendors Need to invest in Enterprise impacting margin structure Gross margins have downward bias on price and mix Toxic, high risk and balance sheet concerns. IP business strong but competition intensifying Cost savings will be given back in pricing "One" Series will only provide short term relief. Samsung, Apple into mid-range smartphones. HTC margins will be under pressure New markets at an investment cost e.g China

14.7 20.0 Buys - 42 Holds - 5 Sells - 2

9.2 10 Cisco ($) ## ## Motorola Solutions ($) 11 ## ## MediaTek (TWD) 12 ## ## 13 Foxconn Tech ## (TWD) ## 14 TPK (TWD) ## 15 STMicro () ## ## 16 ZTE (HKD) ## 17 Foxconn Intl ## (HKD) ## 18 Juniper ($) ## ## 19 Alcatel Lucent ()

Sell

14.0

19.1

-27%

9.6

Buys - 35 Holds - 14 Sells - 2 Buys - 9 Holds - 10 Sells - 2 Buys - 21 Holds - 2 Sells - 4

Sell

40.0

54.6

-27%

14.9

Sell

210.0

325.0

-35%

16.7

Sell

85.0

99.5

-15%

11.6

Buys - 13 Holds - 4 Sells - 6 Buys - 20 Holds - 2 Sells - 8 Buys - 6 Holds - 16 Sells - 5

Sell

320.0

436.5

-27%

9.8

Sell

3.5

4.6

-24%

42.1

Sell

8.5

11.5

-26%

19.1

Buys - 11 Holds - 15 Sells - 8 Buys - 4 Holds - 7 Sells - 3 Buys - 11 Holds - 28 Sells - 3

Sell

To From

3.0 2.0 14.0

4.0

-26%

n/a

Sell

16.8

-17%

15.0

Sell

0.7

0.9

-22%

n/a

Buys - 3 Holds - 13 Sells - 14 Buys - 3 Holds - 11 Sells - 21

20 HTC (TWD) ## ## 21 RIMM ($) ## ## 22 Nokia () ## ##

Sell

150.0

251.0

-40%

15.0

Sell

5.0

12.0

-58%

n/a

Buys - 6 Holds - 28 Sells - 16 Buys - 15 Holds - 12 Sells - 22

Increase in competitive intensity in US market. New BB10 platform not a game changer. Playbook dying a slow death Services revenues to come under attack Lumia - too little too late. NSN in harvest mode a positive. Samsung + Android (China Inc) big threat to Nokia's mid-to-low-end emerging market position

Sell

1.5

2.7

-44%

n/a

Source: Berenberg estimates, Bloomberg for consensus Source: Bloomberg

*All prices as of COB Nov26th on the relevant home exchange.

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Technology Hardware

Prediction #1: Wireless semi industry goes through further consolidation and potential exits
The winners: Samsung, Qualcomm and MediaTek (but long-term) The losers: ST-Ericsson, Renesas, Marvell, Broadcom and Spreadtrum
The wireless semi industry is not becoming any less competitive. ST-Ericsson is struggling to survive (~$400m quarterly revenue run-rate and $100m-150m operating losses), even after its restructuring earlier this year. Qualcomm is in takemarket-share mode. Broadcom (with Samsung and Nokia exposure), Marvell (TDS-CDMA chips and Research in Motion), Renesas (Nokia and Japanese), Intel/Infineon (Samsung and Nokia low-end), Nvidia, Advanced Micro Devices (AMD), FreeScale, MediaTek/M-Star, Spreadtrum, RDA/Coolsands and HiSilicon (Huaweis in-house semi team) are all competing to win business in wireless semis. Texas Instruments has decided to de-emphasise the wireless vertical. Wireless semi R&D ($bn)
3.0 2.5 2.0 1.5 1.0 0.5 0.0
Intel+Infineon ST-Ericsson Mediatek Qualcomm Broadcom Marvell Renesas Spreadtrum instruments Texas Nvidia

Source: Berenberg estimates

Scale is important, given the R&D needed to invest in next-generation technologies, integration and processes. However, the bigger issue is that Apple and Samsung are also important captive vendors. Apple has its A series chips, which it deploys on the iPad and iPhone. We think that this could also shift to its Mac line-up in the next 24 months, as described above. In addition, the patent battles between Samsung and Apple are leading to a rethink in the foundry relationship between the two vendors. We think that Apple has already given the nod and wink to Taiwan Semiconductor Manufacturing Company (TSMC) to start build-out of capacity to transition Apples internal A series line over to TSMC in the next 24 months. A precursor to this is that TSMC has decided not to hike its dividend in the near term. This leaves Samsung with a gaping hole in capacity to fill, given that Apple ships 150m-200m iPhones and 60m-80m iPads annually and that the Samsung chips which go into its own products only account for 35% of capacity currently. We think that Samsung will a) start to waterfall down its Exynos chip platform to the mid- and low-end over time, b) aggressively start to build more modems inhouse as per its recently launched home-grown modem with HSPA and LTE
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functionality, and c) open up to act as a foundry to other third-parties, such as its recent deal with STMicroelectronics. Long-term, if this strategy proves to be a success, there is no reason why Samsung would not push into the merchant wireless semi market, further increasing competitive intensity. Samsung is very good at making chips that go into its own products and then selling them on to the merchant market it has done this in DRAM and NAND memory and in the nonsemi world in LCD/display technologies. This is not good news at all for the industry. As stated above, we have already seen Texas instruments de-emphasise its apps processor portfolio relevant to the wireless segment. MediaTek has joined forces with its former foe, M-Star. ST-Ericsson has shunted its application processor business back up to its parent, STMicroelectronics. There will be more restructurings, JVs and exits in 2013. Qualcomm is calling for its margins to improve in 2013 to the 19-20% range from 16% last quarter, driven by higher ASPs on its modems and efficiencies and yield improvements at 28nm. But it is still in take share mode, as is MediaTek, which will deliver quad-core products in H113. The Chinese smartphone market is growing strongly as telcos subsidise, users upgrade to 2G and 3G smartphones and vendors entice with a plethora of very good Android-based products. Spreadtrum and RDA (Coolsands) will also join this volume growth party during 2013, but this is not going to be good for pricing. However, it begs the question: what is the future of Marvell in wireless semis? Its CFO has recently resigned, and its TDS-CDMA presence is waning, given upcoming products from Qualcomm, MediaTek and Spreadtrum, which all have a lower cost structure and greater scale. In addition, its former prized customer Research in Motion, is in transition, and even if its BB10 software platform starts to gain traction, it is probably going to be with Qualcomm chips inside. The recent announcement that Intels CEO will retire in May 2013 is also, in our view, a direct result of its absence from any serious debate in the wireless chip world. As we describe in Prediction #2 (see next page), Intel has a few choices to make. Broadcom, through its Beceem acquisition, should have integrated solutions out in H113 and Nvidia should also have similar products out through the Icera deal in the same timeframe. We think that Renesas will de-emphasise the application processor business and focus on the strength of its single die-based modem/baseband.

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Technology Hardware

Prediction #2: Intel licenses ARMs Cortex technology


The winners: ARM The losers: Intel, AMD, Qualcomm, Broadcom, ST-Ericsson and Nvidia
Intel has made a huge bet to ramp up capital spend and R&D in order to introduce tri-gate technology on 2x and 1x process nodes in the next two years, in order to leap ahead of the ARM ecosystem and join the tablet and smartphone/post-PC world party on equal (if not better) power consumption/efficiency terms. At the beginning of 2012, there was hope that these investments would start to bear fruit, as at CES in Las Vegas and at MWC in Barcelona, Intel showed off its new application processors and announced LAVA, ZTE, Orange and Google (MMI) as customers. The issue is that there has been really no volume followthrough of these products. In addition, as we have stated ad nauseum, the application processor market is extremely competitive given a) the number of vendors but also b) the captive semi presence of Samsung and Apple. This means that for Intel to realistically carve out a decent market share, it needs to back lossmaking entities such as Nokia, Research in Motion, LG Electronics, Japan Inc, China Inc and Sony Mobile. We think that Intels CEO and management board have realised this and the task in front of them, and we think that this is the main reason for its current CEO to cut his tenure, three years earlier than anticipated. All is not well on the Intel front! As per our tech titans theme, we believe that Intel has been in a state of denial with respect to its prospects in this post-PC world. With tablets cannibalising PCs and tablet prices being lowered, the shift away from PCs (and Intels bread and butter chips) can only accelerate. The key question now is who will replace its current CEO, Paul Otellini? Traditionally, Intel leadership succession occurs internally. If that were to happen again, then there would still be too much weight behind the stay-the-existing-course approach. On the other hand, if Intel were to look outside the firm and approach candidates such as Sanjay Jha (ex-Qualcomm and Motorola), then that is a potential strategic positive in terms of company direction. Why? Well, an external leader will very quickly understand that the architecture battle has been lost in the post-PC domain. It is going to be based on ARM. Period. Hence, Intel has a choice to make: 1. it can continue along its capex and R&D ramp-up path on X86-based technologies and try to catch up with the ARM ecosystem (a non-starter, in our view); 2. it can license ARMs Cortex platform and 64bit technology and leverage its manufacturing prowess to compete against ARM-based fables models (such as Qualcomm, Nvidia, Broadcom); 3. it can use its vast manufacturing resources and become a foundry competing with TSMC, Samsung and the like in the mid- to long term. The issue with all three of these strategies is that the margin structure of a monopoly in the PC world will be no longer. Margins are likely to fall by at least 1,500-2,000bp as it shifts to any of these models. The other concern is if Intel were to switch to ARMs technology, would its manufacturing advantage erode, given that its whole process and tools are based on x86 technologies? This is also obviously an important question for margin development. Finally, as we have predicted, we think 2013 is the year in which we will see a MacBook AIR with iOS. This is now going to be based on Apples own A series chip (ARM-based). That is probably the straw that will break the camels back.
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Prediction #3: Samsung goes captive in modems


The winners: Samsung The losers: Qualcomm, Broadcom, ST-Ericsson, Via and Intel (Infineon)
As we have stated in our research over the past three years, we see the TAM (total addressable market) for applications processors shrinking as OEMs such as Apple, Samsung and Huawei increasingly use their own captive silicon versus merchant solutions, limiting the market for Qualcomm and peers. The question now is: does the modem/baseband market go down this same captive path? We do not think that Apple will pursue such a strategy given its focus on how technology affects the end-user experience. Applications processors obviously act as a big point of differentiation at the end-product level given the linkage with ease of application usage. Modems are like connectivity solutions, allowing the device to join a particular network. On the other hand, however, we feel that now is the time for Samsung to make an aggressive push into its own modem manufacturing. Why? Here are a few reasons. 1. As Apple transitions its foundry business away from Samsung to TSMC, Samsung will be left with capacity to fill. 2. ST-Ericsson talked about IP licence income of $35m in Q312 for non-4G modem technology, but also stated that this did incorporate HSPA. So which company was the licensee? We think it was Samsung. 3. Samsung already has LTE modem expertise, but recently started using its own HSPA/LTE chip in phones in South Korea. 4. Samsung acquired CSRs connectivity IPR as well as 300 engineers. We think Samsung is making a play at becoming a platform wireless semis shop. This is obviously not good news for the modem market size, or for pricing. In addition, LTE modem competition is heating up as ST-Ericsson, Broadcom (via its Beceem deal), Nvidia (via the Icera deal), Renesas, Intel (via the Infineon deal), MediaTek and Spreadtrum (both more at the low end and Spreadtrum with a TDLTE bias) bring out solutions in the next six to 12 months. Qualcomm was sitting at the OEM table all alone when discussing pricing on these modems before, and now it will be accompanied by a few desperate peers.

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Prediction #4: Apple launches a MacBook AIR with iOS functionality


The winner: ARM The losers: Intel and AMD
Given that 85-90% of Apples revenues are based on the iOS operating system (iPhone, iPad and iPod), it has to make business sense for the company at some point to shift its iOS to its MacBook range. We think it is highly likely that Apple will start this shift in 2013 with an iOS version of the MacBook Air. That is not to say that it will not continue to support an OSX version, but we feel that Apple a company that prides itself on simplicity will in the mid-term want to consolidate onto a single platform: i.e. Apple will aim to merge both operating system environments over time. Recent management changes at Apple i.e. iOS and OSX are now under one executive and there is now a team focused on semiconductors point to this potential. In addition, a move away from Intels platform to more of its own, customdesigned processors would further distinguish its products from those running Microsofts software and Intels chip technology. Should Apple uses its own processors, the power savings from the ARM architecture could free up more space for graphics and battery life differentiation for the MacBook AIR versus Intel and Microsofts Ultrabook push. The new iPhone5 houses Apples own ARM-based CPU core. Note that Apple is an ARM architecture licensee, hence Apple semi engineers have been working on finding ways to make the A series products more and more powerful. As Apple takes on board ARMs newest and more powerful technology (64bit architecture), this could lead to a departure from the Intel platform altogether. Obviously, commercial availability of products based on 64bit is probably not going to be there until H114.

