摩根士丹利-中国智能手机芯片库存调整开始-China smartphone chip inventory correction begins-20260331

MorganstanleyRESEARCH

March31,202609:00PMGMT

GreaterChinaTechnologySemiconductors|AsiaPacific

Chinasmartphonechip

inventorycorrectionbegins

MemorycostinflationisincreasinglyweighingonChinasmartphonedemand,drivingsupply-chainordercutsandreinforcingacautiousstanceonsmartphoneexposedsemiconductornames.

SoCvendorsbegincutting4nmwaferorders:Ourfoundrysupplychainchecks

suggestChinasmartphoneSoCvendors,includingMediaTekandQualcomm,have

startedcutting4nmwaferordersatTSMC.4nmproducesMediaTek'sDimensity

7000/8000seriesSoC,withchipASPofUS$30-60andanend-productpricebandofRmb2000-4000.Thatmeansnotjustlow-end,butmid-tohigh-endsegment

also,aresufferingfromdemandweakness.Weestimatetotalreductionscouldreach20-30kwafers,implyingapotentialdeclineof15-20mnunitsinchipshipments.

AbleakerAndroidoutlook:InEricWoodring’srecentAlphaWiseSmartphone

Surveyreport,ourglobalteamlowereditsCY26globalsmartphoneshipment

forecastto1.1bnunits,representing-13%YoY,withAndroidshipmentsdown15%

YoY.Inourview,thispointstoweakerdemandinChina’ssmartphonemarket,drivenbyhighermemorycosts(asdiscussedinourOmnivisiondowngrade,Smartphone

CISDe-specandPricingPressureGivenMemoryCostHike)andthelackofa

compellingnewproductcycle,asneitherEdgeAInorAIsmartphonesappeartobegainingmeaningfultraction.WearealsoseeingsimilarordercutsatMediaTek’skeychiptestingvendors,includingKYEC,andthereforeweexpect2Q26revenueto

comeinbelowourpreviousforecasts.

WhatdoesthatmeanforTSMC?ForTSMC,however,wedonotexpectamaterialimpact.Basedonourchannelchecks,customersinAInetworkinganddesign

servicesimmediatelyabsorbedthecancelled4nmcapacity.Assuch,wearenot

changingourTSMCforecasts.Inourview,theorderbacklogremainssufficiently

longforTSMCtobackfillweakersmartphoneandbroaderconsumersemiconductordemandwithstrongerAI-relateddemand.

Ouractionpoints:WeareloweringourforecastsandpricetargetsforbothUMC

andSMICtoreflectweakerdemandacrosssmartphone-relatedsemiconductors,

includingbutnotlimitedtoCMOSimagesensors,powerICs,andwireless

connectivitychips.Wearealsotrimmingourforecastsandpricetargetsfor

MediaTekandOmnivision,giventheirsignificantexposuretoChinasmartphone

demand,whichaccountsformorethan40%ofrevenueforbothcompanies.

Elsewhere,weexpectsofterdemandandweakerpricingforChinasmartphone

memorymodulevendors.Againstthisbackdrop,wereiterateourEqual-weight

ratingsonPhison(eMMCmodulesandcontrollers)andNanyaTechnology(LPDDR4forlow-endsmartphones).(Formorestockimplications,seenextsection.)

IDEA

MoRGANSTANLEyTAiwANLimiTEd+CharlieChan

EquityAnalyst

Charlie.Chan@

+88622730-1725

DanielYen,CFA

EquityAnalyst

Daniel.Yen@

+88622730-2863

MoRGANSTANLEyAsiALimiTEd+

DaisyDai,CFA

EquityAnalyst

Daisy.Dai@

+8522848-7310

MoRGANSTANLEyTAiwANLimiTEd+

TiffanyYeh

EquityAnalyst

Tiffany.Yeh@

+88627712-3032

MoRGANSTANLEyAsiALimiTEd+

HenryZhao

ResearchAssociate

Henry.Zhao@

+8522239-7731

MoRGANSTANLEyTAiwANLimiTEd+

LucasWang

ResearchAssociate

Lucas.Wang@

+88622730-2875

MoRGANSTANLEyAsiALimiTEd+

EthanJia

ResearchAssociate

Ethan.Jia@

+8523963-2287

GREAtERChinATEchnologySEmiconductoRs

AsiaPacific

IndustryViewAttractive

WHAT’sCHANGED

MediaTek(2454.TW)PriceTarget

From

NT$2,088.00

To

NT$1,988.00

KingYuanElectronicsCoLtd

(2449.TW)

