摩根斯坦利-中国镓和锗出口管制的影响 GaAs Epi-wafer House – Impacts from China's Gallium and Germanium Export Control 20230704

Update

July4,

202303:07PMGMT

GreaterChinaTechnologyHardware|AsiaPacific

GaAsEpi-waferHouse–ImpactsfromChina'sGalliumandGermaniumExportControl

OnJuly3,China'sMinistryofCommerce

announced

thatChinawillimposeexportcontrolsongalliumandgermaniumstartingAugust1"tosafeguardnationalsecurityandinterests".

Ourview:VisualPhotonicsEpitaxy,VPEC(2455.TW),isthededicatedGaAsepitaxyhousewith>90%revenueexposuretoGaAsPAsinsmartphonesandGaAslaserdiode(LD)/photonicdiode(PD)inwirelessequipment.LandMarkOptoelectronics(3081.TW)focusonInPepitaxybutalsohas~30%revenueexposuretoGaAsPDs.

Bothindicatednear-termimpactislimited:VPECsourcesGaAssubstratefromSumitomoElectric(5802.T)inJapanandFreiberger(private)inGermanyand,toalesserextent,AXT(AXTI.O)intheUS(withproductioninChina).LandMarkmainlysourcesfromSumitomo.

Thelong-termdevelopmentsworthmonitoring:Chinacontributes>80%ofglobalGalliumminingoutput,sostrictexportcontrolscouldaffecttheGaAsepi-wafersupplychain–fromGaAssubstratetoorganicGalliumcompoundgas–beyond2023,assumingtherelatedsupplierscarryfourtosixmonthsofinventory.

MorganStanleyTaiwanLimited+

SharonShih

EquityAnalyst

+88622730-2865

Sharon.Shih@

LilyChou

EquityAnalyst

+88622730-2869

Li-Ling.Lily.Chou@

SamanthaChen

ResearchAssociate

+88622730-2876

Samantha.Chen@

GreaterChinaTechnologyHardware

AsiaPacific

IndustryView

In-Line

MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,

refertotheDisclosureSection,locatedattheendofthis

report.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

ValuationMethodologyandRisks

Update

VisualPhotonicsEpitaxyCoLtd(2455.TW)

Basecase,multistageresidualincome(RI)model.Weusebeginningequitypluspresentvalueofallexpectedresidualincomeofearningsinexcessofthecostofcapital.TheRIispositivewhenROAEisabovethecostofcapital,andnegativewhenitisbelow.Weassumeacostofequityof8%(risk-freerateof2%,equityriskpremiumof6%,andabetaof1.2),medium-termgrowthof10%,andterminalrateof3%.

RiskstoUpside

nFasterthanexpectedLiDARshipmentprogress

nNewprojectwinson3Dsensingprojects

nBetter-than-expectedsmartphonesell-through

nFaster-than-expected5Ginfrastructuredeployment

RiskstoDownside

nNoprogressinLiDARprojectgains

nFailuretowinanynew3Dsensingprojects

nIncreasingcompetitioninitswirelessbusiness(fromSananorfromIDMsinternaliza-tion)

nProlongedsmartphonereplacementcycle

LandMarkOptoelectronicsCorporation(3081.TWO)

Basecasescenariovalue,derivedfromourmultistageresidualincome(RI)model.Keyassumptions:costofequity9%(risk-freerate2%,equityriskpremium6%,beta1.3),medium-termgrowthrateof12%,andterminalgrowthrateof5%.

