摩根士丹利-亚太大中华区科技半导体：MCU触底但未走出困局-Greater China Technology SemisAsia Pacific MCU：Bottoming but Not Out-20260417

MorganstanleyRESEARCH

April17,202608:25AMGMT

GreaterChinaTechnologySemis|AsiaPacific

MCU:BottomingbutNotOut

TherecoverylooksmoreL-shapedunlessweseeameaningfuldeclineinmemorypricesorapickupinedgeAI.

KeyTakeaways

TheAprilMCUspotmarketpricinghikesuggeststhecycleisbottoming,thoughpricingmayremainvolatileinthecomingmonths.

Contractpricesarenowonlyreflectingfoundry/packagingcostincreases,suggestinglimitedGMrecovery.

Componentcostsandavailabilityremainthekeydifferentiatorsamongcompanies.

WepreferlargeMCUplayers(e.g.,GigaDevice)andWiFiMCUvendors(Espressif)forLTedgeAIopportunities.

StrongspotpricehikeinApril;thebaseisalreadylow:InApril,STM's32-bitMCUwasup25%MoMtoRmb13.7,whileGigaDevice's32-bitMCUspotpricerose53%

MoMtoRmb9.5,catchinguptherallyinSTM's32bitMCUpricing.InlateMarch,STMicrofurtherraisedpricesfollowingitspre-CNYincrease.BesidesCMSemicon(688380.SS,NC),smallercompaniessuchasPuya(688766.SS,NC)andNSINGTechnologies(300077.SZ,NC)alsoissuedpricehikenotices.

Butlimitedimpactoncontractpricingandgrossmargin:GreaterChinaplayersaretryingtoraisecontractprices.Forexample,bothGigadeviceandNuvotonhaveraisedpricesforsomelowmarginMCUproducts.Thatsaid,thisdoesnotsignalabroadrecovery.SupplywasindeedtightforsmallerMCUdesignhouses.However,mostMCUsareproducedon40nm/55nmnodesusing12-inchcapacity,which

remainslessconstrainedthan8-inchcapacity.Wethereforedonotexpect

meaningfulpriceincreasesfromthebigMCUcompanies.Anypricehikeislikelytobeapass-throughofhighercosts,suggestinglimitedGMexpansion.

Demandremainschallenged;memorysourcingbecomesthekey:Consumer

demandinAprilwasslightlyweakerasseasonal'backtowork'and'backtoschool'demandfaded,whiletherecoveryinautoandindustrialdemandremainsslow.Atthesametime,weseeaccesstoreasonablypricedmemoryasakeydifferentiatoramongMCUvendors.Forexample,NuvotoncouldexpandMPUsharethrough

bundlingwithWinbond'sDDR4,similartoGigaDevice.Espressif'sESP32isseeinghigherdemandgivenitslowermemorycontent.

Stockimplications-awaitingaclearerturnaround:WeremainOWonEspressifbutrevisedownourearningsestimatesandPT.Welikethecompany'sRISCV

advantage,ecosystembreadth,andrecentOPENClawpickup,butweakconsumerdemandmaycreatedownsiderisktoearnings.WeremainUWonNuvotonbutraiseourPTonMPUshareexpansionandBMC/BMICbusinessopportunities.Weare

awaitingGMrecoverybeforeturningmorepositiveonthestock.

MoRGANSTANLEyTAiwANLimiTEd+DanielYen,CFA

EquityAnalyst

Daniel.Yen@

+88622730-2863

CharlieChan

EquityAnalyst

Charlie.Chan@

+88622730-1725

MoRGANSTANLEyAsiALimiTEd+DaisyDai,CFA

EquityAnalyst

Daisy.Dai@

+8522848-7310

MoRGANSTANLEyTAiwANLimiTEd+TiffanyYeh

EquityAnalyst

Tiffany.Yeh@

+88627712-3032

LucasWang

ResearchAssociate

Lucas.Wang@

+88622730-2875

MoRGANSTANLEyAsiALimiTEd+HenryZhao

ResearchAssociate

Henry.Zhao@

+8522239-7731

EthanJia

ResearchAssociate

Ethan.Jia@

+8523963-2287

GREAtERChinATEchnologySEmiconductoRs

AsiaPacific

IndustryViewAttractive

NuvotonTechnology

Corporation(4919.TW)