From

To

PriceTarget

NT$358.00

NT$338.00

UMC(2303.TW)

From

To

PriceTarget

NT$52.50

NT$51.50

SMIC(0981.HK)

From

To

PriceTarget

HK$80.00

HK$70.00

OmniVisionIntegratedCircuitsGroupInc(603501.SS)

From

To

PriceTarget

Rmb130.00

Rmb111.00

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

Morganstanley

RESEARCH

IDEA

Stockimplications

MediaTek(2454.TW),PTtoNT$1,988fromNT$2,088,maintainOW.Webelieve

MediaTekcouldbenefitfromstrongAIASICopportunities,mostnotablyGoogleTPU,amultiyeargrowthdriver.However,theAIsmartphonereplacementcycleremainsthekeywildcard,asAIdrivenupgradesmayprovetoomildtofullypassthroughhigher

costsinChina.Withrecentwaferordercuts,wefurtherreduceMediaTek's20265G

smartphoneshipmentsto-20%Y/Yvs.-15%prior.Wealsotrim2027eshipmentsto+3%Y/Yvs.+8%prior,inlinewithourglobalteam'snewestimatesfortotalChinese

smartphoneshipmentsin2027e.Wethereforelowerourearningsestimatesandpricetarget.

Omnivision(603501.SH),PTtoRmb111fromRmb130,EW.Webelievetheongoing

memorysupercyclewilllikelypressureOmnivision’ssmartphoneCISprofitability.RisingDRAMandNANDpricestakealargershareofthesmartphoneBOM,limitingspendingon

othercomponents.OVremainswellpositionedinsmartphoneandautoCIS,butshorttermmarginpressurefromthememorycyclecouldweighonprofitability.

KYEC(2499.TW),PTtoNT$338fromNT$358,keepOW.AfterMediaTekand

QualcommcutwaferordersatTSMC,weareseeingsimilarcutsatMediaTek’skeychip

testingvendors,includingKYEC.MediaTekandothersmartphoneexposedcustomers

accountforatleast20%ofKYEC'srevenue.Thus,weslightlylowerour2Q26revenue

expectationto+10.4%Q/Qfrom+15.0%Q/Q,reflectingweaknessinsmartphonesemis.However,westillexpectKYECtogrowstronglyin2026,helpedbyAIdemand(~40%of2026erevenue),especiallyfromNVIDIAandBroadcom.Westillforecast2026revenuetogrow38%Y/Y,with20252028erevenueCAGRat36%.

UMC(2303.TW),PTfinetunedtoNT$51.5fromNT$52.50,UW.Weremaincautiousonmaturenodefoundries,especiallyvendorshighlydependentonconsumertech/

smartphoneslikeUMC.OurcheckssuggestUMC’spricingremainslargelyunchangedexceptforcertainnichecustomers,asitdependsonconsumerdemand,whereweseeweaknessinPCandsmartphonesemis.

SMIC(0981.HK),PTtoHK$70fromHK$80,OW.WeviewSMICasakeyenablerofChina’sdomesticAIGPUsupplychain.Also,withUTRremaininghighandASPtrendingupward,webelievethecompanycouldabsorbsomeincrementaldepreciationfrom

ongoingcapacityexpansion.However,weakconsumerdemand(smartphoneandPC)in1H26mayoffsetthisAIsurplus,leadingto2026and2027EPScutsof13%and9%.

Phison(8299.TWO),PTunchanged,remainEW,asweseechallengesformodulemakersfromconstrainedsupply,marginnormalization,andweakeningconsumerSSDdemand

amidhigherNANDprices,especiallyinto2027.Weacknowledgethecompany'seffortintheAI/eSSDspace,whilethecurrentvaluationat12x2026e/16x2027eP/Ealreadypricesinneartermupside.

NanyaTech(2408.TW),PTunchanged,stayEW.Theprivateplacementinvestmentfromkeycustomers,includingKioxia,Solidigm,SanDisk,andCisco,isdefinitelypositiveto

DDR4suppliers'longtermdemand,suggestingclients'determinationforstablesupply.However,weexpectthemonthlyDDR4pricehiketopeakin2Q26aftera752%Y/Y

increasefromFeb25toFeb26.MorecapacitycomingonlineanddelayingEOLin

Morganstanley

RESEARCH

IDEA

202627,includingSamsung,PSMC,andCXMT,arelikelytopressureDDR4pricing.