RiskstoUpside

nStronger-than-expectedSiPhdemand

nAccelerated10GPON/25Gdemand

nMoredesignwinsfor25GandSiPhprojects

nStrongdemandforVCSELwafers

RiskstoDownside

nSlowerGPONdemandrecovery

nSlowingadoptionofSiPhtechnologywithindatacenters

nPotentialnewentrants(VPEC,TrueLight,WINSemi)drivepricingandmarginpressure

nIntelfindsnewSiPhsupplier

MorganStanleyResearch3

Update

DisclosureSection

TheinformationandopinionsinMorganStanleyResearchwerepreparedoraredisseminatedbyMorganStanleyAsiaLimited(whichacceptstheresponsibilityforitscontents)and/orMorganStanleyAsia(Singapore)Pte.(Registrationnumber199206298Z)and/orMorganStanleyAsia(Singapore)SecuritiesPteLtd(Registrationnumber200008434H),regulatedbytheMonetaryAuthorityofSingapore(whichacceptslegalresponsibilityforitscontentsandshouldbecontactedwithrespecttoanymattersarisingfrom,orinconnectionwith,MorganStanleyResearch),and/orMorganStanleyTaiwanLimitedand/orMorganStanley&CoInternationalplc,SeoulBranch,and/orMorganStanleyAustraliaLimited(A.B.N.67003734576,holderofAustralianfinancialserviceslicenseNo.233742,whichacceptsresponsibilityforitscontents),and/orMorganStanleyWealthManagementAustraliaPtyLtd(A.B.N.19009145555,holderofAustralianfinancialserviceslicenseNo.240813,whichacceptsresponsibilityforitscontents),and/orMorganStanleyIndiaCompanyPrivateLimitedhavingCorporateIdentificationNo(CIN)U22990MH1998PTC115305,regulatedbytheSecuritiesandExchangeBoardofIndia(“SEBI”)andholderoflicensesasaResearchAnalyst(SEBIRegistrationNo.INH000001105);StockBroker(SEBIStockBrokerRegistrationNo.INZ000244438),MerchantBanker(SEBIRegistrationNo.INM000011203),anddepositoryparticipantwithNationalSecuritiesDepositoryLimited(SEBIRegistrationNo.IN-DP-NSDL-567-2021)havingregisteredofficeat18thFloor,Tower2,OneWorldCenter,Plot-841,JupiterTextileMillCompound,SenapatiBapatMarg,LowerParel,Mumbai400013,IndiaTelephoneno.+91-22-61181000;ComplianceOfficerDetails:Mr.AnilShenoy,Tel.No.:+91-22-61181000orEmail:Anil.Shenoy@;Grievanceofficerdetails:Mr.AnilShenoy,Tel.No.:+91-22-61181000orEmail:msic-compliance@whichacceptstheresponsibilityforitscontentsandshouldbecontactedwithrespecttoanymattersarisingfrom,orinconnectionwith,MorganStanleyResearch,andtheiraffiliates(collectively,"MorganStanley").

Forimportantdisclosures,stockpricechartsandequityratinghistoriesregardingcompaniesthatarethesubjectofthisreport,pleaseseetheMorganStanleyResearchDisclosureWebsiteat/researchdisclosures,orcontactyourinvestmentrepresentativeorMorganStanleyResearchat1585Broadway,(Attention:ResearchManagement),NewYork,NY,

10036USA.

Forvaluationmethodologyandrisksassociatedwithanyrecommendation,ratingorpricetargetreferencedinthisresearchreport,pleasecontacttheClientSupportTeamasfollows:US/Canada+1800303-2495;HongKong+8522848-5999;LatinAmerica+1718754-5444(U.S.);London+44(0)20-7425-8169;Singapore+656834-6860;Sydney+61(0)2-9770-1505;Tokyo+81(0)3-6836-9000.AlternativelyyoumaycontactyourinvestmentrepresentativeorMorganStanleyResearchat1585Broadway,(Attention:ResearchManagement),NewYork,NY10036USA.

AnalystCertification

Thefollowinganalystsherebycertifythattheirviewsaboutthecompaniesandtheirsecuritiesdiscussedinthisreportareaccuratelyexpressedandthattheyhavenotreceivedandwillnotreceivedirectorindirectcompensationinexchangeforexpressingspecificrecommendationsorviewsinthisreport:LilyChou;SharonShih.

.

GlobalResearchConflictManagementPolicy

MorganStanleyResearchhasbeenpublishedinaccordancewithourconflictmanagementpolicy,whichisavailableat/institutional/research/conflictpolicies.APortugueseversionofthepolicycanbefoundat.br

ImportantRegulatoryDisclosuresonSubjectCompanies

AsofMay31,2023,MorganStanleybeneficiallyowned1%ormoreofaclassofcommonequitysecuritiesofthefollowingcompaniescoveredinMorganStanleyResearch:AACTechnologiesHoldings,AcctonTechnologyCorporation,AcerInc.,AirTACInternational,AsiaVitalComponentsCo.Ltd.,AUOptronics,BizLinkHoldingInc,BOETechnology,CatcherTechnology,ChromaAteInc.,CompalElectronics,DeltaElectronicsInc.,EInkHoldingsInc.,EnnoconnCorporation,GeniusElectronicOpticalCo.Ltd.,Giga-ByteTechnologyCo.Ltd.,GoldCircuitElectronicsLtd.,LarganPrecision,LotesCo.Ltd.,QuantaComputerInc.,RadiantOpto-ElectronicsCorporation,ShengyiTechnologyCoLtd.,SunonwealthElectricMachineIndustryCo,SuzhouTFCOpticalCommunicationCoLtd.,TongHsing,Unimicron,WistronCorporation,WiwynnCorp,XiaomiCorp,YageoCorp.,ZhenDing.

