Industry Risk Assessment Profile (IRAP): Semiconductors

Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor EquipmentUpdated: May 18th, 2012

Semiconductors & Semiconductor Equipment

CFRA's library of more than sixty IRAPs provide a quick reference guide to the key accounting issues thatimpact financial statement analysis in each industry. Each IRAP focuses on target areas for detailed review,and includes instructions for identifying red flags, as well as related company examples. IRAPs are atime-saving resource, a training tool, and a must-have desktop reference for anyone analyzing financialstatements.

This report highlights important accounting issues relating to the Semiconductors & SemiconductorEquipment industry as well as how the application of these issues can impact a company's financialstatements. In analyzing this industry, CFRA believes an understanding of the following accounting issues isessential:

Accelerating the Recognition of RevenueBusiness Combinations - Risks Related to Purchase AccountingCookie Jar Reserves (e.g. Doubtful Accounts. Returns. Royalties. Warranties. InventoryObsolescence)Deferred Gross MarginDepreciation of Property Plant and Equipment (PP&E)Inventory Accounting and AnalysisRelated Party Transactions and Other Governance IssuesRestructuring and Other Special ChargesAppendix 1: Risk Assessment ChecklistAppendix 2: Industry Term GlossaryAppendix 3: Accounting Term GlossaryAppendix 4: Leading Companies in Semiconductors & Semiconductor EquipmentAppendix 5: QuickScores for Semiconductors & Semiconductor Equipment

Semiconductors & Semiconductor Equipment Contact:

Jill Lehman, [email protected]

Industry Team:

Tatiana [email protected]

Related IRAPs:

© 2012. All rights reserved. This document may not be reproduced or redisseminated in whole or in part without prior written permission from CFRA. For exclusive use by CFRA. Printed for Michael Chupeco.

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mailto:[email protected]

mailto:[email protected]

Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment

Updated: May 18th, 2012

Accelerating the Recognition of Revenue

Concern:

Companies may hide a revenue slowdown byrecognizing revenue in an earlier period than originallyexpected.

Indicators:

Growth in accounts receivable, drop in deferredrevenue or deferred profit and/or change in revenuerecognition disclosure

When companies accelerate revenue into the current period, they are essentially "stealing"revenue from future periods. As such, the reported revenue growth during a period in whichrevenue has been accelerated is likely unsustainable. There are many available tactics thatmanagement can use to accelerate revenue, some of which include a change in the distributionof revenue across a contract with multiple deliverables, excess recognition of deferred revenue,large shipments at period-end, a change in revenue recognition policy, and a change in theinterpretation of the revenue recognition policy.

Often times, the acceleration of revenue can be identified by monitoring changes in accountsreceivable and deferred revenue. Specifically, when receivables increase relative to revenue, theconcern is not necessarily one of credit quality; rather, it reflects the possibility that revenue mayhave been accelerated into the current period either through a more aggressive approach torevenue recognition or through an unsustainable increase in end-of-period sales. Additionally,declines in deferred revenue or deferred profit may indicate a potential slowdown in futurerevenue growth and/or a change to a more aggressive revenue recognition model in which agreater proportion of revenue is recorded immediately rather than being deferred for recognitionat a future date. Analysts should also monitor (a) revenue recognition disclosure for changes thatsignal the acceleration of revenue recognition and (b) sales and related receivables to majorcustomers.

CFRA also notes that current US GAAP governing multiple-element arrangements provides asignificant opportunity for aggressive revenue recognition as management determines how muchrevenue to recognize for each delivered element, which in turn also gives management discretionover the timing of revenue recognition. The more stringent previous rules did not allow anyrevenue recognition unless third-party pricing was available for each element of the contract. Nowcompanies may develop their own pricing estimates, and in fact are required to do so at theinception of the contract in the absence of third-party pricing. When analyzing thesearrangements, analysts should look out for aggressive revenue recognition schedules or unusualpatterns of contract price allocation that result in more revenue being recognized upfrontcompared with peers or prior periods.

As an example, CFRA highlighted SMA Solar Technology (S92.GR). S92.GR cited higherexport sales and HPS segment sales as the reasons behind increases in receivables in 3Q11. The receivables level at 3Q11 was at least a four-year high for the third quarter and raisedquestions about the ability of the Company to meet revenue guidance.In June 2009, CFRA cautioned that Lam Research Corp.’s (LRCX) revenues have benefited


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unsustainably from the extension of payment terms granted to customers. The Company’sreceivables increased to 103 days at March 2009, up from 94 days and 65 days in the prior twoquarters, respectively. Concurrently, bad debt expense increased significantly, heighteningconcerns about customer deterioration.

IFRS:Unlike US GAAP, IFRS lacks detailed industry specific guidance for revenue recognition.Companies reporting under IFRS are required to consider the substance of a transaction todetermine the proper revenue recognition policy. The concerns, indicators and discussion aboveare equally applicable when analyzing companies reporting under IFRS.


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Business Combinations - Risks Related to Purchase Accounting

Concern:

A company can manipulate earnings by using theadjustment to fair market value of a target company’sassets and liabilities in an acquisition to understateassets and overstate liabilities, thereby allocating agreater potion of the purchase price to goodwill.

Indicators:

Goodwill accounting for a higher portion of thepurchase price allocation versus other acquisitions inthe industry.Large purchase price adjustments which increase theamount of goodwill recorded.A significant reduction in the acquired company'stangible assets if you are able to obtain historicalfinancials of the target company.

Accounting for business combinations remains a huge area of concern in any industry whereacquisitions are a common occurrence. The revaluation of an acquired company's balance sheetto fair market value required under US GAAP provides an opportunity to value that balance sheetin a way that will benefit future earnings. This is generally done by understating the value ofassets and overstating the value of liabilities acquired. This provides a benefit to earningsfollowing the acquisition because the difference between the fair market value of the target's netassets and the purchase price is allocated to goodwill, which is not expensed unless it is deemedimpaired in a future period, and therefore does not impact earnings on a recurring basis.

Investors should also watch for changes in the fair value of acquisition-related contingentconsideration assets and liabilities which are required to be remeasured to fair value at eachreporting date until the contingency is resolved. Any changes in fair value are recognized inearnings. Investors should watch for companies overstating (understating) liabilities (assets) forcontingent considerations at the acquisition date and subsequently boosting earnings throughreversals in future periods. In addition, material boosts to earnings from the remeasurement ofacquisition-related contingent consideration represent non-recurring sources of income.

IFRS :While a small number of differences exist with respect to business combination accounting underUS GAAP versus IFRS, accounting under both regimes has been largely aligned. The concerns,indicators and discussion above are generally applicable when focusing on companies reportingunder IFRS.


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Cookie Jar Reserves (e.g. Doubtful Accounts. Returns. Royalties. Warranties. Inventory Obsolescence)

Concern:

Estimates required to establish reserves against certainassets - i.e. provisions for doubtful accounts, salesreturns, warranties, etc. - can be used by managementto manipulate revenues, earnings, and margins.

Indicators:

Significant decline in reserve balances and/or provisionamounts relative to related asset balances and sales.

Costs for bad debts, sales returns, warranties, obsolete inventory, and other provisions areestimated by management and recorded as either expenses or offsets to revenue (dependingupon the provision). Management has discretion in calculating these estimates, and therefore hasthe ability to manipulate earnings, and sometimes revenues. Specifically, by under-provisioning orreversing previous provisions, management can generate artificial, and therefore unsustainable,earnings.

The allowance for doubtful accounts (ADA), for instance, is an estimate that is generally basedon past defaults, credit quality, current aging levels, and other relevant considerations. Generally,a company's ADA should closely track its gross receivables, and a company's bad debtsprovision should fluctuate consistently with its sales. As such, analysts can often identify achange in estimates by monitoring changes in (a) ADA as a percentage of gross accountsreceivable and (b) bad debts provision as a percentage of sales. If there does not appear to be asound reason for significant changes in these ratios, the company may be managing earnings byaltering its bad debts estimates/policies. Even if a lower provision is justified, the earnings growthgenerated from the decline in provision may not be sustainable.