SmartphonecustomersareexpeditingadoptionandpenetrationinLPDDR5andDDR5,

whichisalsonegativeforNanyaTech,asitsDDR5capacityandmaturityremainlow.Westillexpectstrongneartermearnings,yetvaluationvs.P/BandearningsrevisionbreadthbothpointtolimitedsharepriceupsideasDRAMpricehikesdecelerateY/Ytoward2H26.

Goodix(603160.SS),PTunchanged,stayUW,givenongoingconcernsaroundtheweakChinasmartphoneoutlookandpersistentdemanduncertainty,partiallyoffsetby

exposuretoHuaweismartphones,whichmaysustainsolidgrowthin2026.WealsoseepotentiallongtermdownsiderisksrelatedtoOLEDTDDI.Thecompanyhasmade

impressiveprogressonitsmultipleproductlines,butweremainUW,asitshouldfacecontinuedcostpressureamidaweaksmartphonemarketoutlookinChina(seereport).

Novatek(3034.TW)/Himax(HIMX.O),PTsunchangedandstayUW/EW.WeareUWonNovatekandEWonHimaxduemainlytoconcernsaroundweaksmartphoneandbroaderconsumertechdemand.WhileNovateksuppliesiPhonethroughpenetrationatLG

Display,wedonotexpectthistomorethanoffsetweaknessintheAndroidandChinasmartphonemarkets,itsprimaryrevenuestreams.

MoRGANSTANLEyREsEARcH3

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Morganstanley

RESEARCH

IDEA

Androiddowncycledeepensonmemorycostpressure

AndroidshipmentoutlookweakensfurtherinCY26.Ourlatestsupplychainchecks

suggestamid-teenY/YdeclineinAndroidsmartphoneshipmentsinCY26.Severalmajorcomponentsupplierspointto20%+Y/YshipmentdeclinesformostAndroidbrandsin

2026,withSamsungthekeyexception,supportedbysufficientmemorysupplyand

trackingtosingle-digitY/Ygrowth(vs.MSe+5%Y/Y).Togetherwithourforecastfora2%Y/YdeclineiniPhoneshipmentsinCY26–mainlydrivenbyashiftinnewiPhonelaunchtiming,with50%ofnewmodelsmovingtoSpring2027fromFall2026–weforecast

total2026smartphoneshipmentsof1.1Bunits,or-13%Y/Y(-15%Y/YforAndroid).Webelievesteepunitdeclineslargelyreflectmateriallyhigherdevicepricing,asvendorsattempttopartiallyoffsetsurgingmemorycosts.Asaresult,our2026Android

smartphonerevenueforecastshowsamoremodest-5%Y/Ydecline(from+9%Y/Y).

Exhibit1:WeexpectAndroidsmartphoneshipmentstodecline13%Y/Y(vs.2%Y/YforiPhone)inCY26,dueprimarilytodemanddestructionamidstpricehikestomitigaterisingcostpressures

iOSvs.Android:Shipments,ASP,andRevenueInCY25-CY26

1,400

-15%Y/Y

1,200

1,010

1,000

854

800

600

-2%Y/Y400

252246

200

0

iOSAndroidiOSAndroidiOSAndroid

Shipments(MUnits)ASPRevenue($B)

WeexpectAndroidsmartphoneshipmentsto

decline15%Y/Yduetocost-inducedprice

hikes.Whileweexpectlessdemand

destrcutioniniPhones,changesiniPhone

launchcadenceleadtoCY26shipments

decline.

+13%Y/Y

$1,206$1,070

CY25CY26

+10%Y/Y$269$297

-5%Y/Y

$308$292

+12%Y/Y

$342

$305

Source:Companydata,IDC,MorganStanleyResearchestimates.Note:iOS(iPhone)ASPandrevenueherecouldbedifferentfromourAAPLmodelasthefiguresherearebasedonIDC'srevenueestimatesinCY25alongwithouriPhoneASPgrowthforecastsinCY26.

