Investor Presentation. December, 2007

Transcription

1 Investor Presentation December, 2007

2 Safe Harbor Statement This presentation contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Please see the information contained in Spreadtrum's filings with the U.S. Securities and Exchange Commission (the "SEC"), including the registration statement on Form F-1 filed on June 26, 2007, as amended, especially the sections under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and such other documents that Spreadtrum may file with the SEC from time to time, including on Form 6-K. Spreadtrum assumes no obligation to update any forward-looking statements, which apply only as of the date of this presentation. 2

3 Spreadtrum At A Glance Baseband Processor Solutions for Future Wireless Communications Market Fabless semiconductor and system company Founded in Employees; 523 Engineers* Offices in Shanghai, Beijing and Shenzhen, PRC and Sunnyvale, CA and Austin, TX Open Development Platform Multi-Generational Wireless Architecture Internally-Developed Software Protocol Stack Full Layer of System Software Multimedia Integration 2006 Revenue of US$107 million (180% YoY Growth) 7 quarters of demonstrated profitability *as of September 30,

4 Investment Highlights China s Wireless Market a Large and Strategic Base One of Only Few Integrated Solutions, with Organic Protocol Stacks Superior Time to Market, Customization and Development Cost Demonstrated Track Record of Successful Execution Well Positioned for TD-SCDMA 3G Roll-out Refreshed Product Line; Expanding Into New Customers, Markets 4

5 China is a Strategic Market China now the Largest Producer of Wireless Handsets Globally (mm) 500 China Production % of Worldwide Production 50% % % % Source: isuppli. 5

6 China Market Dynamics Advocate New Approach Product differentiation, cost optimization Rapid upgrade cycle, fashion, features drive quick TTM and design flexibility Strategic Win-Win partnership (OEMs & IDMs build off Spreadtrum platform) Chip Supplier Phone Design Manufacturer Operator End User OEMs IDH ODM EMS Operator End Users Network System, Test System, Application Software 6

7 China Handset Market Offers Big Growth China Target End-markets: nearly 200 mm Handsets 2006 Handset Production Unbranded Market China OEM ~30 mm Domestic Sales ~40 mm China OEM Exports ~35 mm Int'l Brand Domestic Sales ~80 mm Int'l Brand Exports ~225 mm Quick TTM, cost sensitivity Feature and fashion oriented Very rapid user cycle / upgrades No carrier subsidies Growing IDH/ODM influence Source: Company estimates. 7

8 Market Share within China Market YTD Market Share in GSM/GPRS (Local) ADI, 3% YTD Market Share in Gray Market Others, 4% NXP, 6% Infineon, 9% ADI, 8% Mediatek, 45% NXP, 2% Infineon/Agere 2% Mediatek, 77% 12% Spreadtrum, 10% Mediatek TI, 2% Mediatek TI TI TI, 22% Spreadtrum Infineon Spreadtrum Infineon NXP NXP Source: SINO-MR, 3Q07 Others ADI Source: SINO-MR, 3Q07 Others ADI Spreadtrum can continue to gain market share in China, without over-exposure to volatile Gray/Black market 8

9 Future Requirements Need Total Solution Spreadtrum s Core Competencies Enable New Baseband Approach Multi-Generation Architecture Open Platform System Approach ( Mocor ) Hardware/Software Parallel Development Mobile Multimedia Internet Convergence Benefits Reduced Development Time Customer Time-to-Market Advantage Smaller Die and Code Size Reduce System BOM Cost Enabling Multimedia Functionality for the Mainstream Easier Feature Customization Traditional model pushed an ASIC-centric legacy approach Hardware focused; where software more a post-development process 9

10 Chip/Software Integration = Better TTM, Cost Battery Memory Card Cost = 100% Battery Memory Card Lower Cost Antenna Switch PA Memories Power Mgmt Antenna Switch PA Memories Px / Tx GSM ABB TD-SCDMA ABB GSM DBB TD-SCDMA DBB Application Processor Px / Tx TD-SCDMA / HSDPA / GSM / GPRS Analog / Digital Baseband With Multimedia Camera PAL / NSTC Microphone Speaker LCD Camera PAL / NSTC Microphone Speaker LCD Average Customer Product Development Time = 100% Shorter End-Product Development on average: 3~6 Months Spreadtrum one of only few companies to have an all-in-one solution Not enough to just own software stack, need to create / develop it similar to what the integrated transceiver did for Fast Ethernet market. 10