From

To

PriceTarget

NT$48.00

NT$98.00

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

IDEA

WHAT’sCHANGED

EspressifSystems

(688018.SS)FromTo

PriceTargetRmb188.00Rmb175.00

2

Morganstanley

RESEARCH

IDEA

KeyCharts

Exhibit1:STM32F103VET6spotmarketpricetrend

35

30

25

20

15

10

5

Jan-23Jun-23Nov-23Apr-24Sep-24Feb-25Jul-25Dec-25

STM32F103VET6SpotPrice(Rmb

incl.tax

)

Source:

Bom.ai

,MorganStanleyResearch

Exhibit3:Inventorydaysforproducerspeakedin1Q25andwasflatin4Q25

190

170

150

130

110

90

70

3Q25

1Q25

3Q24

1Q24

3Q23

1Q23

3Q22

1Q22

3Q21

1Q21

3Q20

1Q20

3Q19

1Q19

3Q18

1Q18

3Q17

1Q17

3Q16

1Q16

3Q15

1Q15

3Q14

1Q14

3Q13

1Q13

mmMCUAvgDOIMedian@113days

Source:Companydata,Bloomberg,MorganStanleyResearch

Exhibit5:Consumersentimentshowsmildimprovement,thoughcautionremains

Source:AlphaWise,MorganStanleyResearch.Note:surveydateasofMarch16-19,2026.

Exhibit2:GD32F103VET6spotmarketpricetrend

12

11

10

9

8

7

6

5

Jan-23Jun-23Nov-23Apr-24Sep-24Feb-25Jul-25Dec-25

GD32F103VET6SpotPrice(Rmb

incl.tax

)

Source:

Bom.ai

,MorganStanleyResearch

Exhibit4:LeadingMCUcompanies'capexdeclinedfor2yearsandisshowingslightgrowthin2026

2018

2017

2016

2015

2014

2013

2012

2027e

2026e

2025

2024

2023

2022

2021

2020

2019

4%-7%

-21%-22%

-33%

140%

120%

100%

80%

60%

40%

20%

0%

-20%-40%

-60%

7000

6000

5000

4000

3000

2000

1000

0

8%

-1%

-13%

TotalCapex(USDmn)YoYGrowth(RHS)

11%9%

8%

-8%

69%67%

115%

-48%

Source:Companydata,Bloomberg(e)estimates,MorganStanleyResearch.

Exhibit6:Consumerelectronics'spendingintentionwasstablerecently

Source:AlphaWise,MorganStanleyResearch.Note:surveydateasofMarch16-19,2026.

Morganstanley

RESEARCH

IDEA

Espressif:EarningsEstimateRevisions

Wecutour2026/27EPSestimatesby12%/11%andintroduceour2028forecast:Wefactorinactual2025resultsandcutourrevenueforecasts,aswebelieveoverall

consumerelectronicsdemandisbeingaffectedbyhighermemoryprices.WehavealsoraisedourR&Dexpenseassumptions,asthecompanyguidedtoa20%increaseinR&Dexpensefor2026.Asaresult,our2026/27EPSestimatesareloweredby12%/11%.Wealsointroduceour2028forecast.

Exhibit7:Espressif:Estimaterevisions

NewPrevious

NewPrevious

New

Rmbmn

2026E2026E

Diff.2027E2027E

Diff.2028E

Netsales

3,052

3,069

-1%

3,804

4,001

-5%

4,552

COGS

1,639

1,715

2,106

2,290

2,554

Grossprofit

1,413

1,354

4%

1,697

1,711

-1%

1,999

Operatingexpenses

910

755

1,059

971

1,262

Operatingprofit

503

600

-16%

639

739

-14%

737

Non-op.income(exp.)

