2392

September 1, 2011

ACTION Removed from Asia Pacific Conviction Buy List

Cheng Uei Precision (Foxlink) (2392.TW)

Equity Research

Limited upside to our TP after margin shortfall; down to Neutral

What happened

We remove Cheng Uei (Foxlink) from the Conv Buy list and downgrade to

Neutral as we see limited upside to our revised TP. Foxlink posted 2Q PAT of

NT$624mn, (60% qoq and 181% yoy), 84% higher than GSe but 29% below

Reuters as Foxlink booked around NT$400mn disposal gain from selling

Sollink to Qualcomm. 2Q recurring earnings excluding Sollink’s disposal gains

came in around NT$224mn (-43%qoq/+1%yoy), 34% below GSe mainly on

margin contraction on product mix changes, PQI loss and rising OPEX on

further salary increases. Since we upgraded to Buy and added Foxlink to the

CL on May 5, 2011, it is +29% vs. TAIEX -14% (12m +59%/ TAIEX +2%).

Current view

While Studio A remains the key growth driver with near 63 stores in late

Aug, Studio A has lowered its 2011 year end target from 100 stores to near

90 stores and announced 2012 year end target of 130 stores. Also,

following its 2Q net loss of NT$99mn, we think PQI, the DRAM module

maker, may suffer a bigger loss than we earlier expected in 2H due to

weak DRAM demand and falling ASP. Foxlink has lowered 2H sales growth

(incl PQI and Studio A) guidance (2H:1H of 60:40, implying 50% hoh

growth) to 30%-50% hoh, which is still well above the overall tech industry

but below GSe’s original forecast of 60% hoh. We therefore revise down

2011E/12E/13E sales by 6%/4%/3% and net income by 10%/8%/10% as 1)

PQI may continue to suffer from weakening DRAM price, 2) product mix

may be less favorable at the margin (low margin battery and power supply

increase in the product mix); and 3) 3Q/4Q sales may grow 19%/12% qoq

vs. prior GSe of 30%/15% qoq. Though we remain positive on Foxlink’s

fundamentals, we suggest investors lock in gains at this point.

Valuation: Our 12m TP of NT$85 is based on 15X NTM core earnings and

20X Studio A earnings, from NT$91 (based on 15X NTM EPS ex-dividend),

as we believe this better reflects the value of the two business units.

Key risks: Component shortages and slowdown of global economy.

INVESTMENT LIST MEMBERSHIP

Neutral

Coverage View: Neutral

Henry King +852-2978-0748 [email protected] Goldman Sachs (Asia) L.L.C. Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Angel Wei +886(2)2730-4187 [email protected] Goldman Sachs (Asia) L.L.C.

The Goldman Sachs Group, Inc. Global Investment Research

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the

investment profile measures please refer to

the disclosure section of this document.


Asia Pacific Technology Peer Group Average

Key data Current

Price (NT$) 81.50

12 month price target (NT$) 85.00

Market cap (NT$ mn / US$ mn) 37,894.9 / 1,305.4

Foreign ownership (%) 24.6

12/10 12/11E 12/12E 12/13E

EPS (NT$) New 3.71 4.84 5.60 6.17

EPS revision (%) 0.0 (9.3) (7.9) (9.1)

EPS growth (%) 21.9 30.3 15.7 10.1

EPS (dil) (NT$) New 3.35 4.73 5.47 6.03

P/E (X) 21.9 16.8 14.5 13.2

P/B (X) 1.9 1.8 1.7 1.6

EV/EBITDA (X) 8.8 9.2 6.9 6.1

Dividend yield (%) 3.0 3.6 4.1 4.5

ROE (%) 9.1 11.3 12.3 12.8

CROCI (%) 15.3 12.1 18.0 13.8

Price performance chart

45

50

55

60

65

70

75

80

85

90

Aug-10 Dec-10 Mar-11 Jun-11

7,000

7,300

7,600

7,900

8,200

8,500

8,800

9,100

9,400

9,700

Cheng Uei Precision (Foxlink) (L) Taiwan SE Weighted Index (R)

Share price performance (%) 3 month 6 month 12 monthAbsolute 13.2 44.9 58.9

Rel. to Taiwan SE Weighted Index 31.5 61.0 56.3

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/31/2011 close.