In addition, the accrual for warranty reserves is an estimate that is generally based upon pastwarranty claims experience, an assessment of product quality versus prior periods, currentclaims, production changes, industry developments and other considerations. As warranties aregenerally accrued for each product sold, the level of warranty expense should not fluctuatemarkedly relative to sales. Significant changes in the ratio of warranty expense to sales maysignal that the company is managing earnings by altering its warranty estimates and/or policies.Even if a lower allowance is justified, the earnings growth generated from the decline in theallowance may not be sustainable.

The inventory obsolescence reserve is an estimate that is based on the expected salability ofcurrent inventory. Inventory obsolescence provisions are generally included in cost of sales andare subject to a high degree of management discretion. A large inventory charge would hurtearnings in the current period but could lead to higher margins and earnings if, as a result of thecharge, a company reduces its inventory obsolescence provision in subsequent periods.Additionally, if a company sells this reserved inventory in later periods it would receive a boost togross margins and earnings as the cost basis for the product would be artificially low.

CFRA highlighted a benefit to Soitech S.A’s (SOI.FP) FYE 2010 earnings from continueddeclines in receivables and inventory provisioning levels. The provision for bad debts relative to


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gross accounts receivable declined to 0.7% in FYE 2010 from 1.1% in FYE 2009. Similarly, theinventory provision for obsolete inventory as a percentage of gross inventories declined to 16.7%at FYE 2010 from 17.2% in FYE 2009. CFRA cautioned that the benefit to earnings from thefalling provision levels may not be sustainable and thus, may have provided a short-term benefitto reporting operating profit.

IFRS:The concerns, indicators and discussion above are equally applicable when focusing oncompanies reporting under IFRS.


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Deferred Gross Margin

Concern:

If deferred profit decreases relative to deferred revenue,gross margin in the current quarter may have benefitedto the detriment of gross margin in future periods.

Indicators:

Decline in deferred margin (deferred profit divided bydeferred revenue).

Deferred profit is essentially deferred revenue less deferred cost of goods sold. Deferred grossmargin is deferred profit expressed as a percentage of deferred revenue. Trends in deferredmargins may be leading indicators of trends in actual margins. Specifically, a drop in deferredmargin could mean that when this deferred revenue flows through the income statement as sales,it will be recognized at a lower actual profit margin. Similarly, CFRA cautions that any margingrowth related to the recognition of deferred revenue more rapidly than deferred profit (i.e. leavingcosts on the balance sheet) may not be sustainable.

IFRS:The concerns, indicators and discussion above are equally applicable when analyzing companiesreporting under IFRS.


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Depreciation of Property Plant and Equipment (PP&E)

Concern:

Companies can boost earnings by extending thedepreciable lives of PP&E beyond their reasonable usefullives.

Indicators:

Decline in depreciation expense relative to grossPP&E.Longer depreciable lives for PP&E than competitors.Footnote disclosure of change in depreciable lives ofPP&E.Depreciation consistently lower than capitalexpenditures.

Companies in the Semiconductors and Semiconductor Equipment industry are fixed assetintensive, making depreciation a significant expense for most of these companies. Sincedepreciation is based on estimates of asset lives, management can manipulate these estimatesto manage earnings. Specifically, extending the depreciable life of an asset will boost acompany's earnings while shortening depreciable lives will decrease earnings. Therefore, it isimportant to refer to the notes to the financial statements to ensure that a change in depreciablelife has not occurred. Additionally, analyzing the trend in depreciation expense relative to grossPP&E and comparing the depreciable lives used by competitors with those used by thecompany may detect potential manipulation. Finally, be wary of companies where capitalexpenditures consistently exceed depreciation as these companies may be understatingdepreciation expense or may experience an increase in depreciation expense in future periods.

In December 2009, CFRA cautioned that Axcelis Technologies, Inc. (ACLS)may havelengthened the lives over which it depreciates PP&E during 2009. Specifically, CFRA notedthat depreciation and amortization declined in the first three quarters of 2009 relative to priorperiods. Though ACLS did not change useful lives in 2008 relative to 2007 per the FYE 200810-K, it is possible that the Company may have changed estimates during FYE 2009.

IFRS:The concerns, indicators and discussion above are equally applicable when analyzing companiesreporting under IFRS


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Inventory Accounting and Analysis

Concern:

Companies can use inventory accounting and productionmanagement to manipulate margins.

Indicators:

Rising inventory levels relative to cost of sales. Changes in inventory accounting policies.Rising production relative to cost of sales. Inventory growth that outpaces expected revenuegrowth.

Inventory Glut - A substantial increase in inventory may be a leading indicator of an upcomingdecline in margins. Specifically, when a company's inventory rises faster than cost of goods sold,CFRA cautions that the inventory growth may be due to the company's inability to sell theinventory (which raises the risk of future obsolescence charges) or that the company may beleaving costs on its balance sheet in the form of inventory rather than expensing these costs onits income statement, raising concerns about the sustainability of earnings and margin growth.

Over-Production - "Production" represents all inventory purchases and inventory manufacturingduring the period. CFRA calculates production as: Ending Inventory - Beginning Inventory +COGS. When production rises, Wireless Telecommunications companies experience greaterabsorption of fixed manufacturing costs. In other words, the fixed costs of production areallocated over a larger number of units, which drives down the cost per unit, thereby increasinggross margin when the inventory is sold. Conversely, when production declines, companiesexperience lower absorption of fixed costs, which in turn decreases gross margin.

Since a slowdown in production may result in a gross margin decline, CFRA raises concern whenan increase in production does not appear sustainable. By tracking production relative to cost ofgoods sold (COGS), analysts can gauge a company's level of production. Specifically, increasesin the production-to-COGS ratio may indicate that the company is receiving a benefit to grossmargin. Such increases are not sustainable perpetually, and as such, neither is the relatedmargin growth. Additionally, if a company's production ratio exceeds 100%, it implies that thecompany is producing more product than it is selling. A production ratio of over 100% is notsustainable perpetually, and as production declines, so too should gross margin.

For example, SMA Solar Technology AG’s (S92.GR) inventory relative to forward sales remainedelevated at 3Q11. Specifically, relative to forward sales, inventory rose 49% during 3Q11 from38% in the prior year. Finished goods trended in the same manner, rising to 13.4% of forwardsales from 8.7% in the prior quarter and 12.0% in 3Q10. As sales prices were falling, CFRAhighlighted that upcoming margin pressure may result from the elevated inventory levels.

Renewable Energy Corporation ASA’s (REC.NO) inventories expressed in days sales (DSI) grewto 202 days in 3Q11 from 148 days in the prior year. At the same time, inventories expressed asa percentage of next six months sales grew to a record-high of 68.1% 3Q11 up from 28.3% in theprior year despite a NOK 130 million inventory write-down recorded at the end of 3Q11. CFRAexpressed concern that the continued inventory growth could result in future margin pressure.


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IFRS:The concerns, indicators and discussion above are equally applicable when focusing oncompanies reporting under IFRS. One item to note is that the LIFO inventory costing method isnot permitted under IFRS.


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Related Party Transactions and Other Governance Issues

Concern:

Companies could manipulate results through relatedparties, joint ventures, etc.

Indicators:

Increases in sales to related parties; existence of jointventures.

Companies often engage in related party transactions and joint ventures. CFRA believes that theterms of business transactions with related parties may not always be at arms' length. Jointventures are also common in the industry, although the nature of the joint ventures variesdepending on the structure. Consequently, the types of concerns vary from company to company.The following transactions generally raise concerns:

-Transactions with significant shareholders: We note the possibility that a stockholder couldchoose to direct sales to the related party to prop up its investment. Additionally, if thestockholder were to sell its position, it may lose the incentive to buy goods or services from thecompany.-Two way transactions: When entities have multiple transactions with each other, it is possiblethat terms of the individual transactions were not arranged at arms' length.