60

28

60

28

60

PretaxIncome

563

628

-10%

699

767

-9%

797

Taxes

28

13

35

15

40

Netincome

538

611

-12%

667

748

-11%

760

ReportedEPS(Rmb)

3.43

3.90

-12%

4.26

4.77

-11%

4.85

Margins

Grossmargin

46.3%

44.1%

2ppt

44.6%

42.8%

2ppt

43.9%

Operatingmargin

16.5%

19.5%

-3ppt

16.8%

18.5%

-2ppt

16.2%

Pretaxmargin

18.4%

20.4%

-2ppt

18.4%

19.2%

-1ppt

17.5%

Netmargin

17.6%

19.9%

-2ppt

17.5%

18.7%

-1ppt

16.7%

Source:MorganStanleyResearch(E)estimates

Exhibit8:Espressif:Quarterlyfinancialstatement

2,565

27.8%

1,369

53%

1,196

46.6%

56%

774

30.2%

603

23.5%

89

3.5%

82

3.2%

422

16.5%

63%

86

0

5

17

1.6%

500

19%

(2)

3,804

24.6%

2,106

55%

1,697

44.6%

38%

1,059

27.8%

837

22.0%

108

2.8%

114

3.0%

639

16.8%

27%

60

0

0

60

5.0%

664

17%

3

667

18%

4.26

24%

3,052

19.0%

1,639

54%

1,413

46.3%

45%

910

29.8%

726

23.8%

92

3.0%

92

3.0%

503

16.5%

19%

60

0

0

60

5.0%

535

18%

3

538

18%

3.43

8%

4,552

19.7%

2,554

56%

1,999

43.9%

40%

1,262

27.7%

1,002

22.0%

124

2.7%

137

3.0%

737

16.2%

15%

60

0

0

60

5.0%

757

17%

3

760

17%

4.85

14%

498

19%

3.18

47%

1Q252Q253Q254Q251Q26E2Q26E3Q26E4Q26E1Q27E2Q27E3Q27E4Q27E

TotalRevenues

SequentialChange

ChangevsYearAgoCostofSales

PercentofRevenues

GrossProfit

PercentofRevenues

IncrementalMarginTotalOpex

PercentofRevenues

R&D

PercentofRevenues

General&administrativePercentofRevenues

Selling&marketing

PercentofRevenues

OperatingIncome

PercentofRevenues

ChangevsYearAgo

TotalNon-operatingIncome(Loss)Interestincome

Interestexpense

InvestmentIncome(loss)TaxRate

NetIncome,ContOpsPercentofRevenues

Minorityinterest

ReportedIncome

PercentofRevenues

ReportedEPS(Rmb)

ChangevsYearAgo

558

2.0%

44.1%

316

57%

242

43.4%

-131%

161

28.9%

126

22.6%

18

3.2%

17

3.1%

81

14.5%

162.6%

12

0

0

5

-2.1%

94

17%

(1)

94

17%

0.60

74%

688

23.3%

29.0%

367

53%

321

46.7%

61%

183

26.6%

142

20.7%

20

2.9%

21

3.0%

138

20.1%

58.6%

30

0

0

4

-0.2%

169

25%

(1)

168

24%

1.07

71%

667

-3.1%

23.5%

347

52%

320

48.0%

NM

201

30.1%

155

23.3%

24

3.6%

21

3.2%

119

17.9%

66.2%

10

0

0

3

9.7%

116

17%

(1)