September 1, 2011 Cheng Uei Precision (Foxlink) (2392.TW)

Cheng Uei Precision (Foxlink): Summary Financials

Analyst Contributors

Henry King

[email protected]

Angel Wei

[email protected]

Goldman Sachs Global Investment Research 2

Profit model (NT$ mn) 12/10 12/11E 12/12E 12/13E Balance sheet (NT$ mn) 12/10 12/11E 12/12E 12/13E

Total revenue 56,996.7 85,701.3 115,133.9 137,009.6 Cash & equivalents 5,755.0 8,036.9 8,860.6 10,554.9

Cost of goods sold (49,904.8) (75,303.4) (101,188.2) (120,827.3) Accounts receivable 14,368.6 16,060.3 21,551.9 25,019.6

SG&A (4,288.9) (6,324.3) (8,062.7) (9,388.3) Inventory 7,630.4 10,309.5 14,686.4 16,881.5

R&D (1,219.8) (1,600.1) (2,044.8) (2,422.0) Other current assets 1,816.7 2,263.3 3,238.9 3,899.7

Other operating profit/(expense) 0.0 (270.0) (400.0) (400.0) Total current assets 29,570.7 36,670.0 48,337.8 56,355.6

ESO expense (148.0) -- 0.0 0.0 Net PP&E 16,246.0 18,478.0 19,908.7 20,651.0

EBITDA 4,045.1 4,704.4 6,842.7 8,196.1 Net intangibles 1,224.0 1,342.9 1,342.9 1,342.9

Depreciation & amortization (2,461.9) (2,500.9) (3,404.5) (4,224.1) Total investments 3,825.9 3,891.4 3,912.0 3,932.5

EBIT 1,583.1 2,203.6 3,438.2 3,972.0 Other long-term assets 665.0 682.0 569.9 457.8

Interest income 23.4 20.0 64.3 132.9 Total assets 51,531.4 61,064.4 74,071.3 82,739.8

Interest expense (218.2) (243.8) (281.0) (367.4)

Income/(loss) from uncons. subs. (41.1) 20.6 20.6 20.6 Accounts payable 10,823.2 14,330.6 18,718.0 20,703.7

Others 863.7 949.7 339.9 339.9 Short-term debt 9,145.3 12,727.2 17,527.2 22,327.2

Pretax profits 2,211.0 2,950.1 3,581.9 4,097.9 Other current liabilities 5,997.5 11,342.4 13,614.1 13,738.6

Income tax (417.9) (547.6) (633.9) (717.1) Total current liabilities 25,966.0 38,400.2 49,859.4 56,769.6

Minorities (58.6) (137.1) (326.2) (492.9) Long-term debt 4,811.2 486.6 486.6 486.6

Net income pre-preferred dividends 1,734.4 2,265.3 2,621.8 2,887.9 Other long-term liabilities 276.0 303.7 303.7 303.7

Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 5,087.2 790.3 790.3 790.3

Net income (pre-exceptionals) 1,734.4 2,265.3 2,621.8 2,887.9 Total liabilities 31,053.2 39,190.5 50,649.6 57,559.8

Post-tax exceptionals 0.0 0.0 0.0 0.0

Net income 1,734.4 2,265.3 2,621.8 2,887.9 Preferred shares 0.0 0.0 0.0 0.0

Total common equity 19,600.3 20,623.0 21,885.6 23,200.4

EPS (basic, pre-except) (NT$) 3.71 4.84 5.60 6.17 Minority interest 878.0 1,250.9 1,536.1 1,979.6

EPS (basic, post-except) (NT$) 3.71 4.84 5.60 6.17

EPS (diluted, post-except) (NT$) 3.35 4.73 5.47 6.03 Total liabilities & equity 51,531.4 61,064.4 74,071.3 82,739.8

EPS excl. ESO expense (basic) (NT$) 3.96 5.28 7.00 8.28

EPS excl. ESO expense (dil.) (NT$) 3.35 4.73 5.47 6.03 BVPS (NT$) 41.98 44.07 46.77 49.58

