1. SPORTON INTERNATIONAL INC. （6146TW） 2017/08/11

2. Company Profile Business Domains A. Mandatory Requirement ：
Government standards that need to be passed for product launch
(1).EMC(Electro-Magnetic Compatibility)
(2).Safety
(3).RF & Telecom
B. Conformance Requirement：
Standards required by Telecom Operators/Carriers
(1). Mobile Device (2G/3G/3.5G/4G) Inspection & Certification
(2). Wireless product Inspection & Certification
(3). Others (automobile, IoT, NFC, etc.)
EMI Shielding Components
（10％）
Sales of EMI shielding components is complementary to inspection business, providing customer with solution consulting.
Inspection & Certification
(90%)
Sporton focuses on its core testing business but also one of the very few company in the world being able to offer both inspection services and EMI shielding components

3. Company Profile Core Strengths
Large number of service locations and strong international certification capability with leading inspection technology
Qunshan
ShenZhen
Xian, Shanxi
(Founded in 2013)
BaDe
Keuishan
HuaYa
Linko
ChuBei
HsiChu、Donghu、Neihu
Chongho
DongGuan
Service Locations：Taiwan 8, and China 3. Sporton is one of few global companies providing complete inspection and certification services for IT products.
Recognized by150 countries.
Sporton’s number of smartphone and wireless communication filling at the US FCC and its number 1 market share for 2 years.
1st Asian inspection lab authorized by Wireless Power Consortium (WPC)
One of few global cos. to provide testing & certification for 200GHZ high speed wireless and 1st ad(WiGig),WiHD certified lab.
100%-owned investment – International Certification Co.
(Founded in 2013, and have a good profit per year from 2014.)

4. Core Strengths / Complete Smartphone Testing Capability
Company Profile
Sporton with both mandatory and conformance testing qualifications as well as the most complete capacity can provide mobile phones with a variety of testing services, such as OTA, SAR, RF, PROTOCAL etc.; some other labs with only partial testing capability cannot provide customers with complete services so that these labs are not competitive.

5. Core Strengths / Market Share Comparison with main competitors
Company Profile
Core Strengths / Market Share Comparison with main competitors
FCC Filing IDs for WLAN/60G ~ / ~
Test Firm
2.4GHz
5GHz
Sporton
662 / 348
11.9% / 12.5%
638 / 440
18.1% / 21.4%
Bureau Veritas(ADT)
338 / 132
6.1% / 4.7%
451 / 198
12.8% / 9.6%
SGS
168 / 59
3.6% / 2.1%
156 / 66
4.4% / 3.2%
In total of 2057 FCC 5GHz high-end networking device test fillings, 4040 are filed by Sporton and the 21.4% global market share which is No. 1 in the worldwide has 3.3% growth compared with the 18.1% in 2016.
FCC Filing IDs for 3G/4G LTE ~ / ~
Test Firm
3G/4G LTE
Sporton
188 / 125
13.4% / 18.7%
Bureau Veritas(ADT)
60 / 21
4.0% / 3.1%
SGS
10 / 8
0.7% / 1.2%
All Filing Projects
1401 / 670
100%
From January to June 2017, the US FCC had received 670 smartphone test fillings of which Sporton had filed 125 and the 18.7% global market share which is No. 1 in the worldwide has 5.3% growth compared with the 13.4% in 2016.

6. Business Operation Revenue Breakdown 1. Region：
2. Products: Phones, Networking and Others
IoT related products including cars, appliances, wearables, NB, PCs, etc.

7. Business Operation Consolidated Income Statement 2017/2Q 2017/1Q ％ QoQ
(Unit：NTD$ Thousand Dollars)
2017/2Q
2017/1Q ％
QoQ
Total Revenue
755,101
100%
698,902
8.04%
Gross Profit
368,215
48.92%
312,874
44.77%
17.69%
Operation Expenses
118,904
15.75%
147,592
21.12%
-19.44%
Operating Income
249,311
33.01%
165,279
23.65%
50.84%
Pre-Tax profit
250,329
33.15%
184,188
26.35%
35.40%
Net Profit
188,475
24.69%
146,335
20.94%
28.80%
EPS
(NT $)
2.08
1.62
Consolidated Income Statement
In Q117, the gross margin reduction were mainly caused by a one-time recognition of more than NT$30 million (> 4% gross margin) pension of the Korean subsidiary.
The business performance in Q217 has been restored and the OP margin QoQ hit 50% particularly.

