Operations Review

Extracted from Annual Report 2015

NORTH ASIA

In FY2015, our growth in the North Asian region, comprising the China and Hong Kong markets remained strong, driven mainly by domestic consumption. As a result, revenue contribution from this region increased by 19.1%. Overall, we saw significant growth from four of our focused segments, namely: Memory and Handset, Industrial and Instrumentation ("I&I"), Wireless Audio and Headset and Lighting segment.

Memory and Handset Segment

The handset segment remains our top revenue contributor, with one of the key drivers still coming from the memory component used for smart phones. We saw an increase in the demand of domestic smart phone brands due to a more competitive pricing, which contributed to this growth. Furthermore, the recent consolidation between RFMD and Triquint to form Qorvo, a RF leader, provided more opportunities in this segment. In the new financial year, we expect that the demand will continue, especially with new product lines onboard to cater to this growing segment.

Industrial and Instrumentation Segment

This segment saw major growth from the new product line, Hittite, after they were acquired by Analog Devices, Inc. ("ADI"). Another new product line Epcos has contributed significantly to our Power Transmission and Distribution segment for power control in the industrial area.

Wireless Audio and Headset Segment

Despite strong competition, this segment remained resilient. The highlight this year was the incorporation of the cutting-edge Wifi module from Qualcomm into our wireless audio solutions and bluetooth headsets, which garnered demand in the region. We believe that this will continue to drive demand in the forthcoming years.

Lighting Segment

With a strong focus on smart lightings with Bluetooth Low Energy ("BLE"), we were able to capture new opportunities that surfaced with the increased awareness for smart homes and energy conservation. With the support from our product lines such as sensors from AMS to sustain this growth, we expect the demand to rise in the new financial year.

SOUTHEAST ASIA AND INDIA

In FY2015, Southeast Asia and India achieved a 6.5% growth in revenue to US$335.9 million. With new opportunities stemming from new government initiatives, and domestic demands, the following are the key growth drivers: Wireless Consumer, Memory and Handset and LED Lighting segment. The Power and Defence and Railway segment has further contributed to the region's growth.

Wireless Consumer Segment

Focusing on the expanding IoT arena, specifically in smart homes, smart industrial controls and smart wearables, we have committed strong resources in the wireless communication sector, especially in our bluetooth and BLE applications. We expect the demand to rise with the wider usage in automation, communication, consumer, indoor tracking, and industrial products in this region.

Another highlight came from our Near Field Communication ("NFC") module developed by our R&D teams. This module has since been widely adapted by our audio customers, as we see many bluetooth speakers and headsets adopting this into their products as a key selling feature in the domestic markets.

Memory and Handset Segment

Continuing its growth from 2014, demand from this segment remained strong, especially with the extra push from the arrival of IoT.

In India's consumer mobile sector, demand for local brands is growing fast, and with the rise in the localisation of manufacturing, we are well-positioned to support the memory needs of the local Indian mobile phone manufacturers. In addition, we also expanded our businesses in Indonesia to support the increase in the need for memory components for the domestic mobile brands.

LED Lighting Segment

The demand for LED products has shown stable growth across the Southeast Asian and Indian regions as governments continue to initiate policies towards green energy. The lighting technology is undergoing a rapid change, hence, increasing the demand for LED and sensor technology to control light levels in cities, predicting maintenance requirements, tracking energy consumption and managing asset levels. With smart lightings in place, energy consumption will be reduced, maintenance will be more efficient, and networks will be more reliable. We see countries like Australia and New Zealand getting projects for the replacement of conventional lightings by LED lightings. The demand for LED will continue to flourish as governments continue their efforts towards energy efficiency and conservation.

e-Government projects

Due to political and governmental changes in some countries, some of the e-Government projects were delayed. This year, we saw revival in the demand for projects in Malaysia for the National ID cards and India's Metro Transit Cards. We remain optimistic and expect other projects to pick up in this region in the forthcoming years. With India's new government initiatives such as Smart Cities, Digital India and 'Made In India', we see an optimistic growth in the manufacturing industry with new players entering the market. Going forward, projects in this segment are primed to gain momentum.

Defence and Railway Segment

Specifically in India, the recent introduction of Foreign Direct Investment ("FDI") policy reforms in the defence and railway sector contributed to the growth of this segment. Moving forward, India is poised for strong growth in these sectors with the government's push for the modernisation and upgrading of its ageing defence equipment and railway network.

Power Segment

Another segment that saw growth in 2015 was the power segment. With more awareness in renewable energy and smart-grid technology implementation, we saw growth with new product lines such as Power Integrations, Goodsky, Bourns, Rohm and others. We managed to capture a good market share and believe in the growth potential in this segment.

NEW PRODUCT LINES FOR THE GROUP

One of the highlights this year was Qualcomm's acquisition of CSR, as we were able to inherit a broader range of product lines under Qualcomm. These products aimed at addressing the expanding IoT space, which will see a strong growth potential.

In addition, we have secured the distribution rights from Cypress Semiconductor Corp. ("Cypress"), a leader in CapSense® capacitive touch-sensing controllers, SRAM and NOR flash memories and more. Their portfolio of automotive MCUs and memories delivers high-performance, mixed-signal and programmable solutions that are well-recognised in the market. This has given Excelpoint an edge in our memory business, and it will continue to be a key driver in 2016.

To capitalise on the strong market potential for both regions, we have also signed on several new product lines, such as Hittite, Avago, Bourns, Cree, Power Integrations, Smiths Connectors and more within our focus segments. To mine new opportunities arising in the forthcoming years, we are investing in new resources, which is in line with seeking for new product lines within the IoT arena.