The DRAM Market Advisor June 2010

Transcription

1 DE DIOS & ASSOCIATES Focused on our clients The DRAM Market Advisor June 2010 EXECUTIVE SUMMARY Overall demand so_ened in May and June. PC unit shipments are down. DRAM demand in the channel has weakened. Notebook GB/ PC dropped by 0.8% M/M in May. Spot and retail prices for both DDR2 and DDR3 fell to levels below the 2H March price increase. Decoupled from the channel and DDR2, DDR3 OEM prices are slightly up. Third party module companies face the challenge of DDR3 demand to match the strong shi_ of DRAM fab to the new memory. If not, they risk revenue growth and building unwanted inventory. The channel trails in DDR3 because of much lower DDR2 prices. The channel will have to bring DDR3 prices below DDR2 to demand. This requires temporary of DDR2 and DDR3 purchases from DRAM companies in June and July. Most of the price in the coming months will come from the DRAM channel. Channel price will be limited because overall inventory levels remain low. We believe that OEM prices will remain decoupled from channel through 2010 and stay firm. DRAM supplier inventory will remain well below normal levels even a_er temporary of module company purchases. Facing a 14% Q/Q increase in PC unit produc@on in Q310, OEMs cannot afford to compromise their supply flow. DRAM produc@on growth rates will increase and produc@on mix will change. Wafer starts are up 5 7% since Jan Xnm wafer starts have ramped sharply since April; the 2Gb DDR3 will establish itself as the mainstream by Q410. DRAM wafers con@nue to move aggressively to the mobile DRAM because of its shortage and, to a less extent, GDDRx and NAND. This will help keep OEM prices firm. On the other hand, GB/PC growth will slow or drop in Sep/Oct with more low content commercial PCs and new consumer models. PC and mobile phone sell through remains a major concern. We believe this will lead to a buildup of supplier inventory at the end of 2010, con@nuing and exacerba@ng in 1H We see DDR3 inventory levels rising above normal by Feb 2011 and prices moving down con@nuously a_er that. CONTENTS Market Developments... 1 Signs of Weakening Demand Weak Q210 PC unit demand but strong Q310 PC produc:on plans Weak GB/PC growth: more weakness to come Slower channel transi:on to DDR3 Signs of Increasing DRAM Produc@on Increasing wafer starts Faster ramp of 4Xnm wafer starts since 4/10 Low DRAM company inventory persists Market Analysis and Outlook... 7 PC Unit Shipment Growth Revised Down to 16% Slower or Nega@ve GB/PC Growth in Sep/Oct Channel Faces Product Mix Challenge 2H10 Product Mix Changes Will Limit Price Pressures Lower DRAM Produc@on Costs in 2H10 A View into 1H 2011 Forecast of Demand Supply Condi<ons Bit Inventory Trends: Inventory s@ll low in 2H10 Weeks of Inventory Trends: Rising in 2H10 Demand Produc@on Ra@o Trends: Balanced in 2H10, excess produc@on and inventory in 1H11 Price Forecast Highlights Price Vola@lity will be in Channel OEM Prices S@ll Decoupled from Channel Prices Will We see More DDR3 Price Increases? Server Module Prices and Rela@ve Profits So_ DDR3 Prices in 1H 2011 DRAM Industry Revenue Forecast Price Forecast Tables We expect DRAM revenue in 2010 to reach $45.7 billion, $36.4 billion of which will come from 1Gb and higher DDR3 and DDR2 products and $9.3 billion from specialty memory. We es@mate mobile DRAM revenue to reach $5.8 billion. Revenue growth will con@nue to increase through Q111 but begin to decline in Q211. (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. Reproduc@on prohibited without prior permission.