For example, in 2011 Apollo Solar Energy Technology Holdings, Ltd. (566.HK) sold parts ofinvestments and businesses to related parties which included businesses owned by “keymanagement personnel”. In addition, the Company curiously paid a dividend exclusively tominority shareholders.

IFRS:The concerns, indicators and discussion above are applicable when analyzing companiesreporting under IFRS.


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Restructuring and Other Special Charges

Concern:

Companies can use one-time charges to managereported and/or pro-forma earnings.

Indicators:

Recurring and/or significant special charges,adjustments to previous one-time charges, inclusion ofoperating costs in restructuring charges.

Companies record special charges for unusual or infrequent items, e.g., restructuring charges.Such charges are often excluded from non-GAAP earnings, and therefore provide dishonestmanagement with the ability to enhance analysts' perception of its profitability through aggressiveuse of these special charges.

Significant and/or recurring use of special charges is a red flag that a company may be usingspecial charges to flatter non-GAAP results. Specifically, we caution that companies may boostnon-GAAP earnings in the current period by bundling normal, recurring costs into the specialcharges. Alternatively, the company may position itself to boost reported earnings in futureperiods by either (a) recording excess reserves on the liability side of the balance sheet or (b) byreducing the carrying value of assets that will be used in a subsequent period. For example, thecompany could take a special charge to write down (or write off) inventory, and then sell thegoods later at what amounts to 100% margins. Similarly, a company may decrease the carryingvalue of fixed assets so as to reduce future depreciation expense.

Analysts should further note that even when special charges are made in good faith, frequentrestructuring charges can impair comparability of results across periods, and consequentlyimpede analysis of ongoing operations.

IFRS:Under IAS 1, no items of income and expense are to be presented as extraordinary or as arisingfrom outside the entity's ordinary activities. Although a company can choose to presentextraordinary items in a non IFRS format, when items of income and expense are material, IFRSrequires that their nature and amount be disclosed separately. However, the concerns arisingfrom recording of significant and continuous restructuring charges (even if not presented asextraordinary) as discussed above are equally relevant for companies reporting under IFRSregulations.


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Appendix 1 - Risk Assessment Checklist for Semiconductors & Semiconductor Equipment

Accelerating the Recognition of Revenue Growth in accounts receivable, drop in deferred revenue or deferred profit and/or change in revenue recognition disclosure

Business Combinations - Risks Related to Purchase Accounting Goodwill accounting for a higher portion of the purchase price allocation versus other acquisitions in the industry.Large purchase price adjustments which increase the amount of goodwill recorded.A significant reduction in the acquired company's tangible assets if you are able to obtain historical financials of the targetcompany.

Cookie Jar Reserves (e.g. Doubtful Accounts. Returns. Royalties.Warranties. Inventory Obsolescence)

Significant decline in reserve balances and/or provision amounts relative to related asset balances and sales.

Deferred Gross Margin Decline in deferred margin (deferred profit divided by deferred revenue).

Depreciation of Property Plant and Equipment (PP&E) Decline in depreciation expense relative to gross PP&E.Longer depreciable lives for PP&E than competitors.Footnote disclosure of change in depreciable lives of PP&E.Depreciation consistently lower than capital expenditures.

Inventory Accounting and Analysis Rising inventory levels relative to cost of sales. Changes in inventory accounting policies.Rising production relative to cost of sales. Inventory growth that outpaces expected revenue growth.

Related Party Transactions and Other Governance Issues Increases in sales to related parties; existence of joint ventures.

Restructuring and Other Special Charges Recurring and/or significant special charges, adjustments to previous one-time charges, inclusion of operating costs inrestructuring charges.


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Appendix 2 - Industry Term Glossary

Term Definition

Fab A chip-making factory.

Fabless Fabless companies purchase their inventory instead of manufacturing it.

Non-GAAP Earnings Earnings excluding certain items, such as amortization, stock-based compensation, charges, etc. Definition varies by company.

Production Yields The percentage of functional chips at the end of the production process as a percentage of the total number of chips possible at the start ofproduction. More defective chips will decrease production yields and drive up the carrying cost of inventory, ultimately raising COGS.

Sell-In Companies recognize revenue on a “sell-in” basis if revenue is recognized when product enters the channel.

Sell-Through Companies recognize revenue on a “sell-through” basis if revenue is deferred until the distributor sells the product to the end user.


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Appendix 3 - Accounting Term Glossary

Term Definition

Accrual Accounting The dominant system of accounting in which revenues are recorded as they are earned and expenses are recorded as they are earned andincurred, not necessarily when there is a cash inflow or outflow.

Accruals Balance sheet items that represent liabilities and non-cash-based assets. Accruals measure what a company owes in the future and whatcash revenue it expects to receive. In addition, it allows a company’s assets to appear on the balance sheet that do not have a cash value (i.e.goodwill).

Aging A categorization of accounts receivable based upon the date the invoice was issued. The earliest invoiced receivables are the "oldest" withthe latest receivables listed as "current". Often used to help determine total estimated uncollectible amounts.

Allowance for Doubtful Accounts An estimate of the amount of accounts receivable for which payment will not be received.

Asset Tangible and intangible economic resources that are owned or controlled by a company

Average Cost Method An inventory cost method that assumes the cost of inventory is based on the average cost of all goods available for sale.

Balance Sheet Required financial statement to be disclosed quarterly by publicly traded companies which provides information about a company's presentposition. It reports the assets, liabilities, and owners' equity of the company. It is often referred to as a "snapshot" of a company's financialposition.

Book Value The value of an asset as it appears on a balance sheet; also could refer to total of a company's common stock equity as it appears on abalance sheet, equal to total assets minus liabilities.

Book Value Per Common Share A measure of net worth; computed by dividing stockholders' equity for common stock by the number of shares outstanding for commonstock.

Capital Expenditure - CAPEX An expenditure made in the purchase of a long-term asset. Examples include property, plant and equipment.

Capital Lease A leasing transaction that transfers, in an economic sense, the risks and rewards of ownership to the lessee without transferring title. Thistype of lease is recorded as a purchase and its cost is amortized over its relevant useful life by the lessee.

Capitalization From accounting standpoint, it is where expenditures to acquire an asset are included on the balance sheet as an asset, rather than as anexpense on the income statement

Cash Conversion Cycle Estimates the time duration between the outlay of cash and cash recovery. It is calculated by subtracting the number of days sales in payablefrom the sum of the number of days sales in inventory and days sales outstanding.

Cash Earnings Per Share - Cash EPS A ratio derived by dividing cash flow from operations (CFFO) by diluted shares outstanding.

Cash Flow The net amount of cash a company generates or uses during a period.

Cash Flow from Financing Activities A subsection of the cash flow statement that accounts the flow of cash between a firm and its owners and creditors. This includes externalactivities such as payment of cash dividends, adding or changing loans, or the issuance and sale of stock.

Cash Flow from Investing Activities A category on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses)from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent on in

Cash Flow from Operations - CFFO A category on the cash flow statement that reports an entity's net cash inflow resulting directly from its regular operations (disregardingextraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calc

Cash Flow Statement Required financial statement to be disclosed quarterly by publicly traded companies. The document provides aggregate data regarding allcash inflows and all cash outflows segregated into operating, investing and financing activities.


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Term Definition

Channel Stuffing This is a practice where companies inflate their sales or revenue by selling more products to a distribution channel than that channel iscapable of selling to its customers. This practice typically results in higher sales in the period that the channel stuffing occurs followed bylower sales in future periods.

