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June 2012 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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General Market Developments
Return to positive cash margins leads to near-full capacity utilization and change in competitive pricing environment Supplier inventory now has value Strong mobile DRAM demand, low capex and yields limiting 2Xnm transition Constrained new-process transition is a structural change Strong shift of bit-output allocation to server & mobile DRAMs Reductions of PC-DRAM bit production can lead to OEM inventory burn Operating margins of key DRAMs are converging Rethinking production-mix and pricing strategies in Q412 and 1H 2013 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Estimated DRAM Production-Mix Allocations
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Overview of DRAM Market Conditions
6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Mobile DRAM Market in 2H 2012 Strong demand from smartphones in Q312 and Q412 Samsung and Apple phones taking share Rapid low-cost phone growth, replacing feature phones New product releases from companies defending share Excess builds of tablets with release of new models iPad Mini and low-priced 7” tablets Windows RT Release of crossover tablets with 5-6” displays Requires large increase in allocation shares to meet demand 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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2012 Mobile DRAMs in Smartphones
2012 Est. Smartphone Unit Builds (Millions of Units) 2012 Est. Smartphone DRAM Demand (Millions of Gbits) Low Cost Phones 20+% penetration into feature phone market. Consumes only 13% of mobile DRAM bit demand Low-cost Low-cost Other Brands Other Brands Branded Phones Excess smartphone builds 77% of phone units and 88% of DRAM bit demand Samsung/Apple with 45-50% of phone units and 50-55% of DRAM bit demand Samsung/ Apple Samsung/ Apple 969 million units 4.7 billion Gbits 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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2012 Mobile DRAMs in Tablets
2012 Est. Smartphone Unit Builds (Millions of Units) 2012 Est. Smartphone DRAM Demand (Millions of Gbits) Tegra/Other Platforms New Android, Windows RT, 5-6” display models Excess builds likely 42% of bit demand 7” Tablet low prices Other Platforms Other Platforms Tegra Platforms Tegra Platforms Apple/Samsung Apple dominates tablet market as iPod did the MP3 market Samsung move to crossovers with Galaxy Note Apple/ Samsung Tablets Apple/ Samsung Tablets 129 million units Not included are Intel/AMD-based and China Android tablets using DDR3/L 0.9 billion Gbits 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Smartphone & Tablet Memory Content
2012 Est. Smartphone Memory Content (Megabytes per Phone) 2012 Est. Tablet Memory Content (Megabytes per Tablet) 842 Average 600 Average 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Mobile DRAM Market Conditions
Mobile DRAM Demand and Production Trend Mobile DRAM Production by Supplier 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Production Allocation to the Mobile DRAM
Estimated Bit Output Allocation to Mobile DRAM Percent of DRAM Gbit Production 10-point change in mobile- DRAM allocation percentage from Q212 to Q412 We expect Samsung and Elpida to have the largest allocation changes Range of Allocations Industry Allocation 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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4Gb LPDDR2 Price Forecast 8Gb LPDDR2 Price Forecast
WEIGHTED AVERAGE w/o Samsung, Apple WEIGHTED AVERAGE w/o Samsung, Apple PRICE RANGE PRICE RANGE WEIGHTED AVERAGE w/ Samsung, Apple WEIGHTED AVERAGE w/ Samsung, Apple 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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PC-DRAM Market in 2H 2012 Lower growth prospects for PC unit builds and shipments 0 to -1% PC unit build change, ‘11-’12 2-3% PC unit shipment change, ‘11-’12 Stronger PC unit builds in Aug/Sep to supply channel with new models – Ivy Bridge, Win 8, and Ultrabook But PC build reductions in Q412 Flatter PC content growth Falling PC-DRAM production bits but still in excess over demand 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Forecast of 2H12 Notebook & Desktop Builds
Forecast of Notebook PC-Unit Builds Against Seasonality Scenarios Thousands of PC Units Forecast of Desktop PC-Unit Builds Against Seasonality Scenarios Thousands of PC Units 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Forecast of PC Unit Builds and Shipments
PC unit builds have recently been more volatile than shipments Assume PC companies will compete to fill channel with new models – Ivy Bridge, Windows 8, Ultrabooks Assume sell through will be moderate to weak. OEMs to decrease builds to prevent channel inventory buildup % PC unit shipment growth, 0% PC-unit build growth, 19% PC-DRAM demand growth to 13.3 billion Gbits 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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PC Memory Content Continues to Slow
Megabytes per Notebook PC April 2012 May 2012 % Change Major Brand Developed Markets 4674 4646 -0.6% Emerging Markets 3394 3402 0.2% Regional & White Box 4317 4330 0.3% PC-DRAM demand growth depends heavily on PC-unit builds, which depends on PC-unit shipments and sell-through 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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PC-DRAM Market Conditions
6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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4GB PC-DIMM Price Trend 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Server DRAM Market in 2H 2012 Price pressures in May
Increased volume of special deals v. contract in May Differences in pricing across suppliers Expected improvement in server DRAM demand by August with higher memory content Romley IB evaluations completed Graduate to 64GB per server Requires significant increase in allocation shares across suppliers to meet demand 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Server DRAM Demand Outlook
Weak server-DRAM demand in Q212 due to Romley IB evaluations 5% Gb demand increase Q112 Q212 Expect Aug turning point. 37% Gb demand increase 1H12 2H12 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Server DRAM Market Conditions
Estimated Server DRAM Production By Supplier 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Significant Increases in Server-DRAM Allocation
Estimated Server DRAM Bit Output Allocations Percent of DDR3 Gbit Production Server DRAM share of DDR3 bit output needs to increase by 6 points from Q212 to Q412 to meet demand Approximately 8 point increase needed from DRAM companies Allocation increase usually accompanied by attempts to raise prices 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Driving Towards Positive Operating Margins
RDIMM Price Forecast 8GB RDIMM Operating Margin Range 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Current RDIMM Price Forecast
6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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Converging Operating Margins of Key DRAMs
Estimated Relative Operating Margins – Supplier A Estimated Relative Operating Margins – Supplier B 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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General Outlook for 1H 2013 Investment in 2Xnm transition will have to increase before end of 2012 Driven by yield gains and thinning LPDDR2 profit margins Boost production in Q213 and Q313 2Ynm transitions begin Seasonally down first quarter demand and probability of channel inventory at end of 2012 Seasonally down for mobile DRAM and PC DRAM Server content growth may compensate for server units Changes in allocation focus – server DRAMs in 1H 2013 Demand momentum and need for improved margins 6/14/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
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