DPS (NT$) 2.48 2.90 3.36 3.70

Dividend payout ratio (%) 66.6 60.0 60.0 60.0

Free cash flow yield (%) (8.8) 0.1 (5.3) (2.5)

Ratios 12/10 12/11E 12/12E 12/13E

Growth & margins (%) 12/10 12/11E 12/12E 12/13E CROCI (%) 15.3 12.1 18.0 13.8

Sales growth 35.0 50.4 34.3 19.0 ROE (%) 9.1 11.3 12.3 12.8

EBITDA growth (65.4) 16.3 45.5 19.8 ROA (%) 3.8 4.0 3.9 3.7

EBIT growth 8.0 39.2 56.0 15.5 ROACE (%) 7.6 9.3 10.5 10.2

Net income growth 24.2 30.6 15.7 10.1 Inventory days 45.0 43.5 45.1 47.7

EPS growth 21.9 30.3 15.7 10.1 Receivables days 74.7 64.8 59.6 62.0

Gross margin 12.4 12.1 12.1 11.8 Payable days 62.8 61.0 59.6 59.5

EBITDA margin 7.1 5.5 5.9 6.0 Net debt/equity (%) 40.0 23.7 39.1 48.7

EBIT margin 2.8 2.6 3.0 2.9 Interest cover - EBIT (X) 8.1 9.8 15.9 16.9

Cash flow statement (NT$ mn) 12/10 12/11E 12/12E 12/13E Valuation 12/10 12/11E 12/12E 12/13E

Net income pre-preferred dividends 1,734.4 2,265.3 2,621.8 2,887.9

D&A add-back 2,461.9 2,500.9 3,404.5 4,224.1 P/E (analyst) (X) 21.9 16.8 14.5 13.2

Minorities interests add-back 58.6 137.1 326.2 492.9 P/B (X) 1.9 1.8 1.7 1.6

Net (inc)/dec working capital (3,886.9) (863.5) (5,481.0) (3,677.0) EV/EBITDA (X) 8.8 9.2 6.9 6.1

Other operating cash flow 745.0 (423.5) 1,275.5 (556.8) EV/GCI (X) 0.9 1.1 1.0 0.9

Cash flow from operations 1,113.1 3,616.4 2,147.0 3,371.0 Dividend yield (%) 3.0 3.6 4.1 4.5

Capital expenditures (3,535.5) (3,595.1) (4,179.5) (4,310.5)

Acquisitions (1,534.0) (511.3) (543.7) (543.7)

Divestitures 0.0 0.0 0.0 0.0

Others 237.0 (13.9) 0.0 0.0

Cash flow from investments (4,832.4) (4,120.3) (4,723.1) (4,854.2)

Dividends paid (common & pref) (1,096.3) (1,155.8) (1,359.2) (1,573.1)

Inc/(dec) in debt 5,543.9 3,000.0 4,800.0 4,800.0

Common stock issuance (repurchase) 0.0 0.0 0.0 0.0

Other financing cash flows (17.8) 941.6 (40.9) (49.4)

Cash flow from financing 4,429.8 2,785.8 3,399.9 3,177.5 Note: Last actual year may include reported and estimated data.

Total cash flow 925.6 2,281.8 823.7 1,694.3 Source: Company data, Goldman Sachs Research estimates.



A catch-up Apple supplier

One of the key reasons we upgraded Foxlink to Buy in May was its significant stock

underperformance vs. major Apple players (Catcher, TPK, Foxconn Tech, Largan, etc),

suggesting possible share price catch-up (see Exhibit 2). We argued that Foxlink can be

considered a proxy for Apple (component involvement in almost all Apple’s products with

35%–40% revenue exposure to Apple). Foxlink’s share price has outperformed other

Apple component suppliers in the past few months (see Exhibit 3).

