DRAM MARKET UPDATE November 2013 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

A G E N D A DRAM Production Trends DRAM Demand Trends Demand-supply and Inventory Conditions Price Correction Window Price transition to new Products: LPDDR3 and DDR4-RDIMM Conclusions and Recommendations © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Highlights of DRAM Supply Outlook DRAM Production Bits and Mix Trends SK Hynix recovery1 from Wuxi fab fire by Jan/Feb 2014 Net wafer capacity and wafer-start increase – transfer from NAND Productivity gap across suppliers widens in Q4 2013 through 2014 Market share shifts in 2014 Production growth to slow in 2H 2014 with 2Ynm maturity and long transition to 2Znm Seasonal DDR3-LPDDRx allocations will continue © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

DRAM Supply Developments & Outlook Y/Y Change 2013 2014 Wafer Outs (K) K wafers 7% 6% 2013 driven by higher utilization. 2014 driven by additional capacity transferred from NAND Productivity (Gb/w) Gbit/wafer 5% 19% <3Xnm share of wafer: 32% in 2013  61% in 2014 Bit Output (MGb) M Gbits 13% 35.8 BGb 26% 45.1 BGb 2013 lower and 2014 higher due to lost supply from Wuxi fab fire Supplier Share Ranking (Bit Output) % industry SEC MU SKH SEC MU Capital Spending MUSD $4.6 B $5.8 B Increased share of growth capex vs. maintenance capex © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Change in Nature of Supplier Base in 2014 DRAM Bit Output by Supplier (Millions of Gbits) Merger Transition Recovery from Fire Post-merger Post-Fire Pre-merger Pre-Fire © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Wafer Capacity Transfers from NAND to DRAM DRAM Wafer Outs by Supplier (Thousands) Comparison of DRAM & NAND Flash Revenue per Wafer MU transfers to NAND 24% SEC – transfer from NAND MU’s Elpida acquisition SKH more capacity than pre-fire – transfer from NAND © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Widening Productivity Gap across Suppliers DRAM Productivity by Supplier (Gbits/Wafer) Process Node Share of DRAM Industry Bit Output Productivity gap widens beyond Nov ‘13 3X nm 2X nm 2Y nm 4X nm 2Z nm © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Highlights of DRAM Demand in 2014 Mobile DRAM demand losing its prominence in DRAM portfolio Saturating smartphone and table unit growth Profit margins same or lower than DDR3 Premium has diminished in Q413 Server DRAM demand to outpace mobile DRAM demand growth Driven by content growth – 16GB RDIMM Bottoming of PC DRAM market Healthy Graphic DRAM growth Consumer and other DRAM demand: supplier base issues © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Demand Production Highlights Forecast of DRAM Demand Excess production of 2.6 BGb in 2014 – 6% over demand Saturating and slow set unit growth Profit margin pressures on sets – constrain DRAM content growth Demand still has high level of uncertainty – market conditions sensitive to PC demand © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Bending Trend of Smartphone & Tablet Builds Bending Trend of Smartphone Builds Bending Trend of Tablet Builds © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Lower Mobile DRAM Growth in 1H 2014 Application Processor Builds – Millions of Units Forecast Change from Sep to Oct 2013 Project a 38% growth of mobile DRAM demand in 2014 down from 43% Server demand to outpace mobile DRAM demand in 2014 Stimulate DRAM content growth through price 4% below Sep forecast 9% above Q213 5% below Sep forecast 12% above Q113 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/14/13

DDR3 Profits Matching/Exceeding LPDDR2 Comparison of DRAM Product Operating Margins Supplier 1 Comparison of DRAM Product Operating Margins Supplier 2 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/14/13

Shrinking LPDDR2 Price Premium over DDR3 Comparative Trend of 8Gb LPDDR2 Price And 8Gb Equivalent Price in 4GB SODIMM Ratio of 8Gb LPDDR2 Price to 8Gb EquiDDR3 Equivalent Price in 4GB SODIMM 8Gb LPDDR2 Price Range © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/14/13

