Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Semiconductors & Semiconductor Equipment
CFRA's library of more than sixty IRAPs provide a quick reference guide to the key accounting issues that
impact 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 a
time-saving resource, a training tool, and a must-have desktop reference for anyone analyzing financial
statements.
Semiconductors & Semiconductor Equipment Contact:
This report highlights important accounting issues relating to the Semiconductors & Semiconductor
Equipment industry as well as how the application of these issues can impact a company's financial
statements. In analyzing this industry, CFRA believes an understanding of the following accounting issues is
essential:
Industry Team:
Jill Lehman, CPA
561-961-4692
jill.lehman@cfraresearch.com
Tatiana Mishin
212-804-5385
tatiana.mishin@cfraresearch.com
SAMPLE
Accelerating the Recognition of Revenue
Business Combinations - Risks Related to Purchase Accounting
Cookie Jar Reserves (e.g. Doubtful Accounts. Returns. Royalties. Warranties. Inventory
Obsolescence)
Deferred Gross Margin
Depreciation of Property Plant and Equipment (PP&E)
Inventory Accounting and Analysis
Related Party Transactions and Other Governance Issues
Restructuring and Other Special Charges
Appendix 1: Risk Assessment Checklist
Appendix 2: Industry Term Glossary
Appendix 3: Accounting Term Glossary
Appendix 4: Leading Companies in Semiconductors & Semiconductor Equipment
Appendix 5: QuickScores for Semiconductors & Semiconductor Equipment
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Related IRAPs:
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Accelerating the Recognition of Revenue
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 which
revenue has been accelerated is likely unsustainable. There are many available tactics that
management can use to accelerate revenue, some of which include a change in the distribution
of 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 the
interpretation of the revenue recognition policy.
Often times, the acceleration of revenue can be identified by monitoring changes in accounts
receivable and deferred revenue. Specifically, when receivables increase relative to revenue, the
concern is not necessarily one of credit quality; rather, it reflects the possibility that revenue may
have been accelerated into the current period either through a more aggressive approach to
revenue 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 future
revenue growth and/or a change to a more aggressive revenue recognition model in which a
greater proportion of revenue is recorded immediately rather than being deferred for recognition
at a future date. Analysts should also monitor (a) revenue recognition disclosure for changes that
signal the acceleration of revenue recognition and (b) sales and related receivables to major
customers.
Concern:
Companies may hide a revenue slowdown by
recognizing revenue in an earlier period than originally
expected.
Indicators:
Growth in accounts receivable, drop in deferred
revenue or deferred profit and/or change in revenue
recognition disclosure
SAMPLE
CFRA also notes that current US GAAP governing multiple-element arrangements provides a
significant opportunity for aggressive revenue recognition as management determines how much
revenue to recognize for each delivered element, which in turn also gives management discretion
over the timing of revenue recognition. The more stringent previous rules did not allow any
revenue recognition unless third-party pricing was available for each element of the contract. Now
companies may develop their own pricing estimates, and in fact are required to do so at the
inception of the contract in the absence of third-party pricing. When analyzing these
arrangements, analysts should look out for aggressive revenue recognition schedules or unusual
patterns of contract price allocation that result in more revenue being recognized upfront
compared with peers or prior periods.
As an example, CFRA highlighted SMA Solar Technology (S92.GR). S92.GR cited higher
export 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 raised
questions 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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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
unsustainably from the extension of payment terms granted to customers. The Company’s
receivables increased to 103 days at March 2009, up from 94 days and 65 days in the prior two
quarters, respectively. Concurrently, bad debt expense increased significantly, heightening
concerns 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 to
determine the proper revenue recognition policy. The concerns, indicators and discussion above
are equally applicable when analyzing companies reporting under IFRS.
SAMPLE
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Business Combinations - Risks Related to Purchase Accounting
Accounting for business combinations remains a huge area of concern in any industry where
acquisitions are a common occurrence. The revaluation of an acquired company's balance sheet
to fair market value required under US GAAP provides an opportunity to value that balance sheet
in a way that will benefit future earnings. This is generally done by understating the value of
assets and overstating the value of liabilities acquired. This provides a benefit to earnings
following the acquisition because the difference between the fair market value of the target's net
assets and the purchase price is allocated to goodwill, which is not expensed unless it is deemed
impaired 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 contingent
consideration assets and liabilities which are required to be remeasured to fair value at each
reporting date until the contingency is resolved. Any changes in fair value are recognized in
earnings. Investors should watch for companies overstating (understating) liabilities (assets) for
contingent considerations at the acquisition date and subsequently boosting earnings through
reversals in future periods. In addition, material boosts to earnings from the remeasurement of
acquisition-related contingent consideration represent non-recurring sources of income.
Concern:
A company can manipulate earnings by using the
adjustment to fair market value of a target company’s
assets and liabilities in an acquisition to understate
assets and overstate liabilities, thereby allocating a
greater potion of the purchase price to goodwill.
Indicators:
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 target company.
