1. DRAM MARKET UPDATE February 2015
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2/12/15

2. Major DRAM Market Developments
Supplier Base Developments
Samsung as central figure in 2015 production: growth and flexibility
Supply Continuity or Disruption
5% excess production in Q115
Product mix shifts sharply to mobile in Q215
2H15 supply risks are still high: process transitions and new fab ramp adjustments
DRAM pricing developments
Price reductions causing server DRAM pricing discrepancies
Multi-level pricing based on customer volume and growth
Intent to slow Q215 price reductions
Inventory
Users need to rethink inventory vs. potential supply risks
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2/12/15

3. Risks From SK-Hynix & Micron Process Migration
SK Hynix Bit Output by Process Generation
Micron Bit Output by Process Generation
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2/12/15

4. Risks from Samsung Production Flexibility
Samsung Bit Output by Process Generation
Samsung Bit Output by Fab
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2/12/15

5. DRAM Demand Outlook in 2015 4% excess production in 2015
5% excess production in Q115
Weaker PC-DRAM and slightly weaker mobile DRAM demand
Higher server demand growth
Graphic memory demand strong in Q115
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1/14/15

6. Product Shift Mix to LPx DRAM in Q215
Samsung may shift mix to mobile DRAM in Q215
Meet 9% higher demand
Build ahead of high Q315 demand to limit capacity buildup
Est. 16% Q/Q LPx output growth. 4 point increase in mix share
Assume others will also shift mix to mobile DRAM in Q215
Est. 9% Q/Q LPx output growth to meet 4% Q215 and 24% Q315 demand growth
Smartphone DRAM Market Conditions
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2/12/15

7. Impact of Higher LPx Mix on Other DRAMs in Q215
Samsung’s bit output decreases 1% Q/Q in Q215
Other companies’ bit output increases by 5% Q/Q in Q215
Overall bit output up 2% Q/Q to meet 3% Q/Q demand growth
Still see 6% excess production over demand but with a different supplier base
Non-Smartphone DRAM Market Conditions
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2/12/15

8. Major Drivers of DRAM Prices
DRAM companies worried about prices will enter a “vicious circle”
Lower prices increase user inventory risk, lower prices to reduce user risk
Lower prices reduce revenue, force suppliers to push bits leading to lower prices
Product mix as short term solution
Fab adjustments as near term Q415 solution
Theoretical price resistance when moving inventory does not lead to more profit
So far low chance of reaching this resistance point, depends on demand
Suppliers’ current pricing hierarchy and practice
Protect mobile DRAM prices first, then server DRAM, then PC DRAM
Multi-tier prices due to consolidating market: solidify business with customers with volume, growth, new product adoption
Mobile inventory buildup in Q215 can lead to more price competition in Q315
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2/12/15

9. Trend towards User Concentration
Top 5 DDRx user share: from 54% in 2014 to 60% in 2015
HP, Dell, Lenovo, Kingston, Google, Apple
Rising positions of leading datacenter customers – next wave
Top 7 PC DRAM users had 78% share of consumption
Top 5 LPx user share: 2/3 of bit consumption
Samsung, Apple, Xiaomi, Lenovo, Huawei
Rising value of Xiaomi and share of leading China brands
Concentration of growth in datacenter and smartphone DRAM demand
Multi-tier pricing by suppliers across customers and markets
Lock up larger customers for lower sales cost and effort
Reduce product-mix risks
Ensure transition to new products: DDR4, LP4
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2/12/15

10. 4GB DDR3 SODIMM Price Trend
Forecast of 4GB DDR3 SODIMM Price – Averages and Range
Q215
Avg. OEM $25.61
Low Avg. $25.00
Q415
Avg. OEM $24.06
Low avg
Q115
Avg. OEM $28.17
Low Avg. $27.17
Q315
Avg. OEM $24.66
Low Avg
22% drop,
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2/12/15

11. Major Server DRAM Developments
Signs of our expected double-counting of demand
Several server OEMs building inventory – both DDR3 and DDR4
Datacenter demand proving “lumpy” once again in Q115
Special pricing deals set target for lower prices
Pricing issues
Widening price gap between 32GB and 16GB: rethink transition to 32GB?
DDR4 price premium may stay high as DDR3 reference price falls
Roadmap implementation: 8Gb DDR4
DDR4 transition
Higher mix of DDR4 buys due to DDR3 user inventory
Mixed signals on speed of transition across customers (25% share in Q115)
Start of client adoption in 2H 2015
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2/12/15