Common Size Financial Statement A method of analyzing financial statements that displays all items as percentages of a statement component (i.e. revenue). This methodallows for analysis between companies or between time periods of a single company.

Comprehensive Income Formula which equals net income minus all recognized changes in equity during a period, such as losses or gains on foreign currencytransactions.

Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries.

Contingent Asset An asset in which the possibility of ownership depends solely upon future events uncontrollable by the company.

Contingent Liability A possible future obligation to pay certain amounts which is dependent on future events; or, defined obligations by a company that must bemet, but where the probability of payment is minimal.

Contra Account An account on the balance sheet of a company that offsets the balance of a related and corresponding account.

Cookie Jar Reserve A credit account on the balance (i.e. liability or contra-asset) whose balance is based on estimates that are subject to a great deal ofmanagement discretion. Common examples include, allowance for doubtful accounts, warranty reserve, sales returns reserve, inventoryobsolescence reserve, loan loss reserve, etc.

Cost Of Goods Sold - COGS The expense incurred to purchase, manufacture or deliver the products and/or services delivered during a period.

Coverage Ratio A measure of a corporation's ability to meet a particular expense. Often used to determine if cash flows are sufficient to pay interest amountsdue.

Current Ratio The ratio of current assets to current liabilities.

Date of Record The date on which the shareholders of record are identified as those who will receive dividends.

Days Sales in Inventory - DSI A measure of how well inventory levels are being managed. DSI is computed by dividing the number of days in the period by the inventoryturnover ratio.

Days Sales in Payables - DSP Measure of rate of payment to a company's vendors. Calculated as Accounts Payable divided by Cost of Goods Sold.

Days Sales Outstanding - DSO A measure of the number of days it takes to collect a credit sale; computed by dividing the number of days in the period by the accountsreceivable turnover.

Debt/Equity Ratio A measure of the financial leverage of a company; calculated by dividing long-term debt by stockholder equity.

Declaration Date The date on which a corporation's board of directors formally decides to pay a dividend to shareholders.

Deferred Charge A prepaid expense recorded on the balance sheet as an asset until it is used, matching revenues with expenses.

Deferred Income Tax A balance sheet account (may be an asset or a liability) used to record the difference between income tax expense on the income statementand income taxes payable.

Deferred Revenue A liability on the balance sheet used to collect deposits and other cash receipts prior to the completion of the sale (delivery of the product orservice).

Depletion The system of converting the original cost of a natural resource to an expense on the income statement in the periods benefited.

Depreciation The system of converting the original cost of a log-lived asset (such as plant and equipment) to an expense on the income statement in theperiods benefited.


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Term Definition

Earnings Before Interest & Tax - EBIT A profitability indicator of a company; calculated as revenue minus expenses, excluding tax and interest. (A.K.A. - "operating earnings","operating profit" and "operating income"

Earnings Before Interest, Taxes, Depreciation, andAmortization

A profitability indicator of a company; calculated as revenue minus expenses, excluding taxes, interest, depreciation and amortization.

Earnings Per Share - EPS The amount of net income (earnings) linked to each share of stock; computed by dividing net income by the average number of shares ofcommon stock outstanding during the period

Effective Tax Rate An expression of the tax rate which reflects the percentage of the actual tax liability to the accounting income generated by the company;calculated as: net tax liability/financial (book) income before taxes.

Equity Accounting A method of accounting whereby a corporation will record a portion of the undistributed profits for an unconsolidated subsidiary. The amountof undistributed profits that the corporation generally records is equal to the percentage of equity it controls.

Extraordinary Item Gains or losses included in a company's income statement which are infrequent and unusual in nature. These are usually the result ofunforeseen and atypical events and are often described further in the footnotes to the financial statements.

Factor To sell accounts receivable at a discount before they are due.

Fair Value An estimate of the price that could be received for an asset or paid to settle a liability in a current transaction between marketplaceparticipants in the reference market for the asset or liability.

Financial Accounting Standards Board (FASB) The private organization which established the standards for financial accounting and reporting in the United States.

First In, First Out - FIFO An inventory cost flow system where the first goods purchased are assumed to be the first goods sold so that the ending inventory consists ofthe most recently purchased goods. In periods of rising prices, this method results in higher reported margins.

Fixed Asset A long-term tangible asset that a firm owns and uses in the production of its income and is not expected to be consumed or converted intocash any sooner than at least one year's time.

Fixed-Charge Coverage Ratio A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. For example, since leases are a fixedcharge, the calculation determining a company's ability to pay for the leases would be (EBIT + Lease Expenses)

FOB (free-on-board) destination Seller of goods bears the shipping costs and maintains ownership (does not recognize revenue) until the goods are delivered to the buyer.

FOB (free-on-board) shipping point Buyer of goods bears the shipping costs and acquires ownership at the point of shipment.

Free Cash Flow - FCF A measure of financial performance calculated as operating cash flow minus CAPEX.

Gearing Ratio A measure of financial leverage, demonstrating the degree to which a firm's activities are funded by its owners versus its creditors.

Generally Accepted Accounting Principles - GAAP The guidelines that define accounting practices

Goodwill Any excess purchase price with an acquisition that cannot be attributed to tangible and intangible assets.

Gross Margin The excess of net revenues over the cost of goods sold.

Gross Sales Total sales recorded prior to deducting any sales discounts or sales returns and allowances.

Impairment An evaluation that an asset's carrying amount exceeds its recoverable amount

Income Statement The financial statement that summarizes the revenues generated and the expenses incurred by a company during a given period of time.

Income Tax A tax on money earned, usually filed on a yearly basis.

Intangible Asset A long-lived asset without physical substance, such as licenses, patents, franchises, and goodwill.


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Term Definition

International Financial Reporting Standards - IFRS International accounting guidelines that define accounting standards for reported financial statements. IFRS are issued by the InternationalAccounting Standards Board. IFRS are often confused with International Accounting Standards (IAS), which are the older standards that IFRSreplaced. (IAS were issued from 1973 to 2000.)

Inventory Goods held for sale.

Inventory Reserve An accounting entry that represents a reduction of earnings for the purpose of representing the true economic value of inventoried assets ona balance sheet.

Inventory Turnover A ratio measures how many times the inventory of a company is sold and replaced over a period of time.

Last In, First Out - LIFO An inventory cost flow system where the last goods purchased are assumed to be the last goods sold so that the cost of goods sold consistsof the most recently purchased goods. In periods of rising prices, this method results in lower reported margins.

Leasehold Improvements Represents permanent and unmovable capital expenses on a property that is under an operating lease. Leasehold improvements are classifiedas fixed assets and are depreciated over the remaining life of the lease.

Liability Obligation measured in monetary terms that represents the amount owed to other parties.

LIFO Liquidation When a company using the LIFO (Last In, First Out) method of inventory costing uses up their "older" layers of LIFO inventory. A LIFOliquidation occurs if current period sales are higher than current purchases

LIFO Reserve The difference between inventory values using the LIFO inventory method versus another inventory valuation method, such as FIFO oraverage cost method

Lower of Cost and Market Method A method used for valuing certain assets on the balance sheet at the lower of original cost or current market value.

Mark to Market - MTM The recording of the price or value of an asset (usually a security, portfolio or account) to reflect its current market value rather than its bookvalue.

Market Value The amount of money a typical, well-informed, unrelated buyer would be willing to pay for an asset

Merger The acquisition of one company by another company. By doing so the companies combine to become one legal entity, and the acquiredcompany ceases to exist.

Negative Goodwill A gain occurring when the price paid for an acquisition is less than the fair value of its net assets. This usually listed as a separate line itemand is recognized as income.

Net Debt Calculated as short- and long-term interest-bearing debt less cash and cash equivalents.

Non Performing Asset An asset that is effectively not producing income.

Obsolete Inventory Inventory that is determined to be unable to be sold either due to its age or due to a newer product innovation which hampers the utility ofthe inventory item.

