DRAM MARKET UPDATE November 2014 © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

A G E N D A DRAM market entering a new phase – a more “normal” market – in 2015 Supply Trends and Risks of Change Demand Challenges: Concentration of Growth and Content Dependence Demand-supply balance, supplier inventory, and mix issues Price forecast and analysis of price elasticity and resistance Conclusions © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Trend Towards DRAM Capital Efficiency Trend of DRAM Capital Efficiency (Bit Basis) DRAM companies are correct in stating that more capital investment is required for a new wafer of capacity. Data shows that capital investment for a new DRAM bit of output has become dramatically more efficient in the past 10 years. - due to extended use of scanners and double patterning © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Trend of DRAM Wafer Starts and Output Annual Trend of DRAM Wafer Starts Annual Trend of DRAM Wafer Outs Can be impacted by new process development & yield improvement Impact of longer cycle times © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Supply Growth Still Relies on Process Transitions 2015 DRAM Production Drivers Production growth to 56.1 BGb depends mostly on new processes New “complex” processes reduce output rates Lower WO/WS ratio Cost crossover yields across more products Product mix and new products lower output growth LP mix Larger die size and speed yields of DDR4 & LP4 © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

2015 Production-Related Risks DRAM Bit Output by Process Node Share of DRAM Bit Output by Process Node Micron transition rate to 20nm Samsung, SK Hynix transition to 2z nm © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Specific Risks of Process Transitions Assumed Micron + Inotera DRAM Bit Output by Process Node Assumed 2Z nm Share of DRAM Bit Output of Samsung and SK Hynix Transition can also affect ramp of L17 and M14 Upgrade fabs of multiple, non-mirrored fabs © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

DDR4 Adoption in Server vs. PCs Hyperscale datacenter Adoption entry in Q415 Same as last month © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

DDR2 & DDR3 Server-DIMM Price Crossover DDR3 & DDR2 Server-DIMM Average OEM Price © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

LP4 Market Development in 2015 LP4 Penetration into Smartphone & Tablet DRAM Demand LP4 Attach Rate in Smartphones & Tablets © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Different Output Behavior Across Supplier Base Q/Q Change of DRAM Production by Supplier Changed from last month Samsung output constrained in 1H15 by transition to 21nm and to new products – DDR4, LP4. Strong 2H15 with maturing 21nm and Line 17. SK Hynix transition to 25nm accelerates. Higher capacity utilization. Micron transition to 20nm and additional Inotera wafer capacity. © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Demand: Concentrated & Content-Dependent DRAM Demand Forecast, 2014 - 2015 5% excess production 2.5 BGbit surplus Mobile and Server DRAMs are 80% of ‘14-’15 bit growth Dependent on GB/set growth, not set units Elasticity and price resistance? Suppliers with different target market strategies Changed demand projections: Lower mobile DRAM demand growth, limits of content in China brands as they seek volume Higher Graphics DRAM demand – more dependent on PC graphics than game console for growth Higher Consumer/Others growth due mostly to OTT and SSD buffers. © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

High-End Content Drives Mobile DRAM Demand Smartphone Units by Brand Group Smartphone GB Demand by Brand Group © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

32GB Drives Server DRAM Demand Growth Requires transition to 8Gb-based 32GB 2Rx4 RDIMM Requires transition to DDR4 by OEMs and hyperscale datacenter companies How price elastic is GB/server? Price resistance point? Will lack of supply affect demand plans? Process transitions affect DDR4 roadmap Same as last month © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Forecast of All DRAM Market Conditions Wrong allocations in Sep/Oct – mostly from Samsung – mobile customers looking for more support Allocation decisions more difficult if production-demand gap widens © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Supplier Inventory & Test of Industry Behavior Trend of All DRAM Supplier Inventory Shipping only to Demand Requirements A “normal” market with rising but not excessive supplier inventory DRAM supplier ability to hold inventory in 2H 2015 Users unable to make large buy aheads Supplier inventory does not rise as much compared to last month. Same dynamics apply – DRAM companies have ability to hold inventory. User buy-ahead activity and desire to stock up has big effect on supplier inventory and price behavior. © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

DRAM Inventory Trend of Leading PC OEMs © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Low Capex Burden on Operating Cash Flow Trend of Capital Spending of Memory Companies and Its Share of EBITDA Excludes Samsung, Toshiba, Sandisk © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Potential Product Mix Issues in Q3 2015 Mobile DRAM Market Conditions PC/Server DRAM Market Conditions More gradual mobile DRAM demand in Q315 Buildup of mobile inventory in Q215 because of excess supply and as prep for stronger Q315. Product mix risk for PC/server OEMs in Q315 – ability of DRAM companies to control supply in Q315. © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

4GB DDR3 SODIMM Price Forecast 4GB DDR3 SODIMM Price Trend Average OEM low price: Q115: $29.50 Q215: $25.85 Q315: $24.65 Q415: $25.45 27% drop from Aug ‘14 peak to Dec ‘15 Est. 15-16% ‘14-’15 drop © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Weak Price Elasticity of GB/PC Content Price Forecast’s Impact on PC BOM Cost Price Forecast’s Impact on PC-DRAM Spend © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

PC Industry Price & Growth Pressures Price Elasticity of PC Unit Demand PC ASP Trend Q212 to Q314 © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

16GB DDR3 2Rx4 RDIMM Price Forecast 16GB DDR3 2Rx4 RDIMM OEM Price Forecast 20% drop from Nov ‘14 peak to Dec ‘15 Est. 7% ‘14-’15 drop © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

16GB & 32GB DDR4 Server Modules 16GB DDR4 2Rx4 RDIMM OEM Price Forecast 32GB DDR4 4RX4 LRDIMM OEM Price Forecast 8Gb-based In Q215 16GB DDR3 2RX4 RDIMM Average Contract Price 32GB DDR3 LRDIMM Average Contract Price © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Analysis of Server-DRAM Price Resistance Impact of DRAM Cost on Server OEMs Impact of DRAM Cost on Hyperscale Datacenter Cos. 2015 DRAM spend up 57% Capex up 33% 2015 DRAM spend up 22% IT spend up 1-2% Server Revenue up 5% © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

LPDDR2 & LPDDR3 Price Trend 8Gb LP DRAM Price Trend 16Gb LP DRAM Price Trend Est. 13%‘14-’15 drop Est. 18% ‘14-’15 drop © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

The Market for Mobile DRAM Applications AP Core Mix in Smartphones & Tablets DRAM Cost, % of China brand Smartphone Price © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014

Conclusions Changes in pricing conditions as market becomes more “normal” Is this year an aberration or the new normal? Concentration and content dependence of demand growth Issues of price elasticity and resistance in certain sectors OEMs will focus on cost reductions in 2015 and are likely to change their buying practices and behavior Price forecast yields a revenue of $52 billion in 2015 Considerable risk of upward or downward change of supply and demand © 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/21/2014