DRAM MARKET UPDATE October 2012 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

PC-DRAM Demand Outlook Primary concern: when will PC-DRAM prices bottom/rise? Impact of Ultrabook & Windows 8 insufficient to counter negative effect of global economic weakness Short-lived PC-build increase due to Windows 8 No visible driver of demand growth through 1H 2013. Seasonal weakness expected PC unit inventory accumulating at OEMs v. channel Production of other PC components falling to correct inventory and adjust to the new demand reality © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Dim Outlook for PC Units through 1H13 Notebook PC Builds of Leading PC OEMs Millions of PC Units Disconnect of PC Unit Builds and Shipments Thousands of PC Units 362 MUnits 355 MUnits 356 MUnits 35% DROP 26% DROP Shipments: -2.1% Builds: -6.5% Shipments: +0.4% Builds: +2.5% PC Channel Inventory Buildup PC-OEM DRAM Inventory Takedown © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

The Ultrabook’s Progress Ultrabook Penetration Trend Share of PC Units PC Memory Content Trend Notebook v. Ultrabook, MBytes/PC FORECAST 2% 3/12 3% 6/12 8% 9/12 13% 12/12 MB/Notebook 0.9% monthly growth rate 18% 3/13 24% 6/13 MB/Ultrabook 2.5% monthly growth rate 31% 9/13 38% 12/13 MB/Ultrabook 0.3% monthly growth rate Ultrabook Penetration (Sep ‘12): Emerging Markets: 5% Developed Markets: 13% White Box/Regionals Brands: 2% MB/Mobile-PC 2012-2013 growth: 13% MB/Notebook 1.3% monthly growth rate FORECAST © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

PC Inventory Correction in 1H 2013 Estimated PC OEM Inventory Trend Demand- driven Correction Japan Earthquake HDD Shortage We believe PC unit inventory is mostly at OEMs and not the PC channel Inventory considered high due to weak demand and wrong forecasts Inventory reductions difficult due to weak demand and the need to build newer PC products Expect inventory correction by mid-2013 and mild replenishment to follow © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

PC Component Build Adjustments HDD Unit Production Millions of Units GPU Unit Production Millions of Units AMD MPU Unit Production Millions of Units LCD Driver IC Unit Production Millions of Units 17% below Sep Q213 plan 5% drop, Q412-Q213 25% below Sep Q113 plan 28% drop, Q412-Q113 31% below Sep Q113 plan 52% drop, Q412-Q113 27% below Sep Q213 plan 38% drop, Q412-Q213 Correct inventory and Adjust to New Demand Reality © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Server DRAM Market Trends Server Unit Shipments Thousands of Units Lower corporate earnings affecting global IT spending and telecom carrier capex Technical development trends are limiting server unit growth Large datacenter companies: 12% share in ‘12, 18% in ’13 Virtualized & energy-efficient servers Server OEMs becoming pessimistic about 2013 +4% +2% © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Server Memory Content Growth Several OEMs projecting slower memory content growth in 2013 Server market more competitive, ASPs dropping Intel attempting to take larger share of BOM Trends argue for higher memory content growth Higher memory capacity with Romley platforms – 24 sockets (2P) and 32GB support Approaching cost effectiveness of the 16GB 2Rx4 RDIMM v. 8GB Need for more server revenue Currently projecting a GB/server growth of 29-32% depending on market conditions © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Mobile DRAM Demand Stronger increase in potential smartphone production driven by new products – take larger share of DRAM output 14% in Q113 and 19% in Q213 (Q/Q) Highly concentrated in Samsung, Apple and low-cost versions based on Qualcomm, MediaTek, etc. Transition to low-cost smartphones and peak penetration of mobile phone market New smartphone entrants – Microsoft and Intel MediaTek moving aggressively into 28nm production Expect more blending of segmented prices: Apple v. Samsung, branded v. low-cost white sets Transition to the LPDDR3 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

DRAM Supply Developments Transition from the 2Gb to the 4Gb DDR3 Utilization cuts – inventory-driven & including Korean companies Sell-off of supplier inventory – Taiwanese DRAM cos. & Elpida Industry consolidation: Taiwanese DRAM cos. Continuing reduction of DRAM capacity – Micron scaling Capital spending cuts Slower process technology transitions – extension of current tools © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Bit Output & Changing Supplier Attitudes DRAM Bit Production and Q/Q Change 16-7% bit output growth from 2012 to 2013 based on 10% less wafer runs and lower 28% productivity growth Impact is mainly on Q412 and Q113 output Can be extended if price pressures continue Are DRAM companies not seeing the structural demand problem? © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Supply Will Have an Impact on Market 2012-2013 DRAM Demand & Production Trend 2012-2013 DRAM Supplier Inventory Trend © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