116

17%

0.74

16%

653

-2.1%

19.4%

340

52%

313

48.0%

NM

229

35.1%

180

27.6%

27

4.1%

23

3.5%

84

12.8%

21.4%

34

0

0

5

-2.0%

120

18%

1

121

19%

0.77

37%

659

0.9%

18.1%

354

54%

305

46.3%

-147%

197

29.8%

157

23.8%

20

3.0%

20

3.0%

108

16.4%

33.9%

15

0

0

15

5.0%

117

18%

1

118

18%

0.75

26%

716

8.6%

4.1%

384

54%

331

46.3%

47%

214

29.9%

170

23.8%

22

3.1%

21

3.0%

118

16.4%

-14.9%

15

0

0

15

5.0%

126

18%

1

127

18%

0.81

-24%

820

14.6%

23.0%

440

54%

380

46.3%

46%

244

29.7%

195

23.8%

24

2.9%

25

3.0%

136

16.6%

13.9%

15

0

0

15

5.0%

143

17%

1

144

18%

0.92

25%

858

4.7%

31.4%

461

54%

397

46.3%

46%

256

29.8%

204

23.8%

26

3.0%

26

3.0%

141

16.4%

68.3%

15

0

0

15

5.0%

148

17%

1

149

17%

0.95

23%

810

-5.6%

23.0%

449

55%

361

44.5%

NM

227

28.0%

178

22.0%

24

3.0%

24

3.0%

134

16.6%

24.0%

15

0

0

15

5.0%

142

18%

1

143

18%

0.91

21%

894

10.3%

24.9%

495

55%

399

44.6%

45%

249

27.9%

197

22.0%

26

2.9%

27

3.0%

149

16.7%

26.9%

15

0

0

15

5.0%

156

17%

1

157

18%

1.00

24%

1,026

14.8%

25.2%

568

55%

458

44.7%

45%

285

27.7%

226

22.0%

28

2.7%

31

3.0%

174

16.9%

28.0%

15

0

0

15

5.0%

179

17%

1

180

18%

1.15

25%

1,074

4.7%

25.2%

594

55%

480

44.7%

44%

298

27.8%

236

22.0%

30

2.8%

32

3.0%

181

16.9%

28.4%

15

0

0

15

5.0%

186

17%

1

187

17%

1.19

25%

Source:Companydata,MorganStanleyResearch(E)estimates

ValuationMethodology

WecutourpricetargettoRmb175fromRmb188:Thisreflectsourlowerearnings

estimatesfor2026-27.Ourpricetargetisourbasecasescenariovalue,derivedfroma

residualincomemodel.Ourkeyassumptionsareunchanged:an8.9%costofequity(betaof1.1,risk-freerateof2.0%,andriskpremiumof6.0%),apayoutratioof40%,amedium-termgrowthrateof18.5%,andaterminalgrowthrateof4.5%.

MoRGANSTANLEyREsEARcH3

4

Morganstanley

RESEARCH

IDEA

Accordingly,welowerourbullcasevaluetoRmb202fromRmb217andourbearcasevaluetoRmb75fromRmb81.

Exhibit9:Espressif:Residualincomemodel

mn2026E2027E2028E2029E2030E2031E2032E2033E2034E2035E2036E2037E

TotalEquity

4,771

5,053

5,428

6,005

6,688

7,497

8,456

9,593

10,940

12,536

14,427

16,668

NetProfit

538

667

760

901

1,067

1,265

1,499

1,776

2,104

2,494

2,955

3,502

ROAE

11.6%

13.6%

14.5%

15.8%

16.8%

17.8%

18.8%

19.7%

20.5%

21.2%

21.9%

22.5%

ResidualIncome

123

224

284

373

477

599

743

913

1,114

1,353

1,635

1,968

Spread

2.7%

4.7%

5.6%

6.9%

7.9%

9.0%

9.9%

10.8%

11.6%

12.4%

13.0%

13.6%

EndingEquityCapital4,771

PVofForecastPeriod4,305

PVofContinuingValue18,414

EquityValue27,490

No.ofShares157

ProjectedPrice(Rmb)175

Source:MorganStanleyResearch(E)estimates

MoRGANSTANLEyREsEARcH5

Morganstanley

RESEARCH

IDEA

RiskReward–EspressifSystems(688018.SS)

EdgeAIgrowthconfidence;OW

PRICETARGETRmb175.00

Basecase,residualincomemodel.Weassumean8.9%costofequity(beta1.1,risk-freerate2.0%andriskpremium6.0%),apayoutratioof40%,amedium-termgrowthrateof18.5%,andaterminalgrowthrateof4.5%.