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Prediction #5: Telco infrastructure industry will undergo further restructuring, exits and consolidation
The winners: Telcos The losers: Ericsson, Huawei, Nokia-Siemens, ZTE and AlcatelLucent
As we stated in our infrastructure industry initiation back in January 2010, there is too much capacity in this industry, even though we have had Ericsson-MarconiRedback-Nortel-LG Electronics, Alcatel-Lucent-Nortel and Nokia-SiemensMotorola deals. In the last 10 years, first Huawei and then ZTE leveraged government and bank funding to gain market share. Huawei is aiming to increase its revenues from $25bn today to $100bn by 2020. ZTE had until recently been the price spoiler, with DSOs in the 200-day range and negative cash margins for its Networks business, but recently it has started to focus on profitability as well as on certain geographic regions (Asia-Pacific and Latin America) for its networks wares. Similarly, Alcatel-Lucent is retrenching from certain regions/products, but the major issue confronting the Franco-American behemoth is its very existence as a going concern. It is losing money, not generating sufficient cash, has a weak balance sheet and a ~2bn under-funded pension. On the flip side, Samsung wants to be a top three LTE infrastructure supplier by the end of 2015 through organic growth and leveraging its end-to-end solutions from chipsets through to base stations and smartphones. Samsung has won deals with Sprint, KDDI and 3UK (which could act as a beachhead into other European telcos) in South Korea and the Middle East. The 3UK deal is the most interesting as it is Samsungs first network deal in Europe and Samsung was very aggressive on price i.e. as ZTE leaves its price spoiler tag behind, Samsung has been picking up the baton. Nokia-Siemens impressive margin improvement to the 9% level in Q312 could also give it ammunition to be more price-aggressive than it has in the last two years, placing further pressure on industry structure. Hence, given industry overcapacity, (still) coupled with slower end-market dynamics due to operator consolidation and macro concerns, we predict that 2013 will bring further exits and/or consolidation in the industry. We have always thought that the Chinese should acquire Nokia Siemens Networks (NSN) or Alcatel-Lucent assets for their installed base, customer relationships and most importantly services/maintenance expertise. The issues here are a) political/security concerns on such deals, and b) whether or not Asian vendors have learnt from the BenQ-Siemens debacle i.e. if Asian vendors acquire these assets, they would want cash-in from the acquired parties and government-backed guarantees that they can reduce headcount drastically. The alternative solution is a European solution i.e. an Alcatel-Lucent-NSN combination. What a mess that would be! But it would also be good news for the rest of the industry. The key question really is what is the end-game for AlcatelLucent and NSN. NSN management continues to talk about a potential exit via an IPO. We just do not know who would want to touch that paper, and yes, its all about price, but if investors want exposure to wireless infrastructure they can gain that via the global leader in Ericsson. On Alcatel-Lucent, 2013 is likely to be the year in which the company continues to try to offload assets to shore up its balance sheet. We believe its submarine, enterprise and vertical industry businesses are up for sale, but these three are
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unlikely to fetch more than 750m-1bn combined. Another option for the company is to file for voluntary bankruptcy (a last resort): this would enable the company to then stop paying creditors, given the 837m debt maturing in 2013, the 462m in 2014 and the 1bn in 2015. In doing so, the company could then try to crystallise value for some of its parts. A less radical option is to use some of the companys assets as collateral for new financing. The question here is, str ucturally, will this refinancing solve the companys revenue and margin profile prospects? We think not. Alcatel-Lucent needs to earn a 6-7% operating margin to be cashflow-neutral. The street estimates 1% for 2013.

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Prediction #6: Huawei signs an enterprise distribution agreement with IBM


The winners: Huawei The losers: Cisco, HP and Juniper
Cisco commands a near-monopoly share in the enterprise data networking markets that it serves. History is littered with vendors that have tried to unseat Ciscos dominant position. Wellfleet (Ciscos main routing rival) merged with Synoptics (enterprise switch vendor) in 1994 to create Bay Networks. Cabletron (enterprise switch) re-invented itself into Enterasys (which was taken private in 2006) and Riverstone Networks (which filed for bankruptcy in 2006). Xylan (enterprise switch) was acquired by Alcatel in the technology bubble. Certain point vendors have survived, such as Extreme Networks (which is losing share), Riverbed (which is focusing on network traffic optimisation/management) and F5 Networks (load balancing), but many have ceased to exist or have been acquired by enterprise wannabees (i.e. HPs acquisition of 3Com). The one constant has been Cisco, which we believe is primarily due to its scale advantage compared to peers and the fact that Cisco has used M&A to incorporate new adjacent markets and technologies into its sizable installed base. However, Huawei has already started to make inroads into the corporate market (outside of the US) with decent product, improved channel partners and its ability to offer extreme discounts. But more importantly, it has an ambition to grow its corporate revenues from $2bn in 2010 to $15bn in 2015 i.e. a 7.5x increase in five years. We think it hit $3.8bn in 2011. Its intention is crystal clear. In addition, in order for Huawei to achieve its lofty ambitions to increase group revenues from $25bn in 2010 to $100bn in 2020, it needs to be successful in handsets and corporate networks. Now, we have never believed that the company is going to make inroads into the US corporate vertical. However, outside the US, we think Huawei can leverage its relationships with telcos and the Chinese government to secure enterprise deals. It has already built relationships with some system integrators and distributors in these markets (for example, SDG, ANS and Micro-P). We note that Huawei has also used the Chinese governments strong relationships in Asia and Africa to secure enterprise contracts in these markets. More significantly, though, we think that 2013 will mark the year in which Huawei signs a distributor/systems integration deal with IBM. We highlight that IBM has been working with Huawei since its inception, on management consultancy and more recently branding and marketing projects. We think the next step between the two will be the start of the downfall of Ciscos and Junipers margin structure.

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Prediction #7: Handset industry sees further exits, M&A and restructuring
The winners: Apple and Samsung The losers: Research in Motion, Nokia, HTC, LG Electronics, Sony Mobile, MMI (Google), Japan Inc and ZTE
Over the last 20 years, the handset industry has grown to a 1.8bn-unit shipment market per year (or a $225bn market size in revenue terms). However, during this time, there has been much turbulence, with market shares shifting on the back of new product cycles. Back in the early 1990s, Ericsson was the global leader, in the mid-1990s this shifted to Motorola and by the late 1990s, Nokia was dominant. In the early 2000s, Samsung started to gain share on the back of its clamshell and colour phones, followed by Motorola with the RAZR in the mid-2000s. And in the last few years, Apple and (more recently) Samsung have been dominant. At the same time, we have witnessed consolidation, restructuring and exits from the industry. Sony and Ericsson came together 10 years ago and in late 2011 Sony announced its intention to acquire the 50% Ericsson stake in the JV. Philips, Alcatel, Nortel, Lucent, Siemens, BenQ, Palm, Sanyo, Mitsubishi, Pantech, Benefon, Motorola Mobility, Dell and HP have all tried unsuccessfully to sustain positions in this market. In our initiation on the sector in January 2010, we stated that Palm, Research in Motion, Nokia, HTC, Motorola, SonyEricsson and LG Electronics would all be losers in the mid- to long term, given Apples vertical integration model soaking up more than 50% of industry profits and the horizontalisation of the handset industry on the back of Googles Android platform translating into structurally low-margin hardware similar to the PC industry, especially with the advent of Chinese handset OEMs using the Android platform and their competitive price structures. This thesis is playing out but the big curve ball that we did not foresee was a potential Amazon-based smartphone portfolio based on a loss-making hardware strategy, which could still be on the cards for 2013 entry, but is very dependent on sales of the Kindle Fire in the next six to 12 months. We expect the weak to become weaker. HTC margins are already guided to 1% from the mid-teen levels of only a year ago. Nokia continues to lose share in smartphones, but there is still hope that its new Windows Phone 8 products can turn the tide slowly back into its favour. The bigger issue that confronts the company is how will it turn the tide in the mid- to low-end portfolio versus cheap Android smartphones developed and aided by reference designs from Qualcomm and MediaTek? As we have stated before, Research in Motion is becoming increasingly irrelevant, and we do not think that its new BB10 software platform in H113 will change that drastically at all. Yes, there may be some upgrades and some hope, but structurally it is a hope trade that is driving the rebound in its and Nokias share price, in our view. LG Electronics has lost scale but has some decent new products to give it another quarter or two of breathing space. MMI (Google) has some product, but up against the might of Apple and Samsung, it is also losing relevance. Sony Mobile is bleeding red and management is refocusing the portfolio and its channel to market strategy. ZTEs margins are low single-digit given its push to win business with international operators and Lenovo is still losing money in its smartphone business but has definitely gained traction with vendors such as Tianyi, Oppo, XiaoMi and Huawei in its home market.
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There is also a shift in business models by certain vendors. Amazon is likely (as stated above) to enter the smartphone space with its hardware-at-a-loss strategy. In China, Tencent, Baidu and others are leveraging this model as they have internet service revenues to cross-subsidise. But with most handset vendors globally either losing money or only slightly breaking even, the future is not bright. Apple and Samsung account for ~50% of smartphone volumes and over 100% of industry profits.

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Prediction #8: Apple to launch tailored mini iPhone in mid-2013


The winners: Apple and ARM The losers: Research in Motion, Nokia, HTC, LG Electronics, MMI (part of Google) and Sony Mobile
The Android ecosystem has a dominant share of the smartphone market, primarily driven by the success of Samsungs Galaxy portfolio. In the last 12 months, the smartphone has started to gain big momentum in China and some emerging markets, as well as in the pre-paid population in developed economies. Most of the mass market is either on cheap monthly post-paid contracts or (the majority) prepaid. In order to address this market opportunity, Samsung and China Inc have all launched lower-priced smartphones in the $100+ category. HTC, LG Electronics and Nokia (via its S40 platform) are also addressing the sub-$200 smartphone category. In response, Apple has segmented its price points along age of portfolio, so you can now obtain an Apple 4 for free on a two-year contract or for around $250 wholesale. But the issue here is that the iPhone4, albeit a decent phone, is over two years old. We think that it is inevitable that Apple launches a tailored, low-cost iPhone in 2013 to address the burgeoning mass market opportunity. We note that there are over 150m subscribers in Europe on pre-paid contracts whom Apple is not really addressing today. Also, ZTEs gross margins on its $150 Android handsets are in the 15-20% range. ZTE uses TFT-LCD displays versus the latest and greatest Retina displays of Apple and Samsungs AM-OLED. It also uses a 700MHz processor from Qualcomm i.e. for many users in emerging markets, the smartphone is the first window on the internet, given the low PC and broadband penetration. Considering Apples supply chain relationships and its ability to leverage its $100bn+ in cash as pre-payments, it can surely source components more cheaply and charge a premium, given its brand. However, we do expect gross margin dilution with these tailored low-cost devices. The issue that Apple faces is one of growth. Given that the high-end is a maximum 20-25% of the market and that Apples global smartphone share is in the 15-20% range, it can only grow by another 5% in this market category unless it prices its existing product cheaper (read lower margins) or develops a completely new tailored solution. The China Mobile opportunity is the last real bastion of significant growth for the iPhone and timing on that is uncertain. We think at the earliest H213, but more likely to be in 2014 when the TD-LTE service is launched. Given China Mobiles subscriber base, ~700m subscribers and that in the first year after introduction at AT&T, Apple hit about a 5% penetration of the subscriber base and if that were to occur on the China Mobile base, that would be an incremental 35m units! In the tablet space, Apple has tailored a product for a different price point, the mini i.e. priced at $329 versus the iPad4 starting at the $499 range. In our opinion, that is not done for market growth reasons but more to counteract the Google Nexus 4 and Amazons Kindle Fire. Now, obviously, there is going to be some substitution effect given the lower pricing, but from an Apple perspective, it is better that that substitution is to an Apple product versus its peers. Assuming that the mini iPhone is priced in the $250 range and has a 25% operating margin structure versus the higher-end iPhone in the 35-40% range,
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every additional 50m units sold would add approximately 5% to Apples earnings. But this does not assume any substitution effect. If one in five potential Apple iPhone purchasers decide to buy the mini versus the iPhone, then that would mean that Apple would need to sell 85m-86m minis annually for this to be earningsneutral. In a bullish scenario, with a 20% substitution rate and 250m minis sold annually, earnings should be 15-20% higher than we are currently modelling. In this scenario, there would be 150m iPhones sold, hence a total volume of ~400m (iPhones plus minis) in a smartphone unit base of 1.3bn, i.e. a 30% market share in unit terms.