Withinthelast12months,MorganStanleymanagedorco-managedapublicoffering(or144Aoffering)ofsecuritiesofLenovo.

Withinthelast12months,MorganStanleyhasreceivedcompensationforinvestmentbankingservicesfromLenovo.

Inthenext3months,MorganStanleyexpectstoreceiveorintendstoseekcompensationforinvestmentbankingservicesfromAACTechnologiesHoldings,Advantech,AsustekComputerInc.,AUOptronics,BizLinkHoldingInc,BYDElectronics,CatcherTechnology,CompalElectronics,DeltaElectronicsInc.,EInkHoldingsInc.,EnnoconnCorporation,FoxconnIndustrialInternetCo.Ltd.,GeniusElectronicOpticalCo.Ltd.,HonHaiPrecision,Innolux,Lenovo,Lite-OnTechnology,LuxsharePrecisionIndustryCo.,Ltd.,PegatronCorporation,QTechnology(Group)CompanyLtd,SDICorporation,TCLCorp.,Unimicron,WistronCorporation,WiwynnCorp,XiaomiCorp,YageoCorp..

Withinthelast12months,MorganStanleyhasreceivedcompensationforproductsandservicesotherthaninvestmentbankingservicesfromAACTechnologiesHoldings,AcctonTechnologyCorporation,AcerInc.,AsustekComputerInc.,AUOptronics,BYDElectronics,CompalElectronics,FoxconnTechnology,Giga-ByteTechnologyCo.Ltd.,GoerTekInc,HonHaiPrecision,Innolux,Lenovo,QuantaComputerInc.,YageoCorp..

Withinthelast12months,MorganStanleyhasprovidedorisprovidinginvestmentbankingservicesto,orhasaninvestmentbankingclientrelationshipwith,thefollowingcompany:AACTechnologiesHoldings,Advantech,AsustekComputerInc.,AUOptronics,BizLinkHoldingInc,BYDElectronics,CatcherTechnology,CompalElectronics,DeltaElectronicsInc.,EInkHoldingsInc.,EnnoconnCorporation,FoxconnIndustrialInternetCo.Ltd.,GeniusElectronicOpticalCo.Ltd.,HonHaiPrecision,Innolux,Lenovo,Lite-OnTechnology,LuxsharePrecisionIndustryCo.,Ltd.,PegatronCorporation,QTechnology(Group)CompanyLtd,SDICorporation,TCLCorp.,Unimicron,WistronCorporation,WiwynnCorp,XiaomiCorp,YageoCorp..

Withinthelast12months,MorganStanleyhaseitherprovidedorisprovidingnon-investmentbanking,securities-relatedservicestoand/orinthepasthasenteredintoanagreementtoprovideservicesorhasaclientrelationshipwiththefollowingcompany:AACTechnologiesHoldings,AcctonTechnologyCorporation,AcerInc.,AsustekComputerInc.,AUOptronics,BYDElectronics,CompalElectronics,FoxconnTechnology,Giga-ByteTechnologyCo.Ltd.,GoerTekInc,HonHaiPrecision,Innolux,Lenovo,QuantaComputerInc.,YageoCorp..

TheequityresearchanalystsorstrategistsprincipallyresponsibleforthepreparationofMorganStanleyResearchhavereceivedcompensationbaseduponvariousfactors,includingqualityofresearch,investorclientfeedback,stockpicking,competitivefactors,firmrevenuesandoverallinvestmentbankingrevenues.EquityResearchanalysts'orstrategists'compensationisnotlinkedtoinvestmentbankingorcapitalmarketstransactionsperformedbyMorganStanleyortheprofitabilityorrevenuesofparticulartradingdesks.

