inventec appliances corporation

Inventec Appliances Corporation

March 2010

2

Innovating Customer Value

Agenda

Company Overview

Business Models & Competence

Financial Performance

Company Overview

4


Company SnapshotEstablished in May-2000

Headquarter Wugu, Taipei Taiwan

Production facilities Taipei, Pudong, Jiangning, Dallas

Capital NT$5,120 millions

Market capitalization(1) NT$14.9 billions / US$465 millions

Businesses ODM business (85% of 2009 rev) : Smart handheld andnetworking appliancesOBM business (15% of 2009 rev): OKWAP handset

Employees 12,201

Major shareholders Inventec Corp. (44%)

Management & employees (7%)

Products

Graphing Calculator, Personal Digital Assistant (PDA),Smartphone, MP3 Player, Personal Navigation Device(PND), PHS/GSM/3G/3.5G mobile handset, IP phone,Data Card, POS terminal device

2008 Revenues US$ 1.5 billions

Note: Data as of March 8th, 2010

5


5IAC Confidential

• Main Frame System forProfessional Areas

• Consumer Electronics

• Personal Computer Environment

• Office Productivity

• Communication and Networking Society

• Productivity Enhancement

•Personal Integrated Devices

• Life-Style and Quality

IAC Key Milestones

Sales Revenue

(US$)

1980 1990 2000 2010

100M1975• Start up for Calculator OEM

1985• Start Telephone OEM

1988• Start Notebook PC OEM• Start Malaysia Operation

1989• Start Bilingual DictionaryOwn Brand Distribution

1991• Start China Operation

1993• Start PDA Business

1997• IPO of IEC

1999• Reorganization forYear 2000

• Start Server Business• Start IA Business

1B

10B

2001• Start multi-media Business

2004• Start GPS business

2000• IAC founded• First OKWAP phone shipped

Pre-IAC Stage

2005• IPO of IAC2003

• OKWAP GSM Phone hit 10% market share in Taiwan

2002• Start networking business

2006 / 2007/ 2008• OKWAP PHS Phone

market share #1 in China

2008• Start IPDS Model

6


Product Range and Technology Platform : Smart Handhelds and Network Appliances

7


Smart Handheld:Wireless, Multimedia, Broadband, Broadcasting and Location

8


Network Appliances:VoIP, Multi-Mode and Network Service Integration

9


Employees and Engineering Resources

Pudong62%

Shanghai2%

Taipei6%

Jiangning21%

Xi’an1%

Nanchang1%

OKWAP7%

Employee by location: Engineering breakdown:

Total no. of employee: 12,201

10


Global Operations( 12 Cities, 3 Facilities, 12,000+ Employees, 2,100+ Engineers )

Shanghai-Pudong(103,500 m sq.)

Taipei(Headquarter)

Nanjing-Jiangning(65,000 m sq. )

Dallas (hub)(7,432 m sq. )

Taipei(Headquarter)

Shanghai

Beijing

NanjingDallas

Guangzhou

• Taipei• Shanghai• Nanjing• Beijing• Guangzhou

Silicon Valley

OKWAP Operations ( )

Engineering Centers :Shanghai / Nanchang / Xi’an / Shenzhen / BeijingOverseas Operations and Liaison Offices :

Dallas (hub) / Silicon Valley / Dehli / Tokyo

HH, 2 Main Facilities & 1 Hub

Dehli

Xian

Business Models & Competence

12


12IAC Confidential

Business Models

Resource Pool• Technology and Platform• Talent and Skill

Product Pool• Smart Handhelds• Network Appliances

IPDSIntegrated Product Design Service-- efficient technology deployment

IODMIntegrated Original Design Manufacturing

-- economic scale manufacturing

COBMCommunity & Own Brand Marketing

-- branding effects & values

Products

Services

Products+

Services

Global Customers

Global Customers

Greater China

End Users’Experiences

13


IPDS

Integrated Product Design Service (IPDS)

