DRAM MARKET UPDATE February 2013 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Market Developments Revise 2013 bit production growth down to 13-15% (from 17-21%) Wafer capacity erosion with 2Xnm Break in linear 2Xnm wafer trend – slower transition Inotera and Rexchip increase capacity utilization Revise 2013 bit demand growth down to 30% (from 38%) due to continuity of supply concerns GB/PC reductions due to higher ultrabook BOM cost GB/server slowdown until Ivy Bridge in 2H 2013 Increasing expectation of lower mobile-DRAM demand growth Inventory (or the holding of inventory) will still play a major role Still headed for a real shortage © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Structural Changes of DRAM Supply Downscaling of wafer capacity due to consolidation and advanced process complexity Structural slowdown of advanced process ramps due to complexity Change in attitudes towards capital spending due to process complexity and EUV Consolidation to three major suppliers (98% share by 2H 2013) Structural product-mix disruption due to mobile and PC DRAMs © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Shrinking DRAM Wafer Capacity DRAM Wafer Capacity & Utilization Trends Wafer capacity down 23% from 1H 2011 peak to Q413 2Xnm throughput and space Consolidation Wafer outs down 8% from ‘12-’13 Includes IMI & Rexchip utilization increase Elpida & NTC still hold back Effect of utilization increase is less than in previous years © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Disruption of Slow 2Xnm Process Ramp Comparison of DRAM Process Life Cycles 2Xnm ramp breaking from previous linear trend, down in Jan ‘13 Saturating Samsung 28nm Hynix 29nm issues Slower Elpida 25nm progress Currently, 7-month delay compared to 3Xnm and 4Xnm ramps Trend uncertain but 2Xnm share at less than 40% by year end Delayed entry of Rexchip, Micron, and Inotera © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Quarterly Production Trend and Mix Changes DRAM Bit Production Trend, 2012-2013 Assume full support for non-PC DRAM in 1H 2013 but not in 2H13 Less decline of PC-DRAM bit output due to higher capacity utilization Potential relative mix changes b/n mobile and PC DRAMs in 2H13 Change will depend on relative profit margins and mix per process 2% Q/Q 3% -2% -9% -4% -2% -16% -4% -3% 12% 33% 5% © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

PC-DRAM Supplier Base Challenges Supplier Share of PC-DRAM Production PC-DRAM Bit Production by Supplier © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/6/13

Profile of DRAM Demand & Supply in 2013 Supplier and market inventory levels will drop through end of 2013 Suppliers & channel can hold inventory to raise or protect price © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Production Falls Short of Demand ALL DRAM Market Conditions PC DRAM Market Conditions © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

DRAM Inventory Weeks Peaked in Q412 DRAM Supplier Inventory Trend DRAM Inventory in the Market (OEMs/Channel) © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Inventory Can Have Large Impact on Prices DRAM Demand and Supply Trend Supply = Production + >4 weeks Inventory PC-DRAM Demand and Supply Trend Supply = Production + >4 weeks Inventory © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Weak PC Unit Builds & Inventory Correction Trend of PC Unit Builds and Shipments Thousands of Units Est. NB/UB Builds by Leading PC Companies Millions of Units 27% drop Sep-Dec 1% increase Q312-Q412 (v. prev. -3%) 15% Q/Q 10% drop Q412-Q113 (v. prev. -6%) PC Inventory Correction End of March © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/24/13

4GB SODIMM Price and Margin Forecast 4GB PC-DIMM Price Forecast v. Cost 4GB PC-DIMM Operating & Cash Margin Ranges Cash Margins Operating Margins © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

PC DIMM Price Forecast © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Impact of Price Forecast on PC OEMs Impact on DRAM Price on PC Bill of Materials Impact on PC OEM Spending on DRAMs Based on standard notebook PC -24% Y/Y +37% Y/Y 2011 Millions of US Dollars © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Trend of Server Unit Demand Server Unit Shipment Forecast Capital Spending of Largest Datacenter Cos. 4% growth ;11-’12 2% growth ;12-’13 -8% Q/Q Server ODM units 8% down from Q412 to Q113 after an 8% increase from Q412. Slower than in Q112 and Q111m about -3% Signs of slowing economies/recession – China, Germany, etc, Datacenter: still expect 21% increase in server units v. 0 to -1% for traditional applications Capex quarterlies are asto Capex growth rates slowed in 2012: 39% 2011, 18% 2012 17% 2013est Coincides with slowdown in online and ad revenue – 40% 2011 23% 2012 19% 2013 Facebook still spending at a large percentage of revenue – planning for growth FCBK and AMZN showing stronger growth than GOOG or MSFT © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/24/13

8GB 2Rx4 RDIMM Price Forecast 8GB 2Rx4 RDIMM Price Forecast v. Cost Operating Margin Ranges: 8GB 2R RDIMM v. 4GB SODIMM © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

Price Trend of Other RDIMM Densities 8GB Equivalent Prices of RDIMMs Operating Profit Margins: 16GB v. 32GB 32GB 4RX4 RDIMM 16GB 2RX4 RDIMM © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

RDIMM Price Tables © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

Mobile DRAM Demand in 2013 Growing expectations of slower mobile DRAM demand growth Weakening low-cost smartphone prospects Increasing Samsung captive market Faster transition to the LPDDR3 than previously expected A dominant portion of smartphone design-ins are for LPDDR3 LPDDR3 premium to stay in 2013 Alternative products for the tablet market LPDDR3 PoP, LPDDR3/2 std. package, DDR3/L Match different tablet market segments Relative prices and profit margins will impact decisions © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Trend of Smartphone Demand & Its Components Smartphone Mobile DRAM Demand Components Millions of Sets and Megabyte per Set Smartphone Mobile DRAM Demand Millions of Gbits © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

4Gb LPDDR2 Price Trend and Forecast Operating Margins of 4Gb LPDDR2 & 4GB SODIMM AVERAGE PRICE 4Gb LPDDR2 PRICE RANGE 4GB SODIMM MANUFACTURING COST RANGE © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Impact of 4Gb LPDDR2 Price on Suppliers Operating Margins of 4Gb LPDDR2 & 8GB 2Rx4 RDIMM Impact of LPDDR2 Cost on Smartphones 4Gb LPDDR2 8GB 2Rx4 RDIMM Integrated Baseband & Application Processor IC 3.5” WXGA Display Module Assumes all else the same from Q412 cost. © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

LPDDR2 Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

DRAM Revenue and Capital Spending Trend DRAM Revenue and ASP, 2004-2013 DRAM Revenue and Capital Spending, 2004-2013 67%. 49%. 58%. 44% of Revenue. 42%. 22%. 20% 22%. 19%. 19%. 2013 is a forecast. 2013 is a forecast. © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

DRAM Operating Profit Trend DRAM Operating Margin, 2006-2013 Millions of US$ 2013 is a forecast. 2013 is a forecast. © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13

Conclusions Structural supply changes will move market from perceived to a real shortage. Demand is adjusting. PC-DRAM price increase momentum through April. Uncertainty period will depend primarily on inventory behavior. Higher PC-DRAM prices will change current relative profit margins and can cause changes in product mix Pressure to raise low-end of 4Gb LPDDR2 price range Slower GB/server growth until Ivy Bridge in 2H 2013 Faster transition to the LPDDR3 and multiple mobile-DRAM alternatives in the tablet market © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2/8/13