Operating Lease A lease that does not transfer the risks and rewards of ownership to the lessee.

Other Current Assets A balance sheet item which includes the monetary value of non-cash assets due within one year.

Other Current Liabilities A balance sheet item used by companies to group together current liabilities that are not assigned to other balance sheet liability accounts.

Other Long-Term Liabilities A balance sheet item that includes liabilities that do not currently require interest payments.

Overhead A reference to costs not included in or related to direct labor, materials, or administration costs.

Paid in Capital Capital received from investors in exchange for stock. This is recorded as an entry on the balance sheet in stockholders' equity.

Par-Value Stock Stock that has a nominal value assigned to it in the corporation's charter. This amount is printed on the face of each share of stock.


SAMPLE



Term Definition

Pension Plan A contractual relationship between a company and its employees where the company agrees to pay benefits to employees after theirretirement.

Percentage of Completion The percentage of completion method of revenue recognition typically used for long-term construction-type contracts or service contracts thatspan multiple reporting periods. Under the percentage of completion method, a company recognizes revenues and costs on a contract as itprogresses towards completion.

Prepaid Expense Payments made in advance for items charged to expense.

Pro Forma A method of calculating financial results in order to emphasize either current or projected figures. Pro forma financial statements could bedesigned to reflect a proposed change or to emphasize certain figures (that may not comply with GAAP) when a company issues an earningsannouncement to the public.

Production All inventory purchases and inventory manufacturing during the period, calculated as: Ending Inventory – Beginning Inventory + COGS

Property, Plant, and Equipment - PP&E Tangible, long-lived assets acquired for use in business operations.

Provision The income statement impact (i.e. expense or benefit) resulting from a change in a reserve account.

Public Company Accounting Oversight Board - PCAOB A non-profit regulator of auditors of publicly traded companies.

Purchase Method Accounting for an acquisition allocating the purchase price to the fair value of the acquired assets with the difference being accounted for bythe acquirer as goodwill.

Purchase Returns and Allowances A contra-purchase account used for recording the return of, or allowances for, previously purchased merchandise.

Quality of Earnings Refers to concept that some earnings reported by an entity could be the result of changes in accounting estimates or other factors which arenot representative of the true operational performance of a business during the reporting period.

Quick Ratio The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets (i.e. excluding inventory). Calculated as ((cash plus receivables plus marketable securities)/current liabilities).

Receivables Amount owed to a company for goods and services sold by the company but not yet collected

Recourse Contractual obligations to absorb losses on assets that have been securitized and are no longer present on the balance sheet. A recourseobligation typically arises when a company transfers assets on a sale and retains an obligation to repurchase the assets or absorb losses dueto a default of principal or interest or any other deficiency in the performance of the underlying obligor. Recourse may also exist implicitlywhere a company provides credit enhancement beyond contractual obligations to support assets it has sold.

Replacement Cost The price that would have to be paid to replace an existing asset with a similar asset.

Residual In the context of securitization of financial assets, a residual is an asset that represents the rights to future cash flows from assets that havebeen securitized.

Restatement A revision in a company's earlier financial statements.

Retained Earnings The portion of a corporation's owners' equity that has been earned from the accumulated profitable operations over time which has not beendistributed to stockholders.

Return on Assets - ROA An overall measure of the return to both stockholders and creditors; calculated as net income divided by average total assets.

Return on Equity - ROE A measure of overall performance from a stockholder's viewpoint; includes management of operations, uses of assets, and management ofdebt and equity; calculated as net income divided by average stockholder's equity.

Return on Investment (ROI) A measure of whether a proposed investment is profitable to the investor; calculated as the ratio of the amount gained (taken as positive), orlost (taken as negative), relative to the amount invested.


SAMPLE



Term Definition

Revenue Recognition Methodology by which a company records revenue in its income statement. Basic concept is that revenues are inflows of cash orenhancements of assets or the satisfaction of liabilities as a result of the delivery of goods or services to a customer as part

Salvage, or residual, value Estimated value or actual price of an asset at the conclusion of its useful life, net of disposal costs.

Sarbanes-Oxley Act US Law passed in 2002 increasing regulation on auditors and publicly traded companies.

SEC (Securities and Exchange Commission) Government agency in US responsible for regulating the financial reporting practices of most publicly owned corporations in connection withthe buying and selling of stocks and bonds. Ultimate authority on financial reporting for publicly traded companies

Selling, General & Administrative Expense – SGA Category of the Income Statement and represents the cumulative amount all direct and indirect selling expenses and all general andadministrative expenses of a company incurred in the normal operations of a company.

Shareholders' Equity Category of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, andretained earnings. Also generally equals total assets minus liabilities.

Special Purpose Entity/Vehicle (SPE/V) A SPE/V is a trust with a limited purpose or life that usually serves as a conduit or pass-through organization. In relation to securitization, it isthe entity that holds legal right over the assets transferred by the originator and serves to isolate the assets from the bankruptcy of thetransferor.

Standard unqualified audit report Audit report indicating the auditor's conclusion that the audited financial statements are fairly stated in accordance with generally acceptedaccounting principles.

Statement of cash flows Required financial statement to be disclosed quarterly by publicly traded companies. The document provides aggregate data regarding allcash inflows and all cash outflows segregated into operating, investing and financing activities.

Statement of Earnings (Income Statement) Required financial statement to be disclosed quarterly by publicly traded companies. The statement summarizes the revenues generated andthe expenses incurred by an entity during a period of time.

Statement of Stockholders' Equity Required financial statement to be disclosed quarterly by publicly traded companies which reports all changes in stockholders' equity during aperiod of time.

Straight-line depreciation method A depreciation method in which the depreciation base of an asset (cost - residual value) is allocated equally over the periods of the asset'sestimated useful life.

Treasury Stock (Treasury Shares) Stock repurchased by the issuing company and that should not be included in shares outstanding calculations. Treasury stock is created whena company does a share buyback and purchases its shares on the open market.

Treasury Stock Method The component of the diluted earnings per share denominator that includes the net of new shares potentially created by unexercisedin-the-money warrants and options. This method assumes that the proceeds that a company receives from an in-the-money option exerciseare used to repurchase common shares in the market. The treasury stock method must be used by a company when computing its dilutedearnings per share (EPS) to comply with generally accepted accounting principles (GAAP).

Unearned Revenue Amounts received before they have been earned.

Units-of-production depreciation method The depreciation method in which the depreciable base of the asset is allocated to each period on the basis of the productive output or use ofthe asset during the period.

Variable Interest Entity (VIE) A VIE is an entity with insufficient equity to permit it to finance its activities without external support; or one in which equity investors lackeither voting control, an obligation to absorb expected losses, or the right to receive expected residual returns. FIN 46 requires companies toidentify VIEs in which they have an interest, determine whether they are the primary beneficiary of such entities and, if so, to consolidatethem. A primary beneficiary is an enterprise that will absorb a majority of a VIE's expected losses, receive a majority of its expected residualreturns, or both. A primary beneficiary or other entity having a significant variable interest in a VIE will provide disclosures to enable the usersof financial statements to understand and evaluate that interest.


SAMPLE



Term Definition

Work in Progress - WIP A category of inventory cost which includes all work that has not been completed but has already incurred by the company toward building itsinventory.

Working Capital The amount by which current assets exceed current liabilities.


SAMPLE



Appendix 4 - Leading Companies in Semiconductors & Semiconductor Equipment

Company Ticker Market Cap

Broadcom Corp. BRCM 17710

Applied Materials Inc. AMAT 19356

Texas Instruments Inc. TXN 33408

Taiwan Semiconductor Manufacturing C TSM 58276

Intel Corp. INTC 130214


SAMPLE



Appendix 5 - QuickScores for Semiconductors & Semiconductor Equipment

1 = Lowest Earnings Quality Risk, 10 = Highest Earnings Quality RiskQuickScore quantifies the accrual component of earnings of approximately 5000 North American and 5000 European companies. The model—developed in conjunction with three Whartonprofessors—sorts these companies into deciles. The model's backtesting indicates predictiveness with regard to stock performance, accounting restatements and class action lawsuits.