MoRGANSTANLEyREsEARcH5

Morganstanley

RESEARCH

IDEA

SMARTPHONEMODELUnits(M)

RestofAsia/PacificPRC

EMEA

NorthAmericaLatinAmericaIndia

GlobalTotal

SMARTPHONEMODELY/YUnitGrowth

RestofAsia/PacificPRC

EMEA

NorthAmericaLatinAmericaIndia

GlobalTotal

SMARTPHONEMODEL

ASPs

Y/YASPGrowth

Revenue(M)

Y/YRevenueGrowth

Exhibit2:Weexpectglobalsmartphoneshipmentstodecline11%Y/Y

CY26Est.

CY27Est.

New

Old

Diff.

New

Old

Diff.

157

181

-13%

162

183

-12%

246

284

-14%

252

287

-12%

311

363

-14%

316

363

-13%

135

149

-9%

142

149

-5%

115

139

-18%

118

141

-16%

136

182

-25%

147

189

-22%

1,100

1,299

-15%

1,137

1,312

-13%

CY26Est.

CY27Est.

New

Old

Diff.

New

Old

Diff.

-14%

0%

-14.2pts

3%

1%

1.9pts

-14%

1%

-14.2pts

3%

1%

1.6pts

-15%

0%

-15.1pts

2%

0%

1.8pts

-6%

5%

-10.9pts

5%

0%

4.7pts

-13%

6%

-19.5pts

3%

1%

2.2pts

-10%

14%

-24.7pts

8%

4%

3.8pts

-12.8%

3.1%

-16.0pts

3.4%

1.0%

2.4pts

CY26Est.

CY27Est.

NewOldDiff.NewOldDiff.

$535$48211%$573$50114%

17%6%11.0pts7%4%3.3pts

$588,225$626,102-6%$651,991$657,405-1%

2%10%-8.0pts11%5%5.8pts

Source:IDC,MorganStanleyResearchestimates

Memorycostinflationandsupplytightnessintensify.Asharpriseinmemorycosts,coupledwithtightsupply,isdrivingthedownturn.Supply-sidepressureinDRAMandNANDisthemainfactor.Risingmemorycostsarecreatingahighlyfluidbackdropforcomponentavailability,productplanning,andpricing,forcingvendorstomanagetrade-offsacrosscostabsorption,pricepositioning,andhardwareupgradestrategies.

MemorymakersareprioritizingHBMproductionforAlservers,wheremarginsaremoreattractive,tighteningsupplyofphone-gradeDRAM.Thiscapacityshiftawayfrom

consumerelectronicstowardhigher-marginmemoryforAldatacentersisfurtherintensifyingtheshortage.

Exhibit3:DRAMcostincrease

Source:TrendForce,FactSet,MorganStanleyResearch

6

Morganstanley

RESEARCH

IDEA

MediaTek:Adjustmentsinsmartphone,whileGoogleTPUmaintainsstronggrowthin2027eandbeyond

MediaTek's5Gsmartphoneshipmentnowtrimto-20%Y/Yin2026e

OurfoundrycheckssuggestChinasmartphoneSoCvendors,includingMediaTekand

Qualcomm,havestartedcutting4nmwaferordersatTSMC.Weestimatea20–30kwaferreduction,implyingroughly15–20mnfewerchipunits.Asaresult,wetrimMediaTek's5Gsmartphoneshipmentfrom-15%Y/Yto-20%Y/Y.WeoriginallyexpectedMediaTekto

shiftsomewaferbookingsfromsmartphonetoASIC(GoogleTPU),while4nm-to-3nmconversionisnotachievableorfungible.

InEricWoodring’srecentreport,AlphaWiseSmartphoneSurvey:PositiveResults,Buta

Tough2026Ahead,ourglobalteamlowereditsCY26globalsmartphoneshipment

forecastto1.1bnunits,representing-13%YoY,withAndroidshipmentsdown15%YoY.Inourview,thispointstoweakerdemandinChina’ssmartphonemarket,drivenbyhigher

memorycosts(asdiscussedinourOmnivisiondowngrade,SmartphoneCISDe-specandPricingPressureGivenMemoryCostHike)andthelackofacompellingnewproductcycle,asneitherEdgeAInorAIsmartphonesappeartobegainingmeaningfultraction.