Exhibit 1: Foxlink’s price performance up to early May,

2011 Foxlink’s share price was lagging major Apple component

suppliers in May

Exhibit 2: Foxlink’s price performance as of Aug 30, 2011Foxlink’s share price performance has caught up other major

Apple component suppliers

Source: Datastream, Goldman Sachs Research estimates

Source: Datastream, Goldman Sachs Research estimates

Studio A expansion to slightly miss 2011 target of 100 stores

While Studio A remains the key growth driver with near 63 stores in late Aug, Studio has

lowered its full year target from previous expansion to 100 stores to near 90 stores by the

end of 2011 and announced plans to expand to 130 stores by the end of 2012.

Exhibit 3: Studio A store expansion in 2011E

Source: Company data, Goldman Sachs Research estimates.

-15%

-5%

5%

15%

25%

35%

45%

55%

65%

Ja

n-11

Fe

b-11

Ma

r-11

Ap

r-11

Still in 2011, Foxlink's share price performance has continued to

lag that of the other major Apple component suppliers

Apple

Catcher

Largan

Foxlink

TPK

Foxconn Tech

TWSELEC

TWSE

CATCHER ,111%

LARGAN, 15%

FTC, -12%

Foxlink, 24%

TPK, 5%

APPLE, 18%

TWSE, -15%

TW-ELTRN, -20%-20%

0%

20%

40%

60%

80%

100%

120%

140%

Jan

-11

Feb

-11

Mar-

11

Ap

r-11

May-1

1

Ju

n-1

1

Ju

l-11

Au

g-1

1

Sep

-11

Apple suppliers' relative performance in 2011ytd

27 31 32

40

2

2 3

4 20

23

26

33

-

2

3

10

-

10

20

30

40

50

60

70

80

90

100

1Q11 2Q11E 3Q11E 4Q11E

Taiwan HK Korea China

Apple store: slightly falls short of 2011's original target of 100 stores across four regions



Exhibit 4: Goldman Sachs revisions


Exhibit 5: Foxlink’s quarterly P&L Summary


Consolidated financials

Revised

(fully-loaded)

Original

(fully-loaded)

Revised

(fully-loaded)

Original

(fully-loaded)

Revised

(fully-loaded)

Original

(fully-loaded)

(NT$ mn) 2011E 2011E Difference 2012E 2012E Difference 2013E 2013E Difference

Revenue 85,701 90,911 -5.7% 115,134 119,892 -4.0% 137,010 140,777 -2.7%Gross profits 10,398 11,166 -6.9% 13,946 14,390 -3.1% 16,182 16,538 -2.2%Operating profits 2,204 2,595 -15.1% 3,438 3,718 -7.5% 3,972 4,395 -9.6%Pretax earnings 2,950 3,349 -11.9% 3,582 3,867 -7.4% 4,098 4,537 -9.7%Net earnings 2,265 2,511 -9.8% 2,622 2,861 -8.4% 2,888 3,194 -9.6%

Gross margin 12.1% 12.3% 12.1% 12.0% 11.8% 11.7%Operating margin 2.6% 2.9% 3.0% 3.1% 2.9% 3.1%Net margin 2.6% 2.8% 2.3% 2.4% 2.1% 2.3%

2011E 2012E 2013E1Q11 2Q11 3Q11E 4Q11E 1Q12E 2Q12E 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E 2010 2011E 2012E 2013E

Net sales 14,749 20,121 23,991 26,840 23,818 25,597 31,380 34,338 30,196 31,676 36,140 38,997 56,997 85,701 115,134 137,010 Gross profits 1,888 2,375 2,925 3,210 2,892 3,105 3,864 4,085 3,504 3,675 4,353 4,650 7,092 10,398 13,946 16,182

Operating profits (loss) 392 301 721 790 675 672 1,051 1,041 793 773 1,164 1,243 1,583 2,204 3,438 3,972 Pretax profits 548 826 773 804 710 707 1,087 1,078 823 803 1,196 1,276 2,211 2,950 3,582 4,098 Net profits 390 624 624 627 516 499 815 792 579 545 858 906 1,734 2,265 2,622 2,888 Basic EPS 0.84 1.34 1.33 1.34 1.10 1.07 1.74 1.69 1.24 1.16 1.83 1.94 3.75 4.84 5.60 6.17