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Prediction #9: Windows 8 and Windows Phone 8 stutter


The winners: Apple and Google The losers: Microsoft, PC value chain (i.e. Intel, Dell, HP), Nokia and HTC
Windows 8 is Microsofts comeback strategy, its bet the farm moment to become relevant in the post-PC world. It allows for touch to be introduced on all its hardware platforms PCs, tablets and smartphones. Microsoft has laboured by living in the PC world, as Apple has created a totally new category of product, the iPad, and as Google has become (via Android) the global platform of choice. This is Microsofts response, and with it, it launched its very own Surface tablet. The issue for Microsoft is in the PC world, where it had a defined role as the software and OS provider, whereas Intel would provide the brains (chips) and the likes of Dell, HP and Lenovo would provide the hardware. The Surface is Microsofts hardware, integrated with software and Microsoft-based services i.e. with this product, Microsoft is either showing the hardware industry how products should look in the Windows8 world or it is replicating Apples vertically integrated model. Time will tell, but we think one of the main reasons behind a Microsoft hardware solution is price. So here is the dilemma: Apples iPad (larger versions) have price points ranging from $399 up to $829 with a bill of material (BoM) of $300-450. Hence, if any hardware vendor wants to compete head-on with Apple on a specification-by-specification basis, it must have a similar BoM. The issue in the Microsoft ecosystem is that there are incremental costs: a) the cost of the operating system; b) the cost of an office licence, and c) depending if it is an Intel or ARM-based chip, the cost of that chip. All in, we estimate that an ARM-based Microsoft solution is ~$60-80 more expensive than the equivalent iPad i.e. ~20% more expensive. Herein lies the rub, with Apple commanding 30-35% gross margins on its iPad (it leverages its $100bn+ net cash pile as well for favourable supply price terms), it is no wonder that many hardware OEMs (Dell, HP, Toshiba, LG, Asus, Acer) want to price at the same range as the iPad. That is the problem, given that most consumers right now want to consume applications, and the iPad is still the best product for consumption purposes. Now, if consumers interests shift to create and consume, then the installed base of Microsoft users could be swayed by similar pricing for a Surface-type product. But they could also very well choose iPads or Android-based tablets given that Microsoft will in H113 offer office to these two platforms. Taking the argument a step further, there is only one company globally that can compete with Apple on a pound-for-pound basis on component supply and pricing, and that is Samsung. Samsung already sells its wares to Apple at cost plus. From a Microsoft perspective, Samsung is the hardware vendor to back, if it wants its ecosystem to thrive (assuming users want this). From a Samsung perspective, it gives the company air-cover versus the Android-driven IPR infringement cases with Apple as well as a chance to be a dominant player in the post-PC world as it can differentiate on displays (AMOLED), touch and applications processors, which it could not in the WINTEL-driven PC world. The other issue is that both Windows 8 tablets have setbacks, which obviously can be overcome but could limit accelerated take-up. First, Windows 8, which is powered by Intel, is being positioned for its performance capabilities as well as
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backward compatibility to legacy applications. Intel has an Ivy Bridge chip inside that is its laptop chip in tablet form factor! Hence, it is going to be heavier, need more power and an extra fan! It will also be more expensive, given that Intels chip costs ~$100 versus the ARM-based solutions in the $20-25 range. Second, the Windows RT, powered by ARM, will not be backward-compatible to all the software that has been written historically on Windows platforms, and it will not even support Outlook in its initial version. Hence, we do not think it is going to gain much corporate traction. We think the recent departure of Steven Sinofsky (Microsofts software guru) has to be related with early disappointment at the acceptance of this platform. At the same time, the Windows Phone 8 is now out in the market, with decent product from Nokia and HTC. The question is, are they too late to the party? Once again, key for us is what does Samsung do with its Windows Phone 8 platform offering? The issue for Samsung is that it commands a share of between 50-60% in the Android smartphone market globally, which is approximately 50m units+ from Samsung on a quarterly basis versus probably less than 4m total Windows Phones sold each quarter. If Samsung moves aggressively to the Windows Platform, then that will aid the platforms development as more volumes translates into more developer interest and better applications. We just think that the Apple-Samsung IPR spat is going to be resolved (as all these suits are) at a point in time, and that Samsungs economies of scale in Android and the lead and leverage it has in key components will mean that Windows Phone 8 is just a hedge opportunistic, not strategic.

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Prediction #10: Apple launches smart TVs in H213


The winners: Apple and ARM The losers: Sony, LG Electronics, Sharp, Panasonic, Vizio and other major TV manufacturers also negative for Samsung
Since our sector initiation in January 2010, we have talked about the opportunity for Apple to own the home experience. Handsets had not really changed much apart from size and the shift from black-and-white to colour until Apple came out with the iPhone in 2007 and invented the smartphone segment. Apple TV has been a hobby for management for a while, but incorporating an iOS type platform to the TV screen and content management coupled with the Apple brand and its renowned ease of use could create a similar opportunity for Apple (and the industry) with a shift from TVs to smart TVs. The global volume of TVs shipped is estimated at 250m in 2012. We think smart TVs could account for 15-20% or 50m units in 2014. Assuming that over time Apple takes a 5% market share in the entire TV market (or 30% of the smart TV market in 2014), that would equate to 15m units, probably priced at a premium as the Mac/iPhone/iPod and iPad have been relative to the category. Assuming $2,000/unit, this would equate to ~$30bn in new incremental revenue for Apple i.e. a 15% uplift to its 2012 group revenue run-rate! In addition, Bang & Olufsen in the luxury TV market had been able to achieve 4045% gross margins and 10%+ operating margins in a positive product cycle. Apple has a strong brand appeal, will integrate software via iOS as well as SIRI/Facetime and can leverage its volume supply chain (memory, displays) as well as its $100bn+ net cash position for preferred supplier pre-payments. Hence, on the back of this, it should be able to achieve near corporate average gross and operating margins. Apple has had much success with iTunes with respect to its music content and services, given that the music industry has a set way for being paid, in a controlled manner, versus the free peer-to-peer services of yesteryear. Herein lies the rub: the cable and TV network market is not undergoing the same death spiral that the music industry was 10 years ago, when Apple came along and said we will save the industry with our iTunes business model. Yes, over-the-top services are happening, but looking at the cable and TV network profitability and subscriber base, all is healthy. How is Apple going to differentiate? It can obviously implement some of its differentiated design characteristics to the TV, but the latest Samsung, LG and even Sony TVs are very appealing. So differentiation could come through a combination of hardware, software and services i.e. the existing iOS subscriber base is obviously the targeted initial market for such a product, but to gain lots of traction, a subscription-based services model with differentiated or unique to user/adjusted to user/ la carte content is the way to go. The underlying issue here is that if users want to subscribe to a channel-by-channel service, they have to pay a high price for that subscription given the bundling economics of content, and given the profit profile of cable and TV networks that currently may be a tough ask. This is the greatest challenge that faces Apple in the TV space. Having said that, there are two factors in its favour: a) Robert Iger (Walt Disneys CEO) sits on Apples board and potentially understands how Apple can gain access to favourable content deals (which the industry at the moment is repelling), and b) cable and media companies are starting to feel some pressure from services like Netflix and other digital distribution channels.

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What is working
ARM
Drivers PD ( '000) Licence revenues Royalty revenues PIPD ( '000) Licence revenues Royalty revenues Group Revenues ( '000) Gross margins (IFRS) Gross margins (ex. special items) Gross margin (ex. special items ex. SBC) R&D (ex. special items) R&D (as % of sales) SG&A (ex. special items) SG&A (as % of sales) Operating margin (IFRS) Operating margin (ex. special items ex. SBC) Operating margin (ex. special items) EPS (IFRS) (pence) EPS (ex. special items ex SBC) (pence) EPS (ex. special items) (pence) Other Financials FCF ( '000) Capex ( '000) Working capital ( '000) Working capital as % of sales DSO DSI DPO Total assets ( '000) Net debt ( '000) Source: Berenberg Bank estimates Source: Berenberg Bank estimates 170,896 6,036 31,098 7.6% 94.7 25.0 60.3 1,084,662 -275,101 181,696 12,112 11,235 2.3% 88.8 32.5 114.2 1,299,790 -345,891 177,655 32,977 5,644 1.0% 84.2 21.0 78.9 1,361,860 -337,142 256,860 24,008 8,670 1.3% 84.0 26.0 80.0 1,638,397 -587,404 298,614 15,785 7,461 0.9% 84.0 26.0 75.0 1,906,431 -823,720 391,104 18,850 9,213 1.0% 84.0 26.0 75.0 2,276,341 -1,152,527 407,290 94.0% 94.0% 93.5% 132,765 32.6% 125,330 30.8% 26.3% 40.3% 26.3% 6.39 9.45 7.17 491,826 95.1% 95.1% 94.4% 153,663 31.2% 146,481 29.8% 30.3% 45.1% 30.3% 8.66 13.16 9.49 561,570 95.0% 95.0% 94.7% 157,239 28.0% 152,747 27.2% 38.2% 45.7% 38.2% 12.00 14.98 12.48 684,402 95.2% 95.2% 95.0% 177,944 26.0% 164,256 24.0% 44.4% 50.4% 44.4% 18.35 21.30 18.80 809,494 95.8% 95.8% 95.6% 206,421 25.5% 190,231 23.5% 46.1% 51.2% 46.1% 22.10 25.05 22.55 966,658 96.0% 96.0% 95.8% 231,998 24.0% 202,998 21.0% 50.4% 54.7% 50.4% 28.64 31.60 29.10 26,645 28,323 31,200 30,200 31,962 34,494 32,911 34,810 33,544 35,443 34,810 37,342 107,613 188,065 149,300 222,200 172,152 261,570 202,532 353,389 221,519 457,595 250,000 581,215 2010 2011 2012E 2013E 2014E 2015E

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Imagination
Drivers Royalty revenues Revenues (m) Licensing revenues Revenues (m) Total units & ASPs Total units ASPs Group Revenues (m) Gross margins R&D (m) R&D (as % of sales) SG&A (m) SG&A (as % of sales) Operating margin (reported) EPS (reported) EPS (adjusted) Other Financials FCF (m) Capex (m) Working capital (m) Working capital as % of sales Days receivables Days payable Days in inventory Total assets (m) Net debt/(cash) (m) Source: Berenberg Bank Estimates Source: Berenberg Bank estimates 8 1 14 16.9% 93 174 73 81 (28.9) (22) 12 16 16.5% 103 309 109 175 (43.8) 17 12 20 15.8% 118 458 94 213 (60.7) 36 14 20 13.0% 110 440 92 251 (89.9) 38 14 22 12.5% 110 440 92 291 (119.8) 44 14 24 12.0% 110 440 92 334 (155.5) 81 69.1% 35 43.7% 10 12.9% 12.5% 5.99 7.44 98 78.8% 45 45.6% 16 16.6% 16.6% 7.47 10.44 127 83.5% 60 46.8% 18 14.5% 22.2% 7.93 11.93 153 82.0% 74 48.0% 24 15.5% 18.5% 8.24 12.12 177 81.5% 85 48.0% 28 15.7% 17.8% 9.18 13.06 204 81.0% 98 48.0% 33 16.0% 17.0% 10.06 13.94 126 0.19 245 0.17 325 0.20 426 0.20 519 0.20 619 0.20 23 28 34 40 44 48 24 41 64 83 102 122 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