RISKREWARDCHART

Rmb202.00(+32.89%)

Rmb175.00(+15.13%)

Rmb75.00(-50.66%)

0

APR'25OCT'25APR'26APR'27

CNY

200

150

100

50

Rmb152.00

Key:HistoricalStockPerformanceCurrentStockPricePriceTarget

Source:Refinitiv,MorganStanleyResearch

OVERWEIGHTTHESIS

.WebelieveEspressifcanbenefitfromdemandcreatedbyemergingedgeAIopportunities.

.Weexpectthecompanytocontinuetogainmarketsharebecauseofamore

comprehensiveproductportfolio,bettercostperformanceratio,andpotentiallyhigherRISC-Vadoptionrate.

.Marginhasstabilizedat40%+andweexpectittoremainstable.

.2027eP/Eof36xisbelowthestock's

historicalaverageof43xsince2022;weseethisasattractive,asrisingROEprovides

solidsupportforvaluation.

ConsensusRatingDistribution

100%Overweight0%Equal-weight0%Underweight

MSRating

Source:Refinitiv,MorganStanleyResearch

RiskRewardThemes

SecularGrowth:Positive

ViewdescriptionsofRiskRewardsThemeshere

Rmb202.00

BULLCASE

47xbasecase2027eEPS

Weassume2025-28erevenueCAGRsof30%+forWi-FiMCUsand40%+forWi-Fimodules.Grossmarginof45%+in2026-28e.Espressif'sproductsareadoptedinedgeAIkillerapplicationsin2026-28e.

Rmb175.00

BASECASE

41xbasecase2027eEPS

Weassume2025-28erevenueCAGRsof21%forWi-FiMCUandWi-Fimodules.Grossmarginof~45%in2026-28e.

Espressif'sproductsareadoptedinmoreedgeAIapplicationsin2026-28e.

Rmb75.00

BEARCASE

18xbasecase2027eEPS

Weassume2025-28erevenueCAGRsof

<10%forWi-FiMCUsand15%forWi-Fi

modules.Grossmarginbelow35%in2026-28e.NoEspressifproductsareadoptedinedgeAIapplicationsin2026-28e.

6

Morganstanley

RESEARCH

IDEA

RiskReward–EspressifSystems(688018.SS)

KEYEARNINGSINPUTS

Drivers

MCUchipshipmentgrowth(%)

2025

19.2

2026e

17.2

2027e

28.8

2028e

23.0

MCUchippricinggrowth(%)

5.0

1.3

(2.6)

(2.7)

Grossmargin(%)

46.6

46.3

44.6

43.9

INVESTMENTDRIVERS

·Wi-FIMCUunitshipments·Pricingtrends

·IoTmarketgrowth

·Wi-Fi6unitshipments

GLOBALREVENUEEXPOSURE

0-10%

0-10%

20-30%

70-80%

EuropeexUK

lndia

APAC,exJapan,Mainland

Chinaandlndia

MainlandChina

Source:MorganStanleyResearchEstimateViewexplanationofregionalhierarchieshere

MSALPHAMODELS

1/53MonthMOSTHorizon

Source:Refinitiv,FactSet,MorganStanleyResearch;1isthehighestfavoredQuintileand5istheleastfavoredQuintile

RISKSTOPT/RATING

RISKSTOUPSIDE

·China'sMCUlocalizationgoesfasterthanexpected.

·Gainstractionfromnewcustomers.

·Marginexpansionismoresignificant.

RISKSTODOWNSIDE

·China'sMCUlocalizationpaceisslowerthanexpected.

·Tractionfromnewcustomersislessthanexpected.

·Marginserodeamidmoreintensecompetition.

