DRAM MARKET UPDATE July 2013 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DRAM Market Entering a New Phase Higher production growth in 2H 2013 Economic worries return Weaker than expected PC and server DRAM demand Uncertain mobile-DRAM demand Profit margin challenges – PC and server OEMs Use of market inventory – OEMs ending buy aheads Seasonal demand weakness and excess production in Q114 More factors will pressure prices down – high chance of price correction, low chance of price crash © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Improving DRAM Production Growth All DRAM Bit Production Trend Shift from slow growth (Q412-Q213) to faster growth in 2H13 2H13 growth slower than past Still 17% ’12-’13 bit growth 2H13 production drivers 4% wafer-out growth 8% bit/wafer productivity growth Implications on market & pricing conditions Depend on demand in 2H13 vs. supply in 1H13 Product mix becomes double- edged sword Faster mfg. cost reductions © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Changes in DRAM Wafer Outs DRAM Wafer Outs (Thousands) DRAM Wafer Capacity and Outs (Thousands) 91% Utilization 89% Utilization 98% Utilization 99% Utilization -13% Growth -6% Growth 2% Growth © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DRAM Process Migration & Productivity Trend DRAM Process Transitions Bit/wafer productivity growth 48%, 2011-2012 24%, 2012-2013 23%, 2013-2014 Lower productivity (~20% or less) beyond 2014 Limited by process complexity and capital spending Jul ‘13 Jul ‘13 Jul ‘13 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DRAM Market Outlook for 2014 2014 DRAM Market Conditions – Millions of Gbits Production Components ’12-’13 ‘13-’14 Billions of Gbits 37.4 46.4 Bit Output Change 18% 24% Wafer Out Change -6% 2% Bit/Wafer Change 23% Weaker PC/server demand can widen gap by 3-6 points Demand Components ’12-’13 ‘13-’14 Billions of Gbits 35.0 43.8 Demand Change 24% 25% PC-DRAM 0% -1% Server DRAM 26% 34% Mobile DRAM 73% 54% © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DRAM Mix Changes: Impact on PC-DRAM Supply Mobile DRAM Production (Millions of Gbits) PC-DRAM Production Forecast (Millions of Gbits) 1H13  2H13 59% up 60% up 1H13  2H13 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Server DRAM Supply Forecast Server DRAM Production by Supplier (Millions of Gbits) DRAM companies will have excess supply in Q313 as OEMs use inventory Each major DRAM supplier will dominate different markets © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Changes and Challenges of DRAM Demand PC market will consolidate – response to declining growth, tighter profit margins, and consolidated supply of major components Server OEMs will continue market-share push – declining profit margins from narrow growth segments Mobile and tablet markets beset by low-cost alternatives in China and slowing innovation PC & server leading OEMs will look for cost advantages over competition to gain market share Quarterly pricing, wider price ranges, and use of inventory Mobile DRAM packaging/configurations will standardize and price premiums over DDR3 will decrease © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

PC Industry Consolidation: The Remaining Option Monthly Mobile PC Build Trend (Millions of Units) Quarterly Mobile PC Build Trend (Millions of Units) Leading OEMs: 61% of builds, Q313 Leading OEMs: 54% of builds, Q312 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Price Ceiling in the DRAM Channel DRAM Channel Pricing Dynamics As we expected, attempt to raise prices to DRAM channel have failed 4Gb at $3.30 Spot prices down 11%, faster and deeper than the last price reduction in Mar/Apr Channel resale prices now moving down – sign of elasticity – no volume above $30 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

PC-DRAM Market Dynamics PC-DRAM Market Conditions (Millions of Gbits) PC OEMs using own DRAM inventory in 2H13 10% inventory reduction Q313 25% reduction Q413 Channel still preserving inventory through short shipments Chances of a price correction in Q413 – 2H Oct Some OEMs anticipate earlier correction because of declining purchases © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

4GB SODIMM Price Headed towards Correction 4GB SODIMM Price Trend 4GB SODIMM Operating & Cash Margin Trend © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Potential Impact of Server DRAM Market Inventory Server-DRAM Market Conditions with Market Inventory Effect Millions of Gbits Market forced to use inventory in Q313 to keep prices from rising and their profit margins from shrinking Purchases from suppliers fall below production in Q313 Prices peaking in Q313 Returns to balance in Q413 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

16GB 2Rx4 RDIMM Price Forecast 16GB 2Rx4 RDIMM Price Trend 16GB RDIMM v. 4GB SODIMM Operating Margin © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

8GB 2Rx4 RDIMM Price Forecast 8 GB 2Rx4 RDIMM Price Trend 16GB RDIMM v. 4GB SODIMM Operating Margin © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Other RDIMM Price Trends 16GB EQUIVALENT PRICES OF RDIMMs 32GB RDIMM price decrease to resume with lower 16GB RDIMM price expectations 4Gb-based 8GB RDIMM price gap to widen against 2Gb-based 8GB with the ramp of Ivy Bridge platforms © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DRAM Process Transitions & Platform Releases Platforms are entering at earlier stage of new DRAM process Ivy Bridge – DDR3-1866 Sandy Bridge DDR3-1600 Haswell DDR4-2133 Broadwell DDR4-2400 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DDR4 Product Outlook 4GB 1Rx8 RDIMM 8GB RDIMM: 1Rx4, 2Rx8 Limited customer qualifications (return on qualification cost) x8 advantage depends on leveraging PC demand How different will server and PC DDR4 be? 8GB RDIMM: 1Rx4, 2Rx8 Possible limited suppliers of 8GB RDIMM Not expected to be mainstream module w/o 2Rx4 Some OEMs prefer the 2Rx8 over 1Rx4 x8 issues of 4GB RDIMM also apply © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

DDR4 Product Outlook 16GB 2Rx4 RDIMM Mainstream RDIMM: established in 2014 with DDR3, continue at DDR4 Will not change until a cost-effective 8Gb-based version is available 32GB RDIMM: 4Rx4 LRDIMM, 2Rx4 RDIMM Suppliers will prefer a 2Rx4 RDIMM solution to a 4Rx4 LRDIMM because of LRDIMM cost 8Gb SDP volume to emerge in early Q115 but supplier base will have to evolve beyond that 25nm or 20/21nm? 64GB RDIMM: 4Gb-based 3DS or 8Gb-based 4Rx4 LRDIMM Will volume justify 3DS development? LRDIMM cost per 8Gb is about 44 cents, a large percentage of DRAM unit cost – 8Gb SDP cost manageable © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

Conclusions and Recommendations DRAM market entering a new phase – Market moving from buy aheads to use of inventory DRAM production higher Product mix gives suppliers leverage at least through Q313 Price correction likely, price crash chance is low DRAM profit margins can absorb a price correction Long term insight: Future server-platform generations will enter at earlier stage of DRAM process because of slow process transitions Implications on cost and roadmap © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13

RDIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7/25/13