1. SPORTON INTERNATIONAL INC. （6146）

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
Seoul
Service Locations：Taiwan 8, Korea 1, and China 3. Sporton is one of few global companies providing complete inspection and certification services for IT products.
Recognized by150 countries.
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 ac Wave 2 certified lab
New technology will be first introduced into the Korea lab while the testing process automation and standardization will be refined in Taiwan laboratories and then sent it to the China factories for mass inspections
100%-owned investment – International Certification Co.
(Founded in 2013, Net Profit NT$30mn in 2014)

4. Company Profile Wide Applications
Inspection Categories：
A . IT, communication, and mobile appliance products including NB, mobile phones, tablets, networking products (i.e. wireless Routers, switch) and smart home appliances.
B . Automobile, motorcycle, and related components. Sporton is the only company in Taiwan capable of offering EMI testing for whole vehicles.
Most complete testing capability globally
Total Solution
One Stop Shop
Over 20 yrs industry experience

5. Industry Characteristics
Company Profile
Industry Characteristics
Clear first mover advantages while larger players become stronger
Focus on the service quality and integrity
Stable demand that is shielded from end demand
Local-ization
Impartial third party
Technology and Capital-intensive

6. Gross Margin gradually raised
Business Operation
Gross Margin and Net Margin in last 6 years
Gross Margin gradually raised
up to roughly 50%
Note：Reveal Consolidated Operation Results since 2012

7. Dividend Allotment was over 80% of the net profit for the last 6 years
Business Operation
EPS and Dividend for the last 6 years
Dividend Allotment was over 80% of the net profit for the last 6 years
Cash Dividend
4.0
4.95
4.8
4.3
5.8
Stock Dividend
0.2
0.05
0.1

8. Business Operation Consolidated Income Statement Y2015 Y2014 FY ％ YoY
(Unit：NTD$ Thousand Dollars)
Y2015
Y2014 FY ％
YoY
Total Revenue
3,156,938
100
2,921,759
8.05%
Gross Profit
1,534,181
48.59
1,373,446
47.01
11.70%
Operation Expenses
589,234
18.66
555,684
19.02
6.04%
Operating Income
944,947
29.93
817,762
27.99
15.55%
Pre-Tax profit
965,021
30.57
828,475
28.36
16.48%
Net Profit
761,340
24.12
684,599
23.43
11.21%
EPS
(NT $)
8.50
7.39

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

10. Growth Momentum
Increased mobile phone/ tablet/ wearable devices functionalities/ models
1. Increasing functions:
Features of end devices (i.e. phones, tablet, PC, wearable, etc.) counting to become more advanced. EX: NFC, Wi-FI, GPS, Bluetooth, etc.
2. Increasing variety of products
Brand vendors increasing the number of product offering to stimulate demand. EX: Model A will upgrade to Model A plus or Super A etc.
3. Increasing connective technology
Along side functional increase of devices, connective technology is also increasing (4G→5G、 ac)

11. 未來展望
Growth Momentum
First lead in 4G / LTE Advanced and TDD-LTE inspection services
​ABI Research estimates that there will be nearly 1.37 billion 4G LTE subscribers worldwide by the end of 2015, more than double from 650 million in ABI Research also forecasts the LTE subscribers will exceed 3.5 billion by 2020, with CAGR of 20.8% between  
The mobile Internet and loT ( Internet of Things)have driven the demand and application of 5G network, which bring revolutionary influences into our lives.
Increased competitiveness &service offering
1. Sporton is a designated testing lab for China Mobile and AT&T
2. Sporton expanded offering to include outdoor field testing