OWNERSHIPPOSITIONING

Inst.Owners,%Active87.5%Source:Refinitiv,MorganStanleyResearch

MSESTIMATESVS.CONSENSUS

FYDec2026e

Sales/Revenue

(Rmb,mn)

3,052.2

3丿502.0

3,335.7

Netincome

(Rmb,mn)

538

809.0

690.1

EPS

(Rmb)

3.4

6.4

4.7

ROE

(%)

12.0

23.0

19.7

MeanMorganStanleyEstimatesSource:Refinitiv,MorganStanleyResearch

MoRGANSTANLEyREsEARcH7

Morganstanley

RESEARCH

IDEA

Espressif:FinancialSummary

Exhibit10:Espressif:FinancialSummary

IncomeStatementCashFlowStatement

2025

2026E

2027E

2028E

Rmbmn(YearsEndDec)

NetsalesCOGS

Grossprofit

Operatingexpenses

Operatingincome

Non-operatingincomePre-taxincome

Incometax

Minorityinterests

ReportednetIncome

Adj.wtd.avg.shrs(m)MWEPS(Rmb)

ReportedEPS(Rmb)

2,565

(1,369)1,196(774)

422

86

508

8

(2)

498

157

3.18

3.18

3,052

(1,639)1,413(910)

503

60

563

28

3

538

157

3.43

3.43

3,804

(2,106) 1,697(1,059)

639

60

699

35

3

667

157

4.26

4.26

4,552

(2,554) 1,999(1,262)

737

60

797

40

3

760

157

4.85

4.85

BalanceSheet

Rmbmn(YearsEndDec)20252026E2027E2028E

Cash1,0251,2231,2691,414

876

429

666

1,043

4,237

876

639

1,038

1,043

5,011

876

534

856

1,043

4,579

876

364

628

1,043

3,935

MktSecuritiesAR/NR

InventoryOther

CurrentAssets

252

557

131

172

5,350

0

208

229

0

141

252

557

131

172

5,048

0

188

229

0

141

252

557

131

172

5,691

0

268

229

0

141

252

557

131

172

6,124

0

325

229

0

141

Long-terminvestmentsFixedassets

DeferredassetsOtherassets

TotalAssets

S/TborrowingsAP/NP

OtherSTliabilitiesLTdebt

OtherLTliabilities

TotalLiabilities558579638695

Commonshares167167167167

Additionalcapital3,1643,1643,1643,164

Retainedearning1,1781,4591,7412,116

Othershareholders'equity(18)(18)(18)(

18)

TotalEquity4,4904,7715,0535,428

TotalLiab.&Shrhldr'sEquity5,0485,3505,6916,124

E=MorganStanleyResearchEstimates

Source:MorganStanleyResearch,CompanyData

Source:Companydata,MorganStanleyResearch(E)estimates

Rmbmn(YearsEndDec)

2025

2026E

2027E

2028E

CashflowfromOperations

523

479

454

553

Netprofits

498

538

667

760

Depreciation

24

24

24

24

WorkingCapitalChange

(126)

(83)

(236)

(230)

Otheradjustments

127

0

0

0

CashflowfromInvesting

(1,913)

(24)

(24)

(24)

Capex

(516)

(24)

(24)

(24)

ChangeofLTInvestment

(1,972)

0

0

0

ChangeofSTInvestment

0

0

0

0

Otheradjustments

575

0

0

0

Cashflowfromfinancing

1,757

(257)

(385)

(385)

IncreaseinL/Tdebt

0

0

0

0

IncreaseinS/Tdebt

(1)

0

0

0

CashDividendPaid

(71)

(257)

(385)

(385)

Dir&EmpBonusPaid

0

0

0

0

Issuanceofstock

1,842

0

0

0

Otheradjustments

(13)

0

0

0

Exchangerateadjustment

(16)

0

0

0

Netchangeincash

351

198

46

145

FinancialRatios

2025

2026E

2027E

2028E

Growth(%)

Turnover

27.8

19.0

24.6

19.7

Operatingprofits

63.2

19.1

27.0

15.4

EPS

46.7

8.1

24.0

14.0

Margins(%)

GrossMargin

46.6

46.3

44.6

43.9

OperatingMargin

16.5

16.5

16.8

16.2

PretaxMargin

19.8

18.4

18.4

17.5

NetMargin

Return(%)