13IAC Confidential

IAC Knowledge Database: Innovations/IPs/Knowhow

Customer Requirements

IDC R&D Resources:Shanghai/Nanchang/Xi’an

IT Environment: Efficient/Secured/Flexible

Processes:CMMI/PLM

• Software Modules• Software Packages• Prototype Samples• Engineering Samples• Mass Producible

Products

• SW/HW testing• SIT Reports• Pre-Test Reports• Field Trail Logs

Product Design Service• Application Development & Maintenance• Embedded System Solution• Hardware Development & Integration

Testing & Certification Service• System Integration Test (SIT)• Certification• Global Field Trial• Carrier Acceptance

Manufacturing Consulting• Planning• Testing• Factory Process Management• Assembly Technology

Design

Testing

Manufacturing

IPDS

• Facilities Plan• Manufacturing

Execution Systems• Equipment Plan• NPI Plan• Testing Tools

14


14IAC Confidential

IODM ( Integrated ODM ) Model• Concurrent Product Development Management and Supply Chain Management• Best Utilization of Information System & Technology for Resources Integration• Time to Market, Time to Volume : Based on High Quality, High Efficiency and Low Cost

ProductDevelopment

Internet

LANGlobal WAN

• High Quality• High Efficiency• Low Cost

• Material• Machine• Method• Manpower• Morale

MaterialAdvancedSourcing

Mass Production

Planning

IACTaipei

ShanghaiNanjingDallas

• SAP/R3 Enterprise Resource Planning

• EISEnterprise Information System

• PLMProduct Lifecycle Management

Customers

End Users

Suppliers

Customers

WebAccess

EDI

Direct Ship

Logistics

RMA Service

Local Hub

15


COBM：OKWAP Phone Products

16


13,000 Selling Spots and 700+ Service Centers

Taipei

Beijing

* Taiwan : Over 4,000 retailers, and 4 direct service centers

* China : Over 9,000 selling spots, Over 700 contract service centersand 200 direct service centers

GuangZhou

ShanghaiNanjing

17


OKWAP Service Centers Cross the Region

18


OKWAP Brought Value to PHS Technology

19


Dominated China PHS market with Share of 36%

Built solid and close relationship with carrier from customized and value-adding service

20


OKWAP 2010 Strategy

Leverage close relationship with carriersCDMA/EVDO full spectrum product lineHigh-end GSM/WCDMA for niche demandTD-SCDMA with WM/Android platformCDMA market share reached 6% in 2009Aiming for 10% share in China CDMA market

21


IAC Core Competence

21IAC Confidential

Resources Integration for Highest Total Efficiency• Customer Focus Team for Customer• Development , Supply Chain, Manufacturing and RMA Service Integration• One Stop, Total Solution

Access Terminal Expertise and Innovation• Full Line Technology in Smart Handhelds and Network Appliances• Plenty of Engineering Resources for Customer Value Creation• Leverage Technology Platform for Product Innovation

Product & Technology Customer

Orientation

SystemOperation

IODM Business Proficiency and User Experience• Specific Process Package Designed for Customer’s Convenience• Service, Speed, Flexibility for Customer’s Satisfaction• Field Knowledge and User’s Experience in Greater China

22


Core Technology: Platform Integration & Access

23


Corporate Evolution

* Customers’ code name in IAC.