8. Gross Margin gradually raised
Business Operation
Total Revenue、Gross Margin and Net Margin in last 6 years
Gross Margin gradually raised
up to roughly 50%
單位：%
(Unit：NTD$ Thousand Dollars)
Note：Reveal Consolidated Operation Results since 2012

9. Dividend Allotment was over 70% of the net profit for the last 6 years
Business Operation
EPS and Dividend for the last 6 years
Dividend Allotment was over 70% of the net profit for the last 6 years
Cash Dividend
4.8
4.0
4.3
5.8
6.0
6.1
Stock Dividend
0.2
0.1

10. Growth Momentum
New smartphone announcement in 2017, inspection services of testing business opportunities
Currently 90% of global testing market value comes from smartphones and networking devices. Wearables, IoT and connected vehicles still represents <10%. However, Sporton has already invested and completed projects for wearables, IoT and vehicles. Sporton will continue to invest in these areas to capture to market when it starts to grow.
Samsung Galaxy Tab S3
BlackBerry KeyOne
LG G6
Motorola Moto G5 and
G5 Plus
Huawei P10 and P10 Plus
& Huawei Watch 2
Nokia 3310
Source：MWC2017

11. Growth Momentum
China's smartphone brand rising, led Sporton's China testing Labs take more orders.
●Source：台經院產經 行動通訊產業現況與展望簡報

12. Growth Momentum
China's smartphone brand rising, led Sporton's China testing Labs take more orders.
Y2014~2017/1Q The world's top five smart phone brand sales rankings and market share.
Rank
Y2014
Y2015
Y2016
YOY 1
Samsung(24.7%)
Samsung(22.2%)
Samsung(20.8%)
-3.2% 2
Apple(15.4%)
Apple(16.1%)
Apple(14.5%)
-7.0% 3
Lenovo(7.2%)
Lenovo(7.4%)
Huawei(9.3%)
29.6% 4
Huawei(5.8%)
Huawei(5.1%)
OPPO(5.7%)
113.1% 5
Xiaomi(4.8%)
Xiaomi(5.0%)
VIVO(4.8%)
84.4%
Chinese smartphone brands’ new model developments and technology migration among mid level handsets.
China mobile phone brand unveil their flagships to aggressively challenge Apple’s iPhone 8. MWC 2017 also saw the return of 3 classic smart phone brands with their product offering including Lenovo Moro G, Nokia phones and TCL’s new BlackBerry phone.  China smartphone’s could witness better than average growth and raise market share.
 As China smartphone brands continue to push into overseas market and telecom operators including China Mobile upgrade their infrastructure towards 4G LTE, 4GLTEAdvanced and 3CA, it has brought a trend of technology migration in both mid and high end phones --Benefitting the Sporton’s growth.
Rank
Y2017/1Q 1
Samsung(26.1%) 2
Apple(16.9%) 3
Huawei(11.4%) 4
OPPO(8.1%) 5
VIVO(6.2%)
●Source：TrendForce、IDC、台經院產經資料庫整理，2017年3月

13. 未來展望 Growth Momentum Today
First lead in 4G、WiGig、3CA、RED、WPC、NFC inspection services of business opportunities 、increase the testing fee、and strong competitiveness
4G→5G’s process, there are still many technology breakthrough, ex: 3CA、WiGig、WiHD、RED、WPC、NFC…etc to increase and update.
3CA
Today

14. Growth Momentum
3CA mobile penetration increases annually and drives the related testing services booming.
3CA mobile productions, its testing item,testing time has increase, so that inspection fees also increase.
Every technology migration or function increase requires OTA and SAR testing. Testing fee will increase alongside complexity.