MorganStanleyanditsaffiliatesdobusinessthatrelatestocompanies/instrumentscoveredinMorganStanleyResearch,includingmarketmaking,providingliquidity,fundmanagement,commercialbanking,extensionofcredit,investmentservicesandinvestmentbanking.MorganStanleysellstoandbuysfromcustomersthesecurities/instrumentsofcompaniescoveredinMorganStanleyResearchonaprincipalbasis.MorganStanleymayhaveapositioninthedebtoftheCompanyorinstrumentsdiscussedinthisreport.MorganStanleytradesormaytradeasprincipalinthedebtsecurities(orinrelatedderivatives)thatarethesubjectofthedebtresearchreport.

Certaindisclosureslistedabovearealsoforcompliancewithapplicableregulationsinnon-USjurisdictions.

STOCKRATINGS

MorganStanleyusesarelativeratingsystemusingtermssuchasOverweight,Equal-weight,Not-RatedorUnderweight(seedefinitionsbelow).MorganStanleydoesnotassignratingsofBuy,

4

Update

HoldorSelltothestockswecover.Overweight,Equal-weight,Not-RatedandUnderweightarenottheequivalentofbuy,holdandsell.InvestorsshouldcarefullyreadthedefinitionsofallratingsusedinMorganStanleyResearch.Inaddition,sinceMorganStanleyResearchcontainsmorecompleteinformationconcerningtheanalyst'sviews,investorsshouldcarefullyreadMorganStanleyResearch,initsentirety,andnotinferthecontentsfromtheratingalone.Inanycase,ratings(orresearch)shouldnotbeusedorrelieduponasinvestmentadvice.Aninvestor'sdecisiontobuyorsellastockshoulddependonindividualcircumstances(suchastheinvestor'sexistingholdings)andotherconsiderations.

GlobalStockRatingsDistribution

(asofJune30,2023)

TheStockRatingsdescribedbelowapplytoMorganStanley'sFundamentalEquityResearchanddonotapplytoDebtResearchproducedbytheFirm.

Fordisclosurepurposesonly(inaccordancewithFINRArequirements),weincludethecategoryheadingsofBuy,Hold,andSellalongsideourratingsofOverweight,Equal-weight,Not-RatedandUnderweight.MorganStanleydoesnotassignratingsofBuy,HoldorSelltothestockswecover.Overweight,Equal-weight,Not-RatedandUnderweightarenottheequivalentofbuy,hold,andsellbutrepresentrecommendedrelativeweightings(seedefinitionsbelow).Tosatisfyregulatoryrequirements,wecorrespondOverweight,ourmostpositivestockrating,withabuyrecommendation;wecorrespondEqual-weightandNot-RatedtoholdandUnderweighttosellrecommendations,respectively.

StockRating

Category

Overweight/Buy

Equal-weight/Hold

Not-Rated/Hold

Underweight/Sell

Total

CoverageUniverse

Count

1353

1658

2

610

3,623

Count

280

293

0

68

%ofTotal

37%

46%

0%

17%

641

InvestmentBankingClients(IBC)

%ofTotalIBC

44%

46%

0%

11%

%ofRating

Category21%18%0%11%

OtherMaterialInvestmentServices

Clients(MISC)

Count

%ofTotalOther

MISC

60739%

71646%

00%

22414%

1547

DataincludecommonstockandADRscurrentlyassignedratings.InvestmentBankingClientsarecompaniesfromwhomMorganStanleyreceivedinvestmentbankingcompensationinthelast12months.Duetoroundingoffofdecimals,thepercentagesprovidedinthe"%oftotal"columnmaynotadduptoexactly100percent.

AnalystStockRatings

Overweight(O).Thestock'stotalreturnisexpectedtoexceedtheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Equal-weight(E).Thestock'stotalreturnisexpectedtobeinlinewiththeaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Not-Rated(NR).Currentlytheanalystdoesnothaveadequateconvictionaboutthestock'stotalreturnrelativetotheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Underweight(U).Thestock'stotalreturnisexpectedtobebelowtheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Unlessotherwisespecified,thetimeframeforpricetargetsincludedinMorganStanleyResearchis12to18months.

AnalystIndustryViews

Attractive(A):Theanalystexpectstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthstobeattractivevs.therelevantbroadmarketbenchmark,asindicatedbelow.In-Line(I):Theanalystexpectstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthstobeinlinewiththerelevantbroadmarketbenchmark,asindicatedbelow.

Cautious(C):Theanalystviewstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthswithcautionvs.therelevantbroadmarketbenchmark,asindicatedbelow.