Ontheotherhand,wedonotruleoutthatsmartphoneheadwindsmightcontinueto

squeezemargins.AnumberofnewAIserverchipshaveadoptedLPDDR–suchas

SOCAMMwithNVIDIA’sRubinCPUandAIacceleratorsforinference.LPDDR5costsUS$0.75-0.80perGb,so12GBmobileDRAMshouldcostUS$72-77.eMMC256GBispricedatUS$44,so512GBwouldbeUS$88.ThecombinedDRAM+NANDcostisroughlyUS$163,higherthanMediaTek’shighendDimensity9400priceofUS$110–120.Amemorycostincreaseofmorethan50%in2026maypressuresmartphoneSoC'swalletshare.

Onpricing,wenotethatXiaomi(coveredbyAndyMeng)isadoptinglocalvendor

UniSoC’s(notcovered)low-end5GchipT8300foritsRedMiseries.TheUniSoCT8300alsousesTSMC’s6nmprocessandfeaturesspecs(e.g.,Arm'sCPU)comparableto

MediaTek’sDimensity6400.ThisunderscoresourconcernsaboutMediaTek’s5GSoCpricingin2026.

Exhibit4:MobilephoneSoCshipmentsharecomparison:MediaTekvs.UniSoC

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

3Q19

1Q20

3Q20

1Q21

3Q21

1Q22

3Q22

1Q23

3Q23

1Q24

3Q24

1Q25

MobilephoneSoCshipmentmarketsahre

40%

35%

30%

25%

20%

15%

10%

5%

0%

MediaTekUniSoC

Source:IDC,MorganStanleyResearch

Exhibit5:MediaTek'ssmartphoneSoCcouldbemargin-dilutiveowingto5GSoCpricecompetition

3Q27e

1Q27e

3Q26e

1Q26e

3Q25

1Q25

3Q24

1Q24

3Q23

1Q23

60%

55%

50%

45%

40%

35%

30%

CompanyoverallGMSmartphoneGM

Source:Companydata,MorganStanleyResearchestimates

MoRGANSTANLEyREsEARcH7

Morganstanley

RESEARCH

IDEA

Exhibit6:

SoCcomparison:MediaTekDimensity6400vs.UniSoCT8300

Source:Companydata,MorganStanleyResearchExhibit7:MediaTekSmartphoneSoCRoadmap

Segment1Q19

Flagship

P9

Helio/mid-range5G

Mid-4G

Entry-4G

Entry-3G

2Q19

0

M

1Q212Q212H211H222H221H23

70

P6

Dimensity8200

4nm

US$30-40

Dimensity810

6nm

Dimensity1200

6nm

Dimensity9000+

4nm

Dimensity9200

4nm

Dimensity1100

6nm

Dimensity900

6nm

Dimensity9000

4nm

Dimensity910

6nm

Dimensity8000

5nm

Dimensity930

6nm

0/P55

Dimensity1000

MT673

4Gfeature

800/8207nm

P5

P3512nm

Dimensity

Dimensity

7207nm

4Q19

4Q20

2Q20

3Q19

3Q20

1Q20

G90

G99

5

1

2H25

Dimensity9500

3nm

1H25

Dimensity9400+

3nm

2H231H242H24

Dimensity

6100+

6nm

US$22-24

Dimensity9300

4nm

Dimensity9400

3nm

Source:Companydata,MorganStanleyResearch(e)estimates

StrongTPUdemandupside

Recently,investorshaveaskedwhetherMediaTek'sTPUscheduleremainsontrackfor4Q26production,givendelayconcerns.OurcheckssuggesttheTPUisundergoingECO(EngineeringChangeOrder)forafewmetallayersaspowerconsumptionrunsslightlyhigherthanexpected.However,ourrecentchecksalsoshowthechipdoesn’tneedto

respin,andGoogleistesting/validatingitsimultaneously,soproductionshouldremainontrackfor4Q26,inourview.

Weassign3-4mnTPUunitstoMediaTekin2027inourbullcase,asMediaTek’s3nmTPUhasnotcompletedallengineeringtestsyet,andthesiliconviabilityofthisdesignwillbethedeterminingfactorfor2027orderallocation,inourview.Inaddition,asweindicatedinourAIsemitracker,MediaTek’sTPUvolumedependsonTGlass/substratesupply,nowthemajorbottleneck.IfbothABFsubstratesourcesaresecuredandMediaTek’s3nmTPUperformanceiscomparablewithBroadcom’s,weseeupsidetoourbasecase

400k/2.5mnunitsin2026/2027forMediaTek.Otherwise,Broadcomwilllikelycapturethedemandupside.Ontheotherhand,weassumevolumefromthesecondASIC

customer(MetaMTIAv3.5;Arke)willbeverysmallin2027,whilethedesignservicepartnerforthischipisyettobedecided.