15. 成長主因
5G mobile phone will commercialize in 2019, 5G mobile phone’s market value starts to grow.
5G mobile phone will commercialize in 2019,Sporton is overall arrangement in 5G mobile phone’s market ：
Sporton stands for testing industry to actively participate in the International 5th Generation Action (5G) standard-setting technical meeting.
In the development of technical meetings, it has to do technical, testing venues, and equipment to layout before the specific and consensus technical specifications completed.
According to an IHS study sponsored by Qualcomm.  5G could enable as much as $12.3 trillion in goods and services in 2035 when its full effects are realized, the 5G Economy report said. By that time, companies developing 5G products and services could generate $3.5 trillion in revenue and 22 million jobs. The so-called 5G value chain will spend as much as $200 billion a year building 5G products and services, it estimated.
Source：

16. Growth Momentum 4G/LTE mobile comm. Products continuous Growth
In response to 4G/LTE mobile communications era, OTA, SAR and FTA (GCF / PTCRB) will be necessary parts of the test items in the 4G/LTE network CPE products.
The wireless Wifi transmission technology upgrade from ac to ad(WiGig), or WiHD which create a new era for electric consumer product testing laboratory industry. 
Because of IoT(internet of things) era is coming. New ultra-high-speed 60 GHz transferring technology becoming major technology for consumer electronics including smartphone, tablet, VR(virtual reality device), and drone.  Sporton is committed to continuing its investment in WiGig and WiHD and other new advanced communication technologies to enhance the company’s competiveness and expand market share. 
GSA：LTE end product types continuous growth
According to The Global Mobile Suppliers Association (GSA), the 4G mobile communication terminal market is rapidly maturing in the world. The total LTE user devices increased to 7,037 models and the number of LTE device manufacturers 790 companies (including LTE FDD and TDD (TD-LTE) devices).
Sourcce：GSA

17. Growth Momentum
4G and emerging countries are the main engine of the mobilephone market growth.
資料來源：GSMA(2017)、台經院產經資料庫整理，2017年4月

18. Comparison of regular and 4G/LTE comm. product inspections
Growth Momentum
Comparison of regular and 4G/LTE comm. product inspections
Mandatory Inspection
Regular Comm.
LTE Comm.
Avg. Inspection Fees
Mandatory Inspection V
NT$1mn
SAR X
OTA
FTA(GCF/PTCRB)
NT$5mn
OTA
SAR
Sporton has over 20 OTA antenna inspection (including MIMO) labs and equipments with one of the best OTA testing capability companies in the world.
FTA(GCF/PTCRB)

19. Standard Device Testing vs. Smart Device Testing
Growth Momentum
Standard Device Testing vs. Smart Device Testing
● Testing difference for standard devices vs. smart devices
Standard Devices
Smart Devices
Regulatory Testing: after acquiring testing results from authorized labs, vendors can announce conformance
Regulatory Testing
OTA & SAR
Wi-Fi, Bluetooth and Zibi
GCF & PTCRB
● Sporton's competitive advantage
§Differentiated customer service:
To assist customers in the design phase, the introduction of new technologies and provide new technology testing environment, the test phase of the case of special case integration services.
Nearest customer service: additional China and US test sites, while the layout of the operation of India and Indonesia positions.
§Higher testing efficiency than competitors:
Existing facilities can be used to test smart devices without having to add new equipment which helps to raise utlization rate
Smart devices all have wireless function and will be required to file for authorization to be sold in targeted country which increases the service fee opportunity for certification providers
Sporton's profitability is a function of revenue growth and utilization rate

20. Value of China electronic exports to US
Future Prospects
Value of China electronic exports to US
(Unit：USD$ Thousand Dollars)
In 2016, the total value of computers, computer accessories, telecom equipment, business machines and equipment that China exports to US reached USD$100bn while the number of models reached over 100 billion.
Trump protectionism: Potential to strictly enforce testing requirement as a form of protectionism which benefits the top tier suppliers.
If China enters a MRA with US, this would likely open the domestic China mandatory market. Sporton can further provide a one stop shop for Chinese vendors.
●Source：

