Please refer to page 66 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures . 21 December 2018 Greater China EQUITIES Stocks mentioned in this report Ticker Company Mkt cap (US$m) Rec Price (lcy) TP (Icy) Up side Top picks 2330 TT TSMC 190,113 O 225.5 270 22% 1347 HK Hua Hong 2,530 O 15.42 33 122% 981 HK SMIC 4,778 O 7.42 12 69% Sell ideas 2303 TT UMC 4,565 U 11.3 9 -20% 522 HK ASMPT 4,098 U 78.85 60 -20% Non-rated 603986 CH Gigadevice 2,796 NR 67.68 na na 300316 CH Jingsheng 1,931 NR 10.36 na na 300474 CH Jingjia 1,432 NR 36.43 na na 600171 CH Belling 980 NR 9.65 na na 300458 CH AllWinner 970 NR 20.16 na na 300661 CH SG Micro 771 NR 66.92 na na 300623 CH JieJie 610 NR 23.38 na na 300613 CH Fullhan 601 NR 91.36 na na 603690 CH PNC 499 NR 16.29 na na 3355 HK ASMC 284 NR 1.45 na na Source: Bloomberg, Macquarie Research, December 2018, Price as of December 19, 2018 Inside MacVisit: Allwinner 6 MacVisit: ASMC 12 MacVisit: Belling 17 MacVisit: Fullhan 24 MacVisit: GigaDevice 30 MacVisit: JieJie Micro 36 MacVisit: Jingjia 43 MacVisit: Jingsheng 48 MacVisit: PNC 54 MacVisit: SG Micro 60 Analysts Macquarie Capital Limited Allen Chang +852 3922 1136 [email protected] Jin Guo +86 21 2412 9054 [email protected] Heidi Leung +852 3922 3783 [email protected] Fiona Liu +852 392 2 1368 [email protected] Verena Jeng +852 3922 3766 [email protected] Macquarie Capital Limited, Taiwan Securities Branch Patrick Liao +886 2 2734 7515 [email protected] Lynn Luo +886 2 2734 7534 [email protected] Semiconductors Supply chain survey – Memory, AI, IC design , Equipment, GPU, Analog, IGBT, Foundry Key points  We conducted a semiconductor supply chain survey and interviewed 10 smaller -scale companies .  Subsectors include Memory, AI chips, GPU, Analog IC, Foundry, Wafer Equipment, EEPRO M, smart meter IC, MOSFET, IGBT & Purity Equipment .  We reiterate our bullish view on TSMC (technology leader), Hua Hong (solid mover), and SMIC (aggressive mover), and sell ideas UMC and ASMPT. We conducted a supply chain survey and interviewed 10 companies  The s ubsectors include memory (GigaDevice), AI chips (Fullhan, Allwinner), GPU (Jingjia), analog IC (SG Micro), foundry (ASMC), wafer equipment (Jingsheng) , EEPROM, Smart meter IC (Belling), MOSFET, IGBT (JieJie Micro) and Purity process equipment (PNC ). While these Chinese players acknowle dged the technology gap with global majors , we do see the industry’s strong commitment to technology breakthroughs and the Chinese government ’s constructive support (Figs 1~3) in facilitating the growth of the ecosystem (highlighted in our China IC Fund report ). Our top buy ideas are TSMC, HuaH ong, and SMIC ; our sell ideas are UMC and ASMPT. Progress by subsectors  Memory : check DRAM progress after Jinhua ban ; While the US ban on Jinhua has reportedly led it to halt operation s, GigaDevice (兆易创新 ) indicated its own 19nm DRAM progress with Innotron remain on track for 8Gb DDR4 small volume production by year end and 8Gb LPDDR4 mass production in 3Q19. YMTC, Innotron, an d Jinhua are China’s key memory ventures with strong govt’ support (link, China Memory ).  GPU : from military to civil applications ; Jingjia (景嘉微 ), a key supplier of military GPUs, is set to launch its first commercial GPU in 1Q19 with a target of 100k units shipment for 2019. Jingjia also expects to receive Rmb978m from China IC Fund to develop more advanced GPUs for PC and servers .  IC design : aiming for import substitution ; this area has been dominated by foreign majors. SG Micro (圣邦股份 , analog IC), Fullhan (富瀚微 , ISP, A