Exhibit8:OurAsiaGoogleTPUvolumeforecastsfromCoWoSandMorganStanleyAsiaestimates(supplychain-based)

kUnits

2023

2024

2025e

2026e

2027e

2028e

v5

500

2,400

250

v6(Trillium)

1,000

v7(Ironwood/Sunfish,byBroadcom)

500

3,200

3,500

3,500

v8(Zebrafish;3nm,byMediaTek)

400

2,500

2,500

v9(Pumafish;2nm,byBroadcom)

500

v10(Humufish;2nm,byMediaTek)

500

Total

500

2,400

1,750

3,600

6,000

7,000

Source:MorganStanleyResearch(e)estimates

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RESEARCH

Morganstanley

Exhibit9:TPUv7Ironwood

Source:Google

IDEA

Exhibit10:PeakperformanceofTPUs

Source:Google

MoRGANSTANLEyREsEARcH9

Morganstanley

RESEARCH

IDEA

KYEC:Notcompletelyimmunetosmartphoneweakness,butstrongAldemandtosustaingrowth

AfterMediaTekandQualcommcutwafersatTSMC,weareseeingsimilarordercutsat

MediaTek’skeychiptestingvendors,includingKYEC.Smartphone-exposedcustomers,

includingMediaTek,currentlyaccountforatleast20%ofKYEC'srevenue.Wethereforetrimour2Q26revenueexpectationto+10.4%Q/Qfrom+15.0%Q/Qtoreflect

smartphonesemisweakness.However,westillexpectKYECtogrowstronglythroughout2026,supportedbyAIdemand(~40%of2026erevenue),especiallyfromNVIDIAand

Broadcom,whichwouldrampnext-generationGPUandTPUin2Qand3Q.Westillforecast2026revenuetogrow38%Y/Y,witha2025–2028erevenueCAGRof36%.

Initially,weassumedMediaTek'sTPUFTtimeat~450seconds;ourrecentcheckssuggestFTcouldstartat500-600seconds,~20%higheratthemidpoint.Furthermore,thefour-hourburn-intime,similartoitsmajorcustomer'sB-seriesXPU,isslightlyaboveourthree-hourexpectation.WethereforeseebusinessupsideforKYEC,asitislikelytohandlemostofMediaTek'sTPUtesting;thebenefitcouldbemostlyin2027and2028.(Seemore

detailsinGreaterChinaSemiconductors:Back-endObservations:ASEandKYECAIsemirevenueforecasts.)

Exhibit11:KYEC:Testingrevenue(excludingwafersort)frommajorcustomers

1Q252Q253Q254Q251Q262Q26e3Q26e4Q26e20252026e2027e

Units(k)

H-series

650

200

250

500

400

400

600

600

1,600

2,000

B-serieswithGDDR7

-

-

300

500

250

250

250

250

800

1,000

B-serieswithHBM

1,000

1,100

1,400

1,500

1,500

1,500

1,400

1,050

5,000

5,450

2,000

R-series

800

1,200

2,000

5,000

GoogleTPU

1,750

3,680

5,400

GoogleCPU

1,500

2,000

Testtime(assumeHoppertestingtimefor~6mins)

Perchiptesttime

H-seriestesttime(seconds)

350

350

350

350

350

350

350

350

350

350

350

B-serieswithGDDR7testtime(seconds)

350

350

350

350

350

350

350

350

350

B-serieswithHBMtesttime(seconds)

700

750

900

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

R-seriestesttime(seconds)

1,200

1,200

1,200

1,200

1,200

1,200

1,800

GoogleTPUblendedtesttime(seconds)

186

340

500

GoogleCPUtesttime(seconds)

300

300

Totaltestdemand

H-series(khrs)

63

19

24

49

39

39

58

58

156

194

-

B-serieswithGDDR7(khrs)

29

49

24

24

24

24

78

97

-

B-serieswithHBM(khrs)