Ratio analysis% of salesGross margins 12.8% 11.8% 12.2% 12.0% 12.1% 12.1% 12.3% 11.9% 11.6% 11.6% 12.0% 11.9% 12.4% 12.1% 12.1% 11.8%

Operating expense 10.1% 10.3% 9.2% 9.0% 9.3% 9.5% 9.0% 8.9% 9.0% 9.2% 8.8% 8.7% 9.7% 9.6% 9.1% 8.9%

Operating margins 2.7% 1.5% 3.0% 2.9% 2.8% 2.6% 3.3% 3.0% 2.6% 2.4% 3.2% 3.2% 2.8% 2.6% 3.0% 2.9%

Tax rate (fully tax at 25%) 22.5% 22.5% 15.2% 15.0% 18.0% 18.0% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 18.9% 18.6% 17.7% 17.5%

Net margins 2.6% 3.1% 2.6% 2.3% 2.2% 1.9% 2.6% 2.3% 1.9% 1.7% 2.4% 2.3% 3.0% 2.6% 2.3% 2.1%

Qoq growth (%)Sales (23.4%) 36.4% 19.2% 11.9% (11.3%) 7.5% 22.6% 9.4% (12.1%) 4.9% 14.1% 7.9%

Gross profits (20.2%) 25.8% 23.1% 9.8% (9.9%) 7.4% 24.5% 5.7% (14.2%) 4.9% 18.5% 6.8%

Operating profits (45.4%) (23.3%) 139.5% 9.6% (14.6%) (0.3%) 56.3% (1.0%) (23.8%) (2.5%) 50.6% 6.8%

Non-operating profits (222.3%) 236.8% (90.1%) (73.3%) 153.0% (1.2%) 4.7% 1.1% (16.5%) (1.3%) 5.4% 1.3%

Net profits (15.6%) 59.8% 0.1% 0.3% (17.6%) (3.3%) 63.4% (2.9%) (26.9%) (5.8%) 57.4% 5.5%

Yoy growth (%)

Sales 73.4% 61.3% 43.2% 39.4% 61.5% 27.2% 30.8% 27.9% 26.8% 23.7% 15.2% 13.6% 35.0% 50.4% 34.3% 19.0%

Gross profits 114.0% 57.7% 25.1% 35.7% 53.2% 30.7% 32.1% 27.2% 21.2% 18.3% 12.7% 13.8% 22.5% 46.6% 34.1% 16.0%

Operating profits 3,262.5% 138.9% (0.8%) 9.8% 71.9% 123.4% 45.8% 31.8% 17.5% 14.9% 10.7% 19.5% 8.0% 39.2% 56.0% 15.5%

Non-operating profits 100.2% 214.9% (89.8%) (111.0%) (77.3%) (93.3%) (30.0%) 164.8% (12.6%) (12.7%) (12.2%) (12.0%) 78.4% 18.9% (80.8%) (12.4%)

Net profits 778.2% 180.9% (37.9%) 35.5% 32.2% (20.0%) 30.5% 26.3% 12.2% 9.3% 5.3% 14.4% 24.2% 30.6% 15.7% 10.1%



Exhibit 6: Share price performance vs. peer group Closing prices as of Aug 31, 2011

