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Silicon Motion Technology Corporation Silicon for Mobile Information Investor Presentation July 29, 2005
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2 Safe Harbor Statement This presentation does not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Specifically, this presentation does not constitute a “prospectus” within the meaning of the Securities Act of 1933, as amended. This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company does not undertake to revise forward-looking statements to reflect future events or circumstances.
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3 Agenda Our Company Our Strategy Our Financials
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4 Investment Highlights Provider of universally compatible, high performance, low power portable digital media devices A leader in the NAND flash controller market Highly defensible technology backed by patent protection Strategically located to the Asia-based electronics supply chain US-styled gross margins and Asian operating expenses One of a Kind Company with Ability to Deliver Superior Performance
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5 Our Company Our Strategy Our Financials
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6 Our Company Launched CF controllers (1st in Asia) 1998 Wallace Kou, CEO, elected a Director of MMCA and the Chairman of MMCA Compliance committee Launched MP3 player controllers NASDAQ IPO on June 30, 2005 2005 Mission Overview A leader in the flash memory controller market Market position: Founded in 1997Incorporation: Silicon Motion is a leading fabless semiconductor company that provides universally compatible, high- performance, low-power semiconductor solutions for the multimedia consumer electronics markets Key milestones Financial highlights 20041H05 Net Sales (US$m)68.933.9 Gross margin41%45% Operating margin18%20% Net margin12%20% Headquartered in Taiwan, with offices in U.S., Japan, Korea, Germany and China Location: 196 employees as of June 30, 2005Employees: First million CF controllers shipped in 2-years 2000 1M CF controllers shipped 2002 Launched MMC and SD controllers with 1M of each shipped 200 3 Launched USB 2.0 controllers with: 7M USB 2.0 controllers shipped 7M MMC controllers shipped 20M SD controllers shipped 2004
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7 Our Team NamePosition Experience Wallace Kou Western Digital, VP and Chief Architect of Multimedia Products 20-years industry experience M.S. in Electrical & Computer Engineering, UCSB B.S. in Electrical & Control Engineering, NCTU President & CEO The Team: Experienced senior management team –15 VPs and directors avg. 15 yrs experience –Extensive international work experience Richard WeiCFO Experienced CFO of a US-listed semiconductor company Research Analyst, Lehman Brothers & Morgan Stanley MBA, Cornell University B.S. in Computer Science, MIT Robust R&D team of 110 engineers –93 engineers with Masters degrees or PhDs –Engineering managers avg. >10 yrs experience
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8 Our Products and End Markets Product Mix 2004 Product Mix 1H05 Wide-Ranging End Markets Flash memory controllers Portable audio SoCs Multimedia display processors Card reader MP3 Controller Graphics USB 2.0 Flash Disk (UFD) xD-Picture Secure Digital (SD) Our Controllers and Processors Multimedia Card (MMC) Compact Flash (CF) Universal Serial Bus (USB) 2.0 controllers
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9 A Driver of Growth in Our End-Markets: Digital Cameras Growth accelerated since 2004 No. of Digital Photo Exposures Source: IC Insights CAGR 23.3% Digital Camera Sales Driving Increased Use of Flash Memory Cards Larger digital camera base Increased picture resolution Improved convenience with camera phone
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10 A Driver of Growth in Our End-markets: Mobile Phones Camera Phones CAGR: 52.5% Smartphones CAGR: 35.8% 3G Phones CAGR: 52.3% MP3 Phones CAGR: 64.6% Increased functionalities Need for memory