Benchmarksforeachregionareasfollows:NorthAmerica-S&P500;LatinAmerica-relevantMSCIcountryindexorMSCILatinAmericaIndex;Europe-MSCIEurope;Japan-TOPIX;Asia-relevantMSCIcountryindexorMSCIsub-regionalindexorMSCIACAsiaPacificexJapanIndex.

StockPrice,PriceTargetandRatingHistory(SeeRatingDefinitions)

MorganStanleyResearch5

Update

6

Update

ImportantDisclosuresforMorganStanleySmithBarneyLLC&E*TRADESecuritiesLLCCustomers

ImportantdisclosuresregardingtherelationshipbetweenthecompaniesthatarethesubjectofMorganStanleyResearchandMorganStanleySmithBarneyLLCorMorganStanleyoranyoftheiraffiliates,areavailableontheMorganStanleyWealthManagementdisclosurewebsiteat/online/researchdisclosures.ForMorganStanleyspecificdisclosures,youmayreferto/researchdisclosures.

EachMorganStanleyresearchreportisreviewedandapprovedonbehalfofMorganStanleySmithBarneyLLCandE*TRADESecuritiesLLC.ThisreviewandapprovalisconductedbythesamepersonwhoreviewstheresearchreportonbehalfofMorganStanley.Thiscouldcreateaconflictofinterest.

OtherImportantDisclosures

MorganStanley&Co.InternationalPLCanditsaffiliateshaveasignificantfinancialinterestinthedebtsecuritiesofLenovo.

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MorganStanleyisnotactingasamunicipaladvisorandtheopinionsorviewscontainedhereinarenotintendedtobe,anddonotconstitute,advicewithinthemeaningofSection975oftheDodd-FrankWallStreetReformandConsumerProtectionAct.

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Thefixedincomeresearchanalysts,strategistsoreconomistsprincipallyresponsibleforthepreparationofMorganStanleyResearchhavereceivedcompensationbaseduponvariousfactors,includingquality,accuracyandvalueofresearch,firmprofitabilityorrevenues(whichincludefixedincometradingandcapitalmarketsprofitabilityorrevenues),clientfeedbackandcompetitivefactors.FixedIncomeResearchanalysts',strategists'oreconomists'compensationisnotlinkedtoinvestmentbankingorcapitalmarketstransactionsperformedbyMorganStanleyortheprofitabilityorrevenuesofparticulartradingdesks.

The"ImportantRegulatoryDisclosuresonSubjectCompanies"sectioninMorganStanleyResearchlistsallcompaniesmentionedwhereMorganStanleyowns1%ormoreofaclassofcommonequitysecuritiesofthecompanies.ForallothercompaniesmentionedinMorganStanleyResearch,MorganStanleymayhaveaninvestmentoflessthan1%insecurities/instrumentsorderivativesofsecurities/instrumentsofcompaniesandmaytradetheminwaysdifferentfromthosediscussedinMorganStanleyResearch.EmployeesofMorganStanleynotinvolvedinthepreparationofMorganStanleyResearchmayhaveinvestmentsinsecurities/instrumentsorderivativesofsecurities/instrumentsofcompaniesmentionedandmaytradetheminwaysdifferentfromthosediscussedinMorganStanleyResearch.DerivativesmaybeissuedbyMorganStanleyorassociatedpersons.

WiththeexceptionofinformationregardingMorganStanley,MorganStanleyResearchisbasedonpublicinformation.MorganStanleymakeseveryefforttousereliable,comprehensiveinformation,butwemakenorepresentationthatitisaccurateorcomplete.WehavenoobligationtotellyouwhenopinionsorinformationinMorganStanleyResearchchangeapartfromwhenweintendtodiscontinueequityresearchcoverageofasubjectcompany.FactsandviewspresentedinMorganStanleyResearchhavenotbeenreviewedby,andmaynotreflectinformationknownto,professionalsinotherMorganStanleybusinessareas,includinginvestmentbankingpersonnel.

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ToourreadersbasedinTaiwanortradinginTaiwansecurities/instruments:Informationonsecurities/instrumentsthattradeinTaiwanisdistributedbyMorganStanleyTaiwanLimited("MSTL").Suchinformationisforyourreferenceonly.Thereadershouldindependentlyevaluatetheinvestmentrisksandissolelyresponsiblefortheirinvestmentdecisions.MorganStanleyResearchmaynotbedistributed