Time /Items 2001 2008

Employees Total: 2,034 Total: 13,000+

Engineer: 576 Engineer:2,200+

Production Facilities

40,000 m2 216,700 m2

Major Customers * T- Bone, Psion, OKWAP Phone, Cidco

T- Bone, Pyramid, May, Trump, OKWAP, HW, Dragon, Venus, Navy

Product Ranges Graphic Calculator, PDA, GSM Phone, E-mail Terminal

Graphic Calculator, PDA, Smart Phone, MP3 Player, GPS Navigator, PHS Phone, GSM Phone, 3G Phone, VoIP Phone, Wireless Credit Card Reader, PC Data Modem Card

Owned-Brand Business

NT$ 1 Billion NT$ 7 Billion

Consolidated Revenue

NT$ 7 Billion NT$ 70 Billion

25



79

120

105

93

69

49.0

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008 2009

(NT$

bn)

2.1

3.0

2.1

3.2

2.2

0.04

0.310.08

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2004 2005 2006 2007 2008 1Q09 2Q09 3Q09(N

T$bn

)

Net Revenues Net profits

Source: CompanyNote: Numbers are on consolidated basis.

26


Net Profit Margin Continued to Improve

9.5%

0.4%

7.3%8.5%

9.4%

8.1%

11.6%10.3% 10.6%

2.0%

0.3%

3.2%3.5%2.6% 2.5% 2.1%

2004 2005 2006 2007 2008 1Q09 2Q09 3Q09

Gross margin

Net margin

Gross margin and Net profit margin from 2004 to date

Source: Company, consolidated number

27


Balance Sheet Management

Note: Peers included HTC, Compal Communication, Arima, Mitac, and Qisda.

Days inventoryA/R days

5157 59 56

49

6157

4953 55

0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008

IAC Peers average

(Day

s)

21

32

39

3431

48

39

3335 36

0

10

20

30

40

50

60

2004 2005 2006 2007 2008

IAC Peers average

(Day

s)

IAC’s Working Capital Turnover Has Continued to Improve

28


Strong Returns on Equity

Sales/Invested capital - 2008

7.58.5 9.0

7.5

2.73.7

4.4

5.9

3.93.1

0

2

4

6

8

10

2004 2005 2006 2007 2008

IAC Peers average(X

)

Note: Chart on the right hand side shows peers including HTC, Compal Communication, Arima, Mitac, and Qisda.

Return on Equity - 2008

48.8

22.519.3

16.4 15.8 14.6 13.911.1 10.2

1.4

-12.2-15.7(20)

(10)

0

10

20

30

40

50

60

HTCQua

ntaW

istron IA

CCom

pal

Foxco

nnInv

entec

Compa

l Com

.Asu

stek

Mitac

Qisda

Arima C

om.

(%)

29


Condensed Income Statement

Source: Company

(NT$ millions) 2006 2007 2008 1Q09 2Q09 3Q09Net Sales 105,202 92,650 69,395 8,001 7,631 11,620

% YoY growth -12.4% -11.9% -25.1% -58.7% -61.2% -40.9%

Gross profit 7,657 9,542 7,337 648 888 1,105

% Margin 7.3% 10.3% 10.6% 8.1% 11.6% 9.5%

Operation profit 2,485 3,657 1,928 -176 -268 1

% Margin 2.4% 3.9% 2.8% -2.2% -3.5% 0.0%

Net profit 2,059 3,249 2,194 22 163 43

% Margin 2.0% 3.5% 3.2% 0.3% 2.1% 0.4%

30


Condensed Balance Sheet

Source: Company

(NT$ millions) 2006 2007 2008 1Q09 2Q09 3Q09Cash 5,399 7,099 7,731 7,660 7,282 5,804Other Current Assets 24,368 22,888 9,236 8,440 8,433 15,810LT Investment 209 202 504 518 476 506Fixed Assets 6,828 6,701 6,589 6,652 6,302 6,015Total Assets 37,666 37,873 24,981 24,230 23,408 29,062

ST Debt 2,325 120 1,374 945 1,707 1,907Other Current Liabilities 23,176 23,595 9,057 8,485 8,987 14,544LT Debt 0 0 0 0 0 0Total Liabilities 26,362 24,565 11,589 10,542 11,336 17,073

Shareholders' Equity 11,304 13,308 13,392 13,688 12,073 11,989

Thank You

inventec appliances corporation

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