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Infineon
Drivers Automotive Revenues ( m) Operating margin (reported) Industrial Power Control (IPC) Revenues ( m) Operating margin (reported) Power management & Multimarker (PMM) Revenues ( m) Operating margin (reported) Chip card and Security Revenues ( m) Operating margin (reported) Group Revenues ( m) Gross margins (reported) R&D ( m) R&D (as % of sales) SG&A ( m) SG&A (as % of sales) Operating margin (reported) EPS (reported) (from continuing ops) Other Financials FCF ( m) Capex ( m) Working capital ( m) Working capital as % of sales Days receivables Days in inventory Days payable Total assets ( m) Net debt/(cash) (inc. pension liab) ( m) Source: Berenberg Bank estimates Source: Berenberg Bank estimates 650 322 536 16.3% 76 91 118 4,993 (1,331) 407 845 365 9.1% 54 79 115 5,873 (2,387) (189) 832 484 12.4% 50 84 92 5,898 (1,940) 183 659 408 11.6% 50 84 94 5,998 (1,973) 437 527 422 12.1% 52 80 92 6,087 (2,079) 634 418 420 11.9% 52 80 92 6,338 (2,366) 3,295 37.5% 399 12.1% 386 11.7% 10.6% 0.27 3,997 41.4% 399 10.0% 386 9.7% 18.4% 0.60 3,904 36.6% 455 11.7% 475 12.2% 11.7% 0.38 3,514 31.5% 415 11.8% 404 11.5% 7.1% 0.17 3,482 33.5% 331 9.5% 338 9.7% 13.2% 0.33 3,521 35.0% 352 10.0% 352 10.0% 13.9% 0.35 407 5.4% 428 12.6% 457 12.3% 480 10.0% 504 14.0% 529 15.0% 0.0% 0.0% 929 15.3% 873 8.0% 847 15.0% 847 16.0% 0.0% 0.0% 728 16.2% 604 5.0% 574 15.0% 557 16.0% 1,268 15.6% 1,552 18.0% 1,660 13.1% 1,557 6.5% 1,557 12.0% 1,588 12.2% 2010 2011 2012 2013E 2014E 2015E

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STM
Drivers APG Revenues ($ m) Operating margin (reported) AMM Revenues ($ m) Operating margin (reported) Wireless Revenues ($ m) Operating margin (reported) Group Revenues ($ m) Gross margins (reported) Gross margins (adjusted) R&D (ex. special items) R&D (as % of sales) SG&A (ex. special items) SG&A (as % of sales) Operating margin (reported) Operating margin (adjusted) EPS (reported) EPS (adjusted) EPS (reported) () EPS (adjusted) () Other Financials FCF ($ m) Capex ($ m) Working capital ($ m) Working capital as % of sales DSO DSI DPO Total assets ($ m) Net debt/(cash) (incl. pension liab) ($ m) Source:Berenberg Berenberg Bank estimates Source: Bank estimates 760 1034 1,494 16.5% 50 85 71 13,349 (925) (180) 1060 1,921 19.7% 39 89 39 12,094 (439) 252 598 1,655 19.8% 42 89 45 10,998 (891) 364 600 1,641 19.7% 42 91 48 11,839 (2,204) 382 550 1,701 19.2% 42 90 48 13,493 (1,401) 520 500 1,817 19.2% 42 90 48 13,000 (1,921) 9,049 30.0% 30.0% 2,350 26.0% 1,174 13.0% -9.1% -7.9% -0.51 -0.11 -0.38 -0.08 9,735 36.7% 32.7% 2,351 24.1% 1,210 12.4% -3.5% -2.8% 0.29 -0.02 0.21 -0.01 8,350 33.2% 33.2% 2,380 28.5% 1,119 13.4% -7.7% -7.7% 0.01 -0.36 0.01 -0.29 8,343 32.0% 32.0% 2,378 28.5% 1,035 12.4% -7.9% -7.9% 0.04 0.06 0.03 0.04 8,853 35.0% 35.0% 2,479 28.0% 1,151 13.0% -5.1% -5.1% 0.26 0.28 0.18 0.19 9,458 35.0% 35.0% 2,459 26.0% 1,229 13.0% -3.2% -3.2% 0.42 0.44 0.29 0.30 2,220 -21.8% 1,552 -52.4% 1,335 -62.0% 1,268 -55.0% 1,268 -55.0% 1,306 -50.0% 2,663 20.8% 2,974 19.6% 3,063 12.5% 3,124 12.0% 3,374 11.0% 3,644 11.0% 4,107 10.0% 3,534 9.9% 1,560 8.9% 1,622 8.3% 1,768 8.5% 1,945 8.5% 2010 2011 2012E 2013E 2014E 2015E

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MediaTek
Drivers Group Revenues (TW$m) (GAAP) 113,522 86,858 105,265 119,329 138,375 172,797 2010 2011 2012E 2013E 2014E 2015E

Gross margins (GAAP)

53.7%

45.3%

41.3%

40.0%

38.0%

38.0%

R&D (TW$m) R&D (as % of sales) SG&A (TW$m) SG&A (as % of sales) Operating margin (GAAP) EPS (GAAP) Other Financials FCF(TW$m) Capex(TW$m) Working capital(TW$m) Working capital as % of sales(TW$m) Days receivables Days in inventory Days payable Total assets(TW$m) Net Cash (TW$m)

23,311 20.5% 6,518 5.7% 27.4% 28.53

21,185 24.4% 5,815 6.7% 14.2% 12.54

23,685 22.5% 6,421 6.1% 12.7% 12.62

27,446 23.0% 7,398 6.2% 10.8% 12.27

31,826 23.0% 8,302 6.0% 9.0% 11.93

39,743 23.0% 10,368 6.0% 9.0% 14.40

27,069 2,147 -5,236 -4.6% 24 66 61 140,293 101,474

12,302 2,585 -5,334 -6.1% 31 72 69 147,746 96,359

12,341 2,372 -13,830 -13.1% 42 90 82 173,880 98,368

15,440 3,580 -17,923 -15.0% 37 80 69 507,353 439,952

16,472 4,843 -21,735 -15.7% 36 80 69 521,504 443,831

20,192 6048 -27,142 -15.7% 36 80 69 544,434 451,745

Source: Berenberg Bank estimates

27

Global Technology
Technology Hardware

Samsung
Drivers Revenue(won bn) Semiconductor DP IM Digital media Smartphones Units in million ASP($) Operating Margin in % Semiconductor DP IM Digital media Group Group Revenues(won bn) Gross margins R&D (won bn) R&D (as % of sales) SG&A (won bn) SG&A (as % of sales) Operating margin EPS EPS - diluted Other Financials FCF(won bn) Capex(won bn) Working capital (won bn) Working capital as % of sales(won bn) 2,206 -21,621 7,408 4.8% 150 -21,963 9,989 6.1% 10,850 -24,287 15,916 7.9% 18,468 -22,171 22,310 9.2% 13,497 -29,994 29,165 10.5% 17,906 -32,169 32,656 10.7% 154,630 33.6% 9,099 5.9% 26,243 17.0% 11.2% 106,577 105,755 165,002 35.9% 9,391 5.7% 26,493 16.1% 14.5% 96,386 95,645 202,728 37.0% 12,164 6.0% 35,275 17.4% 14.0% 162,175 160,937 242,976 37.3% 14,579 6.0% 42,764 17.6% 14.0% 202,310 200,766 277,722 35.5% 15,275 5.5% 46,102 16.6% 13.7% 218,910 217,239 306,369 35.0% 16,850 5.5% 50,857 16.6% 13.2% 233,356 231,575 26.8% 6.7% 10.6% 0.8% 26.5% 4.4% 8.4% 0.1% 14.0% 9.0% 19.2% 4.0% 15.0% 9.5% 19.5% 2.0% 12.0% 8.0% 18.0% 4.0% 12.0% 8.0% 18.0% 4.0% 24 343 98 304 218 309 314 287 424 264 572 232 37,640 29,912 40,830 57,613 36,993 29,232 55,545 59,004 35,180 33,892 108,138 46,532 38,662 35,083 142,623 46,608 43,211 36,866 168,061 49,583 45,103 37,056 191,623 52,587 2010 2011 2012E 2013E 2014E 2015E

Days receivables Days in inventory Days payable Total assets(won bn) Net Cash (won bn)

45 48 33 134,289 13,416

48 54 34 155,631 13,541

48 62 38 186,462 23,792

47 59 33 224,726 36,028

47 58 33 247,280 50,102

47 55 33 267,445 64,974

Source: Berenberg Bank estimates

28

Global Technology
Technology Hardware

HTC
Drivers Global smartphone market (m units) HTC market share Handsets Units shipped (m) ASP (NT$) Revenues (NT$ m) Group Revenues (NT$ m) Gross margins R&D (NT$ m) R&D (as % of sales) SG&A (NT$ m) SG&A (as % of sales) Operating margin EPS Other financials FCF (NT$ m) Capex (NT$ m) Working capital (NT$ m) Working capital as % of sales Days receivables Days in inventory Days payable Total assets (NT$ m) Net debt (NT$ m) 41,057 4,991 24,895 8.9% 82 49 120 190,382 75,355 80,096 8,411 15,127 3.2% 50 31 84 254,592 90,656 2,000 6,140 5,998 2.2% 49 30 85 174,881 52,681 3,008 3,682 4,966 2.1% 46 30 79 174,423 60,298 4,800 2,692 3,201 1.5% 47 29 80 173,724 65,098 (191) 1,801 2,728 1.5% 45 31 78 167,273 64,907 278,761 30.1% 12,940 4.6% 26,796 9.6% 15.8% 47.89 465,795 28.3% 15,961 3.4% 47,049 10.1% 14.8% 73.76 274,175 24.6% 13,709 5.0% 36,191 13.2% 6.4% 19.19 235,739 21.5% 14,144 6.0% 30,646 13.0% 2.5% 7.06 207,044 19.0% 10,352 5.0% 24,845 12.0% 2.0% 5.20 180,074 17.0% 9,004 5.0% 21,609 12.0% 0.0% 0.81 24.6 11,003 270,680 45.5 10,000 455,000 29.6 9,000 266,175 27.2 8,370 227,739 25.0 7,952 199,044 22.8 7,554 172,074 2010 281 8.8% 2011 461 9.9% 2012E 603 4.9% 2013E 911 3.0% 2014E 1,200 2.1% 2015E 1,400 1.6%

Source: Berenberg Bank estimates

29

Global Technology
Technology Hardware

Cisco
Drivers Product Revenues($m) YoY growth Service Revenues($m) YoY growth Group Revenues ($m) (GAAP) YoY growth Gross margins 43,218 7.9% 63.3% 46,061 6.6% 62.4% 47,800 3.8% 62.1% 48,200 0.8% 61.3% 48,700 1.0% 60.4% 8,692 5.6% 9,735 12.0% 9,950 2.2% 10,300 3.5% 10,500 1.9% 34,526 6.5% 36,326 5.2% 37,850 4.2% 37,900 0.1% 38,200 0.8% 2011 2012 2013E 2014E 2015E

R&D ($m) R&D (as % of sales) SG&A ($m) SG&A (as % of sales) Operating margin (GAAP) Operating margin (adj. Non-GAAP) EPS (GAAP) EPS (adjusted non-GAAP) Other Financials FCF($m) Capex($m) Working capital($m) Working capital as % of sales($m) Deferred revenues($m) Deferred CoGS($m) Days receivables Days in inventory Days payable Total assets($m) Net Cash ($m) Source: Berenberg Bank estimates Source: Berenberg Bank estimates