19.4

17.6

17.5

16.7

ROAE

14.9

11.6

13.6

14.5

ROAA

12.9

10.3

12.1

12.9

Gearing(%)

NetDebt/Equity

(22.8)

(25.6)

(25.1)

(26.1)

Liabilities/Equity

Ratios(X)

12.4

12.1

12.6

12.8

Currentratio

9.4

9.7

9.2

9.0

Quickratio

Others

3.3

3.8

3.6

3.7

AR/NRTurnover(days)

51

51

51

51

InventoryTurnover(days)

148

148

148

148

APTurnover(days)

46

46

46

46

CashConversion(days)

153

153

153

153

8

Morganstanley

RESEARCH

IDEA

Nuvoton:EarningsEstimateRevisions

Wefactorintheactual4Q25resultsand1Q26preliminaryrevenue,expectalossin2026,raiseour2027EPSby12%,andintroduceour2028forecast:Weexpect

Nuvotonısutilizationtoimprovein2026vs.2025,butatamilderpace;wetherefore

slightlyloweroursalesforecastfor2027.WealsoexpectNuvotontofacesomemarginpressurein2026fromhighermaterialcosts,althoughthisshouldbemodest,and

thereforelowerourmarginassumptions.Weexpectmarginimprovementin2027E,supportedbynewproductintroductionsandspecmigration.

Exhibit11:Nuvoton:Estimaterevisions

Source:Companydata,MorganStanleyResearchestimates

MoRGANSTANLEyREsEARcH9

Morganstanley

RESEARCH

IdEA

Exhibit12:Nuvoton:QuarterlyFinancials

4Q26e

2Q26e

3Q26e

1Q26e

2026e

2027e

2028e

4Q25

2Q25

3Q25

1Q25

2025

TotalRevenues8,3647,8167,2727,0407,9888,3198,0577,945

30,49232,30936,82540,494

SequentialChange

15.1%

-6.6%

-7.0%

-3.2%13.5%4.2%-3.1%-1.4%

ChangevsYearAgo

-1.2%

-5.0%

-8.6%

-3.2%-4.5%6.4%10.8%12.8%

-4.5%6.0%14.0%10.0%

CostofSales(4,914)(5,088)(4,675)(4,627)(5,202)(5,305)(5,127)(5,049)

(19,304)(20,683)(22,651)(23,854)

PercentofRevenues58.7%65.1%64.3%65.7%65.1%63.8%63.6%63.5%

63.3%64.0%61.5%58.9%

GrossProfit

3,4512,728

2,597

2,413

2,785

3,014

2,931

2,896

11,189

11,626

14,174

16,640

GrossMargin

41.3%34.9%

35.7%

34.3%

34.9%

36.2%

36.4%

36.5%

36.7%

36.0%

38.5%

41.1%

TotalOpex

(3,177)(3,030)

(3,113)

(3,097)

(3,244)

(3,162)

(3,030)

(2,970)

(12,417)

(12,406)

(12,747)

(13,389)

Q/Q

6.3%-4.7%

2.8%

-0.5%

4.8%

-2.5%

-4.2%

-2.0%

Y/Y

3.2%0.6%

3.6%

3.6%

2.1%

4.4%

-2.7%

-4.1%

2.8%

-0.1%

2.7%

5.0%

PercentofRevenues

38.0%38.8%

42.8%

44.0%

40.6%

38.0%

37.6%

37.4%

40.7%

38.4%

34.6%

33.1%

R&D

(2,303)(2,196)

(2,293)

(2,257)

(2,396)

(2,329)

(2,216)

(2,169)

(9,049)

(9,110)

(9,482)

(9,767)

PercentofRevenues

27.5%28.1%

31.5%

32.1%

30.0%

28.0%

27.5%

27.3%

29.7%

28.2%

25.7%

24.1%

SalesandMarketing

(254)(250)

(249)

(254)

(272)

(266)

(258)

(254)

(1,007)

(1,050)

(1,179)

(1,296)