Source: Factset, Quantum Database

Company Ticker Primary analystPrice

currencyPrice as of

08/31/11Price performance

since 05/05/113 month price performance

6 month price performance

12 month price performance

Asia Pacific Technology Peer Group Cheng Uei Precision (Foxlink) 2392.TW Henry King NT$ 81.50 29.4% 13.2% 44.9% 58.9%AAC Technologies 2018.HK Robert Yen HK$ 16.30 -22.2% -18.9% -16.7% 14.5%Acer 2353.TW Henry King NT$ 35.00 -34.6% -37.6% -51.3% -53.4%Advanced Semiconductor Engineering 2311.TW Edward Yen NT$ 26.00 -13.6% -18.1% -13.0% 31.5%Advanced Semiconductor Engineering (ADR) ASX Edward Yen $ 4.49 -15.4% -18.6% -12.5% 47.7%Anhui USTC iFLYTEK 002230.SZ Sam Li Rmb 36.00 -18.4% -3.4% -21.0% 10.1%AsiaInfo-Linkage ASIA Donald Lu, Ph.D $ 11.44 -43.2% -36.2% -43.8% -35.9%ASM Pacific Technology 0522.HK Donald Lu, Ph.D HK$ 80.40 -25.8% -24.0% -22.1% 27.7%ASUSTeK Computer 2357.TW Henry King NT$ 245.00 11.3% -0.4% 11.1% 40.0%AU Optronics 2409.TW Liang-chun Lin NT$ 13.80 -40.1% -41.4% -48.7% -50.1%AutoNavi Holdings Ltd. AMAP Sam Li $ 15.18 -16.1% -11.4% -4.5% -2.3%Beijing Bewinner Communications 002148.SZ Sam Li Rmb 17.28 -12.9% -1.8% -36.9% -32.1%Beijing Ultrapower Software 300002.SZ Sam Li Rmb 33.33 -1.4% 7.2% -20.3% -31.7%BYD Electronic 0285.HK Robert Yen HK$ 2.34 -45.3% -41.5% -52.7% -37.4%Camelot Information Systems CIS Evan Xu $ 5.91 -67.9% -68.0% -71.7% -60.7%Catcher Technology 2474.TW Henry King NT$ 227.50 21.0% 21.7% 83.5% 221.3%Chimei Innolux 3481.TW Liang-chun Lin NT$ 12.60 -55.6% -56.3% -60.1% -61.9%China Wireless Technologies 2369.HK Robert Yen HK$ 1.48 -49.0% -21.3% -48.8% -54.0%Chipbond Technology Corp. 6147.TWO Edward Yen NT$ 26.50 -38.9% -47.3% -47.9% -31.7%Compal Communications 8078.TW Robert Yen NT$ 31.35 33.4% 11.6% 11.0% 25.1%Compal Electronics 2324.TW Henry King NT$ 31.10 -3.0% -10.5% -10.5% -13.4%Coretronic 5371.TWO Liang-chun Lin NT$ 26.15 -41.9% -43.5% -45.1% -39.0%Delta Electronics 2308.TW Robert Yen NT$ 85.00 -34.9% -25.4% -31.2% -30.0%E Ink Holdings Inc 8069.TWO Robert Yen NT$ 62.40 2.3% -3.4% 20.0% 31.5%Epistar 2448.TW Liang-chun Lin NT$ 62.00 -30.3% -34.7% -38.9% -24.9%Everlight Electronics 2393.TW Liang-chun Lin NT$ 54.20 -32.6% -31.0% -34.9% -34.1%Foxconn International Holdings 2038.HK Robert Yen HK$ 3.87 -10.8% -11.8% -29.8% -25.1%Foxconn Technology 2354.TW Henry King NT$ 103.00 -25.4% -21.9% 2.0% 17.8%HCL Technologies Ltd. HCLT.BO Balaji V. Prasad Rs 411.20 -17.1% -19.2% -7.0% 4.7%Hon Hai Precision 2317.TW Henry King NT$ 73.30 -25.3% -19.8% -26.0% -28.6%HTC Corp. 2498.TW Robert Yen NT$ 756.00 -36.5% -34.9% -25.5% 35.7%Hunan Talkweb Information System 002261.SZ Sam Li Rmb 17.43 -17.5% -9.1% -29.7% -15.4%Hynix Semiconductor 000660.KS Marcus Shin W 19,100.00 -41.1% -36.5% -32.6% -9.5%Infosys Ltd. INFY.BO Balaji V. Prasad Rs 2,342.80 -17.6% -15.7% -22.0% -13.1%Infosys Ltd. (ADR) INFY Balaji V. Prasad $ 51.62 -18.5% -16.4% -22.6% -9.9%Kinsus Interconnect Technology 3189.TW Edward Yen NT$ 105.00 1.0% -18.6% 13.5% 64.1%Largan Precision 3008.TW Robert Yen NT$ 829.00 -11.1% -12.1% 2.2% 43.4%Lenovo Group 0992.HK Henry King HK$ 5.22 21.1% 14.0% 10.8% 17.0%LG Display 034220.KS Michael Bang W 20,900.00 -45.8% -41.8% -41.6% -37.2%LG Electronics 066570.KS Michael Bang W 66,600.00 -36.9% -31.5% -40.0% -30.9%LG Innotek Co. 011070.KS Michael Bang W 71,600.00 -32.1% -27.0% -43.8% -45.8%Lite-On Technology 2301.TW Robert Yen NT$ 31.50 -13.3% -13.6% -14.4% -14.2%Mediatek 2454.TW Donald Lu, Ph.D NT$ 291.50 -16.1% -8.9% -12.7% -33.2%Mphasis MBFL.BO Balaji V. Prasad Rs 353.45 -17.4% -24.8% -18.0% -43.2%MStar Semiconductor 3697.TW Donald Lu, Ph.D NT$ 158.50 -25.7% -11.4% -34.8% NANan Ya PCB 8046.TW Edward Yen NT$ 95.60 -4.4% -14.7% -7.1% -4.4%Nationz Technologies 300077.SZ Sam Li Rmb 26.84 -20.1% -5.2% -43.5% -48.6%NavInfo Co. 002405.SZ Sam Li Rmb 29.00 -3.9% 0.1% -27.4% -17.5%Novatek Microelectronics 3034.TW Liang-chun Lin NT$ 76.00 -15.3% -22.4% -16.3% -0.5%Patni Computer Systems Ltd. PTNI.BO Rishi Jhunjhunwala Rs 288.75 -25.6% -20.8% -35.7% -37.7%Patni Computer Systems Ltd. (ADR) PTI Rishi Jhunjhunwala $ 12.83 -24.6% -17.6% -34.5% -32.8%Pegatron 4938.TW Henry King NT$ 28.10 -7.1% -8.9% -19.7% -29.9%Powertech Technology 6239.TW Edward Yen NT$ 69.70 -25.9% -28.3% -25.9% -19.3%Quanta Computer 2382.TW Henry King NT$ 58.70 -3.1% -9.8% 1.0% 20.8%Radiant Opto-Electronics 6176.TW Liang-chun Lin NT$ 95.70 4.6% -8.7% 49.3% 136.4%Rolta India ROLT.BO Rishi Jhunjhunwala Rs 99.35 -25.0% -27.7% -28.9% -39.0%Samsung Electro-Mechanics 009150.KS Marcus Shin W 67,500.00 -35.7% -27.3% -47.7% -40.8%Samsung Electronics 005930.KS Michael Bang W 744,000.00 -18.7% -17.5% -19.4% -1.6%Samsung SDI Co 006400.KS Marcus Shin W 140,000.00 -25.5% -20.7% -15.9% -16.7%Samsung Techwin 012450.KS Marcus Shin W 58,400.00 -32.0% -27.0% -26.3% -47.1%Seoul Semiconductor 046890.KQ Marcus Shin W 27,300.00 -17.1% 0.7% -35.2% -25.2%Siliconware Precision Industries 2325.TW Edward Yen NT$ 26.45 -32.0% -31.4% -35.3% -8.3%Siliconware Precision Industries (ADR) SPIL Edward Yen $ 4.59 -31.9% -31.1% -32.4% 2.9%Silitech Technology 3311.TW Robert Yen NT$ 77.90 9.7% 9.1% 4.3% -11.2%SK C&C 034730.KS Seung Shin W 141,500.00 25.8% 8.8% 49.1% 54.8%Tata Consultancy Services Ltd. TCS.BO Balaji V. Prasad Rs 1,040.60 -6.6% -9.8% -6.5% 22.9%TCL Communication 2618.HK Robert Yen HK$ 4.71 -34.9% -24.8% -41.1% 10.8%TPK Holding 3673.TW Liang-chun Lin NT$ 704.00 -21.4% -20.9% -9.6% NATPV Technology 0903.HK Liang-chun Lin HK$ 3.49 -20.5% -23.6% -23.8% -24.8%Tripod Technology 3044.TW Edward Yen NT$ 97.60 -18.2% -19.8% -17.9% -1.5%TSMC 2330.TW Donald Lu, Ph.D NT$ 69.40 -7.2% -9.5% -1.6% 17.8%TSMC (ADR) TSM Donald Lu, Ph.D $ 11.97 -11.7% -12.4% -2.6% 27.3%UFIDA Software Co. 600588.SS Evan Xu Rmb 23.99 19.2% 21.6% 9.6% 3.6%Unimicron 3037.TW Edward Yen NT$ 41.95 -11.1% -20.8% -23.7% -17.3%United Microelectronics Corp. 2303.TW Donald Lu, Ph.D NT$ 11.30 -24.7% -23.6% -26.6% -13.1%United Microelectronics Corp. (ADR) UMC Donald Lu, Ph.D $ 1.99 -28.2% -26.8% -28.9% -22.6%Wintek 2384.TW Liang-chun Lin NT$ 25.00 -36.3% -28.4% -51.8% -30.9%Wipro Ltd. WIPR.BO Balaji V. Prasad Rs 335.05 -22.5% -24.1% -23.6% -15.9%Wipro Ltd. (ADR) WIT Balaji V. Prasad $ 9.98 -26.0% -27.8% -24.2% -22.2%Wistron 3231.TW Henry King NT$ 36.10 -25.4% -29.8% -28.3% -24.3%Young Fast Optoelectronics 3622.TW Liang-chun Lin NT$ 85.60 -53.1% -53.9% -65.6% -73.1%ZTE Corporation (A) 000063.SZ Donald Lu, Ph.D Rmb 18.65 -14.6% -13.9% -30.7% -9.9%ZTE Corporation (H) 0763.HK Donald Lu, Ph.D HK$ 21.60 -19.7% -22.0% -27.8% -10.3%