5,257 12.2% 10,773 24.9% 20.2% 26.2% 1.16 1.54

5,066 11.0% 10,961 23.8% 21.9% 27.7% 1.49 1.85

5,640 11.8% 11,568 24.2% 21.7% 26.1% 1.61 1.94

5,736 11.9% 11,664 24.2% 20.8% 25.2% 1.64 1.99

5,649 11.6% 11,883 24.4% 20.0% 24.4% 1.72 2.09

8,905 -1,174 5,308 12.3% 12,207 73.2% 40 33 19 87,095 28,351

10,365 -1,126 5,173 11.2% 12,880 72.1% 35 34 18 91,759 32,419

9,117 -983 4,880 10.2% 12,478 67.5% 32 32 18 91,126 28,582

9,725 -1,012 5,088 10.6% 12,532 65.8% 33 32 18 94,545 32,307

9,469 -1,023 5,105 10.5% 12,662 64.2% 33 31 18 97,810 35,776

30

Global Technology
Technology Hardware

Ericsson
Drivers Networks Revenues (SKr bn) Operating margin (adjusted) Professional Services Revenues (SKr bn) Operating margin (adjusted) Multimedia Revenues (SKr bn) Operating margin (adjusted) ST Ericsson Revenues (US$ m) Operating margin (adjusted) Group Revenues (SKr bn) Gross margins R&D (SKr bn) R&D (as % of sales) SG&A (SKr bn) SG&A (as % of sales) Operating margin (adj.) EPS reported EPS (adjusted) Other Financials Restructuring charges (SKr bn) FCF (SKr bn) Capex (SKr bn) Working capital Working capital as % of sales Days receivables Days in inventory Days payable Total assets (SKr bn) Net debt (SKr bn) ex. Pensions Source: Berenberg Bank estimates Source: Berenberg Bank estimates 7.3 23.0 3.6 18.3 9.0% 114 87 72 282 56 3.7 5.9 4.6 29.0 12.8% 101 83 63 280 50 4.0 0.6 5.2 44.8 19.4% 108 87 61 283 38 3.0 32.6 3.6 31.4 13.3% 92 76 62 315 82 3.0 20.4 3.5 33.8 14.0% 90 81 62 350 113 3.0 21.7 3.7 37.0 14.6% 90 81 62 388 146 203.3 38.2% 29.9 14.7% 25.3 12.4% 11.7% 3.48 5.09 226.9 35.7% 30.1 13.2% 27.3 12.0% 9.5% 3.97 4.82 230.3 33.0% 32.7 14.2% 26.7 11.6% 5.2% 2.45 2.50 235.8 32.0% 32.5 13.8% 25.9 11.0% 6.3% 2.97 3.22 241.6 33.0% 32.6 13.5% 25.9 10.7% 8.1% 4.04 4.20 253.0 33.0% 33.4 13.2% 26.1 10.3% 8.8% 4.70 4.81 2,292 -19.0% 1,650 -44.3% 1,353 -45.0% 1,353 -30.0% 1,380 -15.0% 1,449 -8.0% 10,517 -4.1% 10,642 -3.4% 14,047 8.3% 14,750 5.0% 15,487 5.0% 16,262 5.0% 58,529 15.2% 58,834 14.7% 69,424 13.5% 79,143 13.0% 88,641 13.5% 97,505 13.8% 112,708 14.5% 132,395 14.3% 116,508 5.5% 115,343 7.0% 116,496 8.0% 119,991 8.5% 2010 2011 2012E 2013E 2014E 2015E

31

Global Technology
Technology Hardware

Juniper
Drivers Product Revenues ($'000) Gross Margin Service Revenues ($000) Gross Margin Group Revenues ($'000) Gross margins R&D ($'000) R&D (as % of sales) SG&A ($'000) SG&A (as % of sales) Operating margin (GAAP) Operating margin (adjusted) EPS (GAAP) EPS (adjusted) Other Financials FCF($'000) Capex($'000) Working capital($'000) Working capital as % of sales($'000) Days receivables Days payable Total assets($'000) Net Cash ($'000) 492,717 185,291 705,542 17.2% 53 79 8,467,851 2,286,401 918,275 266,314 733,095 16.5% 47 75 9,983,820 3,551,743 365,495 322,731 816,656 18.9% 41 61 10,198,989 3,281,895 664,771 322,731 1,095,085 23.7% 42 59 2,151,686 3,315,452 561,562 351,053 1,132,590 22.6% 45 60 11,788,440 4,571,764 663,928 379,857 1,215,998 22.4% 45 60 12,660,047 5,235,692 4,093,300 68% 837,188 20.5% 945,970 23.1% 21.1% 24.0% 1.15 1.32 4,445,400 65% 925,711 20.8% 1,071,465 24.1% 16.4% 20.6% 0.78 1.19 4,324,221 63% 1,016,192 23.5% 1,145,919 26.5% 6.2% 13.0% 0.35 0.73 4,612,857 61% 1,014,829 22.0% 1,143,989 24.8% 9.7% 13.9% 0.62 0.88 5,015,047 60% 1,003,009 20.0% 1,178,536 23.5% 12.3% 16.1% 0.85 1.10 5,426,523 59% 976,774 18.0% 1,275,233 23.5% 14.0% 17.5% 1.04 1.30 834,600 59.7% 967,200 57.8% 994,571 59.5% 1,060,957 58.0% 1,253,762 58.5% 1,410,896 59.0% 3,258,700 69.6% 3,478,200 67.6% 3,329,650 64.0% 3,551,900 61.5% 3,761,285 60.0% 4,015,627 59.0% 2010 2011 2012E 2013E 2014E 2015E

Source: Berenberg Bank estimates

32

Global Technology
Technology Hardware

Alcatel-Lucent
Drivers Carrier Revenues (mn) Operating margin (ex. restructuring) Application Software Revenues (mn) Services Revenues (mn) Group Revenues (bn) Gross Margins (pro-forma) R&D (pro-forma) (bn) R&D (as % of sales) SG&A (pro-forma) (bn) SG&A (as % of sales) Operating margin (pro-forma ex. restructuring) EPS (pro-forma) excl restruct. pension & discont. ops. Other Financials Free cash flow (m) Capex (m) Working capital (m) as % of sales Days receivable Days in inventory Days payable Total assets (m) Net debt Source: Berenberg Bank estimates Source: Berenberg Bank estimates 818 692 1,634 10.2% 84 80 151 24,876 -311 477 570 1,490 9.7% 81 74 145 24,203 146 1,002 542 1,320 9.2% 89 85 163 24,426 197 1,087 502 1,243 8.9% 87 82 158 23,081 1,284 581 489 1,246 8.9% 85 78 150 22,261 1,865 420 480 1,261 8.9% 85 78 150 21,881 2,284 16.00 34.8% 2.5 15.6% 2.8 17.4% 1.8% 0.09 15.33 36.3% 2.4 15.4% 2.7 17.4% 3.4% 0.45 14.40 29.0% 2.4 16.8% 2.3 16.0% -2.9% -0.16 13.95 28.0% 2.0 14.5% 2.1 15.0% -1.5% -0.09 13.97 27.5% 2.0 14.0% 1.9 13.5% 0.0% 0.00 14.10 27.6% 1.9 13.5% 1.8 13.0% 1.1% 0.05 9,603 1.9% 9,654 2.7% 8,608 -5.0% 7,834 -4.0% 7,562 -3.5% 7,403 -2.0% 2010 2011 2012E 2013E 2014E 2015E

1,917

498

483

498

512

528

3,733

3,963

4,201

4,411

4,631

4,863

33

Global Technology
Technology Hardware

Hon Hai
Market share (of COGS in %) Apple Hon Hai market share of COGS (in %) HP Hon Hai market share of COGS (in %) Sony Hon Hai market share of COGS (in %) Group Revenues (NT$m) Gross margins 2,997,205 8.1% 3,452,681 7.7% 3,879,514 8.3% 4,254,214 8.4% 4,834,982 8.2% 5,236,216 7.7% 77.7% 78.0% 78.0% 78.0% 78.0% 78.0% 15.1% 15.5% 15.5% 15.5% 15.5% 15.5% 53.1% 56.0% 60.0% 60.0% 60.0% 62.0% 2010 2011 2012E 2013E 2014E 2015E

R&D (NT$m) R&D (as % of sales) SG&A (NT$m) SG&A (as % of sales) Operating margin (reported) EPS (basic) EPS (diluted) Other Financials FCF (NT$m) Capex (NT$m) Working capital (NT$m) Working capital as % of sales Days receivables Days payable Days in inventory Total assets (NT$m) Net debt /(cash) (NT$m) Source: Berenberg Bank estimates Source: Berenberg Bank estimates

38,791 1.3% 119,265 4.0% 2.9% 8.01 7.75

40,847 1.2% 142,691 4.1% 2.4% 7.72 7.44

47,718 1.2% 182,337 4.7% 2.4% 7.28 7.18

55,305 1.3% 195,694 4.6% 2.5% 8.50 8.37

62,855 1.3% 212,739 4.4% 2.5% 9.63 9.49

68,071 1.3% 178,031 3.4% 3.0% 12.45 12.27

(10,260) 72,716 234,889 7.8% 49 57 34 1,380,532 (12,064)

14,036 87,170 308,077 8.9% 50 63 44 1,730,311 (15,671)

27,856 54,313 365,748 9.4% 50 60 43 1,834,669 (33,931)

66,753 51,051 399,313 9.4% 48 56 41 1,928,710 (91,090)

49,577 58,020 453,429 9.4% 48 55 40 2,092,667 (131,073)

92,191 62,835 489,981 9.4% 48 55 40 2,275,185 (213,670)

34

Global Technology
Technology Hardware

Catcher
Drivers Apple Catcher market share of COGS (in %) Dell Catcher market share of COGS (in %) HTC Catcher market share of COGS (in %) 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 2010 2011 2012E 2013E 2014E 2015E

Group Revenues (NT$m) Gross margins R&D (NT$m) R&D (as % of sales) SG&A (NT$m) SG&A (as % of sales) Operating margin (reported) EPS (basic) EPS (diluted) Other Financials FCF (NT$m) Capex (NT$m) Working capital (NT$m) Working capital as % of sales Days receivables Days payable Days in inventory Total assets (NT$m) Net debt/(cash) (NT$m) Source: Berenberg estimates Source: Berenberg BankBank estimates (719) 5,192 8,439 38.6% 159 83 55 58,094 2,408 3,462 8,031 11,771 32.8% 127 62 49 89,278 (14,792) 4,757 7,628 11,140 32.1% 127 62 45 97,691 (19,548) 3,838 8,501 12,279 31.8% 127 62 43 107,653 (23,386) 4,483 8,699 13,797 31.7% 127 62 43 118,404 (27,869) 6,007 7,891 13,885 31.7% 127 62 43 127,494 (33,876) 21,845 35.5% 759 3.5% 1,906 8.7% 23.3% 6.66 6.21 35,914 47.0% 781 2.2% 2,897 8.1% 36.8% 14.22 14.14 34,672 42.8% 832 2.4% 2,843 8.2% 32.2% 11.06 10.99 38,643 42.0% 966 2.5% 3,169 8.2% 31.3% 12.69 12.61 43,493 41.0% 1,305 3.0% 3,566 8.2% 29.8% 13.58 13.51 43,840 40.0% 1,315 3.0% 4,822 11.0% 26.0% 11.96 11.89

35

Global Technology
Technology Hardware

Foxconn Technology
Drivers Apple Apple revenues % of total revenues Nintendo Nintendo revenues % of total revenues Group Revenues (NT$m) Gross margins R&D (NT$m) R&D (as % of sales) SG&A (NT$m) SG&A (as % of sales) Operating margin (reported) EPS (basic) EPS (diluted) Other Financials FCF (NT$m) Capex (NT$m) Working capital (NT$m) Working capital as % of sales Days receivables Days payable Days in inventory Total assets (NT$m) Net debt/(cash) (NT$m) Source: Berenberg Bank estimates Source: Berenberg Bank estimates 8,037 3,662 14,872 10.9% 74 55 16 92,552 (15,032) 3,675 3,851 17,932 13.6% 95 64 14 97,723 (23,472) 6,895 10,870 13,143 10.9% 84 64 14 102,118 (29,197) 7,415 6,938 14,071 10.1% 81 64 14 112,069 (35,443) 8,608 6,867 13,839 10.1% 81 64 14 119,229 (42,883) 7,297 7,466 15,048 10.1% 81 64 14 129,096 (49,011) 136,724 10.8% 1,290 0.9% 4,070 3.0% 6.9% 6.85 6.81 131,498 9.0% 1,132 0.9% 3,612 2.7% 5.4% 6.84 6.80 120,781 10.2% 1,208 1.0% 3,503 2.9% 6.3% 6.12 6.12 138,761 11.2% 1,110 0.8% 4,024 2.9% 7.5% 6.94 6.94 137,331 11.0% 1,099 0.8% 3,708 2.7% 7.5% 6.87 6.87 149,326 11.0% 1,195 0.8% 4,032 2.7% 7.5% 7.45 7.45 90,330 66.1% 76,186 57.9% 59,400 49.2% 70,035 50.5% 57,190 41.6% 54,825 36.7% 22,234 16.3% 30,161 22.9% 34,971 29.0% 37,035 26.7% 42,111 30.7% 48,865 32.7% 2010 2011 2012E 2013E 2014E 2015E