11 Significant Investment in R&D 523 engineers, 52 patents issued and 267 pending* Product Roadmap Roadmap to future product expansion Current Future GSM / GPRS Protocol Stack TD-SCDMA / HSPDA Protocol Stack EDGE Protocol Stack Time WCDMA / B3G Protocol Stack R&D Centers in China and USA Shanghai Beijing Shenzhen Sunnyvale Austin R&D investments in 2007 to fuel growth in 2008 and beyond *as of September 30,

12 R&D Milestones Reflect SPRD s Innovation SC6600B SC8800D SC8800H 2003 World's first GSM/GPRS (2.5G) baseband with integrated multimedia and PMU on one chip 2004 World's first single chip Dual-mode TD-SCDMA/GSM baseband chip 2007 World s first Multi-mode baseband chip of HSDPA/TD-SCDMA/ GSM/GPRS Spreadtrum has become one of the leading Chinese baseband chip providers PRC National Science and Technology Advancement First Class Award

13 Chip Roadmap: 2G/2.5G Product High-end Phone Seine Venus GSM/GPRS/EDGE Dual Core GSM/GPRS MDTV(China) Dual Core SC6800E Mid-range Phone SC6800D GSM/GPRS 5M DSC TV-OUT SC6600R GSM/GPRS/EDGE Single Core SC6600M SC6600I GSM/GPRS QVGA MMI; 2M DSC MP4 / Scale up to QVGA TP/MP3/USB1.1 Dual-SIM Entry level Phone GSM/GPRS MP3 GSM/GPRS QCIF MPEG4 0.3M DSC MP3; USB1.1 SC6600H SC6600D 2006 GSM/GPRS High quality Audio (MP3) USB1.1 QVGA LCD ctrl/tp (planned) 13

14 3G TD-SCDMA Market Opportunity In China This is a 5+ year market deployment, not just 2008 China Mobile, completing trials in 8 cities $3B in infrastructure, $500MM in handset subsidies, 100M subscriber target by According to TDIA: 30 handset makers, and 100 models ready Solution stability and production capability are key to deployment: Performance: 95% call rate, 150 hour stand-by, 4+ hours talk Applications: Video blogging, streaming, video ring-back Thus, do not look for CMCC to rush timing or react to rumors. 14

15 Spreadtrum Positioned for TD-SCDMA Single Chip Solutions (SC8800D / SC8800H) Integrated multimedia and GSM/GPRS compatibility Active Member of TD-SCMDA Industry Alliance August 2007: announced partnership with ZTE October: ZTE demo d working TD-MBMS using SC8800 Recently announced TD products using SPRD: o ZTE s U80 (MBMS) and MU318 data card October 2007: introduced SC8800S for data cards Leading Technology: 1st to Exhibit Dual Mode Call (Oct 2005) 1st to Develop Single-Chip HSDPA (Feb 2007) 15

16 Quorum Systems Acquisition Spreadtrum acquiring Quorum Systems Definitive agreement: November 16 Anticipated closing: December 31, 2007 Purchase price $55 million in cash, $15 million in stock, plus earn-outs $6 Million Earn-outs: based on milestones achieved within 2 years Performance-based RSUs for employees who stay for 2+ years 16

17 Quorum Systems Background Founded in 2003; based in San Diego, California 45 employees, 10 years average experience (37% advanced degrees) Technology CMOS single-chip multi-band radio systems with superior multi-mode performance and extended talk-time Ultra-low-power, low-cost architecture Enable smallest form factor phones by integrating all multi-mode radio technologies into a single device Strategy: Quorum s RF technology combined with SPRD s complete baseband and software solutions provide unique solution from RF to baseband, from physical layer software to protocol and applications Quorum / SRPD have been working together since Oct

18 Quorum Systems Products 2G / 2.5 /2.75 G platform QS1000: CMOS GSM/GPRS/EDGE Ultra-small quad-band foot print 10-20% improvement in handset talk-time in EDGE QS500: CMOS GSM/GPRS Ultra-small dual-band foot print 10-15% improvement in handset talk-time in GSM/GPRS 3G platform QS3000: Single chip CMOS WCDMA / HSDPA + GSM/GPRS/EDGE Quad-band GSM/GPRE/EDGE and tri-band WCDMA + HSDPA Excellent GSM/EDGE talk time, world-class RF performance High level integration enabling reduced BOM cost and footprint Already sampling with international customers QS3200: TD-SCDMA product announced August 28 Single chip TD-SCDMA + GSM/GPRS/EDGE transceiver Quorum's sixth RF transceiver product introduction since