Company Ticker QuickScore Period Ending

3P System Co. Ltd. 110500.KS 1 12/31/2011

ABOV Semiconductor Co. Ltd. 102120.KS 10 12/31/2011

ACTIONS SEMICNDCTR LTD -ADR ACTS 8 9/30/2011

ADVANCED ANALOGIC TECH AATI 3 9/30/2011

ADVANCED ENERGY INDS INC AEIS 5 12/31/2011

ADVANCED MICRO DEVICES AMD 2 12/31/2011

Advanced Semiconductor ManufacturingCorp. Ltd.

3355.HK 3 6/30/2011

ADVANTEST CORP -ADR ATE 10 9/30/2011

Aixtron SE AIXA.GR 8 12/31/2011

AIXTRON SE -ADR AIXG 8 9/30/2011

aleo solar AG AS1.GR 9 12/31/2011

ALPHA AND OMEGA SEMICONDUCTR AOSL 7 12/31/2011

Alpha Chips Corp. 117670.KS 10 12/31/2011

ALTERA CORP ALTR 2 12/31/2011

AMKOR TECHNOLOGY INC AMKR 6 12/31/2011

AMTECH SYSTEMS INC ASYS 8 9/30/2011

ANADIGICS INC ANAD 3 9/30/2011

ANALOG DEVICES ADI 3 1/31/2012

AnaPass Inc. 123860.KS 1 12/31/2011

APPLIED MATERIALS INC AMAT 9 1/31/2012

APPLIED MICRO CIRCUITS CORP AMCC 6 12/31/2011

ARM Holdings PLC ARM.LN 6 12/31/2011

ARM HOLDINGS PLC -ADR ARMH 6 12/31/2011

Asia Pacific Systems Inc. 054620.KS 6 12/31/2011

ASM INTERNATIONAL NV ASMI 8 9/30/2011

ASML Holding N.V. ASML.NA 2 12/31/2011

ASML HOLDING NV -ADR ASML 2 12/31/2011

ASTJETEC Co. Ltd. 090470.KS 7 12/31/2011

ATMEL CORP ATML 7 12/31/2011

ATMI INC ATMI 5 12/31/2011


austriamicrosystems AG AMS.SW 10 9/30/2011

AUTHENTEC INC AUTH 7 9/30/2011

Avaco Co. Ltd. 083930.KS 1 12/31/2011

AVAGO TECHNOLOGIES LTD AVGO 2 10/31/2011

AXCELIS TECHNOLOGIES INC ACLS 7 9/30/2011

AXT INC AXTI 8 9/30/2011

BCD SEMICONDUCTOR MFG -ADR BCDS 9 9/30/2011

BE Semiconductor Industries N.V. BESI.NA 4 9/30/2011

BIEMT Co. Ltd. 052900.KS 3 12/31/2011

BROADCOM CORP -CL A BRCM 3 12/31/2011

BROOKS AUTOMATION INC BRKS 7 12/31/2011

BTU INTERNATIONAL INC BTUI 6 12/31/2011

C&S Technology Co. Ltd. 038880.KS 10 12/31/2011

CABOT MICROELECTRONICS CORP CCMP 2 12/31/2011

CAMTEK LTD CAMT 4 9/30/2011

CANADIAN SOLAR INC CSIQ 8 9/30/2011

CASCADE MICROTECH INC CSCD 2 9/30/2011

CAVIUM INC CAVM 10 12/31/2011

Centrosolar Group AG C3O.GR 10 9/30/2011

centrotherm photovoltaics AG CTN.GR 9 9/30/2011

CEVA INC CEVA 3 9/30/2011

Charm Engineering Co. Ltd. 009310.KS 6 12/31/2011

CHINA SUNERGY CO LTD -ADR CSUN 9 9/30/2011

CHIPMOS TECHNOLOGIES LTD IMOS 2 9/30/2011

CIRRUS LOGIC INC CRUS 10 12/31/2011

CML Microsystems PLC CML.LN 5 9/30/2011

CNPV Solar Power S.A. ALCNP.FP 10 12/31/2010

COHU INC COHU 5 12/31/2011

Core Logic 048870.KS 9 12/31/2011

CREE INC CREE 10 12/31/2011


SAMPLE




CSR PLC CSR.LN 10 12/31/2011

CTL Inc. 036170.KS 2 12/31/2011

Curoholdings Co. Ltd. 051780.KS 10 12/31/2011

CVD EQUIPMENT CORP CVV 1 9/30/2011

CYBEROPTICS CORP CYBE 2 9/30/2011

CYMER INC CYMI 3 12/31/2011

CYPRESS SEMICONDUCTOR CORP CY 2 12/31/2011

D. ID Corp. 074130.KS 2 12/31/2011

DAQO NEW ENERGY CORP -ADR DQ 9 9/30/2011

Dialog Semiconductor PLC DLG.GR 10 12/31/2011

DIODES INC DIOD 8 12/31/2011

Display Tech Co. Ltd. 066670.KS 10 12/31/2011

DMS Co. Ltd. 068790.KS 10 12/31/2011

DS Co. Ltd. 051710.KS 6 12/31/2011

DSP GROUP INC DSPG 1 9/30/2011

e-LITECOM Co. Ltd. 041520.KS 7 12/31/2011

EEMS Italia S.p.A. EEMS.IM 7 9/30/2011

Elk Corp. 094190.KS 7 12/31/2011

Elmos Semiconductor AG ELG.GR 4 12/31/2011

Emerging Memory & Logic Solutions Inc. 080220.KS 1 12/31/2011

ENERGY CONVERSION DEV ENERQ 1 9/30/2011

Enspert. Inc. 098400.KS 1 12/31/2011

ENTEGRIS INC ENTG 2 12/31/2011

ENTROPIC COMMUNICATIONS INC ENTR 3 12/31/2011

EO Technics Co. Ltd. 039030.KS 7 12/31/2011

Eugene Technology Co. Ltd. 084370.KS 1 12/31/2011

Evertechno Co. Ltd. 070480.KS 8 12/31/2011

EXAR CORP EXAR 1 12/31/2011

EZCHIP SEMICONDUCTOR LTD EZCH 3 9/30/2011

FAIRCHILD SEMICONDUCTOR INTL FCS 5 12/31/2011

Fine Semitech Corp. 036810.KS 10 12/31/2011

Fine Technix Co. Ltd. 106240.KS 9 12/31/2011

First Sensor AG SIS.GR 8 9/30/2011

FIRST SOLAR INC FSLR 9 12/31/2011

FORMFACTOR INC FORM 2 12/31/2011

FREESCALE SMCNDCTR HLD I LTD FSL 1 12/31/2011


From30 Co. Ltd. 073570.KS 4 12/31/2011

FSI INTL INC FSII 9 11/30/2011

G Learning Corp. 032800.KS 3 12/31/2011

GCL-Poly Energy Holdings Ltd. 3800.HK 10 6/30/2011

GemVax & KAEL Co. Ltd. 082270.KS 1 12/31/2011

GENNUM CORP GND. 9 11/30/2011

GIGOPTIX INC 3GGOX 9 9/30/2011

Global Standard Technology Co. Ltd. 083450.KS 9 12/31/2011

GSI TECHNOLOGY INC GSIT 5 12/31/2011

GT ADVANCED TECHNOLOGIES INC GTAT 2 12/31/2011

Hana Micron Inc. 067310.KS 8 12/31/2011

Hanmi Semiconductor Co. Ltd. 042700.KS 9 12/31/2011

HANWHA SOLARONE CO LTD -ADR HSOL 10 9/30/2011

Hanyang Digitech Co. Ltd. 078350.KS 8 12/31/2011

Hicel Co. Ltd. 066980.KS 1 12/31/2011

HIMAX TECHNOLOGIES INC -ADR HIMX 4 9/30/2011

HITTITE MICROWAVE CORP HITT 5 12/31/2011

Hynix Semiconductor Inc. 000660.KS 8 12/31/2011

I&C Technology Co. Ltd. 052860.KS 7 12/31/2011

IDS Co. Ltd. 078780.KS 2 12/31/2011

IKANOS COMMUNICATIONS INC IKAN 1 9/30/2011

Iljin Display Co. Ltd. 020760.KS 9 12/31/2011

Imagination Technologies Group PLC IMG.LN 10 10/31/2011

Imagis Co. Ltd. 115610.KS 5 12/31/2011