36

Global Technology
Technology Hardware

What is not working

Motorola Solutions
Drivers Government Revenues ($bn) 5.1 5.4 6.1 6.4 6.5 6.6 2010 2011 2012E 2013E 2014E 2015E

Enterprise Mobility Solutions Revenues ($bn) 2.7 2.9 2.6 2.6 2.7 2.7

Group Revenues ($bn) Gross margins R&D ($bn) R&D (as % of sales) SG&A ($bn) SG&A (as % of sales) Operating margin (adj.) EPS (reported) EPS (adjusted) Other Financials FCF ($m) Capex ($m) Working capital ($m) Working capital as % of sales Days receivables Days in inventory Days payable Total assets ($ bn) Net debt ($ bn) Source: Berenberg Bank estimates Source: Berenberg Bank estimates 2,120 192 1,487 18.9% 79 24 68 19 (6.2) 687 167 1,701 20.4% 82 22 60 14 (3.6) 1,156 183 1,822 21.1% 81 22 54 13 (2.5) 1,002 180 1,857 20.7% 80 23 55 14 (3.5) 962 183 1,888 20.7% 80 23 55 15 (4.4) 984 185 1,914 20.7% 80 23 55 16 (5.4) 7.9 50.2% 1.0 13.1% 1.8 22.5% 14.7% 1.88 2.34 8.3 50.7% 1.0 12.2% 1.8 21.8% 16.6% 1.87 2.60 8.7 50.5% 1.0 11.8% 1.9 21.5% 17.2% 2.72 3.05 9.0 50.0% 1.1 12.3% 1.9 21.3% 16.4% 3.13 3.22 9.1 50.0% 1.1 12.3% 1.9 21.2% 16.5% 3.45 3.55 9.3 50.0% 1.1 12.3% 1.9 21.0% 16.7% 3.55 3.64

37

Global Technology
Technology Hardware

Apple
Drivers Mac Units ('000) Desktops Portables ASP ($) Desktops Portables Revenue ($m) iPOD Units ASP ($) Revenue ($m) iPhone Global Smartphone shipments (units m) iPhone shipments (units m) Apple's market share ASP ($) Revenue ($m) iPhone gross margins iPAD Units ASP ($) Revenue ($m) Group Revenues ($bn) Gross margins R&D ($bn) R&D (as % of sales) SG&A ($bn) SG&A (as % of sales) Operating margin EPS (non-GAAP) Other financials FCF ($m) Capex ($m) Working capital ($m) Working capital as % of sales Days receivable Days in inventory Days payable Total assets ($m) Net debt ($m) Source:Company data, Berenberg Bank Source: Company data, Berenberg Bank 16,590 2,005 -5,454 -8.4% 31 10 111 75,183 -51,011 33,269 4,260 -8,487 -7.8% 18 4 83 116,371 -81,570 42,561 8,295 -9,454 -6.0% 25 3 88 176,064 -121,251 57,305 12,766 -12,922 -6.7% 26 5 90 243,616 -178,556 62,759 16,708 -17,791 -7.1% 26 5 90 319,644 -241,014 62,541 18,765 -19,981 -7.1% 26 5 90 394,243 -303,255 65.2 39.4% 1.8 2.7% 5.5 8.5% 28.2% 16.41 108.2 40.5% 2.4 2.2% 7.6 7.0% 31.2% 29.79 156.5 43.9% 3.4 2.2% 10.0 6.4% 35.3% 47.86 191.9 40.5% 4.6 2.4% 12.5 6.5% 31.6% 51.06 251.2 39.0% 5.5 2.2% 16.3 6.5% 30.3% 63.70 282.1 39.0% 6.2 2.2% 18.3 6.5% 30.3% 71.48 7,458 665 4,958 32,394 628 20,358 58,310 556 32,424 75,000 473 35,449 95,000 425 40,412 105,000 404 42,432 281 40 14% 630 25,179 52.6% 461 72 16% 651 47,057 52.8% 603 125 21% 644 80,477 56.7% 911 169 19% 642 108,318 52.0% 1200 219 18% 635 139,405 49.0% 1400 263 19% 629 165,613 49.0% 50,342 164 8,274 42,620 175 7,453 35,165 160 5,615 28,000 144 4,024 22,000 132 2,909 20,000 124 2,486 4,627 9,035 4,669 12,066 4,656 13,502 4,609 14,852 4,563 16,040 4,563 17,003 2010 2011 2012 2013E 2014E 2015E

1,340 1,248 17,479

1,379 1,272 21,783

1,297 1,272 23,221

1,220 1,247 24,146

1,159 1,222 24,893

1,101 1,210 25,597

38

Global Technology
Technology Hardware

RIM
Drivers CY Global smartphone market (m units) RIMM's market share 2010 2009 172 2011 2010 281 2012 2011 461 2013E 2012E 603 2014E 2013E 911 2015E 2014E 1,200

21.4%

18.6%

10.6%

4.2%

2.0%

1.2%

Hardware Units shipped (m) ASP ($) Revenues ($m) Services Subscriber base Net additions ARPU ($) Revenues ($m) Group Revenues ($m) Gross margins R&D ($m) R&D (as % of sales) SG&A ($m) SG&A (as % of sales) Operating margin EPS (reported) EPS (adjusted) Other financials FCF ($m) Capex ($m) Working capital ($m) Working capital as % of sales Days receivables Days in inventory Days payable Total assets ($m) Net cash ($m) 2,025 1,009 2,600 17.4% 57 27 27 10,204 1,911 2,970 1,039 3,741 18.8% 60 20 27 12,875 2,121 2,010 902 3,345 18.2% 70 32 23 13,731 1,774 985 471 1,862 18.1% 85 37 32 11,904 2,153 (612) 364 1,773 23.4% 80 41 33 10,919 1,542 (104) 282 1,461 23.3% 80 41 33 10,356 1,437 14,953 44.0% 965 6.5% 1,811 12.1% 21.7% 4.41 3.63 19,907 44.3% 1,351 6.8% 2,400 12.1% 23.3% 6.36 6.36 18,400 35.6% 1,559 8.5% 2,604 14.2% 7.9% 2.22 1.54 10,308 28.0% 1,546 15.0% 1,835 17.8% -10.8% -1.64 -1.64 7,577 30.0% 1,137 15.0% 1,288 17.0% -8.0% -0.89 -0.89 6,273 31.0% 1,066 17.0% 1,255 20.0% -11.0% -1.01 -1.01 41,300 16,917 5.2 2,159 60,900 19,600 5.0 3,197 77,850 16,950 4.7 4,086 76,850 -1,000 4.1 3,849 75,650 -1,200 3.8 3,498 74,350 -1,300 3.6 3,240 36.7 331 12,154 52.3 305 15,956 49.0 282 13,794 25.5 225 5,738 17.8 191 3,414 14.3 163 2,322

Source: Berenberg Bank estimates Source: Berenberg Bank estimates

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TPK
Drivers SFF touch module Revenue from SFF touch module 14,771 17,128 12,987 16,173 17,664 19,416 2010 2011 2012E 2013E 2014E 2015E

LFF touch module Revenue from LFF touch module 19,305 49,790 56,025 77,675 86,760 104,652

Touch display Revenue from touch display Apple market share Group Revenues (NT$m) Gross margins R&D (NT$m) R&D (as % of sales) SG&A (NT$m) SG&A (as % of sales) Operating margin (reported) EPS (basic) EPS (diluted) Other Financials FCF (NT$m) Capex (NT$m) Working capital (NT$m) Working capital as % of sales Days receivables Days payable Days in inventory Total assets (NT$m) Net debt /(cash) (NT$m) Source: Berenberg Bank estimates Source: Berenberg Bank estimates (4,770) 10,711 1,128 1.9% 73 103 22 41,929 1,697 (5,482) 23,458 (6,370) -4.7% 20 80 36 92,953 12,838 (3,460) 23,177 (7,478) -4.8% 20 75 30 105,479 16,300 (2,297) 27,442 (11,278) -6.2% 20 78 28 124,426 18,597 (2,909) 28,084 (11,669) -6.2% 20 78 28 137,584 21,506 (2,024) 31,570 (13,262) -6.3% 20 78 28 152,736 23,530 59,699 16.8% 1,574 2.6% 2,210 3.7% 10.5% 22.69 21.93 135,784 16.9% 3,491 2.6% 4,751 3.5% 11.4% 48.22 48.22 154,512 16.3% 4,635 3.0% 4,867 3.2% 10.2% 36.84 36.84 182,948 15.0% 5,854 3.2% 5,488 3.0% 8.8% 37.58 37.58 187,224 14.5% 5,991 3.2% 5,617 3.0% 8.3% 37.25 37.25 210,468 14.0% 6,735 3.2% 6,314 3.0% 7.8% 39.37 39.37 25,623 60.0% 68,867 55.0% 85,500 45.0% 89,100 45.0% 82,800 45.0% 86,400 45.0%

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Foxconn International
Market share (of COGS in %) Nokia FIH market share of COGS (in %) Motorola FIH market share of COGS (in %) Sony Ericsson FIH market share of COGS (in %) Group Revenues (USDm) Gross margins R&D (USDm) R&D (as % of sales) SG&A (USDm) SG&A (as % of sales) Operating margin (reported) Operating margin (adj.) EPS (basic) EPS (diluted) Other Financials FCF (USDm) Capex (USDm) Working capital (USDm) Working capital as % of sales Days receivables Days payable Days in inventory Total assets (USDm) Net debt (USDm) Source: Berenberg Bank estimates Source: Berenberg Bank estimates (360) 254 995 15.0% 91 81 43 6,017 (762.1) 310 178 805 12.7% 81 74 37 5,612 (1,439.0) (61) 210 683 12.4% 81 74 37 4,863 (968.1) (9) 193 640 12.6% 81 74 37 4,657 (959.6) (19) 184 607 12.6% 81 74 37 4,512 (941.1) (24) 174 575 12.5% 81 74 37 4,365 (917.4) 6,626 4.3% 220 3.3% 279 4.2% -3.3% 6,354 5.3% 194 3.1% 275 4.3% -2.1% 5,528 2.2% 171 3.1% 238 4.3% -5.2% 5,086 4.5% 147 2.9% 209 4.1% -2.5% 4,831 4.3% 140 2.9% 198 4.1% -2.7% 4,590 4.0% 133 2.9% 188 4.1% -3.0% 2010 2011 2012E 2013E 2014E 2015E

15.6%

14.0%

12.0%

12.0%

12.0%

12.0%

30.0%

27.0%

25.0%

25.0%

25.0%

25.0%

20.2%

16.0%

16.0%

16.0%

16.0%

16.0%

-0.03 -0.03

-0.01 -0.01

-0.03 -0.03

-0.01 -0.01

-0.01 -0.01

-0.01 -0.01

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ZTE
Drivers Networks Revenues (CNY '000) YoY growth Handsets Revenues (CNY '000) YoY growth Others Revenues (CNY '000) YoY growth Group Revenues (CNY '000) Gross margins R&D R&D (as % of sales) SG&A SG&A (as % of sales) Operating margin (reported) Operating margin (adjusted) EPS (reported) CNY EPS (adjusted) CNY EPS (reported) (HK$) EPS (adjusted) (HK$) Other Financials FCF (CNY '000) Capex (CNY '000) Working capital (CNY '000) Working capital as % of sales Days receivables Days in inventory Days payable Total assets (CNY '000) Net debt (CNY '000) Source: Berenberg estimates Source: Berenberg BankBank estimates (2,125) 3,067 19,668 28.0% 172 91 192 85,509 (1,530) (5,877) 4,065 15,135 17.5% 139 91 198 105,368 1,039 (3,625) 2,283 19,025 20.8% 140 83 170 102,072 6,699 (75) 2,410 20,166 20.9% 140 84 170 104,998 6,774 (198) 2,566 21,474 20.9% 140 84 170 108,263 6,972 1,075 2,697 22,573 20.9% 140 84 170 112,172 5,896 70,263 30.8% 7,092 10.1% 11,414 16.2% 7.2% 3.4% 1.17 1.25 1.35 1.44 86,254 30.3% 8,493 9.8% 13,385 15.5% 5.7% 3.3% 0.61 0.66 0.70 0.76 91,303 26.5% 8,309 9.1% 13,376 14.7% 1.5% 1.1% 0.05 0.05 0.06 0.06 96,392 26.0% 8,675 9.0% 13,495 14.0% 2.5% 2.1% 0.26 0.26 0.32 0.32 102,644 26.0% 9,238 9.0% 14,370 14.0% 2.5% 2.1% 0.30 0.30 0.37 0.37 107,897 26.0% 8,632 8.0% 15,106 14.0% 3.5% 3.2% 0.56 0.56 0.69 0.69 10,346 24.5% 12,799 23.7% 14,591 14.0% 14,883 2.0% 15,329 3.0% 15,789 3.0% 17,927 37.1% 26,934 50.2% 32,051 19.0% 34,615 8.0% 38,076 10.0% 41,884 10.0% 41,990 5.0% 46,522 10.8% 44,661 -4.0% 46,894 5.0% 49,239 5.0% 50,224 2.0% 2010 2011 2012E 2013E 2014E 2015E