PC-DRAM Market Conditions 2012-2013 PC-DRAM Demand & Production Trend PC-DRAM Production Trend by Supplier © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Price Increase to Achieve Operating Profit Bringing 4GB SODIMM Price from Bottom to Operating Profits 4GB SODIMM Price (USD) Uncertainties can change trends Mobile DRAM demand strength can reverse itself Global economic or geopolitical surprises Longer OEM inventory correction Who owns and pushes DRAM supplier inventory Faster return to full capacity utilization Impact of buy aheads Price at 10% Operating margin $2.61 4Gb Eq. 68% increase $2.46 4Gb Eq. 59% increase $2.35 4Gb Eq. 52% increase $2.28 4Gb Eq. 49% increase Actual & Forecast Prices © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

PC DRAM Price Outlook Forecast of 4GB SODIMM Price to OEMs USD OCT 2012 Samsung below mfg. cost, Micron below cash cost JAN 2013 – FEB 2013 Price bottom Attempt to raise prices OEMs still taking down inventory APRIL 2013 New PC build ramp (Mar- Apr) Faster price increase to break cash cost OEMs near end of inventory correction 2H 2013 Balanced demand & production Cautious utilization increase Takedown of supplier inventory Buy ahead impact Potential upside prices © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Will Consolidation Break Pricing Seasonality? Seasonality of the PC-DRAM Price, 2010 - 2013 Index of the Lowest PC-DRAM Price (Base = Jan) Past seasonal pattern influenced by “buy aheads” and unexpected demand weakness Rise in 1H and fall in 2H 1H12 increase was stronger and 2H12 prices not as steep Reflects stress in the DRAM industry 1H13 attempts to increase price Similar to 2011 Will they finally succeed in raising 2H prices? Lose-to-recover cash cycle: Sep 2011 – Mar 2012 Oct 2012 – Apr 2013 forecast © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

RDIMM Price Outlook 8GB 2Rx4 RDIMM Price Trend Against Manufacturing Cost Range 8GB Equivalent Price of Different RDIMMs © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Mobile DRAM Price Trend 8Gb LPDDR2 Price Range Against Manufacturing Cost Range 8Gb LPDDR2 v. LPDDR3 Price Trend © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Long Term DRAM Issues Changing demand mix towards mobile DRAMs Mobile DRAM demand growth may peak in 2014 Changing relative importance of OEMs There needs to be an extended, profitable shortage before the transition to EUV lithography The transition to consolidation is not easy Demand improvement Inventory Correction Return to full utilization Business models will change, both on sell side and buy side © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

The Changing DRAM Demand Mix Forecast of PC-DRAM V. Mobile DRAM Bit Shipments Billions of Gigabits Based on 32% CAGR for total DRAM bit shipments, ‘12-’15 15% CAGR for PC-DRAM, 55% for mobile DRAM Mobile DRAM bits cross over PC-DRAM in 2H 2014 Changes relative size of OEM customers Lenovo, Apple, Samsung Telecom Sets engineering and manufacturing priorities of DRAM companies © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Scenario to a Stable Industry Consolidation DRAM Production by Process Technology Billions of Gbits DRAM Wafer Capacity, Wafer Outs, and Utilization 18%/yr. bit/wafer growth Wafer capacity increase ‘15-’16 Utilization Increase, ’14 18% Utilization Cuts, ‘12-’13 22% 38% Capacity Cuts, ’11-’13 16% 33% YR-YR CHANGE © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Extending Life of Process Generations Comparison of Actual and Forecasted Process Generation Lives Slower production ramp of future process generations 6 quarter ramp to peak share lengthening to 8-10 quarters Capital spending increase only by 2H 2014 Clear inventory and raise utilization before industry consolidation effect Longer product life and delayed legacy period © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12

Slowing Transitions to New Process Tech DRAM Production by Process Technology Millions of Gbits Complexity of future process technologies Multi-patterning DSA EUV-450nm Extending life of existing lithography tools Non-optical shrinks Capital spending constraints Purchasing tools to ramp No slowdown in process development efforts Enables DDR4 DDR4-2133 Enables 4Gb DDR3 8Gb LPDDR3 DDR4-2400 8Gb DDR4 Enables 4Gb LPDDR2 Enables 2Gb DDR3 2Gb LPDDR2 Will Samsung have an advantage because of its investment in ASML’s EUV-450nm development (along with Intel and TSMC)? Enables premium-less crossover © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10/30/12