2 The DRAM Market Advisor 1 MARKET DEVELOPMENTS SIGNS OF WEAKENING DEMAND 1. A series of news through May and early June point to weakening electronic system and DRAM demand. 2. Weak PC unit demand. Supply of HDD, LCD, optical drives, and graphic cards have moved into excess after being tight all the way through April. Rumors are floating about weaker PC unit shipments and bookings of mainstream notebook PCs of the larger OEMs. Motherboard orders slowed down in the first week of June. These developments indicate that PC unit demand in Q210 will show a negative and less than seasonal Q/Q growth. Projections of PC unit builds by ODMs and motherboard makers, however, remain optimistic and show a 14% growth from Q210 to Q Two significant events coincided with the demand weakness: a) the euro s devaluation and the eurozone s debt crisis; and b) the successful sales of the ipad. We may also be seeing the beginning of the effect of the China government s efforts to curb economic growth. The euro has devalued by approximately 20% since the start of 2010 and approximately 11% since the middle of April (Exhibit 1). The devalued euro results in higher-priced PCs, which are based heavily on dollar-denominated costs and prices, and the potential of reduced sell-through demand. Approximately 2 million ipads shipped in April and May and international reception has been positive. The ipad is very likely replacing netbooks because of its features and competing for the consumer budgets for traditional notebooks. Its sales volume in Q210 is approximately 80% total netbook production and 12% of traditional notebook PC production (Exhibit 2). Its price range is equivalent to that of traditional notebooks. 4. Weak GB/PC growth. GB/PC growth slowed even more in May and is not compensating for weaker-thanexpected PC units. 5. Our data shows that the average memory content of notebook PCs decreased by 0.8% from April to May, following an already weak 1.1% growth last month (Exhibit 3). Regional brand and white-box notebooks had the largest memory-content reduction (down 1.8%), as the gap between lower DDR2 spot prices and higher DDR3 spot prices widened from 2H April through May. Major-brands in developed markets showed the next largest reduction (down 1.0%) of memory content. Major-brand memory content in emerging markets was up 1.1%. This provides further evidence of weakening demand in developed markets - US and Europe - and in the DRAM channel. 6. The average memory content of DDR3-based notebooks was down 0.1% in May compared to a 0.1% increase in April. The average memory content of DDR2-based notebooks was down 2.9% in May compared to a 0.6% increase in April. The DDR3 share of notebook megabyte demand increased from 59% to 63%. The DDR2 memory content decrease was larger than we projected. The data explains the faster-than-expected weakening of DDR2 demand, driven by both a migration of PCs to DDR3 and a faster decrease of DDR2 memory content. 7. May is the fourth consecutive month that the average notebook memory content has been below the linear trend line (since Oct 2007). This trend is likely to continue or worsen. PC-OEMs reacted more seriously to the April/May DRAM price increases and have telegraphed their intentions to reduce GB/PC growth. DRAM demand in 2H 2010 will depend much more on the strength of PC units than on GB/PC growth.

3 The DRAM Market Advisor 2 8. Channel (Spot and Retail) prices fall at the end of May and in early June. DRAM spot and retail prices have decreased significantly since the latter part of May (Exhibits 4 & 5). DDR2 and DDR3 spot prices fell 12% and 7%, respectively, in the last week of May. May revenue reports of Taiwanese module companies have started to reflect this. More importantly, the median retail prices of branded and generic 2GB SODIMMs fell from 5/21 to 6/10. The median retail prices of both branded and generic DDR2 SODIMMs dropped 10% in that period. The median retail price of branded DDR3 SODIMMs declined 17% and that of generic DDR3 SODIMMs dipped 3%. 9. Micron s inventory reduction and aggressive prices at the end of its fiscal quarter contributed to the spot price decline. In early June, the spot prices rebounded but remain below mid-may levels. Nevertheless, the spot price reductions, along with the retail price drops, indicate that channel demand has weakened and channel inventory has increased. 10. It is also interesting to note that spot and retail prices have returned to their early March price levels, before the significant price hikes in late March and April. The price reductions of the past two months have not sustained themselves, as we expected. Despite the downward movement of spot and retail prices, OEM prices have remained resilient in early June. Some DRAM companies raised OEM contract prices slightly in June. 11. Slower Channel Transition to DDR3. Our data also shows that regional-brand and white-box notebook PCs have lagged significantly in the adoption of DDR3 memory. In May, the DDR3 accounted for only 32% of megabyte demand from regional-brand and white-box notebook PC makers compared to 70% for major brands in developing markets and 61% for major brands in emerging markets (Exhibit 6). This explains the weakness of DDR3 demand and the resilience of DDR2 demand in the DRAM channel, which supports these markets. The DDR2 demand has lost its robustness, however, because of faster-than-expected reductions in GB/PC. 12. The trailing DDR3 transition in the DRAM channel was caused mostly by periodic tight supply of the 1Gb DDR3 or DDR2 and by the difference in the spot prices of the two products. Today, DDR2 channel inventory levels are higher than the DDR3 and DDR2 spot prices are much lower. The DDR2 spot price went from being 6% lower than the DDR3 in mid-may to 17% lower at the start of June and 14% by June 10. Channel customers will tend to stay with the DDR2 in June, limiting the growth of DDR3 channel demand. 13. This situation poses a problem for both the DRAM channel and DRAM companies. The channel s problem is that DRAM companies are reducing DDR2 production at a quick pace. The channel s supply flow from DRAM fabs is now primarily DDR3 but its demand and its inventory is still heavily DDR2. The impact on the DRAM companies will depend on how the channel resolves this issue. SIGNS OF INCREASING DRAM PRODUCTION 14. Increasing Wafer Starts. We have seen an increase in DRAM wafer starts since April when DRAM prices increased. May wafer starts (1.192M) were 5% higher than January and we expect June wafer starts (1.207M) to be 6% higher. A few DRAM companies are either squeezing more wafers from fully utilized fabs, returning fabs to full utilization, or expanding equipment installations in under-utilized fab space. A 6% increase in wafer starts is significant when combined with rising productivity. The market will see the increased bits from these additional wafers in July and onward.