Weak Server and PC Unit Trends Server Unit Shipment and ASP Trend Trend of PC Unit Shipments and Builds 2% growth Falling ASP and profit margins 2013-2014 Change -3% Shipments +6% Builds 2012-2013 Change -10% Shipments -14% Builds © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Price Interaction between PC and Server DRAMs Comparison of 4Gb DDR3 prices extracted from the 4GB SODIMM & 16GB RDIMM 4Gb in SODIMM currently more profitable than 4Gb in RDIMM Suppliers will have to change their wafer allocation criteria from 2013 practice Interactions across key DRAMs can limit upward or downward price movement © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/14/13

Forecast of DRAM Market Conditions ALL DRAM Market Conditions1 DDR3 DRAM Market Conditions1 1 – Does not include the effect of inventory at suppliers, channel, and OEMs. © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

User Inventory Trends OEM using bit inventory to augment tight supply and protect against high opportunistic prices Weak demand keeping weeks of inventory low Purchasing to maintain inventory Channel resellers maintaining inventory by constraining supply flow and sales to their markets Charging higher prices and profit margins Avoiding high quotes from suppliers ODMs bringing DRAM bits and weeks of inventory down because of weak demand – settle at levels needed for operations Reducing purchases © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Trend of Supplier and User Inventory Users accumulate inventory DDR3 inventory pressure © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

4GB SODIMM Price Trend 4GB SODIMM Price Forecast Price correction, not crash, by historical standards Approx. 5% ASP drop, ‘13-’14 Less than cost drop  profit Less than bit growth  revenue growth Average cost of user inventory Little effect of high Q413 prices Trigger of user inventory release is around $28 Bottom price still profitable for suppliers Weighted Average Return to pre-fire prices ~20% ~30% © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

16GB RDIMM Price Trend 16GB 2Rx4 RDIMM Price Trend Price/GB Comparison ~14% ~20% Breaks 3Xnm fully loaded cost 4% ASP drop 2013-2014 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

RDIMM Price Trends Some increases in 32GB RDIMM/LRDIMM price 16GB Equivalent Prices of Different RDIMMs Some increases in 32GB RDIMM/LRDIMM price Separation of prices of 2Gb and 4Gb based 8GB RDIMMs has started Correlates with Ivy Bridge platform penetration © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

DDR4 RDIMM Price Forecast 16GB DDR4 RDIMM Price Forecast 8GB DDR4 RDIMM Price Forecast 96% premium 95% premium 65% 60% 47% 40% 30% 21% 25% 17% 12-13% Premium in 2015 18% 13% © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

LPDDR2 and LPDDR3 Price Trends 4Gb LPDDR2 and LPDDR3 Price Trend 8Gb LPDDR2 and LPDDR3 Price Trend 2H14 price interaction raises several issues © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Changes in Relative Prices of the LPDDRx 8Gb LPDDR2 & LPDDR3 Price Trend v. 4x2Gb DDR3 Price premiums have narrowed LPDDR3-1600 parity in late Q214 LPDDR3-1333 parity in Q114 Prices to settle with LPDDR3 about 10% higher than memory- down DDR3L and 15% higher than 4Gb DDR3 in PC DIMM Competition starts between DDR4 and LPDDR4 for post-DDR3 PC memory © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Major Influences on DRAM Prices in 2014 User inventory and a price correction Trigger point is price vs. average cost of user inventory Convergence of the prices of key DRAM products Changes wafer allocation criteria of suppliers next year Interaction among prices – limits price movements Elasticity (when prices affect volume) Effective today in PC-DRAMs to OEMs and the channel To be next tested in the server DRAM market Financial motivation remains for some suppliers to raise prices © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Debt Burden & ROI Influences on Capex Debt Service Coverage Ratio Cumulative Return on Assets © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Trend of Capital Spending as % of Sales Capital Spending as a Percent of Sales Trend of Capital Intensity Ratio © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

Conclusions and Recommendations OEMs will respond to 2013 events with their own revised strategies A price correction is expected and perhaps necessary Difference in price conditions in 2014: Convergence of key DRAM prices and Elasticity Barriers Capital spending to rise 25% or more DRAM investment attractiveness at least through 1H14 Another profitable year but market still has to learn its way towards more stable pricing © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

PC-DIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

DDR3 RDIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

DDR4 RDIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

LPDDR2 DRAM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13

LPDDR3 Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11/25/13