SAMPLE
IFRS :
While a small number of differences exist with respect to business combination accounting under
US GAAP versus IFRS, accounting under both regimes has been largely aligned. The concerns,
indicators and discussion above are generally applicable when focusing on companies reporting
under IFRS.
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Cookie Jar Reserves (e.g. Doubtful Accounts. Returns. Royalties. Warranties. Inventory Obsolescence)
Costs for bad debts, sales returns, warranties, obsolete inventory, and other provisions are
estimated by management and recorded as either expenses or offsets to revenue (depending
upon the provision). Management has discretion in calculating these estimates, and therefore has
the ability to manipulate earnings, and sometimes revenues. Specifically, by under-provisioning or
reversing previous provisions, management can generate artificial, and therefore unsustainable,
earnings.
Concern:
The allowance for doubtful accounts (ADA), for instance, is an estimate that is generally based
on 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 debts
provision should fluctuate consistently with its sales. As such, analysts can often identify a
change in estimates by monitoring changes in (a) ADA as a percentage of gross accounts
receivable and (b) bad debts provision as a percentage of sales. If there does not appear to be a
sound reason for significant changes in these ratios, the company may be managing earnings by
altering its bad debts estimates/policies. Even if a lower provision is justified, the earnings growth
generated from the decline in provision may not be sustainable.
Indicators:
Estimates required to establish reserves against certain
assets - i.e. provisions for doubtful accounts, sales
returns, warranties, etc. - can be used by management
to manipulate revenues, earnings, and margins.
Significant decline in reserve balances and/or provision
amounts relative to related asset balances and sales.
SAMPLE
In addition, the accrual for warranty reserves is an estimate that is generally based upon past
warranty claims experience, an assessment of product quality versus prior periods, current
claims, production changes, industry developments and other considerations. As warranties are
generally accrued for each product sold, the level of warranty expense should not fluctuate
markedly relative to sales. Significant changes in the ratio of warranty expense to sales may
signal 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 the
allowance may not be sustainable.
The inventory obsolescence reserve is an estimate that is based on the expected salability of
current inventory. Inventory obsolescence provisions are generally included in cost of sales and
are subject to a high degree of management discretion. A large inventory charge would hurt
earnings in the current period but could lead to higher margins and earnings if, as a result of the
charge, 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 to
gross 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 continued
declines in receivables and inventory provisioning levels. The provision for bad debts relative to
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
gross accounts receivable declined to 0.7% in FYE 2010 from 1.1% in FYE 2009. Similarly, the
inventory 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 the
falling provision levels may not be sustainable and thus, may have provided a short-term benefit
to reporting operating profit.
IFRS:
The concerns, indicators and discussion above are equally applicable when focusing on
companies reporting under IFRS.
SAMPLE
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Deferred Gross Margin
Deferred profit is essentially deferred revenue less deferred cost of goods sold. Deferred gross
margin is deferred profit expressed as a percentage of deferred revenue. Trends in deferred
margins may be leading indicators of trends in actual margins. Specifically, a drop in deferred
margin 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 margin
growth related to the recognition of deferred revenue more rapidly than deferred profit (i.e. leaving
costs on the balance sheet) may not be sustainable.
IFRS:
The concerns, indicators and discussion above are equally applicable when analyzing companies
reporting under IFRS.
Concern:
If deferred profit decreases relative to deferred revenue,
gross margin in the current quarter may have benefited
to the detriment of gross margin in future periods.
Indicators:
Decline in deferred margin (deferred profit divided by
deferred revenue).
SAMPLE
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Depreciation of Property Plant and Equipment (PP&E)
Companies in the Semiconductors and Semiconductor Equipment industry are fixed asset
intensive, making depreciation a significant expense for most of these companies. Since
depreciation is based on estimates of asset lives, management can manipulate these estimates
to manage earnings. Specifically, extending the depreciable life of an asset will boost a
company's earnings while shortening depreciable lives will decrease earnings. Therefore, it is
important to refer to the notes to the financial statements to ensure that a change in depreciable
life has not occurred. Additionally, analyzing the trend in depreciation expense relative to gross
PP&E and comparing the depreciable lives used by competitors with those used by the
company may detect potential manipulation. Finally, be wary of companies where capital
expenditures consistently exceed depreciation as these companies may be understating
depreciation expense or may experience an increase in depreciation expense in future periods.
Concern:
Companies can boost earnings by extending the
depreciable lives of PP&E beyond their reasonable useful
lives.
Indicators:
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.
SAMPLE
In December 2009, CFRA cautioned that Axcelis Technologies, Inc. (ACLS)may have
lengthened the lives over which it depreciates PP&E during 2009. Specifically, CFRA noted
that depreciation and amortization declined in the first three quarters of 2009 relative to prior
periods. Though ACLS did not change useful lives in 2008 relative to 2007 per the FYE 2008
10-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 companies
reporting under IFRS
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Inventory Accounting and Analysis
Inventory Glut - A substantial increase in inventory may be a leading indicator of an upcoming
decline 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 the
inventory (which raises the risk of future obsolescence charges) or that the company may be
leaving costs on its balance sheet in the form of inventory rather than expensing these costs on
its income statement, raising concerns about the sustainability of earnings and margin growth.