Infineon Technologies AG IFX.GR 2 12/31/2011

INFINEON TECHNOLOGIES AG-ADR IFNNY 2 12/31/2011

Innox Corp. 088390.KS 10 12/31/2011

INPHI CORP IPHI 8 9/30/2011

INSIDE Secure S.A. INSD.FP 10 12/31/2010

INTEGRATED DEVICE TECH INC IDTI 4 12/31/2011

INTEGRATED SILICON SOLUTION ISSI 7 12/31/2011

Intekplus Co. Ltd. 064290.KS 2 12/31/2011

INTEL CORP INTC 8 12/31/2011

INTERSIL CORP -CL A ISIL 3 12/31/2011

INTEST CORP INTT 7 9/30/2011

INTL RECTIFIER CORP IRF 8 12/31/2011


SAMPLE




IQE PLC IQE.LN 9 6/30/2011

ITEST Co. Ltd. 089530.KS 7 12/31/2011

IXYS CORP IXYS 4 12/31/2011

JA SOLAR HOLDINGS CO LTD-ADR JASO 9 9/30/2011

JINKOSOLAR HOLDING CO -ADR JKS 10 9/30/2011

JT Corp. 089790.KS 7 12/31/2011

Jusung Engineering Co. Ltd. 036930.KS 10 12/31/2011

KC Tech Co. Ltd. 029460.KS 1 12/31/2011

KEC Corp. 092220.KS 4 12/31/2011

Kerself S.p.A. KRS.IM 2 12/31/2010

KLA-TENCOR CORP KLAC 2 12/31/2011

KoMiCo Ltd. 059090.KS 7 12/31/2011

Kontron AG KBC.GR 6 12/31/2011

Kookje Electric Korea Co. Ltd. 053740.KS 1 6/30/2011

KOPIN CORP KOPN 6 9/30/2011

Korea Display System Co. Ltd. 080530.KS 10 12/31/2011

Korea Semiconductor System 089890.KS 9 12/31/2011

KULICKE & SOFFA INDUSTRIES KLIC 1 12/31/2011

L&F Co. Ltd. 066970.KS 9 12/31/2011

LAM RESEARCH CORP LRCX 2 12/31/2011

LATTICE SEMICONDUCTOR CORP LSCC 3 9/30/2011

LB Semicon Inc. 061970.KS 10 12/31/2011

LDK SOLAR CO LTD -ADR LDK 9 9/30/2011

LDT Inc. 096870.KS 5 12/31/2011

LIG ADP Co. Ltd. 079950.KS 2 12/31/2011

LINEAR TECHNOLOGY CORP LLTC 3 12/31/2011

LMS Co. Ltd. 073110.KS 7 12/31/2011

LSI CORP LSI 1 12/31/2011

LTS Co. Ltd. 138690.KS 10 12/31/2011

LTX-CREDENCE CORP LTXC 2 10/31/2011

MAGNACHIP SEMICONDUCTOR CORP MX 2 9/30/2011

Manz AG M5Z.GR 9 9/30/2011

MARVELL TECHNOLOGY GROUP LTD MRVL 2 10/31/2011

MATTSON TECHNOLOGY INC MTSN 4 9/30/2011

MAXIM INTEGRATED PRODUCTS MXIM 3 12/31/2011

MAXLINEAR INC MXL 6 9/30/2011


Meerecompany Inc. 049950.KS 10 12/31/2011

Melexis N.V. MELE.BB 3 9/30/2011

MELLANOX TECHNOLOGIES LTD MLNX 10 12/31/2011

MEMC ELECTRONIC MATRIALS INC WFR 7 12/31/2011

MEMSIC INC MEMS 5 9/30/2011

MICREL INC MCRL 2 12/31/2011

MICROCHIP TECHNOLOGY INC MCHP 4 12/31/2011

MICRON TECHNOLOGY INC MU 6 11/30/2011

Micronas Semiconductor Holding AG MASN.SW 7 12/31/2011

MICROSEMI CORP MSCC 10 12/31/2011

MINDSPEED TECHNOLOGIES INC MSPD 5 12/31/2011

MIPS TECHNOLOGIES INC MIPS 6 12/31/2011

Mirae Corp. 025560.KS 3 12/31/2011

MKS INSTRUMENTS INC MKSI 3 12/31/2011

MONOLITHIC POWER SYSTEMS INC MPWR 5 9/30/2011

MOSAID TECHNOLOGIES INC MSD. 9 10/31/2011

MOSYS INC MOSY 8 9/30/2011

MtekVision Co. Ltd. 074000.KS 1 12/31/2011

Nanoco Group PLC NANO.LN 8 1/31/2012

NANOMETRICS INC NANO 6 9/30/2011

NeoFidelity Inc. 101400.KS 9 12/31/2011

Nepes Corp. 033640.KS 9 12/31/2011

NETLOGIC MICROSYSTEMS INC NETL 4 12/31/2011

NEW ENERGY TECHNOLOGIES INC 3NENE 10 11/30/2011

Nexolon Co. Ltd. 110570.KS 10 12/31/2011

Nordic Semiconductor ASA NOD.NO 10 9/30/2011

NOVA MEASURING INSTRMNTS LTD NVMI 4 9/30/2011

NOVELLUS SYSTEMS INC NVLS 1 12/31/2011

NVE CORP NVEC 4 12/31/2011

NVIDIA CORP NVDA 6 1/31/2012

NXP SEMICONDUCTORS NV NXPI 3 9/30/2011

O2MICRO INTL LTD -ADR OIIM 3 9/30/2011

OD Tech Co. Ltd. 080520.KS 7 12/31/2011

Okmetic Oyj OKM1V.FH 6 9/30/2011

OMNIVISION TECHNOLOGIES INC OVTI 7 10/31/2011

ON SEMICONDUCTOR CORP ONNN 7 12/31/2011


SAMPLE




PDF SOLUTIONS INC PDFS 3 9/30/2011

PERICOM SEMICONDUCTOR CORP PSEM 8 12/31/2011

Phoenix Materials Co. Ltd. 050090.KS 2 12/31/2011

Phoenix Solar AG PS4.GR 7 9/30/2011

PHOTRONICS INC PLAB 7 10/31/2011

Pilkor Electronics Co. Ltd. 033290.KS 7 12/31/2011

PIXELWORKS INC PXLW 2 9/30/2011

PLA Co. Ltd. 082390.KS 10 12/31/2011

PLX TECHNOLOGY INC PLXT 10 9/30/2011

PMC-SIERRA INC PMCS 3 12/31/2011

POWER INTEGRATIONS INC POWI 7 12/31/2011

Protec Co. Ltd. 053610.KS 1 12/31/2011

PV Crystalox Solar PLC PVCS.LN 7 6/30/2011

PVA TePla AG TPE.GR 7 9/30/2011

Q-Cells SE QCE.GR 1 9/30/2011

QUICKLOGIC CORP QUIK 2 9/30/2011

RAMBUS INC RMBS 10 12/31/2011

RAMTRON INTERNATIONAL CORP RMTR 9 9/30/2011

Raygen Co. Ltd. 047440.KS 7 12/31/2011

RENESOLA LTD -ADS SOL 8 9/30/2011

Renewable Energy Corp. ASA REC.NO 1 9/30/2011

RF MICRO DEVICES INC RFMD 4 12/31/2011

RFsemi Technologies Inc. 096610.KS 10 12/31/2011

Riber S.A. RIB.FP 1 6/30/2011

Rorze Systems Corp. 071280.KS 2 12/31/2011

Roth & Rau AG R8R.GR 1 9/30/2011

RUBICON TECHNOLOGY INC RBCN 9 9/30/2011

RUDOLPH TECHNOLOGIES INC RTEC 2 12/31/2011

S Connect Co. Ltd. 096630.KS 8 12/31/2011

S Polytech Co. Ltd. 050760.KS 7 12/31/2011

S&S Tech Corp. 101490.KS 9 12/31/2011

S-Energy Co. Ltd. 095910.KS 9 12/31/2011

Samsung Electronics Co. Ltd. 005930.KS 6 12/31/2011

SAMT Co. Ltd. 031330.KS 3 12/31/2011

Sejin Electron Inc. 080440.KS 8 12/31/2011

SEMICONDUCTOR MFG INTL -ADR SMI 8 9/30/2011


SEMILEDS CORP LEDS 4 11/30/2011

Semisysco Co. Ltd. 136510.KS 10 12/31/2011

Semiteq Co. Ltd. 081220.KS 3 12/31/2011

SEMTECH CORP SMTC 3 10/31/2011

Seoul Semiconductor Co. Ltd. 046890.KS 9 12/31/2011