12. Growth Momentum
4G mobile penetration increases annually and drives the related testing services booming
* For 4G/LTE mobile comm. products，the testing hours of OTA，PTCRB will be up over 50%
4G inspection fees increase over 30%
Standard
Test item
Test Hour
Total test hour
PTCRB(No LTE)
2G/3G
228
PTCRB(withLTE)
234
360
LTE
126
Every technology migration or function increase requires OTA and SAR testing. Testing fee will increase alongside complexity.
A substantial increase for 4G/LTE testing hours from 3G
UBS report estimates an average of 50 – 55% increase in fees from 3G to 4G migration (includes Wi-FI and NFC functions)

13. 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.
802.11ac Wave2 technology can simultaneously provide services to multiple devices,and is estimated to become the next wave of mainstream product
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 4,416 models and the number of LTE device manufacturers grew 34% YoY to 369 companies (including LTE FDD and TDD (TD-LTE) devices).
Sourcce：GSA

14. 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)

15. Development trend of electronic devices in the future
Growth Momentum
Development trend of electronic devices in the future
IoT is to connect all emitting devices to the next to realizing a smarter management
More devices are connecting into the internet which is creating concepts such as connected automobile, power grid, appliances, medical, etc.
Increasing number of smart products provides testing firms a good growth opportunity.
As connective technology improves and function increase, testing categories becomes more complicated. Sporton can use existing handset testing capability to extend to testing other connected devices. This also allows Sporton to provide one-stop shopping while minimizing the capital requirements and maximizing utilization rate

16. IOT creates more opportunities for testing services
Growth Momentum
IOT creates more opportunities for testing services
Smart Home
Wearable Devices
Smart Healthcare

17. Growth Momentum Global IOT Markets
IDC expects 29.5bn connected devices by 2020
Asia and Pacific Region (ex. Japan):
Will have 8.6bn connected devices
Market value is estimated to increase from US$250bn to $583bn
●Source：

18. Growth Momentum Global IOT Markets
The Industrial Internet of Things (IoT) market was valued at USD Billion in 2014, to reach USD Billion by 2020 and is expected to grow at a CAGR of 8.03% between 2015 and 2020.
Unit：USD,Bn
●Source：Markets and Markets, January 2016

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
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)
●Source：

21. US FCC will stop accepting Chinese laboratory test reports
Future Prospects
US FCC will stop accepting Chinese laboratory test reports
Reason
The FCC has announced it will stop accepting certification from non-MRA country’s labs that are not accredited by the FCC on July 13th It will be carried out after July 12th 2016.
Effects on non-MRA countries
US FCC will not accept FCC testing report from Chinese labs because China and US has no MRA
China exports of electronic devices such as computers, telecom equipment, etc. to US reached over USD$100bn. These vendors may need to explore cooperation with accredited labs.
Sporton has seen the effects of order shift starting in 2015 (Big vendors Middle vendors Smaller vendors)
Opportunities for Sporton
Sporton has 3 labs in China that focuses on mobile phone testing which can be expanded to include testing for computers and computer accessories
Pretest and Debug in China, while Final Test and FCC report be issued in Taiwan
Because EMC regulations are consistent among countries, US FCC conformance testing efforts can extend into certification for European Union CE, Japan, Canada, etc.
One-stop shopping for both EMC and safety

22. Future Prospects
Capacity Expansion and Inspection Efficiency Enhancement
Future Operation Development
Time
Main Item/Contents
First Stage: Capacity Expansion Project (Completed)
3Q/2014 ~
1Q/2015
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
1Q/2015~
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 companys’ equipment sold to SkyTL which were rent from Sporton Inc. in the pass. Korea Sporton subsidiary and branch companys’ employee transfer to SkyTL as well, for a premium gain includes USD 14million in cash.
Sporton provides SkyTL long term technique service by contract
Enlarge Sporton testing business and service in Korea market
Chinese Inspection Lab Ownership
(Reduced systemic risk)
2016
2020
Qunshan-Sporton raised USD 4 million in 2015/12
Shenzhen
Second Stage: Global Allocation
Future
Japan
USA

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 at the first step, and will expand the labs in Beijing and Chong Qing at the second step.

24. Thank You