Over-Production - "Production" represents all inventory purchases and inventory manufacturing
during the period. CFRA calculates production as: Ending Inventory - Beginning Inventory +
COGS. When production rises, Wireless Telecommunications companies experience greater
absorption of fixed manufacturing costs. In other words, the fixed costs of production are
allocated over a larger number of units, which drives down the cost per unit, thereby increasing
gross margin when the inventory is sold. Conversely, when production declines, companies
experience lower absorption of fixed costs, which in turn decreases gross margin.
Concern:
Companies can use inventory accounting and production
management 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 revenue
growth.
SAMPLE
Since a slowdown in production may result in a gross margin decline, CFRA raises concern when
an increase in production does not appear sustainable. By tracking production relative to cost of
goods sold (COGS), analysts can gauge a company's level of production. Specifically, increases
in the production-to-COGS ratio may indicate that the company is receiving a benefit to gross
margin. Such increases are not sustainable perpetually, and as such, neither is the related
margin growth. Additionally, if a company's production ratio exceeds 100%, it implies that the
company is producing more product than it is selling. A production ratio of over 100% is not
sustainable perpetually, and as production declines, so too should gross margin.
For example, SMA Solar Technology AG’s (S92.GR) inventory relative to forward sales remained
elevated at 3Q11. Specifically, relative to forward sales, inventory rose 49% during 3Q11 from
38% in the prior year. Finished goods trended in the same manner, rising to 13.4% of forward
sales from 8.7% in the prior quarter and 12.0% in 3Q10. As sales prices were falling, CFRA
highlighted that upcoming margin pressure may result from the elevated inventory levels.
Renewable Energy Corporation ASA’s (REC.NO) inventories expressed in days sales (DSI) grew
to 202 days in 3Q11 from 148 days in the prior year. At the same time, inventories expressed as
a percentage of next six months sales grew to a record-high of 68.1% 3Q11 up from 28.3% in the
prior year despite a NOK 130 million inventory write-down recorded at the end of 3Q11. CFRA
expressed concern that the continued inventory growth could result in future margin pressure.
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
IFRS:
The concerns, indicators and discussion above are equally applicable when focusing on
companies reporting under IFRS. One item to note is that the LIFO inventory costing method is
not permitted under IFRS.
SAMPLE
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Related Party Transactions and Other Governance Issues
Companies often engage in related party transactions and joint ventures. CFRA believes that the
terms of business transactions with related parties may not always be at arms' length. Joint
ventures are also common in the industry, although the nature of the joint ventures varies
depending 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 could
choose to direct sales to the related party to prop up its investment. Additionally, if the
stockholder were to sell its position, it may lose the incentive to buy goods or services from the
company.
-Two way transactions: When entities have multiple transactions with each other, it is possible
that terms of the individual transactions were not arranged at arms' length.
Concern:
Companies could manipulate results through related
parties, joint ventures, etc.
Indicators:
Increases in sales to related parties; existence of joint
ventures.
SAMPLE
For example, in 2011 Apollo Solar Energy Technology Holdings, Ltd. (566.HK) sold parts of
investments and businesses to related parties which included businesses owned by “key
management personnel”. In addition, the Company curiously paid a dividend exclusively to
minority shareholders.
IFRS:
The concerns, indicators and discussion above are applicable when analyzing companies
reporting under IFRS.
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Restructuring and Other Special 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 dishonest
management with the ability to enhance analysts' perception of its profitability through aggressive
use of these special charges.
Concern:
Significant and/or recurring use of special charges is a red flag that a company may be using
special charges to flatter non-GAAP results. Specifically, we caution that companies may boost
non-GAAP earnings in the current period by bundling normal, recurring costs into the special
charges. Alternatively, the company may position itself to boost reported earnings in future
periods by either (a) recording excess reserves on the liability side of the balance sheet or (b) by
reducing the carrying value of assets that will be used in a subsequent period. For example, the
company could take a special charge to write down (or write off) inventory, and then sell the
goods later at what amounts to 100% margins. Similarly, a company may decrease the carrying
value of fixed assets so as to reduce future depreciation expense.
Indicators:
Companies can use one-time charges to manage
reported and/or pro-forma earnings.
Recurring and/or significant special charges,
adjustments to previous one-time charges, inclusion of
operating costs in restructuring charges.
SAMPLE
Analysts should further note that even when special charges are made in good faith, frequent
restructuring charges can impair comparability of results across periods, and consequently
impede analysis of ongoing operations.
IFRS:
Under IAS 1, no items of income and expense are to be presented as extraordinary or as arising
from outside the entity's ordinary activities. Although a company can choose to present
extraordinary items in a non IFRS format, when items of income and expense are material, IFRS
requires that their nature and amount be disclosed separately. However, the concerns arising
from recording of significant and continuous restructuring charges (even if not presented as
extraordinary) as discussed above are equally relevant for companies reporting under IFRS
regulations.