194

229

350

417

417

417

389

292

1,190

1,514

556

R-series(khrs)

-

-

267

400

667

2,500

GoogleTPU(khrs)

90

348

750

GoogleCPU(khrs)

125

167

Testhourrate(forthelargestcustomerincludingburn-in)

190

180

180

180

180

169

180

190

220

Testhourrate(forTPUwithself-boughttesters)

200

250

280

LargestcustomerrevenuetoKYEC(US$mn)

49.0

44.8

72.6

92.5

86.4

81.1

132.9

147.1

258.8

447.5

672.2

%ofKYECMSeRevenue

21%

16%

24%

29%

26%

22%

30%

31%

23%

28%

29%

TPUrevenuetoKYEC(US$mn)

18.1

86.9

210.0

%ofKYECMSeRevenue

1.6%

5.6%

9.6%

GoogleCPUrevenuetoKYEC(US$mn)

31.3

46.7

%ofKYECMSeRevenue

2.0%

2.1%

Source:MorganStanleyResearchestimates

Morganstanley

RESEARCH

IDEA

Exhibit12:AIbusinesscomparisonbetweenASEandKYEC

10

ASE(3711.TW)KYEC(2449.TW)

oSOutsource

IncludingbothAIGPUandASIC

NA

FullCoWoS-likeProcess

MajorlyCPU(includingVeniceandVera)

NA

TestingBusiness

Majorlywafersort

Closeto100%marketshareatmajorcustomerandTPUfinaltest

Newbusiness

MorewafersortandpackagingoutsourcefromTSMC

Gainingsharesinwafersort

Grossmargin

ATMmargin25-30%

Corporateaveragecloseto40%

2025-28erevenueCAGR

24%

38%

AIrevenuetototalrevenue

Closeto15%in2026

Closeto40%in2026

Source:Companydata,MorganStanleyResearchestimates

MoRGANSTANLEyREsEARcH11

Morganstanley

RESEARCH

IDEA

MediaTek:EarningsRevisionandQuarterlyFinancials

Wereflecttheactual2025result,cut2026eEPSby1%,2027eEPSby4%and2028eEPSby3%,respectively:WefurthercutMediaTekıs20265Gsmartphoneshipmentto-20%Y/Yvs.previously-15%Y/Y.Wealsotrimdown2027eshipmentsto+3%Y/Yvs,priorestimatesof+8%,inlinewithourglobalteamısnewestimatesfortotalChinese

smartphoneshipmentin2027e.For2028e,wealsoslightlytweakdownthetotal

smartphoneSoCshipmentto324mnvs.previousestimatesof339mn,whichimplies+8%Y/Yvs.+2%Y/Ypreviously,giventhelow2027ebase.Wealsoslightlylowerthe

shipmentfortablet/chromebook,setupboxandODDtoreflectthememoryshortageimpact.Ontheotherhand,wealsoslightlylowerthenon-opestimatesbasedonactual2025result.

Exhibit13:MediaTek:Earningsestimaterevisions

(NT$mn)

Current

Actual2025

Previous

Old2025e

Diff.%

Current

New2026e

Previous

Old2026e

Diff.%

Current

New2027e

Previous

Old2027e

Diff.%

Current

New2028e

Previous

Old2028e

Diff.%

Netsales

595,966

595,966

0%

604,838

608,941

-1%

930,647

951,544

-2%

1,062,511

1,081,695

-2%

Grossprofit

283,080

283,035

0%

267,756

269,541

-1%

389,616

398,720

-2%

441,754

450,245

-2%

Operatingprofit

103,470

107,098

-3%

95,313

96,987

-2%

206,250

214,832

-4%

232,991

241,003

-3%

Pretaxincome

119,517

122,473

-2%

110,313

117,587

-6%

221,250

235,632

-6%

247,991

259,803

-5%

Reportednetincome

99,948

102,972

-3%

93,451

99,611

-6%

186,956

199,109

-6%

209,553

219,534

-5%

ReportedbasicEPS

62.79

64.69

.3%

58.70

62.57

.6%

117.44

125.07

.6%

131.63

137.90

.5%

ReporteddilutedEPS

62.70

64.60

.3%

58.61

62.47

.6%

117.25

124.88

.6%

131.43

137.69

.5%

Margins

Grossmargin

47.5%

47.5%

44.3%

44.3%

41.