Taiwan SE Weighted Index 7,741 -14.2% -13.9% -10.0% 1.6%

Note: Prices as of most recent available close, which could vary from the price date indicated above.This table shows movement in absolute share price and not total shareholder return. Results presented should not and cannot be viewed as an indicator of future performance.



Reg AC

I, Henry King, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or

companies and its or their securities. I also 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 report.

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Disclosure Appendix

Coverage group(s) of stocks by primary analyst(s)

Henry King: Asia Pacific Technology.

Asia Pacific Technology: AAC Technologies, Acer, Advanced Semiconductor, Advanced Semiconductor (ADR), ASUSTeK Computer, AU Optronics,

BYD Electronic, Catcher Technology, Cheng Uei Precision (Foxlink), Chimei Innolux, China Wireless Technologies, Chipbond Technology Corp.,

Compal Communications, Compal Electronics, Coretronic, Delta Electronics, E Ink Holdings Inc, Epistar, Everlight Electronics, Foxconn Int'l Holdings,

Foxconn Technology, Hon Hai Precision, HTC Corp., Kinsus Interconnect Technology, Largan Precision, Lenovo Group, Lite-On Technology, Nan Ya

PCB, Novatek Microelectronics, Pegatron, Powertech Technology, Quanta Computer, Radiant Opto-Electronics, Siliconware Precision, Siliconware

Precision (ADR), Silitech Technology, SK C&C, TCL Communication, TPK Holding, TPV Technology, Tripod Technology, Unimicron, Wintek, Wistron,

Young Fast Optoelectronics.

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The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies

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Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be

aggregated under US securities law) as of the month end preceding this report: Cheng Uei Precision (Foxlink) (NT$81.50)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 32% 54% 14% 52% 41% 37%

As of July 1, 2011, Goldman Sachs Global Investment Research had investment ratings on 3,167 equity securities. Goldman Sachs assigns stocks as

Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for

the purposes of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage groups and views and related definitions' below.



Price target and rating history chart(s)

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Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy

or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned

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Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular


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Goldman Sachs rating and stock price target history

Stock Price Currency : Taiw an Dollar

Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2011.

The price targets show n should be considered in the context of all prior published Goldman Sachs research, w hich may or may not have included price targets, as w ell as developments relating to the company, its industry and f inancial markets.

Rating

Price target

Price target at removal

Covered by Henry King

Not covered by current analyst

May 4, 2011 to B from N

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coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent

investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return.

Return potential represents the price differential between the current share price and the price target expected during the time horizon associated

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outlook over the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in

an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis

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