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
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 target
company.
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).
SAMPLE
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 in
restructuring charges.
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
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 of
production. 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.
SAMPLE
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
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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 and
incurred, 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 what
cash 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" with
the 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
Balance Sheet
Book Value
Book Value Per Common Share
Capital Expenditure - CAPEX
Capital Lease
SAMPLE
An inventory cost method that assumes the cost of inventory is based on the average cost of all goods available for sale.
Required financial statement to be disclosed quarterly by publicly traded companies which provides information about a company's present
position. It reports the assets, liabilities, and owners' equity of the company. It is often referred to as a "snapshot" of a company's financial
position.
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 a
balance sheet, equal to total assets minus liabilities.
A measure of net worth; computed by dividing stockholders' equity for common stock by the number of shares outstanding for common
stock.
An expenditure made in the purchase of a long-term asset. Examples include property, plant and equipment.
A leasing transaction that transfers, in an economic sense, the risks and rewards of ownership to the lessee without transferring title. This
type 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 an
expense 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 payable
from 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 external
activities 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 (disregarding
extraordinary 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 all
cash inflows and all cash outflows segregated into operating, investing and financing activities.
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Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
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 is
capable of selling to its customers. This practice typically results in higher sales in the period that the channel stuffing occurs followed by
lower 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 method
allows 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 currency
transactions.
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 be
met, 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
Cost Of Goods Sold - COGS
Coverage Ratio
Current Ratio
Date of Record
Days Sales in Inventory - DSI
SAMPLE
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 of
management discretion. Common examples include, allowance for doubtful accounts, warranty reserve, sales returns reserve, inventory
obsolescence reserve, loan loss reserve, etc.
The expense incurred to purchase, manufacture or deliver the products and/or services delivered during a period.
A measure of a corporation's ability to meet a particular expense. Often used to determine if cash flows are sufficient to pay interest amounts
due.
The ratio of current assets to current liabilities.
The date on which the shareholders of record are identified as those who will receive dividends.
A measure of how well inventory levels are being managed. DSI is computed by dividing the number of days in the period by the inventory
turnover 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 accounts
receivable 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 statement
and 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 or
service).
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 the
periods benefited.
© 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.
Page 16
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
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, and
Amortization
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 of
common 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 amount
of 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 of
unforeseen and atypical events and are often described further in the footnotes to the financial statements.
Factor
Fair Value
Financial Accounting Standards Board (FASB)
First In, First Out - FIFO
Fixed Asset
Fixed-Charge Coverage Ratio
SAMPLE
To sell accounts receivable at a discount before they are due.
An estimate of the price that could be received for an asset or paid to settle a liability in a current transaction between marketplace
participants in the reference market for the asset or liability.
The private organization which established the standards for financial accounting and reporting in the United States.
An inventory cost flow system where the first goods purchased are assumed to be the first goods sold so that the ending inventory consists of
the most recently purchased goods. In periods of rising prices, this method results in higher reported margins.
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 into
cash any sooner than at least one year's time.
A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. For example, since leases are a fixed
charge, 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.
© 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.
Page 17
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Term
Definition
International Financial Reporting Standards - IFRS
International accounting guidelines that define accounting standards for reported financial statements. IFRS are issued by the International
Accounting Standards Board. IFRS are often confused with International Accounting Standards (IAS), which are the older standards that IFRS
replaced. (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 on
a 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 consists
of 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 classified
as 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
LIFO Reserve
Lower of Cost and Market Method
Mark to Market - MTM
Market Value
Merger
SAMPLE
When a company using the LIFO (Last In, First Out) method of inventory costing uses up their "older" layers of LIFO inventory. A LIFO
liquidation occurs if current period sales are higher than current purchases
The difference between inventory values using the LIFO inventory method versus another inventory valuation method, such as FIFO or
average cost method
A method used for valuing certain assets on the balance sheet at the lower of original cost or current market value.
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 book
value.
The amount of money a typical, well-informed, unrelated buyer would be willing to pay for an asset
The acquisition of one company by another company. By doing so the companies combine to become one legal entity, and the acquired
company 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 item
and 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 of
the 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.
© 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.
Page 18
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Term
Definition
Pension Plan
A contractual relationship between a company and its employees where the company agrees to pay benefits to employees after their
retirement.
Percentage of Completion
The percentage of completion method of revenue recognition typically used for long-term construction-type contracts or service contracts that
span multiple reporting periods. Under the percentage of completion method, a company recognizes revenues and costs on a contract as it
progresses 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 be
designed to reflect a proposed change or to emphasize certain figures (that may not comply with GAAP) when a company issues an earnings
announcement 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.
SAMPLE
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 by
the acquirer as goodwill.
Purchase Returns and Allowances
Quality of Earnings
Quick Ratio
Receivables
Recourse
A contra-purchase account used for recording the return of, or allowances for, previously purchased merchandise.
Refers to concept that some earnings reported by an entity could be the result of changes in accounting estimates or other factors which are
not representative of the true operational performance of a business during the reporting period.
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).