12. Client Transition to New Memory Technologies
Transition of PC-OEM DRAM GB Demand
to New Memory Technologies
Share of PC-OEM DRAM GB Demand
by Memory Performance Technology
Adds 15% more bit demand above that from servers in 2H15
Client DDR4 demand will be 33% of total in 2016, 40% of total in Q416
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2/12/15

13. 16GB DDR3 2Rx4 RDIMM Price Trend
Forecast of 16GB DDR3 2Rx4 RDIMM Price – Average and Range
-30% CAGR,
Q115
Avg. OEM
$129.6
Low $126
Q315
Avg. OEM $121
Low $120
+10% increase,
73% drop,
Q215
Avg. OEM $123.50
Low $122
Return to pre-Wuxi fire levels in Q215
Q415
Avg. OEM $119
Low $116
11% drop,
8% drop,
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2/12/15

14. 32GB DDR3 4R LRDIMM Price Forecast
32GB DDR3 4Rx4 LRDIMM Price Forecast
15% drop,
Q115
Avg. OEM
$301
Q315
Avg. OEM
$273
40% drop,
12% drop,
Q215
Avg. OEM
$281
Q415
Avg. OEM
$265
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2/12/15

15. 16GB DDR4 2R RDIMM Price Forecast
5-10%
premium
mid-2015
-28% drop,
DDR4 5%
premium
Q415
Q115
Avg. OEM
$155
Q215
Avg. OEM
$142
Q315
Avg. OEM
$134
Q415
Avg. OEM
$126
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2/12/15

16. 32GB DDR4 Module Price Forecast
Price Trend of 32GB Equivalent Solutions
32GB DDR4 2R RDIMM Price Forecast
Q415
Avg. OEM
$269
Q115
Avg. OEM
$363
Q215
Avg. OEM
$327
Q315
Avg. OEM
$299
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2/12/15

17. Relative Pricing of PC and Server DRAMs
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2/12/15

18. Mobile DRAM Market Developments
Slight 2-3% reduction of average market prices in Q1 2015
Expect small price movement in Q2 2015
Samsung captive demand and accumulation of inventory for Q315
Samsung and Apple enjoy preferential pricing
Expect it to track with the highest of equivalent PC or Server DRAMs
LP4 transition
Overheating of supporting Qualcomm processor
Market to be driven by Exynos and Apple Aps
Moderate transition from low-end AP makers in 2H 2015
Special pricing for major users. Market price pricing at 30%+ premiums.
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2/12/15

19. Mobile DRAM Price Outlook
Comparison of Mobile DRAM Prices against Server & PC DRAM Prices
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2/12/15

20. Analysis of First Real Price Resistance Points
2014
2015 (Current Forecast)
2015 (Supplier Resistance Point)
Est. 4Gb Equiv. ASP
Change
from 2014
Mobile DRAM
4.37
3.71
-15%
PC DRAM
4.09
3.19
-22%
2.90
-29%
Server DRAM
3.72
3.42
-9%
3.13
-16%
Graphics DRAM
4.90
4.03
-18%
3.49
Consumer DRAM
4.80
4.32
-10%
ALL DRAMs
4.24
3.61
3.40
-19%
Revenue Change
+7%
+2%
Profit Margin Change
+2 pct. points
0 pct. point
9% PC/Server DRAM price drop from current forecast to 1st resistance point
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2/12/15

21. Conclusions Product mix already shifting in Q215 towards mobile DRAMs
Supplier base pricing behavior changes
Dynamic supplier base strategies required – not same as Q115
Set commitments from suppliers: leverage concentration of growth
Preserve and plan your inventory
Remember the rule: whoever holds inventory controls price
Reduce supply risks from process transitions and product mix
Show optimism to supplier on 2H 2015 demand to preserve supplier production plans
DDR4 transition issues may rise: supply or price
Issues: DDR4 price premiums, demand penetration, and client adoption of DDR4
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2/12/15