August 2012 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Weak Global Economy’s Impact on DRAMs Global IT spending – downward revisions Enterprise equipment – longer approval and shipment cycles Telecom carriers – flat to lower capital spending PC unit shipments drop 7% Q2/Q1 2012 Global unemployment – 200 million out of jobs (WLO) Weak US/Europe – 50% of global consumption Bright spots Datacenters – 20% global digital-ad spending growth in ’12 Smartphones & tablets – replacing the old What about 2013? 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

The Semiconductor Industry Feels the Pain Rising inventory levels Intel - inventory up 22% Memory inventory up – DRAM & NAND Fabless semiconductor companies – TSMC seeing a buildup of inventory IC supply corrections in Q1 2013 HDD controller supply down 21% Q/Q FPGAs down 14% Q/Q WLAN IC down 7% Application processors down 9% Semiconductor equipment companies - order push-outs and lower orders 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Forecast of DRAM Market Conditions Slower 2Xnm transition, 30nm ramp. Falling PC-DRAM bit output Improving 2Xnm yields but limited wafers. Chance of utilization reductions (not reflected) Utilization increases Slower 2Ynm transition. Falling PC-DRAM bit output. Weaker-than-expected PC demand & delayed Apple demand Overflow of mobile demand to Q113 but seasonally weak markets. CHANGE THIS SLIDE Stronger box builds: Sep – Nov but year-end build corrections Seasonal improvement of demand. Win 8 traction. Low-cost smartphone/tablet volumes. Buy-Ahead Activity Buy-Ahead Inventory Takedown 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

2013 DRAM Demand Assumptions System Unit Growth 2013 Memory Content/Growth Other Factors PC DRAM 371M PCs 4% growth 4.8 GB 15% growth Ultrabook: 22% of Mobile PCs Inhibiting GB/PC growth Low BOM impact Server DRAM 11M Servers 11% growth 63.5 GB 43% growth Content-driven growth: Romley & 16GB/8GB crossover Strong datacenter demand CPU vs. DRAM in BOM 32GB activity Mobile DRAM 1217M smartphones 34% growth 823MB Increasing low cost smartphones “Good enough” low cost phones Shrinking BOM w/ low phone ASP 172M tablets 42% growth 888MB 1% growth Volume shift to <8” tablets Increasing OS competition leading to excess builds Shrinking BOM – lower tablet ASP 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Slowing Process Transitions 4X nm 250 wafer increase per quarter – 1st 7 quarters 7 QTRS TO PEAK 3X nm 232 wafer increase per quarter – 1st 7 quarters 8 QTRS TO PEAK 2X nm 113 wafer increase per quarter, est. – 1st 7 quarters 12 QTRS TO PEAK est. 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

How Much Cash Left for Faster 2X/2Ynm Ramp? Estimated Cash Generation and Use in 2012 Sources of External Cash: Samsung (Debt and Internal) SK Hynix (SK) Elpida (Micron) Micron (Debt and Stock) Nanya (Formosa Plastics) 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

PC Builds Determine PC-DRAM Prices Notebook-PC Production by Major PC Company Millions of Units PC unit shipments dropped 7% from Q112 to Q212 PC builds up 10% from Q312 to Q412 because of Sep/Oct builds Recovery to pre-HDD- shortage build levels by Q412 No boost from ultrabooks or Windows 8 Weak May builds trigger DRAM price declines Windows 8 builds in Sep/Oct Year-end takedown Q312 builds up only 2% to correct channel inventory tegra 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

PC Memory Content Trend Memory content growing well since 2H 2011 Mobile PCs in emerging markets Lower than historical rates (CMGR 1/11-12/12) 1.9% CMGR for mobile 1.2% for desktop OEM slowing content growth in 2H 2012 Increase profit margins as PC units slow 2013 growth based on granularity Mobile PC: 4.3 GB ‘12 average Desktop PC: 3.8GB ‘12 average All PC: 4.1 GB ‘12 average 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Ultrabook Penetration & Memory Content Mobile PC Units by Type – July 2012 DRAM Content by Mobile-PC Type – July 2012 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