Amount owed to a company for goods and services sold by the company but not yet collected
Contractual obligations to absorb losses on assets that have been securitized and are no longer present on the balance sheet. A recourse
obligation typically arises when a company transfers assets on a sale and retains an obligation to repurchase the assets or absorb losses due
to a default of principal or interest or any other deficiency in the performance of the underlying obligor. Recourse may also exist implicitly
where 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 have
been 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 been
distributed 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 of
debt 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), or
lost (taken as negative), relative to the amount invested.
© 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.
Page 19
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Term
Definition
Revenue Recognition
Methodology by which a company records revenue in its income statement. Basic concept is that revenues are inflows of cash or
enhancements 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 with
the 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 and
administrative 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, and
retained 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 is
the entity that holds legal right over the assets transferred by the originator and serves to isolate the assets from the bankruptcy of the
transferor.
Standard unqualified audit report
Statement of cash flows
Statement of Earnings (Income Statement)
Statement of Stockholders' Equity
Straight-line depreciation method
SAMPLE
Audit report indicating the auditor's conclusion that the audited financial statements are fairly stated in accordance with generally accepted
accounting principles.
Required financial statement to be disclosed quarterly by publicly traded companies. The document provides aggregate data regarding all
cash inflows and all cash outflows segregated into operating, investing and financing activities.
Required financial statement to be disclosed quarterly by publicly traded companies. The statement summarizes the revenues generated and
the expenses incurred by an entity during a period of time.
Required financial statement to be disclosed quarterly by publicly traded companies which reports all changes in stockholders' equity during a
period of time.
A depreciation method in which the depreciation base of an asset (cost - residual value) is allocated equally over the periods of the asset's
estimated 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 when
a 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 unexercised
in-the-money warrants and options. This method assumes that the proceeds that a company receives from an in-the-money option exercise
are used to repurchase common shares in the market. The treasury stock method must be used by a company when computing its diluted
earnings 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 of
the 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 lack
either voting control, an obligation to absorb expected losses, or the right to receive expected residual returns. FIN 46 requires companies to
identify VIEs in which they have an interest, determine whether they are the primary beneficiary of such entities and, if so, to consolidate
them. A primary beneficiary is an enterprise that will absorb a majority of a VIE's expected losses, receive a majority of its expected residual
returns, or both. A primary beneficiary or other entity having a significant variable interest in a VIE will provide disclosures to enable the users
of financial statements to understand and evaluate that interest.
© 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.
Page 20
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
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 its
inventory.
Working Capital
The amount by which current assets exceed current liabilities.
SAMPLE
© 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.
Page 21
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
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
© 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.
Page 22
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Appendix 5 - QuickScores for Semiconductors & Semiconductor Equipment
1 = Lowest Earnings Quality Risk, 10 = Highest Earnings Quality Risk
QuickScore quantifies the accrual component of earnings of approximately 5000 North American and 5000 European companies. The model—developed in conjunction with three Wharton
professors—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
Company
Ticker
QuickScore
Period Ending
3P System Co. Ltd.
110500.KS
1
12/31/2011
austriamicrosystems AG
AMS.SW
10
9/30/2011
ABOV Semiconductor Co. Ltd.
102120.KS
10
12/31/2011
AUTHENTEC INC
AUTH
7
9/30/2011
ACTIONS SEMICNDCTR LTD -ADR
ACTS
8
9/30/2011
Avaco Co. Ltd.
083930.KS
1
12/31/2011
ADVANCED ANALOGIC TECH
AATI
3
9/30/2011
AVAGO TECHNOLOGIES LTD
AVGO
2
10/31/2011
ADVANCED ENERGY INDS INC
AEIS
5
12/31/2011
AXCELIS TECHNOLOGIES INC
ACLS
7
9/30/2011
ADVANCED MICRO DEVICES
AMD
2
12/31/2011
AXT INC
AXTI
8
9/30/2011
Advanced Semiconductor Manufacturing
Corp. Ltd.
3355.HK
ADVANTEST CORP -ADR
ATE
Aixtron SE
SAMPLE
3
6/30/2011
10
9/30/2011
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
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
© 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.
Page 23
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Company
Ticker
QuickScore
Period Ending
Company
Ticker
QuickScore
Period Ending
CSR PLC
CSR.LN
10
12/31/2011
From30 Co. Ltd.
073570.KS
4
12/31/2011
CTL Inc.
036170.KS
2
12/31/2011
FSI INTL INC
FSII
9
11/30/2011
Curoholdings Co. Ltd.
051780.KS
10
12/31/2011
G Learning Corp.
032800.KS
3
12/31/2011
CVD EQUIPMENT CORP
CVV
1
9/30/2011
GCL-Poly Energy Holdings Ltd.
3800.HK
10
6/30/2011
CYBEROPTICS CORP
CYBE
2
9/30/2011
GemVax & KAEL Co. Ltd.
082270.KS
1
12/31/2011
CYMER INC
CYMI
3
12/31/2011
GENNUM CORP
GND.