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Qualcomm
Drivers Integrated Circuits Unit shipped(m) ASP($) Revenue($m) 399 17 6,701 483 18 8,840 590 21 12,160 710 21 14,910 850 19 16,150 1,000 16 16,000 2010 2011 2012 2013E 2014E 2015E

Technology Licensing Handset Sales(m) Handset ASP($) Market size($m) Blended royalty rate Revenue($m) Group Revenues ($m) (GAAP) 10,981 14,958 19,121 22,734 24,593 24,461 569 186 105,976 3.5% 3,709 726 207 149,919 3.5% 5,247 853 220 187,276 3.5% 6,555 1,006 217 218,302 3.3% 7,204 1,100 216 237,600 3.3% 7,793 1,150 209 240,350 3.3% 7,811

Gross margins (GAAP)

71.0%

68.0%

64.5%

62.8%

62.0%

61.0%

R&D ($m) R&D (as % of sales) SG&A ($m) SG&A (as % of sales) Operating margin (GAAP) Operating margin (adj. Non-GAAP) EPS (GAAP) EPS (adjusted non-GAAP) Other Financials FCF($m) Capex($m) Working capital($m) Working capital as % of sales($m)

2,143 19.5% 1,262 11.5% 29.9% 40.0% 1.96 2.49

2,585 17.3% 1,511 10.1% 33.0% 40.6% 2.56 3.20

3,363 17.6% 1,860 9.7% 29.7% 37.1% 3.20 3.80

4,069 17.9% 2,092 9.2% 30.8% 35.7% 3.82 4.25

4,304 17.5% 2,509 10.2% 29.8% 34.3% 4.10 4.54

4,207 17.2% 2,642 10.8% 28.5% 33.0% 4.01 4.44

3,689 426 -2,492 -22.7%

4,308 594 -1,113 -7.4%

4,714 1,284 455 2.4%

6,126 1,167 539 2.4%

5,014 1,230 456 1.9%

5,949 1,223 432 1.8%

Days receivables Days in inventory Days payable Total assets($m) Net Cash ($m)

24 60 87 30,572 18,402

16 44 40 36,422 19,107

28 55 70 43,012 26,837

27 53 64 49,104 27,564

29 55 60 51,878 34,825

29 55 60 54,967 37,538

Source: Berenberg Bank estimates

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Nokia
Drivers Global handset market size (m units) Global smartphone market (m units) 2010 1,427 2011 1,511 2012E 1,600 2013E 1,887 2014E 2,000 2015E 2,200

281

461

603

911

1,200

1,400

Nokia Device and Services Nokia's market share Units shipped (m) ASP () Revenues (m) Operating margin (adjusted) NSN Revenues (m) Operating margin (adjusted) Location & Commerce Revenues (m) Operating margin (adjusted) Group Revenues ( bn) Gross margins (adjusted) R&D (adjusted) (bn) R&D (as % of sales) SG&A (adjusted) ( bn) SG&A (as % of sales) Operating margin (IFRS) Operating margin (adjusted) EPS (IFRS) EPS (adjusted) Other Financials FCF (bn) Capex (m) Working capital (bn) Working capital as % of sales Days receivable Days in inventory Days payable Total assets (bn) Net debt (bn) Source: Berenberg Bank estimates Source: Berenberg Bank estimates 4.10 679 4.0 9.4% 64 31 75 39.1 (7.0) 0.54 597 4.0 10.3% 67 31 73 36.2 (5.8) (0.54) 395 2.4 8.2% 69 27 78 29.5 (4.9) (1.92) 391 3.2 11.1% 72 30 73 27.4 (3.1) (0.82) 325 3.0 11.1% 72 30 73 24.8 (1.4) (0.75) 312 2.9 11.0% 72 30 73 23.2 (0.6) 42.5 30.6% 5.3 12.5% 4.5 10.6% 6.0% 7.5% 0.50 0.61 38.7 29.4% 5.2 13.4% 4.4 11.5% -2.7% 4.7% 0.15 0.29 29.4 23.8% 4.4 15.0% 3.9 13.4% -8.7% -4.6% 0.73 0.40 28.5 24.0% 3.7 13.0% 3.4 12.0% -3.1% -1.0% 0.28 0.11 27.1 24.0% 3.3 12.0% 3.0 11.0% -1.2% 1.0% 0.15 0.03 26.0 23.0% 2.9 11.0% 2.9 11.0% -1.3% 1.0% 0.15 0.03 1,003 26.4% 1,050 19.4% 1,100 13.0% 1,300 11.0% 1,400 10.0% 1,500 9.0% 12,661 0.8% 14,041 1.6% 13,300 3.5% 13,500 4.0% 13,300 4.3% 13,300 3.0% 31.7% 453 62.8 29,137 10.9% 27.6% 417 56.9 23,943 6.6% 21.1% 338 45.5 15,383 -8.0% 17.4% 328 41.9 13,724 -9.0% 15.6% 311 39.8 12,386 -8.0% 13.4% 296 37.8 11,178 -7.0%

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Price target and valuation changes


On Samsung, we take our price target up to KRW1,650,000 from KRW1,450,000. Our new price target is based on a 8x P/E multiple on our FY14 EPS of KRW217,239. On ARM, we take our price target up to 10.0 from 7.2. Our new price target is based on a 40x P/E multiple on our FY14 EPS of 0.25. On Imagination, we take our price target down to 3.6 from 4.0. Our new price target is based on a DCF model assuming a 3% terminal growth rate, a 8.5% WACC and a 25% terminal EBIT margin. On Ericsson, we take our price target down to SKR51.0 from SKR53.0. Our new price target is based on a 12x P/E multiple on our FY14 EPS of SKR4.2. On Foxconn International, we take our price target up to HKD3.00 from HKD2.0. Our new price target is based on a sum-of-the-parts valuation.

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Please note that the use of this research report is subject to the conditions and restrictions set forth in the General investment-related disclosures and the Legal disclaimer at the end of this document. For analyst certification and remarks regarding foreign investors and country-specific disclosures, please refer to the respective paragraph at the end of this document.

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG)
Company ARM Holdings Alcatel-Lucent Apple Catcher Technology Cisco Ericsson Foxconn International Foxconn Technology HTC Hon Hai Precision Imagination Technologies Infineon Technologies Juniper Networks MediaTek Motorola Solutions Nokia Qualcomm Research in Motion STMicroelectronics Samsung Electronics TPK Holding ZTE (1) (2) (3) (4) (5) (6) Disclosures no disclosures no disclosures 5 no disclosures 5 no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures

Berenberg Bank or its affiliate(s) was Lead Manager or Co-Lead Manager over the previous 12 months of a public offering of this company. Berenberg Bank acts as Designated Sponsor for this company. Over the previous 12 months, Berenberg Bank and/or its affiliate(s) has effected an agreement with this company for investment banking services or received compensation or a promise to pay from this company for investment banking services. Berenberg Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. Berenberg Bank holds a trading position in shares of this company. Berenberg Bank and/or its affiliate(s) holds a net short position of 1% or more of the share capital of this company, calculated by methods required by German law as of the last trading day of the past month.

Historical price target and rating changes for ARM Holdings in the last 12 months (full coverage) Date 16 March 12 29 November 12 Price target - GBP 7.20 10.00 Rating Buy Buy Initiation of coverage 06 January 10

Historical price target and rating changes for Alcatel-Lucent in the last 12 months (full coverage) Date 16 March 12 08 June 12 04 September 12 Price target - EUR 1.20 1.00 0.70 Rating Sell Sell Sell Initiation of coverage 06 January 10

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Historical price target and rating changes for Apple in the last 12 months (full coverage) Date 16 March 12 04 September 12 Price target - USD 750.00 800.00 Rating Buy Buy Initiation of coverage 06 January 10

Historical price target and rating changes for Catcher Technology in the last 12 months (full coverage) Date 09 December 11 16 March 12 08 June 12 04 September 12 Price target - TWD 190.00 250.00 180.00 150.00 Rating Buy Buy Hold Hold Initiation of coverage 09 December 11

Historical price target and rating changes for Cisco in the last 12 months (full coverage) Date Price target - USD Rating Initiation of coverage 07 June 10 Historical price target and rating changes for Ericsson in the last 12 months (full coverage) Date 08 June 12 29 November 12 Price target - SEK 53.00 51.00 Rating Sell Sell Initiation of coverage 06 January 10

Historical price target and rating changes for Foxconn International in the last 12 months (full coverage) Date 09 December 11 16 March 12 08 June 12 04 September 12 29 November 12 Price target - HKD 3.72 4.70 2.50 2.00 3.00 Rating Sell Sell Sell Sell Sell Initiation of coverage 09 December 11

Historical price target and rating changes for Foxconn Technology in the last 12 months (full coverage) Date 09 December 11 16 March 12 08 June 12 Price target - TWD 86.00 100.00 85.00 Rating Hold Sell Sell Initiation of coverage 09 December 11

Historical price target and rating changes for HTC in the last 12 months (full coverage) Date 08 June 12 Price target - TWD 150.00 Rating Sell Initiation of coverage 06 January 10

Historical price target and rating changes for Hon Hai Precision in the last 12 months (full coverage) Date 09 December 11 16 March 12 08 June 12 Price target - TWD 96.00 125.00 80.00 Rating Buy Buy Hold Initiation of coverage 09 December 11

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Historical price target and rating changes for Imagination Technologies in the last 12 months (full coverage) Date 14 December 11 12 January 12 16 March 12 08 June 12 29 November 12 Price target - GBp 580.00 580.00 660.00 400.00 360.00 Rating Buy Hold Hold Sell Sell Initiation of coverage 20 October 11

Historical price target and rating changes for Infineon Technologies in the last 12 months (full coverage) Date 16 March 12 08 June 12 04 September 12 Price target - EUR 8.00 6.50 6.00 Rating Hold Hold Hold Initiation of coverage 06 January 10

Historical price target and rating changes for Juniper Networks in the last 12 months (full coverage) Date 08 June 12 Price target - USD 14.00 Rating Sell Initiation of coverage 07 June 10

Historical price target and rating changes for MediaTek in the last 12 months (full coverage) Date Price target - TWD Rating Initiation of coverage 03 September 10

Historical price target and rating changes for Motorola Solutions in the last 12 months (full coverage) Date 16 March 12 08 June 12 Price target - USD 43.00 40.00 Rating Sell Sell Initiation of coverage 24 January 11

Historical price target and rating changes for Nokia in the last 12 months (full coverage) Date 16 March 12 08 June 12 04 September 12 Price target - EUR 3.20 1.80 1.50 Rating Sell Sell Sell Initiation of coverage 06 January 10

Historical price target and rating changes for Qualcomm in the last 12 months (full coverage) Date 16 March 12 08 June 12 Price target - USD 65.00 50.00 Rating Hold Sell Initiation of coverage 03 September 10

Historical price target and rating changes for Research in Motion in the last 12 months (full coverage) Date 16 March 12 08 June 12 04 September 12 Price target - USD 11.00 7.00 5.00 Rating Sell Sell Sell Initiation of coverage 06 January 10

Historical price target and rating changes for STMicroelectronics in the last 12 months (full coverage) Date 16 March 12 08 June 12 Price target - EUR 4.50 3.50 Rating Sell Sell Initiation of coverage 06 January 10

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Historical price target and rating changes for Samsung Electronics in the last 12 months (full coverage) Date 08 June 12 29 November 12 Price target - KRW 1450000.00 1650000.00 Rating Buy Buy Initiation of coverage 08 June 12

Historical price target and rating changes for TPK Holding in the last 12 months (full coverage) Date 09 December 11 16 March 12 08 June 12 04 September 12 Price target - TWD 400.00 400.00 360.00 320.00 Rating Hold Sell Sell Sell Initiation of coverage 09 December 11

Historical price target and rating changes for ZTE in the last 12 months (full coverage) Date 08 June 12 04 September 12 Price target - HKD 13.00 8.50 Rating Sell Sell Initiation of coverage 06 January 10

Berenberg distribution of ratings and in proportion to investment banking services Buy Sell Hold 51.28 % 14.47 % 34.26 % 68.00 % 8.00 % 24.00 %

Valuation basis/rating key


The recommendations for companies analysed by Berenberg Banks equity research department are either made on an absolute basis (absolute rating system) or relative to the sector (relative rating system), which is clearly stated in the financial analysis. For both absolute and relative rating system, the three-step rating key Buy, Hold and Sell is applied. For a detailed explanation of our rating system, please refer to our website at http://www.berenberg.de/research.html?&L=1 NB: During periods of high market, sector or stock volatility, or in special situations, the rating system criteria as described on our website may be breached temporarily.

