2013

Industry Analysis

Markis Capital Limited

Contents 2

Industry Basics

Analytical methods

PEST analysis

SWOT analysis

5 forces analysis

Total Available Market / Market Sizing

Trend growth analysis

Supply & Demand

Example studies

Method vs. Methodology 3

Source: MIC

Typical Reports 4

Quarterly Market Share / Unit Shipment Tracker

Worldwide IT Spending

Price Index Forecasts

Market Review & 2013-2017 Forecasts

Industry Commentary, Market Trends, Monthly Insights

Analytical Framework (DIEM) 5

Define

Scope of Industry

Investment Mandate

Exclusions

Identify

Key Drivers

Pros & Cons

Internal & External Factors

Evaluate

Intensity

Market share

Growth Rates

Monitor

Review

Consolidate Data

Monitor Changes

Four stages of the industry life cycle 6

1. Pioneer.

2. Growth.

3. Mature.

4. Decline.

Time

Pioneer Growth

Mature

Decline

Revenue

Stock Characteristics 7

Growth Stocks accelerating sales and high profit margins during all phases of the

business cycle

Defensive Stocks Typically in the mature phase of the life cycle

Demand relatively independent of the business cycle

Cyclical Stocks Product demand tends to increase during both the expansion

and peak phases and drop significantly during the recessionary phase

Speculative Stocks company that invests in a business with an uncertain outcome.

Analytical Models 8

Industry Analysis Models 9

1. Industry classification

2. External factor review PEST

3. Competitive Analysis Five Forces, SWOT

4. Supply, Demand, and Pricing

Industry Classification 10

Global Industry Classification Standard (GICS): 102468154

Industry Classification Benchmark (ICB): 10194111475,000

Thomson Reuters Business Classification (TRBC): 102552124

TSE:29 TEJ: 88, 167 : 1989 254

551

Source: DGBAS, TEJ, ICB, MSCI, S&P, Wikipedia

PEST - Macro Environment Analysis 11

PEST(LE) analysis describes a framework used to scan

the organizations external macro environment.

PEST(LE) stands for

Political

Economic

Social

Technological

Legal

Environmental

Five Forces 12

New Entrants Buyers

Suppliers Substitutes

Competitors

SWOT Analysis 13

Strengths Weaknesses

Opportunities Threats

BCG Growth Share Matrix 14

Star Question Marks

Cash Cow Dog

Product Life Cycle 15

Source: Olga Tarkovskiy

Finding Data

Google

Wikipedia

SSRN

Associations & Industry Data

16

Example: Market Share, Growth 17

The worldwide smart connected device market will again exhibit double-digit

year-over-year growth of 10.6% in 2013, but this growth will gradually slow to just

3.1% in 2017.

Product Category 2013 Unit Shipments 2013

Market Share

2017 Unit Shipments

2017 Market Share

20132017 Growth

Desktop PC 134.4 8.6% 123.11 5% -8.4%

Portable PC 180.9 11.6% 196.6 8% 8.7%

Tablet 227.3 14.6% 406.8 16.5% 78.9%

Smartphone 1,013.2 65.1% 1,733.9 70.5% 71.1%

Total 1,556 100% 2,460.5 100% 58.1%

Source: http://www.idc.com/getdoc.jsp?containerId=prUS24314413

Tablet Shipments Forecast to Top Total PC Shipments in the Fourth Quarter of 2013

and Annually by 2015

Value Creation & Business Models 18

This element focuses on the sources of value that can be extracted through the value chain. The value chain consists of suppliers of raw materials, but also the delivery firms that deliver the finished product to the consumers

Business Models The rationale of how an organization creates, delivers, and captures value

Bricks & Clicks

Cutting out the

middleman Direct Sales Franchise Freemium

Outsourcing MLM /

Pyramid Scheme

Razor & Blades

Low Cost Carrier

Source: Wikipedia

Industry Drivers & Inhibitors 19

Technology Considerations Whether or not the innovation will be successful.

Whether or not competition from new technologies will supplant the old technology.

What are the industry drivers, technical barriers?

Industry Specific Considerations Competition

Supply Drivers

Demand Drivers

Develop and Use Checklists & Frameworks!

Demand Forecasting 20

To begin with global industry

analysis, an estimation of demand

is needed.

Usual metrics includes global

GDP, consumer spending data,

export/import figures, industry

utilization, price and volume data,

consumption data.

Demand Coverage

Product-level

Input/ Outputs

Regional Dynamics

Global Industry Trends

Estimating Supply 21

Supply is often a matter of definition. Sometimes more transparent, apple-to-apple comparisons are important.

Many Industries have their own terminology. (UTR, Yield, ATK/RTK, ARPU, SSS, ton-miles, throughput, etc.)

Design Capacity

Yield Rate

Production Capacity

Utilization Rate

Inventory

Shipment Rate

Effective Supply

Pricing & Margins 22

Decreasing US GoM jack-up rates

(Day Rates)

300ft+ jack-ups in SE Asia

(Operating Margins)

Concentration Ratio 23

The concentration ratio is the measure of the

percentage market share in an industry held by the

largest firms within that industry. For example, suppose

3 firms dominate a specific industry, such as beverages,

holding 80% market share of the beverage industry. The

concentration ratio of the beverage industry would

thus be 80%.

Herfindahl Index 24

The Herfindahl index is simply the sum of the squares

of the market shares for each firm within the industry

and is always less than one.

Herfindahl index = 2

Other methods / Issues 25

Inventory Analysis

Book to Bill Ratio

Capacity Database

Total Available Market / Serviceable Market / Market Share

Market Segmentation

CAGR =

1

# 1

ex: (2017/2013)^(1/5)-1

Example Studies 26

Example: Airline Industry 27

Boeing vs. Airbus What is the difference?

In their outlook? Segmentation? Growth rates?

Impact on business model?

Impact on share price & earnings?

http://www.boeing.com/boeing/commercial/cmo/

http://www.airbus.com/company/market/gmf2013/

Example: Mobile Handset 28

Question Is HTC competitive?

What is your market assessment? Technology assessment?

What is the supply chain? Who benefits?

Key Words mobile handset market share

http://www.idc.com/getdoc.jsp?containerId=prUS24302813

https://www.abiresearch.com/research/service/mobile-devices/

http://www.gartner.com/newsroom/id/2573415

http://www.isuppli.com/Mobile-and-Wireless-Communications/Pages/Low-End-Smartphones-Boost-Market-Growth.aspx

Example: Taiwan Tech Inventory 29

Sub-Sector Segmentation

Inventory Days

Cash Conversion Cycle

Example: Taiwan Industry Valuations 30

PE Band

PB Band

Resources 31

mcl.tw/Library102

http://ieknet.iek.org.tw/index.jsp

http://college.itri.org.tw/

http://mic.iii.org.tw/

http://www.digitimes.com.tw/

DisplaySearch http://www.displaysearch.com.tw/

http://www.topology.com.tw

http://www.dramexchange.com/

(Teddy H. Tsai) (Director & CEO)

801 2092

: +886-7-241-2329 123 : 0910723698

: teddy.tsai@markis.asia : http://www.markis.tw

Q&A

32