Shunfeng Photovoltaic International Ltd. 1165.HK 10 12/31/2010

SIGMA DESIGNS INC SIGM 1 10/31/2011

Signetics Corp. 033170.KS 6 12/31/2011

SILICON IMAGE INC SIMG 9 9/30/2011

SILICON LABORATORIES INC SLAB 6 12/31/2011

SILICON MOTION TECH -ADR SIMO 8 9/30/2011

SiliconFile Technologies Inc. 082930.KS 7 12/31/2011

SILICONWARE PRECISION -ADR SPIL 7 9/30/2011

Siliconworks Co. Ltd. 108320.KS 2 12/31/2011

SKYWORKS SOLUTIONS INC SWKS 8 12/31/2011

SMA Solar Technology AG S92.GR 9 9/30/2011

Soitec S.A. SOI.FP 3 9/30/2011

SOLAR POWER INC 3SOPW 10 9/30/2011

Solar-Fabrik AG SFX.GR 5 9/30/2011

SolarWorld AG SWV.GR 7 12/31/2011

soulbrain ENG Co. Ltd. 039230.KS 9 12/31/2011

SPANSION INC CODE 4 12/31/2011

SPREADTRUM COMMUNICATNS -ADR SPRD 5 9/30/2011

STANDARD MICROSYSTEMS CORP SMSC 7 11/30/2011

STMICROELECTRONICS NV -ADR STM 4 9/30/2011

STS Semiconductor & TelecommunicationsCo. Ltd.

036540.KS 10 12/31/2011

Suess Microtec AG SMHN.GR 4 9/30/2011

SUNPOWER CORP SPWR 4 9/30/2011

SUNTECH POWER HOLDINGS -ADR STP 9 9/30/2011

Sunways AG SWW.GR 9 9/30/2011

SUPERTEX INC SUPX 4 12/31/2011

Taesan LCD Co. Ltd. 036210.KS 2 12/31/2011

TAIWAN SEMICONDUCTOR -ADR TSM 8 9/30/2011

TechWing Inc. 089030.KS 10 12/31/2011

Tera Semicon Corp. 123100.KS 10 12/31/2011


SAMPLE




TERADYNE INC TER 10 12/31/2011

TESSERA TECHNOLOGIES INC TSRA 4 12/31/2011

TEXAS INSTRUMENTS INC TXN 10 12/31/2011

TLI Inc. 062860.KS 10 12/31/2011

Top Engineering Co. Ltd. 065130.KS 6 12/31/2011

Topsil Semiconductor Materials A/S TPSL.DC 9 9/30/2011

TRANSWITCH CORP TXCC 8 9/30/2011

TRIDENT MICROSYSTEMS INC TRIDQ 1 9/30/2011

TRINA SOLAR LTD -ADR TSL 8 12/31/2011

TRIQUINT SEMICONDUCTOR INC TQNT 8 12/31/2011

Trony Solar Holdings Co. Ltd. 2468.HK 10 6/30/2011

ULTRA CLEAN HOLDINGS INC UCTT 8 9/30/2011

ULTRATECH INC UTEK 5 12/31/2011

UniTest Inc. 086390.KS 1 12/31/2011

UTD MICROELECTRONICS -ADR UMC 8 9/30/2011

VEECO INSTRUMENTS INC VECO 7 12/31/2011

VIMICRO INTL CORP -ADR VIMC 5 9/30/2011

VITESSE SEMICONDUCTOR CORP VTSS 7 12/31/2011

VOLTERRA SEMICONDUCTOR CORP VLTR 4 9/30/2011

Wolfson Microelectronics PLC WLF.LN 9 12/31/2011

Won Ik Quartz Corp. 074600.KS 8 12/31/2011

Wonik IPS Co. Ltd. 030530.KS 8 12/31/2011

Woongjin Energy Co. Ltd. 103130.KS 10 12/31/2011

Worldex Industry & Trading Co. Ltd. 101160.KS 6 12/31/2011

XILINX INC XLNX 6 12/31/2011

YINGLI GREEN ENERGY HLDG-ADR YGE 9 9/30/2011

ZEUS Co. Ltd. 079370.KS 7 12/31/2011

For exclusive use by CFRA. Printed for Michael Chupeco.

SAMPLE

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CFRA research is delivered by Institutional Shareholder Services Inc. (“ISS”). ISS is an indirect wholly-owned subsidiary of MSCI Inc. (“MSCI”). MSCI is apublicly traded company on the NYSE (Ticker: MSCI). As such, MSCI is not generally aware of who its stockholders are at any given point in time. ISShas, however, established policies and procedures to restrict the involvement of any of MSCI’s non-employee stockholders, their affiliates and boardmembers in the content of ISS’ analyses. Neither MSCI’s non-employee stockholders, their affiliates nor MSCI’s non-management board members areinformed of the contents of any of ISS analyses prior to their publication or dissemination.

The issuer that is the subject of this analysis may be a client of CFRA, ISS, ICS, or another MSCI subsidiary, or the parent of, or affiliated with, a client ofCFRA, ISS, ICS, or another MSCI subsidiary.

This analysis has not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. While ISS exercised due care in compiling this analysis, it makes no warranty, express or implied, regarding the accuracy, completeness or usefulness ofthis information and assumes no liability with respect to the consequences of relying on this information for investment or other purposes. In particular,the research provided is not intended to constitute an offer, solicitation or advice to buy or sell securities.

This issuer may have purchased self-assessment tools and publications from ISS Corporate Services, Inc. (“ICS”), a wholly-owned subsidiary ofInstitutional Shareholder Services Inc. (“ISS”), or ICS may have provided advisory or analytical services to the issuer in connection with the proxiesdescribed in this report. No employee of ICS played a role in the preparation of this report. If you are an ISS institutional client, you may inquire about anyissuer’s use of products and services from ICS by emailing [email protected].

ISS, ICS, MSCI, M&A Edge and all other ISS product names are the trademarks, registered trademarks, or service marks of ISS or its affiliates in theUnited States and other jurisdictions.

For exclusive use by CFRA. Printed for Michael Chupeco.

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Industry Risk Assessment Profile (IRAP): Semiconductors

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Transcript of Industry Risk Assessment Profile (IRAP): Semiconductors