4 The DRAM Market Advisor Faster Ramp of 4Xnm Wafer Starts. We have also seen an acceleration of 4Xnm wafer starts primarily from Samsung and Hynix since April. Elpida and Micron have also started 4Xnm mass-production wafer starts in the past two months. The 4Xnm share of total DRAM wafer starts was 10% in May, up from 4% in March and 2% in January. 4Xnm wafer starts increased more than 6X since the beginning of the year. We expect the 4Xnm share to widen to 14% in June. 16. This development has several implications. a. First, it shows that yields of Samsung and Hynix have improved to levels that bring the cost-per-bit of the 4Xnm 2Gb DDR3 below that of the 5Xnm 1Gb DDR3. Therefore DRAM manufacturing costs will be lower in 2H b. Second, bit production will increase more rapidly. We expect DRAM bit output to rise by 14% in Q310 (Q/Q) compared to a 10% increase in Q210. Bit output from Samsung and Hynix will be much higher. c. Third, the DRAM production mix will begin to shift significantly to the 2Gb DDR3 and mobile DRAM in Q310, as we predicted. We estimate that 2Gb DDR3 share of total DRAM bit production will expand from 10% in Q210 to 25% in Q310. The mobile DRAM s share will widen from 9% in Q210 to 11% in Q310. Wafers will shift to these products from the DDR2 and 1Gb DDR3. We expect the DDR3 share to fall from 25% in Q210 to 17% in Q310. The 1Gb DDR3 share is projected to narrow from 49% in Q210 to 41% in Q Some DRAM companies justified their April and May price increases by pointing to the difficulty of generating cash due to low bit growth and no cost improvements. The accelerated 4Xnm wafer-start ramp will change the market conditions in 2H 2010 and reduce the validity of this justification. 18. Low DRAM company inventory at the end of May. Our models show that DRAM supplier inventory has remained very low at the end of May, much less than a week of inventory. We believe DRAM companies continue to be bullish about Q310 and are pricing slightly higher in June.

5 The DRAM Market Advisor 4 Exhibit 1. Year to date Devaluation of the Euro Exhibit 2. ipad Unit Sales against Portable PC Unit Production!"#$%!&'(%)*+,-.%(&,/%(!"#&$!"(#$!"(&$!"'#$!"'&$!"(')$!*(*!&$!"!#$%&'()#!&*#+,'!-(.!/&!)$%$$$!!!($%$$$!!!'$%$$$!!!&$%$$$!!,0123,3.*14! *.,+-../!!"#"$%$#!"#$%&'(")*"+*,"&-%./0*,!*%)1*',%1* 2)'-*,&"134-'")*!"%#$!#$%$$$!!!"%&$!"!#$!"%&+$ +*(*!&$!"!!!! *+,-../! 5612! Exhibit 3. Trend of Notebook PC Memory Content 1(3'-2,(%$/("$+),(-)).$/0$ #&,%-'## #&,!)+## #+,%(!## #+,!'-## #$,%&(## #$,!+'## #%$+##../&#01234#../+#01234# #9:6;<=6#../&,>?<;6#@A#06=<BCD6#.6E<78# F/GH.#IJHG# $!# $$# $+# $# +# &# '# %# (# )# -# *# $!# $$# $+# $# +# &# '# %# (# )# -# *# $!# $$# $+# $# +# &# '# %# *!"# )%"# (!"# '%"# &!"# $%"#!"#!!"#$%&'"($)*$+),(-)).$/0$1-2,($!(1'+!$ +!!)# +!!-# +!!*# +!$!#

