Where Success Knows No Limits Index Korea Where Success Knows No Limits 1. Status of Korea's Semiconductor Industry 3 2. Enhancement of Technological Competitiveness 12 3. Status of Foreign Direct Investment 15 4. Government Policies and Incentives 18 Semiconductor

Status of Korea's Semiconductor Industry Global market shares of major countries Korea ranks second in the global semiconductor market, with 16.2% of the market share. However, Korea needs to diversify its product items, as there is a big gap between Korea and the world’s largest semiconductor producer, the USA. Global semiconductor market shares by major country in 2013 Unit: % Other, Source: IHS (April, 2014) 3

Status of Korea's Semiconductor Industry Changing market trends Decreasing demand for PCs due to the advancement of smartphones is creating a paradigm shift in the industry of semiconductors, the core part of smartphones. In the semiconductor market, DRAM, which used to be the industry’s flagship item, has been replaced by application processors (AP) and other system semiconductor solutions. AP Nand Flash 4

Status of Korea's Semiconductor Industry Market shares of global companies Top 10 global semiconductor producers (2013) 2013 Company Sales (USD 1 mn) Market share (%) 1 Intel 46,981 14.8 2 Samsung 33,822 10.6 3 Qualcomm 17,212 5.4 4 Micron 14,121 4.4 5 SK Hynix 12,809 4.0 6 Toshiba 11,946 3.8 7 TI 11,420 3.6 8 Broadcom 8,179 2.6 9 STM 8,082 2.5 10 Renesas 7,971 5

Status of Korea's Semiconductor Industry Global market shares of major countries Korea’s market share of DRAM in 2013 was a whopping 63.1% DRAM semiconductor market shares in 2013 Unit : % Source: IHS (April, 2014) 6

Status of Korea's Semiconductor Industry DRAM market share analysis Samsung and SK Hynix secured 66% M/S of DRAM and 54% M/S of NAND in 2Q14 Samsung and SK Hynix lead the DRAM market with through silicon via (TSV), DDR4 technologies. DRAM semiconductor market shares in 2013 Etc. Unit : % 66% 7

Status of Korea's Semiconductor Industry Global market shares of major countries Korea’s market share of NAND flash memory was 47.2%. NAND flash semiconductor market shares in 2013 Unit : % Source: IHS (April, 2014) 8

Status of Korea's Semiconductor Industry NAND market share analysis In NAND, they have Triple Level Cell (TLC) and 3D NAND production know-how. Most analysts expect our memory business to be fine in 2015. NAND flash semiconductor market shares in 2013 Unit : % 54% 9

Status of Korea's Semiconductor Industry Export and import trends of Korea Imports and exports of Korea's semiconductor industry Unit: USD 1 mn. Export products DRAM NAND flash AP Image sensors Driver ICs Import products System semiconductors Source: KITA.net 10

Status of Korea's Semiconductor Industry Semiconductor industry cluster An industrial semiconductor cluster has formed around Gyeonggi and Chungcheong provinces. Samsung Electronics and SK Hynix made large-scale investments every year in the metropolitan areas, which attracted SMEs to form an industrial cluster. Chungcheong Province has been strategically forming semiconductor clusters, including the Cheonan Foreign Investment Zone, Ochang complex and Asan complex to attract both foreign and domestic companies. A semiconductor town built in Pangyo New City, Gyeonggi Province is driving the formation of a new industrial cluster. Seoul is home to many fabless companies, which seems attributable to the higher availability of high-quality human resources compared to other regions. Pangyo Semiconductor Venture Town Cheonan Foreign Investment Zone Ochang complex and Asan complex Source: KITA.net, Note: ( ) indicates year-on-year rates. 11

Enhancement of Technological Competitiveness Promising investment areas of the semiconductor industry Memory semiconductor market Front-end processing technologies System semiconductor market Shift to high-capacity storage through NAND flash memory Development of MCPs and SiPs to reduce the size of chips High-K/metal gate is taking the place of SiON/poly gate from 45-nm. MOTIE* : Ministry of Trade, Industry and Energy 12

Samsung Electronics to build the world's largest semiconductor complex Enhancement of Technological Competitiveness Samsung Electronics to build the world's largest semiconductor complex 1 Dram Processing 25 Nano → 20 Nano 2 Nand Flash : 19 Nano 3 Plan to mass produce 14-nano semiconductors through FinFET technologies in 2015 Source: KITA.net, Note: ( ) indicates year-on-year rates. 13

Enhancement of Technological Competitiveness Samsung Electronics to build the world's largest semiconductor complex Construction to start in the early half of 2015 First phase investment : KRW 16.6 trillion -> Largest in the market’s history Scheduled to be completed and operated by the end of 2017 MOTIE* : Ministry of Trade, Industry and Energy 14

Status of Foreign Direct Investment Overview of FDI Armed with the highly efficient performance of its financial sector and logistics industry as well as the strong competitiveness of its semiconductor industry, Korea is serving as the business hub of Northeast Asia. Foreign Investment in Korea's Semiconductor Industry 2006 2007 2008 2009 2010 2011 2012 2013 2014.2Q No. of declarations (cases) 146 101 80 84 92 69 59 44 25 Amount declared (USD 1 mn) 1,563 259 623 1,296 1,044 521 572 157 139 Source: Ministry of Trade, Industry & Energy 15

Status of Foreign Direct Investment Overview of FDI Large-scale annual investments by large-scale domestic semiconductor providers, such as Samsung Electronics and SK Hynix, result in active FDI in the semiconductor equipment and materials markets. Foreign-invested companies in Korea's semiconductor industry Source: KITA.net, Note: ( ) indicates year-on-year rates. 16

Status of Foreign Direct Investment Status of Fairchild Korea Co., Ltd. IGBT, Q-FET, SIP-TR, SPS $ Funded 100% Switched the production line to 8-inch in 2014 Participated in an R&D project promoted by the government Annual sales KRW 700 bn 80 masters / Ph.D. degree holders 430 university graduates Employees Source: Venture-In (2013) 17

Government Policies and Incentives Take-off strategy issued by MOTIE* Memory System IC Equipment & Materials Support R&D investment (2015-2017  USD 10 mn) R&D investment (2017  USD 15 mn) Develop HW + Embedded SW Platform Asher, Vapor Blank MASK, CMP Slurry EFEM, RF Generator, etc. MOTIE* : Ministry of Trade, Industry and Energy 18

Government Policies and Incentives Strategic promotion of next-generation technology development "IC 2015" Item Details DTV Develop a multi-port, all-in-one interface for D-TV that supports HDMI, DisplayPort, MHL and ethernet connectivity and SoC for 2D/3D picture conversion in 3D-TV. Develop SoC with a 10,000DMIPS or higher spec. for open smart TV boxes and commercialization platform. Cellular phones Introduce multi-band, multi-mode Wireless Connectivity IP and SoC for smart mobile devices. Develop semiconductor elements for 3D space-touch multi-sensor systems using IrLEDs with sensing distance of 15 cm or more and sensing angle of ±30 or more. Develop multi-purpose power management ICs for smart mobile devices. Automobiles Develop high-definition picture processing technology for SXGA-class vehicles and ECU integrated SoCs. Develop SoC with built-in functions for braking systems in automobiles that meet international standards. International cooperation International cooperation for system semiconductor R&BD MOTIE* : Ministry of Trade, Industry and Energy 19

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