9
11/30/2011
CYPRESS SEMICONDUCTOR CORP
CY
2
12/31/2011
GIGOPTIX INC
3GGOX
9
9/30/2011
D. ID Corp.
074130.KS
2
12/31/2011
Global Standard Technology Co. Ltd.
083450.KS
9
12/31/2011
DAQO NEW ENERGY CORP -ADR
DQ
9
9/30/2011
GSI TECHNOLOGY INC
GSIT
5
12/31/2011
Dialog Semiconductor PLC
DLG.GR
10
12/31/2011
GT ADVANCED TECHNOLOGIES INC
GTAT
2
12/31/2011
DIODES INC
DIOD
8
12/31/2011
Hana Micron Inc.
067310.KS
8
12/31/2011
Display Tech Co. Ltd.
066670.KS
10
12/31/2011
Hanmi Semiconductor Co. Ltd.
042700.KS
9
12/31/2011
DMS Co. Ltd.
068790.KS
10
12/31/2011
HANWHA SOLARONE CO LTD -ADR
HSOL
10
9/30/2011
DS Co. Ltd.
051710.KS
6
12/31/2011
Hanyang Digitech Co. Ltd.
078350.KS
8
12/31/2011
DSP GROUP INC
DSPG
1
9/30/2011
Hicel Co. Ltd.
066980.KS
1
12/31/2011
e-LITECOM Co. Ltd.
041520.KS
7
12/31/2011
HIMAX TECHNOLOGIES INC -ADR
HIMX
4
9/30/2011
EEMS Italia S.p.A.
EEMS.IM
7
9/30/2011
HITTITE MICROWAVE CORP
HITT
5
12/31/2011
Elk Corp.
094190.KS
7
12/31/2011
Hynix Semiconductor Inc.
000660.KS
8
12/31/2011
Elmos Semiconductor AG
ELG.GR
4
12/31/2011
I&C Technology Co. Ltd.
052860.KS
7
12/31/2011
Emerging Memory & Logic Solutions Inc.
080220.KS
1
12/31/2011
IDS Co. Ltd.
078780.KS
2
12/31/2011
ENERGY CONVERSION DEV
ENERQ
1
9/30/2011
IKANOS COMMUNICATIONS INC
IKAN
1
9/30/2011
Enspert. Inc.
098400.KS
1
12/31/2011
Iljin Display Co. Ltd.
020760.KS
9
12/31/2011
ENTEGRIS INC
ENTG
2
12/31/2011
Imagination Technologies Group PLC
IMG.LN
10
10/31/2011
ENTROPIC COMMUNICATIONS INC
ENTR
3
12/31/2011
Imagis Co. Ltd.
115610.KS
5
12/31/2011
EO Technics Co. Ltd.
039030.KS
7
12/31/2011
Infineon Technologies AG
IFX.GR
2
12/31/2011
Eugene Technology Co. Ltd.
084370.KS
1
12/31/2011
INFINEON TECHNOLOGIES AG-ADR
IFNNY
2
12/31/2011
Evertechno Co. Ltd.
070480.KS
8
12/31/2011
Innox Corp.
088390.KS
10
12/31/2011
EXAR CORP
EXAR
1
12/31/2011
INPHI CORP
IPHI
8
9/30/2011
EZCHIP SEMICONDUCTOR LTD
EZCH
3
9/30/2011
INSIDE Secure S.A.
INSD.FP
10
12/31/2010
FAIRCHILD SEMICONDUCTOR INTL
FCS
5
12/31/2011
INTEGRATED DEVICE TECH INC
IDTI
4
12/31/2011
Fine Semitech Corp.
036810.KS
10
12/31/2011
INTEGRATED SILICON SOLUTION
ISSI
7
12/31/2011
Fine Technix Co. Ltd.
106240.KS
9
12/31/2011
Intekplus Co. Ltd.
064290.KS
2
12/31/2011
First Sensor AG
SIS.GR
8
9/30/2011
INTEL CORP
INTC
8
12/31/2011
FIRST SOLAR INC
FSLR
9
12/31/2011
INTERSIL CORP -CL A
ISIL
3
12/31/2011
FORMFACTOR INC
FORM
2
12/31/2011
INTEST CORP
INTT
7
9/30/2011
FREESCALE SMCNDCTR HLD I LTD
FSL
1
12/31/2011
INTL RECTIFIER CORP
IRF
8
12/31/2011
SAMPLE
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Page 24
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Company
Ticker
QuickScore
Period Ending
Company
Ticker
QuickScore
Period Ending
IQE PLC
IQE.LN
9
6/30/2011
Meerecompany Inc.
049950.KS
10
12/31/2011
ITEST Co. Ltd.
089530.KS
7
12/31/2011
Melexis N.V.
MELE.BB
3
9/30/2011
IXYS CORP
IXYS
4
12/31/2011
MELLANOX TECHNOLOGIES LTD
MLNX
10
12/31/2011
JA SOLAR HOLDINGS CO LTD-ADR
JASO
9
9/30/2011
MEMC ELECTRONIC MATRIALS INC
WFR
7
12/31/2011
JINKOSOLAR HOLDING CO -ADR
JKS
10
9/30/2011
MEMSIC INC
MEMS
5
9/30/2011
JT Corp.
