DRAM MARKET UPDATE August 2013 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

DRAM Market Has Entered a New Phase in 2H13 Higher bit production growth in 2H13 Weaker-than-expected PC & server DRAM demand Worries about mobile DRAM sell-through Profit-margin issues of PC-OEMs, DRAM-channel, and server-OEMs Price elasticity barriers Buy aheads have stopped. Market inventory being used Indications of weak Nov-Dec and 1Q14 demand DRAM companies still have leverage – probability of price crash is low but high chance of a price correction © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Higher but Moderate Production Growth DRAM Production Trend (Includes Mobile DRAM) Slow Production Growth Slow migration to 2Xnm Low capital spending Low utilization Process & Utilization Improvement Wafers up for Mobile DRAM 2Xnm & SEC 2Ynm wafers up Slower transition to next process Effects of wafer capacity changes Transition to 2Ynm/ 2Znm 22% growth in 2014 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Major Market Developments PC Unit Shipment and Build Trend History of PC Unit Shipment Change Consolidation. Increasing market share 2012-2013 Change: Shipments, +1% Builds, -4% 2012-2013 Change: Shipments, -3% Builds, -7% 2012-2013 Change: Shipments, -12% Builds, -14% Weak channel demand © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

4GB SODIMM Channel Trends 4GB SODIMM Channel Prices and Profit Margin 4GB SODIMM Relative Prices 11% delta 19% down Allows resellers to reduce resale price to generate volume More pressure on OEM prices to decrease © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

2GB SODIMM Channel Trends 2GB SODIMM Channel Prices & Profit Margin 2GB SODIMM Relative Prices 4% delta 18% down © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Ongoing PC Industry Consolidation PC Revenue Trend by PC Company Weak demand & tight profit margins causing concentration HP, Lenovo, Dell & Apple raised unit share by 4 points to 50% Declining Acer/Asus share – from 18% in Q212 to 14% in Q213 Elasticity barriers have been hit Rising BOM costs have reduced PC operating margins to 2-3% and falling Average prices rising but affecting unit demand DRAMs vs. Intel in PC BOM © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Weak & Competitive Server Market Server Unit Shipment Trend Server ASP Trend 1% DROP 6.3% DROP 5.5-7% DROP 17% DROP © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Slowing Datacenter Momentum? Capital Spending of Major Datacenter Companies Capital Spending as % of Related Revenue Expect less growth From hyperdatacenters GOOG, AMZN, FCBK, MSFT, BIDU GOOG, AMZN, FCBK, MSFT, BIDU WITHOUT MSFT WITHOUT MSFT Decelerating revenue growth © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

OEM Return to Profit Protection in July OEM Price to End User (16GB Equivalent – USD) OEM Profit Margins Shows price elasticity barrier even in servers © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Saturating Growth of Mobile DRAM Demand Smartphone Unit Build and Memory Content Trend Tablet Unit Build and Memory Content Trend © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Concern from Mobile Component Suppliers Q/Q Change of Mobile Component Builds Worries over 2H13 sell through Saturating smartphone & tablet installed base China’s slowing economy & US issues Impact of low-cost sets on higher cost ones Profit margin pressure on low- cost sets 2014 mobile DRAM demand depends on successful replacement sales strategies Range: -4% to -14% © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Uncertain DRAM Wafer Capacity Trend in 2014 DRAM Industry Wafer Out Trend (Thousands) Thousands of Wafer Outs by Producer Group -5% growth in 2013 -13% growth in 2012 Uncertain (Range from 2% to -2%) © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Product-Mix and Tight Supply Periods Demand-Production Ratio of DRAM Product Groups Reduced product-mix issues in 1H14 Slower mobile DRAM capacity growth OEMs and channel to replenish inventory probably between Dec ‘13 and Mar ’14 Price correction, not price crash because of “stoppers” DRAM capacity changes Market inventory replenishment PRODUCT MIX ISSUES PRODUCT MIX ISSUES © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

4GB SODIMM Price Trend 4GB SODIMM OEM Price Trend (USD) 4GB SODIMM Operating and Cash Margins © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

PC DRAM Price Forecast 4GB SODIMM Price Forecast © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

16GB 2Rx4 RDIMM Price & Profit Trend 16GB 2Rx4 RDIMM Price Trend 16GB RDIMM v. 4GB SODIMM Operating Margins Relative profit margin keeps 16GB RDIMM prices from faster drop Why is the PC-DRAM the reference profit? © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

8GB 2Rx4 RDIMM Price Trend 8GB 2Rx4 RDIMM Price Trend Relative Operating Margins © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Other RDIMM Price Trends 16GB Equivalent Prices of Different RDIMMs 32GB competition increasing with more active suppliers Limited 16GB RDIMM price peak allows faster 32GB RDIMM drop 4Gb-based 8GB RDIMM pulls away from 2Gb-based when Ivy Bridge volumes increase © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Trend of LPDDRx and DDR3x Prices Mobile and DDR3 Price Trends through 2014 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Long Term DRAM Issues DRAM market has changed structurally Lower production growth and less Q/Q volatility Slowing DRAM manufacturing cost trend Further DRAM product fragmentation with post-DDR3 PC memory New set platforms introduced in early stage of process cycles Price elasticity and competition with Intel in set BOM limits price increases and profit margins Refining the capital spending model – no more dedicated DRAM fabs? DRAM industry consolidation has not yet ended OEMs to adopt structural changes in their DRAM buying and supply- chain strategies © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Process Transition Impact on Server Roadmap DRAM Roadmap DRAM roadmap challenges: New server platforms entering at earlier stage of DRAM process technology Supply of advanced products Breadth of supplier base Cost maturity and price premiums Ivy Bridge DDR3-1866 Sandy Bridge DDR3-1600 Haswell DDR3-1866 DDR4-2100 8Gb DDR4 Broadwell 8Gb DDR4-2400 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

Conclusions and Recommendations Current business models addressed return to profits but still need to evolve for future issues Economic realities will challenge DRAM companies despite the industry consolidation and capex constraints Consolidating customer industries Price elasticity barriers Intra-industry competition will be based on more strategic factors: capital, capex & fab models, advanced process implementation, and target markets Extra-industry competition with Intel for PC and server BOM share The DRAM market still has a lot of surprises in store © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

PC DIMM Price Forecast © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13

DDR3 RDIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8/26/13