19 Quorum Systems Financial Impact Operating expenses for Quorum ~ $9 million for 2008 (pre-merger estimate) Expected cost reductions and synergies: Lower wafer costs through Spreadtrum s foundry relationship at TSMC Lower assembly & test costs through Spreadtrum s back-end service providers Elimination of a few redundant positions in finance and operations Merger expected to be dilutive in 1H08, but turn accretive in 2H08. 19

20 Other Markets to Leverage Digital TV: Spreadtrum is turning Chinese standard into reality August 07: Introduced the world s first AVS decoder chip (SV6111) Sept. 07: passed China Netcom s first AVS-based commercial trial tests for STBs. Digital TV market offers a great market opportunity for Spreadtrum. Mobile TV: Our goal is to leverage our background / skills to become a leader in this market segment Forecast of China Mobile TV market (in millions of units) Forecast of China Digital TV market (in millions of units) Units (in MM) Units (in MM) urce: ABI Research 0 Source: CCID IPTV Cable TV Satellite TV 20

21 Robust Growth Opportunities Strong Pipeline of 2.5G Products Rollout of TD-SCDMA Continued Growth From China: Market Share Shifts, Exports Adjacent Markets, e.g. Mobile TV, AVS Expanding to HSDPA, WCDMA, NFC, 4G Global Branded Customers 21

22 Financial Highlights 180% revenue growth in 2006 Increased contribution from higher margin baseband semiconductor revenue Strong financial model; profitable since 1Q06 Low cost structure with presence in China $143 million in net cash, with positive cash flow 22

23 Strong Business Momentum Revenues -- Annual Baseband Revenues By Quarter $ $40 $ $90 $ $25 $60 $ $15 $30 $ $10 $5 $ Q05 1Q06 1Q07 2Q07 3Q07 Baseband revenue grew 118% Y/Y and 25% sequentially in 3Q07 23

24 Driven by Strong Volume Growth Annual Baseband Units (mm) Units (in millions) YTD 3Q07: Second quarter of consecutive 37%+ sequential shipment growth 24

25 Strong Revenue Growth Successful Transitioning From Turnkey to Baseband Focus Annual Revenue Trend (US$ mm) Quarterly Revenue Trend (US$ mm) $120 $100 $ $40 $30 Handset Boards Phased Out $60 $40 $20 $ $20 $10 $ Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 Baseband Semiconductor Turnkey Modules Turnkey Handset Boards Turnkey Other 25

26 Gross Margin Expansion Annual Trend (%) Quarterly Trends (%) 60.0% 60% 40.0% 40.7% 40% 31.4% 38.8% 43.2% 46.4% 42.9% 45.5% 45.6% 22.5% 22.6% 20.0% 11.1% 20% 0.0% % 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 Gross Margin Gross Margin Margin Expansion: First as Spreadtrum phases out lower margin turnkey business; Then, as product mix and process migrations take effect 26

27 Income Statement U.S. GAAP Q 2007 Long-Term Model (Annual) Revenue (US$ mm) $107.1 $38.6 Gross Margin 40.7% 45.6% 47 50% R&D 17.3% 23.3% 16 18% SG&A 10.5% 10.5% 8 10% Operating Margin 12.9% 11.7% 20 24% Non-GAAP Op. Margin 16.8% 15.6% 22 26% Effective Tax Rate 6.8% 7.1% 15% Net Margin 13.4% 15.8% 20 22% 27

28 Balance Sheet Highlights (US$ mm) Sept 30, 2007 Cash, Cash Equivalents and Term Deposit $146.8 Accounts Receivable 3.0 Inventories 15.0 Total Assets Accounts Payable 10.9 Total Long-term Loan 3.8 Total Liabilities 40.2 Total Shareholders Equity Accounts Receivable Days, DSO (1) 11 Inventory Days (1) 65 Accounts Payable Days, DPO (1) 47 Note: 1. Based on ending balance of accounts receivable, inventory and accounts payable versus period sales and cost of goods sold. 28

29 3Q Results / 4Q Outlook 3Q Results: Revenue of $38.6 million (up 20% Q/Q, up 44% Y/Y) Baseband revenue grew 35% sequentially Operating margin of 11.7%, up from 7.9% in 2Q07 Guidance was for over 10% GAAP EPS of $0.13, versus EPS $0.07 in 2Q07 consensus of $0.11 4Q Outlook $46-47 million in revenue Operating margin > 13% Reiterated guidance on November 27,

30 Q&A 30