PercentofRevenues

3.0%3.2%

3.4%

3.6%

3.4%

3.2%

3.2%

3.2%

3.3%

3.3%

3.2%

3.2%

GeneralandAdmin

(620)(584)

(571)

(586)

(576)

(566)

(556)

(546)

(2,361)

(2,246)

(2,086)

(2,326)

PercentofRevenues

7.4%7.5%

7.8%

8.3%

7.2%

6.8%

6.9%

6.9%

7.7%

7.0%

5.7%

5.7%

OperatingIncome

273(302)

(516)

(684)

(459)

(148)

(99)

(74)

(1,228)

(781)

1,427

3,252

PercentofRevenues

3.3%-3.9%

-7.1%

-9.7%

-5.7%

-1.8%

-1.2%

-0.9%

-4.0%

-2.4%

3.9%

8.0%

%QoQ

-224.2%-210.4%

71.1%

32.4%

-32.8%

-67.8%

-32.8%

-25.8%

(1,228)

(781)

1,427

3,252

TotalNon-operatingIncome(Loss)

59(343)

45

22

76

63

0

38

(217)

177

726

600

Forexgain(loss)

35(588)

0

0

0

0

0

0

(553)

0

0

0

Interestexpense

(40)(52)

(50)

(41)

0

0

0

0

(182)

0

0

0

Interestincome

7260

43

37

76

63

0

38

212

177

276

240

NetInvestmentIncome

(14)155

0

0

0

0

0

0

141

0

450

360

InvestmentDisposalGain(loss)

00

0

0

0

0

0

0

0

0

0

0

Otherincome(expense)

682

52

26

0

0

0

0

166

0

0

0

ProfitBeforeTaxes

333(644)

(471)

(662)

(383)

(85)

(99)

(35)

(1,445)

(603)

2,153

3,852

PercentofRevenues

4.0%-8.2%

-6.5%

-9.4%

-4.8%

-1.0%

-1.2%

-0.4%

-4.7%

-1.9%

5.8%

9.5%

ChangevsYearAgo

-17.9%-1410.6%

1227.5%

3329.9%

-215.2%

-86.8%

-78.9%

-94.6%

Taxes

(115)(30)

(43)

(32)

54

12

14

5

(220)

84

(301)

(539)

TaxRate

34.6%-4.7%

-9.0%

-4.8%

14.0%

14.0%

14.0%

14.0%

-15.2%

14.0%

14.0%

14.0%

ReportedIncome(TWGAAP)

217(675)

(513)

(694)

(330)

(73)

(86)

(30)

(1,665)

(519)

1,852

3,312

PercentofRevenues

2.6%-8.6%

-7.1%

-9.9%

-4.1%

-0.9%

-1.1%

-0.4%

-5.5%

-1.6%

5.0%

8.2%

ChangevsYearAgo

-46.8%3061.4%

386.9%

1011.9%

-251.6%

-89.1%

-83.3%

-95.6%

-857.2%

-68.8%

-456.8%

78.9%

MWDilutedEPS(NT$,TWGAAP)

0.52(1.61)

(1.22)

(1.65)

(0.79)

(0.17)

(0.20)

(0.07)

(3.96)

(1.24)

4.41

7.89

EBSDilution(%)

11.9%0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

11.9%

11.9%

11.9%

11.9%

ReportedBasicEPS(NT$,GAAP)

0.52(1.61)

(1.22)

(1.65)

(0.79)

(0.17)

(0.20)

(0.07)

(3.96)

(1.24)

4.41

7.89

SequentialChange

-448.4%-410.3%

-24.1%

35.5%

-52.5%

-77.8%

16.7%

-64.4%

-856.7%

-68.8%

-456.8%

78.9%

Source:Companydata,MorganStanleyResearch

Nuvoton:ValuationMethodology

WeraiseourPTfromNT$48toNT$98:Wefactorinourearningsestimatechangesfor2026-2027e.Theincreaseintargetpriceisdrivenmainlybyournewlyintroduced2028

forecast,whichaffectsthemedium-termoutlook,whilewekeeptheotherRlm