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11 2005-08 CAGR: 65% Fastest transfer speed - v4.0 available in x1, x4, x8 bit, up to 52MHz Capacity ranges from 8MB to 2GB Dual voltage support for v4.0 Flash Memory Card Storage Options Secured Digital (SD)MultiMedia Card (MMC) xD-Picture (xD) /SmartMedia (SM) 2005-08 CAGR: 4% SM has large form factor and low density of up to 128MB xD will replace SM xD v1.2 contains a controller as well as memory xD available with capacity of up to 1GB Compact Flash (CF) 2005-08 CAGR: 30% Unique encryption feature ideal for applications requiring IP protection Capacity ranges from 4MB to 2GB Up to x4 bit, 50MHz Popular due to small size and low power 2005-08 CAGR: 1% High capacity of up to 4GB x8 bit, up to 25MHz Single voltage Large form factor suitable for high resolution digital camera Note: SD includes miniSD; MMC includes RS-MMC Source: IDC 2005 Shipment 219.1 million
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12 Our Role in a Flash Memory Card World-class Flash Memory Controller Functionalities Flash memory controller NAND Flash memory Functions: Controls data flow between host device and NAND flash Determines read/write speed Functions: Stores data NAND Flash Memory ItemASP ~$50.00512MB SD card ~$1.25Flash controller ~$30.00Flash memory (512MB)
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13 Our Company Our Strategy Our Financials
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14 Past and Future Growth Drivers Mobile Graphics 01 03040506 – 07 Flash Controller (MMC and SD) USB 2.0 Controller Portable Audio SoC Image Processor and Video Codec Flash Controller (CF) 02
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15 Flash Memory Card and USB Flash Drive Controllers Flash Memory Card Controller (1) CAGR: 38.2% Silicon Motion Market Share (1) Assumes 1 controller per flash memory card; Source: IDC USB 2.0 Flash Drive Controller (1) Silicon Motion Market Share CAGR: 39.7% (1) Assumes 1 controller per USB flash drive; Source: IDC
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16 Portable Audio SoC and Embedded Graphics Portable Audio SoC Portable audio player controller (1) Market participants (1) Assumes 1 controller per portable audio player; Source: IDC Embedded Graphics Market participants Embedded graphics controller (1) CAGR: 34.8% CAGR: 8.2% (1) Includes only car navigation and handheld computers; Assumes 1 controller per unit; Source: Gartner
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17 HIGH LOW HIGH Captives Emerging Asian competition Necessary Learning Curve LOW Learning curve Pricing floor for captives Cost Structure Pricing ceiling for Asia competitors Our Competitive Advantage in Flash and USB Flash Drive Controllers
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18 Our Customer Base Multimedia SoCsMobile Storage Products 1H05 Customer Concentration 2004 Customer Concentration
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19 Our Company Our Strategy Our Financials
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20 Our Sales Trend 2Q05: +7% Sequentially +37% Year-Over-Year
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21 Sales By Product Mobile Storage Products include flash card controllers and USB 2.0 controllers. Multimedia System-on-Chip Products include multimedia display processors and portable audio SoCs.
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22 Unit Shipments Mobile Storage Products include flash card controllers and USB 2.0 controllers. Multimedia System-on-Chip Products include multimedia display processors and portable audio SoCs.
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23 Our Margin Trend
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24 Our Net Income Trend 2Q05: +21% Sequentially +3,734% Year-Over-Year
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25 Our Balance Sheet As of 12/31/04 (NT$ Million) As of 6/30/05 (NT$ Million) As of 6/30/05 (US$ Million) Cash & Cash Equivalent 7271504.8 Short Term Investments 15488628.0 Total Assets 2,1671,97562.5 Total Debt --- Total Liabilities 71931710.0 Shareholders’ Equity 1,4481,65852.5
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26 Our Financial Ratios 1Q052Q05 A/R Days (average)6145 Inventory Days (average)13687 Inventory Days (ending balance)11263 Current Ratio6.05.9 ROE26%29% ROA19%24%
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27 Investment Highlights Provider of universally compatible, high performance, low power portable digital media devices A leader in the NAND flash controller market Highly defensible technology backed by patent protection Strategically located to the Asia-based electronics supply chain US-styled gross margins and Asian operating expenses One of a Kind Company with Ability to Deliver Superior Performance
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