21. Future Prospects
Capacity Expansion and Inspection Efficiency Enhancement
Future Operation Development
Time
Main Item/Contents
First Stage: Capacity Expansion Project (Completed)
2014 /Q3 ~
Taoyuan HuaYa: Construction of New high-end mobile
phones inspection laboratory
Hsinchu: Expansion of Wireless Networking inspection lab and equipments
China Qunshan and Shenzhen:
Expansion of Mobile and Networking inspection lab and
equipments
Inspection Efficiency Enhancement Project
2015/Q1~
Inspection automation
Inspection report computerization
Simplify the testing process with strict quality
control of internal processes
Korea Subsidiary Localization
2015/12~
Korea Sporton subsidiary and branch company’s equipment sold to SkyTL which were rent from Sporton Inc. in the pass. Korea Sporton subsidiary and branch company’s employee transfer to SkyTL as well, for a price includes share of SkyTL and USD 1.4million in cash. And it was recognized in 2017/1Q.
Sporton provides SkyTL long term technique service by contract
Convert KunShan Lab to self owned from rented
Qunshan-Sporton raised USD 4 million in 2015/12
Strengthen China management and technician capabilities
Acquired A2LA
Expand automation to lower error rate and increase efficiency
Chinese Inspection Lab Ownership
(Reduced systemic risk)
2016~
2020
Shenzhen
Second Stage: Global Allocation
Future
Addition of Donguan Lab (H117): expand wireless equipment and IoT testing
Add US region testing lab (2017)
Expand into India and Indonesia

22. Future Arrangements & Prospects
New Technology
New technology in : Sporton is participating in the standard setting process for new technologies and will be ready to provide service immediately for these new technology.
Technology
FCC/CE
OTA
GCF/PTCRB
Field trial
NB-IoT V
5G Generation mobile phone
4.5G or 4G+
RED
3CC, 4CC
VR with 60Ghz
LoRa
4x4, AT&T 3CC
4x4 MIMO+CA combination

23. Future Prospects Expand China laboratories and Operations
In order to meet the Chinese inspection demand, Sporton has established the inspection labs in Qun Shan, Shen Zhen and Xi An.

24. Future Prospects Expand global allocation-India Market
The China mobile phone brand accelerate to the international in 2017.
Focus on India, extending Southeast Asia, South America, Africa and other overseas markets.
MI and Foxconn set up a second mobile phone foundry in India at 2017, that trying to challenge e-commerce channel market share of 50%.
Plan to manufacturing mobile phones in India, and resorted the double-brand strategy, synchronized online and offline distribution path.
Actively expand the United States, Southeast Asia, Europe and other markets.
MediaTek’s “India Mobile Handset Hardware Design Training Program” on 13 January 2017:   In conjunction with the Taiwanese government’s 新南向 initiative to expand cooperation and businesses in ASEAN, South Asia and ANZ markets, especially eyeing the opportunity in Asia’s 3rd largest economy, India, Sporton is hopeful the seminar can promote the cooperation between Taiwan’s handset supply chain and India’s handset market.  Bringing its expertise in handset testing and certification, Sporton hopes to work with major handset related suppliers, including MediaTek, to further develop the India’s handset market opportunities.
At the end of 2016, OPPO planned to invest $ 216 million to set up a mobile phone line in Greater Nodia, India.
In 2017,OPPO accelerates the expansion of New Zealand, Kazakhstan, Saudi Arabia and other 27 overseas markets, and set up sales centers in Egypt to expand the Middle East and North Africa market.
In 2017, OPPO will invest 1 billion Baht (about NT$879 million), strengthen the Thai market marketing.
●資料來源：台經院產經 行動通訊產業現況與展望簡報

25. Future Prospects Expand global allocation U.S India Indonesia
“Local manufactured” is new trend that make mobile phone assembly settlement changes.
Made in U.S： ＊During the campaign, Trump asked Apple to move mobile phones and computer lines back to the United States.
Trade policy： ＊Will impose to China and Mexico 45% & 35% import duty.
Tax cuts policy： ＊The corporate tax rate was reduced from 35% to 15% to encourage the manufacturing industry return to U.S.
U.S
Import taxes： ＊The import taxes on mobile phones increased from 6% to 12.5%. ＊For the charger and other mobile phone parts levy 12.5% of the import taxes. ＊2% import taxes on PCB.
Local Content Requirement： ＊Local content requirement more than 30% in order to set up factories in local.
India
Import taxes： ＊In 2014, levy 20% import taxes on smart phones which price more than 5 million rupiah.
Local Content Requirement： ＊The government currently applies a mandatory 20 percent local content requirement for smart phones. In 2017, for 4G mobile phones, local content requirement increased to 30%.
Indonesia
Local manufactured
●資料來源：台經院產經 行動通訊產業現況與展望簡報

26. Thank You