The Ultrabook/Air Differentiation Product Weight by Mobile-PC Type – July 2012 Ultrabook Storage GB by Type – July 2012 SSD: 58% of UB & 5% of Mobile PCs 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

PC-DRAM Market Conditions, 2012-2013 20% PC-DRAM bit demand growth in 2013 Expect more PC-DRAM supply reductions in 2H 2013 Micron to control a large share of PC-DRAM supply Challenge is weathering 1H 2013 price pressures Production adjustments to prevent inventory growth? OEM Buy Aheads 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

4GB PC-DIMM Price Forecast through 2013 DRAM companies will try to prevent a deep 1H13 price drop DRAM companies will try to raise 2H13 prices to achieve operating margins 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Financial Impact of PC-DRAM Prices Range of 4GB PC-DIMM Cash & Operating Margins 4GB PC-DIMM Operating Margins by Supplier 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Server-DRAM Market Server units challenged by weaker global IT spending and longer approval cycles Cloud, virtualization, and video driving GB content growth Westmere content growth peaking in Q3 2012 Romley content growth to pick up in Q4 2012 DRAM suppliers to push 16GB & 32GB in Q412/Q113 Datacenter activity still strong – 18% increase in digital ad spending in 2012 8GB prices facing loss of operating margins Proliferation of server-DRAM products 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Trend of Server DRAM Demand Trend of Server Units & DRAM Content Trend of Server DRAM Demand Moving to Mainstream 16GB Romley Content Growth 8GB mainstream 59% bit demand growth in 2013 Westmere Content Growth 50% bit demand growth in 2012 61% bit demand growth in 2011 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

8GB RDIMM Price Forecast 8GB RDIMM Operating Margin Range Average Price Avoiding lower PC-DRAM Prices Tighter PC-DRAM Supply Manufacturing Cost Range 2Xnm Penetration 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

8GB & 16GB RDIMM Operating Margin Ranges RDIMM Price Forecast 8GB & 16GB RDIMM Operating Margin Ranges 16GB RDIMM OPERATING MARGINS 8GB RDIMM OPERATING MARGINS 16GB/8GB Price/Byte Crossover 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Mobile DRAM Market Smartphones have another 1.5-2.0 years of strong growth Risks in mobile DRAMs Consolidation of mainstream smartphone market Competition from “good enough” low-cost handsets Carrier capex and changing handset policies Low-cost tablets, volumes from <8” displays with lower DRAM content Shrinking margins, shrinking BOMs Is Apple peaking? Shift to low-cost iPhones and iPads with lower margins 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Updated Mobile DRAM Demand in Smartphones 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Updated Mobile DRAM Demand in Tablets 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Memory Content Analysis 2012 Est. Smartphone Memory Content (Megabytes per Phone) 2012 Est. Tablet Memory Content (Megabytes per Tablet) 892 Average 611 Average 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Content Trends and Shifting Demand Mix Memory Content Trend Smartphones and Tablets Distribution of Smartphone Mobile-DRAM Demand 13% Share Low cost Phones 42% Share Other Mainstream Brands 45% Share Samsung/ Apple 2058 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Forecast of Mobile DRAM Prices EST. AVERAGE PRICE EST. AVERAGE PRICE PRICE RANGE PRICE RANGE MANUFACTURING COST RANGE MANUFACTURING COST RANGE 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Conclusions and Recommendations Is the DRAM business no longer attractive? DRAM demand profiles will change. PC can revive but not as before. Mobile DRAM faces long term challenges Resilient server DRAM demand The DRAM industry must change its business models in the face of slowing demand growth Relative profit margin method for pricing Capital spending discipline and ROI management More industry consolidation in 2013 Supply shortage in late 2013 and at least 1H 2014 as DDR4 server-DRAM market develops 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

Appendix 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

PC-DIMM Price Forecast 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

RDIMM Price Forecast 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.

LPDDR2 Price Forecast 8/29/12 © 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.