089790.KS
7
12/31/2011
MICREL INC
MCRL
2
12/31/2011
Jusung Engineering Co. Ltd.
036930.KS
10
12/31/2011
MICROCHIP TECHNOLOGY INC
MCHP
4
12/31/2011
KC Tech Co. Ltd.
029460.KS
1
12/31/2011
MICRON TECHNOLOGY INC
MU
6
11/30/2011
KEC Corp.
092220.KS
4
12/31/2011
Micronas Semiconductor Holding AG
MASN.SW
7
12/31/2011
Kerself S.p.A.
KRS.IM
2
12/31/2010
MICROSEMI CORP
MSCC
10
12/31/2011
KLA-TENCOR CORP
KLAC
2
12/31/2011
MINDSPEED TECHNOLOGIES INC
MSPD
5
12/31/2011
KoMiCo Ltd.
059090.KS
7
12/31/2011
MIPS TECHNOLOGIES INC
MIPS
6
12/31/2011
Kontron AG
KBC.GR
6
12/31/2011
Mirae Corp.
025560.KS
3
12/31/2011
Kookje Electric Korea Co. Ltd.
053740.KS
1
6/30/2011
MKS INSTRUMENTS INC
MKSI
3
12/31/2011
KOPIN CORP
KOPN
6
9/30/2011
MONOLITHIC POWER SYSTEMS INC
MPWR
5
9/30/2011
Korea Display System Co. Ltd.
080530.KS
10
12/31/2011
MOSAID TECHNOLOGIES INC
MSD.
9
10/31/2011
Korea Semiconductor System
089890.KS
9
12/31/2011
MOSYS INC
MOSY
8
9/30/2011
KULICKE & SOFFA INDUSTRIES
KLIC
1
12/31/2011
MtekVision Co. Ltd.
074000.KS
1
12/31/2011
L&F Co. Ltd.
066970.KS
9
12/31/2011
Nanoco Group PLC
NANO.LN
8
1/31/2012
LAM RESEARCH CORP
LRCX
2
12/31/2011
NANOMETRICS INC
NANO
6
9/30/2011
LATTICE SEMICONDUCTOR CORP
LSCC
3
9/30/2011
NeoFidelity Inc.
101400.KS
9
12/31/2011
LB Semicon Inc.
061970.KS
10
12/31/2011
Nepes Corp.
033640.KS
9
12/31/2011
LDK SOLAR CO LTD -ADR
LDK
9
9/30/2011
NETLOGIC MICROSYSTEMS INC
NETL
4
12/31/2011
LDT Inc.
096870.KS
5
12/31/2011
NEW ENERGY TECHNOLOGIES INC
3NENE
10
11/30/2011
LIG ADP Co. Ltd.
079950.KS
2
12/31/2011
Nexolon Co. Ltd.
110570.KS
10
12/31/2011
LINEAR TECHNOLOGY CORP
LLTC
3
12/31/2011
Nordic Semiconductor ASA
NOD.NO
10
9/30/2011
LMS Co. Ltd.
073110.KS
7
12/31/2011
NOVA MEASURING INSTRMNTS LTD
NVMI
4
9/30/2011
LSI CORP
LSI
1
12/31/2011
NOVELLUS SYSTEMS INC
NVLS
1
12/31/2011
LTS Co. Ltd.
138690.KS
10
12/31/2011
NVE CORP
NVEC
4
12/31/2011
LTX-CREDENCE CORP
LTXC
2
10/31/2011
NVIDIA CORP
NVDA
6
1/31/2012
MAGNACHIP SEMICONDUCTOR CORP
MX
2
9/30/2011
NXP SEMICONDUCTORS NV
NXPI
3
9/30/2011
Manz AG
M5Z.GR
9
9/30/2011
O2MICRO INTL LTD -ADR
OIIM
3
9/30/2011
MARVELL TECHNOLOGY GROUP LTD
MRVL
2
10/31/2011
OD Tech Co. Ltd.
080520.KS
7
12/31/2011
MATTSON TECHNOLOGY INC
MTSN
4
9/30/2011
Okmetic Oyj
OKM1V.FH
6
9/30/2011
MAXIM INTEGRATED PRODUCTS
MXIM
3
12/31/2011
OMNIVISION TECHNOLOGIES INC
OVTI
7
10/31/2011
MAXLINEAR INC
MXL
6
9/30/2011
ON SEMICONDUCTOR CORP
ONNN
7
12/31/2011
SAMPLE
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Page 25
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Company
Ticker
QuickScore
Period Ending
Company
Ticker
QuickScore
Period Ending
PDF SOLUTIONS INC
PDFS
3
9/30/2011
SEMILEDS CORP
LEDS
4
11/30/2011
PERICOM SEMICONDUCTOR CORP
PSEM
8
12/31/2011
Semisysco Co. Ltd.