Competent supervisory authority


Bundesanstalt fr Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Strae 108, 53117 Bonn and Lurgiallee 12, 60439 Frankfurt am Main

General investment-related disclosures


Joh. Berenberg, Gossler & Co. KG (Berenberg Bank) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note. Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies analysed by Berenberg Bank are divided into two groups: those under full coverage

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(regular updates provided); and those under screening coverage (updates provided as and when required at irregular intervals). The functional job title of the person/s responsible for the recommendations contained in this report is Equity Research Analyst unless otherwise stated on the cover. The following internet link provides further remarks on our financial analyses: http://www.berenberg.de/research.html?&L=1&no_cache=1

Legal disclaimer
This document has been prepared by Berenberg Bank. This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements. The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document. This document is not a solicitation or an offer to buy or sell the mentioned stock. The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. Berenberg Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content. Berenberg Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. Berenberg Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services.

Analyst certification

I, Adnaan Ahmad, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates. I, Tammy Qiu, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates. I, Daud Khan, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates. I, Ali Khwaja, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates.

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I, Sebastian Grabert, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates.

Remarks regarding foreign investors

The preparation of this document is subject to regulation by German law. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

United Kingdom
This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.

United States of America

This document has been prepared exclusively by Berenberg Bank. Although Berenberg Capital Markets LLC, an affiliate of Berenberg Bank and registered US broker-dealer, distributes this document to certain customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this document constitute research of Berenberg Capital Markets LLC. In addition, this document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. This document is classified as objective for the purposes of FINRA rules. Please contact Berenberg Capital Markets LLC (+1 617.292.8200), if you require additional information.

Third-party research disclosures Company


ARM Holdings Alcatel-Lucent Apple Catcher Technology Cisco Ericsson Foxconn International Foxconn Technology HTC Hon Hai Precision Imagination Technologies Infineon Technologies Juniper Networks MediaTek Motorola Solutions Nokia Qualcomm Research in Motion STMicroelectronics Samsung Electronics TPK Holding ZTE (1) (2)

Disclosures
no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures

Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior month.* Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.*

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(3) (4) (5)

Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months, or expects to receive such compensation in the next 3 months.* There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the analyst knows or has reason to know at the time of publication of this research report.

* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) section above.

Copyright

Berenberg Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without Berenberg Banks prior written consent. June 2012 Berenberg Bank

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Contacts: Investment Banking


Equity Research
BANKS Nick Anderson James Chappell Andrew Lowe Eleni Papoula BEVERAGES Philip Morrisey Josh Puddle BUSINESS SERVICES William Foggon Simon Mezzanotte Arash Roshan Zamir Konrad Zomer CAPITAL GOODS Frederik Bitter Benjamin Glaeser William Mackie Margaret Paxton Alexander Virgo Felix Wienen CHEMICALS Jade Barkett Asad Farid John Philipp Klein Jaideep Pandya CONSTRUCTION Chris Moore Robert Muir Michael Watts DIVERSIFIED FINANCIALS Pras Jeyanandhan Richard Perrott +44 (0) 20 3207 7838 +44 (0) 20 3207 7844 +44 (0) 20 3465 2743 +44 (0) 20 3465 2741 ECONOMICS Dr. Holger Schmieding Dr. Christian Schulz Robert Wood FOOD MANUFACTURING Fintan Ryan James Targett +44 (0) 20 3207 7889 +44 (0) 20 3207 7878 +44 (0) 20 3207 7822 E-mail: firstname.lastname@berenberg.com; Internet www.berenberg.de MID-CAP GENERAL Gunnar Cohrs Bjoern Lippe Anna Patrice Alexandra Schlegel REAL ESTATE Kai Klose Estelle Weingrod TECHNOLOGY Adnaan Ahmad Sebastian Grabert Daud Khan Ali Khwaja Tammy Qiu TELECOMMUNICATIONS Wassil El Hebil Usman Ghazi Stuart Gordon Laura Janssens Paul Marsch Barry Zeitoune TOBACCO Erik Bloomquist Kate Kalashnikova UTILITIES Robert Chantry Andrew Fisher Lawson Steele +44 (0) 20 3207 7894 +44 (0) 20 3207 7845 +44 (0) 20 3207 7863 +44 (0) 20 3207 7896

+44 (0) 20 3207 7892 +44 (0) 20 3207 7881

+44 (0) 20 3465 2748 +44 (0) 20 3207 7873

+44 (0) 20 3207 7888 +44 (0) 20 3207 7931

+44 (0) 20 3207 7882 +44 (0) 20 3207 7917 +44 (0) 20 3465 2636 +44 (0) 20 3207 7920

GENERAL RETAIL & LUXURY GOODS Bassel Choughari +44 (0) 20 3465 2675 John Guy +44 (0) 20 3465 2674 HEALTHCARE Scott Bardo Alistair Campbell Charles Cooper James Harvey Louise Hinds Adrian Howd Tom Jones

+44 (0) 20 3207 7916 +44 (0) 20 3207 7918 +44 (0) 20 3207 7837 +44 (0) 20 3207 7934 +44 (0) 20 3207 7856 +44 (0) 20 3207 7915

+44 (0) 20 3207 7869 +44 (0) 20 3207 7876 +44 (0) 20 3465 2637 +44 (0) 20 3207 7885 +44 (0) 20 3465 2747 +44 (0) 20 3207 7874 +44 (0) 20 3207 7877

+44 (0) 20 3207 7851 +44 (0) 20 3207 7834 +44 (0) 20 3465 2638 +44 (0) 20 3207 7852 +44 (0) 20 3465 2673

HOUSEHOLD & PERSONAL CARE Seth Peterson +44 (0) 20 3207 7891 Andrew Steele +44 (0) 20 3207 7926 INSURANCE Tom Carstairs Peter Eliot Matthew Preston Sami Taipalus MEDIA Emma Coulby Laura Janssens Sarah Simon

+44 (0) 20 3207 7862 +44 (0) 20 3207 7824 +44 (0) 20 3207 7858 +44 (0) 20 3465 2639 +44 (0) 20 3207 7857 +44 (0) 20 3207 7859

+44 (0) 20 3207 7937 +44 (0) 20 3207 7932 +44 (0) 20 3207 7930 +44 (0) 20 3207 7890

+44 (0) 20 3207 7823 +44 (0) 20 3207 7880 +44 (0) 20 3207 7913 +44 (0) 20 3207 7866

+44 (0) 20 3207 7870 +44 (0) 20 3465 2665

+44 (0) 20 3465 2737 +44 (0) 20 3207 7860 +44 (0) 20 3207 7928

+44 (0) 20 3207 7861 +44 (0) 20 3207 7937 +44 (0) 20 3207 7887

+44 (0) 20 3207 7821 +44 (0) 20 3465 2639 +44 (0) 20 3207 7830

+44 (0) 20 3207 7899 +44 (0) 20 3207 7925

Sales
Specialist Sales CONSUMER Rupert Trotter INSURANCE Trevor Moss LONDON Miel Bakker John von Berenberg-Consbruch Ronald Bernette Matt Chawner Toby Flaux Sean Heath David Hogg Ben Hutton James Matthews Andrew McNally David Mortlock Peter Nichols George Smibert Max von Doetinchem Paul Walker Peter Young +44 (0) 20 3207 7815 HEALTHCARE Frazer Hall TECHNOLOGY Jean Beaubois HAMBURG Susette Mantzel Marco Weiss PARIS Christophe Choquart Dalila Farigoule Clmence La Clavire-Peyraud Olivier Thibert ZURICH Stephan Hofer Carsten Kinder Gianni Lavigna Benjamin Stillfried CRM LONDON Greg Swallow Laura Cooper HAMBURG Sandra Bode CORPORATE ACCESS LONDON Patricia Nehring E-mail: firstname.lastname@berenberg.com; Internet www.berenberg.de UTILITIES +44 (0) 20 3207 7875 Benita Barretto +44 (0) 20 3207 7829 INDUSTRIALS Chris Armstrong Kaj Alftan Sales Trading HAMBURG Paul Dontenwill Christian Endras Gregor Labahn Fin Schaffer Lars Schwartau Marvin Schweden Tim Storm Philipp Wiechmann LONDON Stewart Cook Chris McKeand Simon Messman Stephen O'Donohoe PARIS Sylvain Granjoux EVENTS LONDON Natalie Meech Charlotte Kilby Hannah Whitehead

+44 (0) 20 3207 7893

+44 (0) 20 3207 7835

+44 (0) 20 3207 7809 +44 (0) 20 3207 7879

+44 (0) 20 3207 7808 +44 (0) 20 3207 7805 +44 (0) 20 3207 7828 +44 (0) 20 3207 7847 +44 (0) 20 3465 2745 +44 (0) 20 3465 2742 +44 (0) 20 3465 2628 +44 (0) 20 3207 7804 +44 (0) 20 3207 7807 +44 (0) 20 3207 7802 +44 (0) 20 3207 7850 +44 (0) 20 3207 7810 +44 (0) 20 3207 7911 +44 (0) 20 3207 7826 +44 (0) 20 3465 2632 +44 (0) 20 3465 2670

+49 (0) 40 350 60 694 +49 (0) 40 350 60 719

+33 (0) 1 5844 9508 +33 (0) 1 5844 9510 +33 (0) 1 5844 9521 +33 (0) 1 5844 9512

+49 (0) 40 350 60 563 +49 (0) 40 350 60 359 +49 (0) 40 350 60 571 +49 (0) 40 350 60 596 +49 (0) 40 350 60 450 +49 (0) 40 350 60 576 +49 (0) 40 350 60 415 +49 (0) 40 350 60 346

+41 (0) 44 283 2029 +41 (0) 44 283 2024 +41 (0) 44 283 2038 +41 (0) 44 283 2033

+44 (0) 20 3465 2752 +44 (0) 20 3207 7938 +44 (0) 20 3465 2754 +44 (0) 20 3465 2753

FRANKFURT Michael Brauburger Nina Buechs Andr Grosskurth Boris Koegel Joachim Kopp

+44 (0) 20 3207 7833 +44 (0) 20 3207 7806

+33 (0) 1 5844 9509

+49 (0) 69 91 30 90 741 +49 (0) 69 91 30 90 735 +49 (0) 69 91 30 90 734 +49 (0) 69 91 30 90 740 +49 (0) 69 91 30 90 742

+49 (0) 40 350 60 459

+44 (0) 20 3207 7831 +44 (0) 20 3207 7832 +44 (0) 20 3207 7922

+44 (0) 20 3207 7811 E-mail: firstname.lastname@berenberg-us.com

US Sales
BERENBERG CAPITAL MARKETS LLC Member FINRA & SIPC Andrew Holder Colin Andrade Burr Clark Julie Doherty +1 (617) 292 8222 +1 (617) 292 8230 +1 (617) 292 8282 +1 (617) 292 8228

Kelleigh Faldi Kieran O'Sullivan Emily Mouret Jonathan Saxon

+1 (617) 292 8288 +1 (617) 292 8292 +1 (646) 445 7204 +1 (646) 445 7202

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HAMBURG BIELEFELD BRAUNSCHWEIG BREMEN DSSELDORF FRANKFURT MUNICH STUTTGART WIESBADEN LONDON LUXEMBOURG PARIS SALZBURG SHANGHAI VIENNA ZURICH

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