136510.KS
10
12/31/2011
Phoenix Materials Co. Ltd.
050090.KS
2
12/31/2011
Semiteq Co. Ltd.
081220.KS
3
12/31/2011
Phoenix Solar AG
PS4.GR
7
9/30/2011
SEMTECH CORP
SMTC
3
10/31/2011
PHOTRONICS INC
PLAB
7
10/31/2011
Seoul Semiconductor Co. Ltd.
046890.KS
9
12/31/2011
Pilkor Electronics Co. Ltd.
033290.KS
7
12/31/2011
Shunfeng Photovoltaic International Ltd.
1165.HK
10
12/31/2010
PIXELWORKS INC
PXLW
2
9/30/2011
SIGMA DESIGNS INC
SIGM
1
10/31/2011
PLA Co. Ltd.
082390.KS
10
12/31/2011
Signetics Corp.
033170.KS
6
12/31/2011
PLX TECHNOLOGY INC
PLXT
10
9/30/2011
SILICON IMAGE INC
SIMG
9
9/30/2011
PMC-SIERRA INC
PMCS
3
12/31/2011
SILICON LABORATORIES INC
SLAB
6
12/31/2011
POWER INTEGRATIONS INC
POWI
7
12/31/2011
SILICON MOTION TECH -ADR
SIMO
8
9/30/2011
Protec Co. Ltd.
053610.KS
1
12/31/2011
SiliconFile Technologies Inc.
082930.KS
7
12/31/2011
PV Crystalox Solar PLC
PVCS.LN
7
6/30/2011
SILICONWARE PRECISION -ADR
SPIL
7
9/30/2011
PVA TePla AG
TPE.GR
7
9/30/2011
Siliconworks Co. Ltd.
108320.KS
2
12/31/2011
Q-Cells SE
QCE.GR
1
9/30/2011
SKYWORKS SOLUTIONS INC
SWKS
8
12/31/2011
QUICKLOGIC CORP
QUIK
2
9/30/2011
SMA Solar Technology AG
S92.GR
9
9/30/2011
RAMBUS INC
RMBS
10
12/31/2011
Soitec S.A.
SOI.FP
3
9/30/2011
RAMTRON INTERNATIONAL CORP
RMTR
9
9/30/2011
SOLAR POWER INC
3SOPW
10
9/30/2011
Raygen Co. Ltd.
047440.KS
7
12/31/2011
Solar-Fabrik AG
SFX.GR
5
9/30/2011
RENESOLA LTD -ADS
SOL
8
9/30/2011
SolarWorld AG
SWV.GR
7
12/31/2011
Renewable Energy Corp. ASA
REC.NO
1
9/30/2011
soulbrain ENG Co. Ltd.
039230.KS
9
12/31/2011
RF MICRO DEVICES INC
RFMD
4
12/31/2011
SPANSION INC
CODE
4
12/31/2011
RFsemi Technologies Inc.
096610.KS
10
12/31/2011
SPREADTRUM COMMUNICATNS -ADR
SPRD
5
9/30/2011
Riber S.A.
RIB.FP
1
6/30/2011
STANDARD MICROSYSTEMS CORP
SMSC
7
11/30/2011
Rorze Systems Corp.
071280.KS
2
12/31/2011
STMICROELECTRONICS NV -ADR
STM
4
9/30/2011
Roth & Rau AG
R8R.GR
1
9/30/2011
036540.KS
10
12/31/2011
RUBICON TECHNOLOGY INC
RBCN
9
9/30/2011
STS Semiconductor & Telecommunications
Co. Ltd.
RUDOLPH TECHNOLOGIES INC
RTEC
2
12/31/2011
Suess Microtec AG
SMHN.GR
4
9/30/2011
S Connect Co. Ltd.
096630.KS
8
12/31/2011
SUNPOWER CORP
SPWR
4
9/30/2011
S Polytech Co. Ltd.
050760.KS
7
12/31/2011
SUNTECH POWER HOLDINGS -ADR
STP
9
9/30/2011
S&S Tech Corp.
101490.KS
9
12/31/2011
Sunways AG
SWW.GR
9
9/30/2011
S-Energy Co. Ltd.
095910.KS
9
12/31/2011
SUPERTEX INC
SUPX
4
12/31/2011
Samsung Electronics Co. Ltd.
005930.KS
6
12/31/2011
Taesan LCD Co. Ltd.
036210.KS
2
12/31/2011
SAMT Co. Ltd.
031330.KS
3
12/31/2011
TAIWAN SEMICONDUCTOR -ADR
TSM
8
9/30/2011
Sejin Electron Inc.
080440.KS
8
12/31/2011
TechWing Inc.
089030.KS
10
12/31/2011
SEMICONDUCTOR MFG INTL -ADR
SMI
8
9/30/2011
Tera Semicon Corp.
123100.KS
10
12/31/2011
SAMPLE
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Page 26
Industry Risk Assessment Profile (IRAP)—Semiconductors & Semiconductor Equipment
Updated: May 18th, 2012
Company
Ticker
QuickScore
Period Ending
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
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