6 The DRAM Market Advisor 5 Exhibit 4. 2GB DDR2 SODIMM OEM, Spot & Retail Prices Exhibit 5. 2GB DDR3 SODIMM OEM, Spot & Retail Prices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xhibit 6. DDR3 Penetration of Notebook PC Market Segments!!"#$%&'"($)*$+),(-)).$/0$1-2,($!(1'+!$ '!"# &!"# %!"# $!"#!"# -./01#21.345#678790:74#-.1;7<=# -./01#21.345#>?71@A3@#-.1;7<=# B7@A03.9#21.34#5#CDA<7#20E# F99#G7@?73<=# '# (# )!# ))# )$# )# $# *# %# +# &#,# '# (# )!# ))# )$# )# $# *# %# +# $!!(# $!)!#

7 The DRAM Market Advisor 6 Exhibit 7. Trend of DRAM Wafer Starts Exhibit 8. Forecast of Accelerating 4Xnm Wafer Starts &$"$! &$""! )! %! (! '! &! "! "&! ""! "$! -./01234!,! +! *! )! %! (! '! &! "!!"#$$$!!!"#$%$!!!"#"$$!!!"#"%$!!!"#&$$!!!"#&%$!!!"#$%&'(%)#*)(+&,)-&*.+)%!&+!%)/.+),#'!") )!!" (!!" '!!" &!!" %!!" $!!" #!!"!" (,"-." ',"-." &,"-." %,"-." / " #" $" %" &" '" (" )" *" +" #!"##"#$" #" $" %" &" '" ("!"#$%&'(%)#*)(+&,)-&*.+)%!&+!%)/.+),#'!") $!#!" $!##"

8 The DRAM Market Advisor 7 MARKET ANALYSIS & OUTLOOK DOWNWARD REVISION OF PC UNIT SHIPMENT GROWTH TO 16% 19. We are revising our forecast of PC unit shipment growth in 2010 from 18% to 16% (Exhibit 9). We base this primarily on weaker PC unit demand in Q210 and continue to project stronger seasonal growth in 2H We project an 18% PC unit production growth in 2010, down from 20%. 20. The PC unit production outlook from ODMs and motherboard makers remains strong. Our data shows a 14% increase of PC unit production from Q210 to Q310, which is optimistic by any measure. Growth is strong across desktops, notebooks, and netbooks, although netbook growth is losing steam. The important question is whether sell-through will be strong enough to justify PC production growth. We do not believe, however, that PC unit growth can grow faster than we expect to compensate for Q210. The eurozone economic recovery will be saddled by tighter credit and reduced government spending. The ipad, iphone, and other smartphones will compete with notebook PCs for a share of the consumer s electronic budget. 21. We still see potential downside in 2H 2010 and our 16% growth projection. Much will depend on how strong corporate PC purchases will be and how much consumer spending wallets will expand in this start-andstop recovery. Most large OEMs are relying on corporate spending to boost 2H 2010 and continue to plan for this. But some now question whether the sentiment of cash-rich corporations will affect it. Desktop production growth in Q310 is strong but depends on corporate buys. Netbook growth, though lower, is still relatively strong but depends on the ability to compete against the ipad. We do not put much hope in that. If desktops and netbooks are adjusted downward, we believe that Q/Q growth in 2H 2010 can lose up to two percentage points and result in a 2010 PC unit shipment growth of 15%. EXPECT LOWER GB/PC IN SEP/OCT Although GB/PC growth is slowing, we believe that more reductions are still to come, especially between September and October this year. Three events will occur at that time: a) the saturation of DDR3 penetration; b) the strong increase of commercial/corporate PC units; and c) the release of new consumer PC SKUs. This implies that DRAM demand will depend heavily on PC unit shipment growth, the strength of which remains positive but unclear. 23. The saturation of DDR3 penetration will take away any remaining growth of the average GB/PC as it bumps into the flat trend of the higher DDR3-based GB/PC. The PC-mix shift to commercial PCs can reduce the average GB/PC because the memory content of the average commercial PC is substantially lower than that of the average consumer PC (Exhibit 10). This mix shift is a major assumption behind the strong PC unit projections for 2H New consumer PC SKUs for the year-end holiday season will emerge in September after the back-to-school period. We believe PC OEMs will reduce the average memory content of these new consumer PCs. We believe OEMs decided on the memory content of these new models in May as DRAM companies continued to raise prices. They have been telegraphing their intent to reduce GB/PC since the April price increase.

9 The DRAM Market Advisor 8 THE DRAM CHANNEL FACES CHALLENGES THAT CAN PRESSURE PRICES DOWN 24. We have been saying, since late last year, that the channel will be the primary catalyst of a downward movement of DRAM prices. In fact, the channel (or third-party module companies, to be exact) has been largely responsible for moving prices up beyond the expectations of DRAM companies since Q209. It led the prices up in April 2009, in 2H 2009, and in late March to April The Challenge. Third-party module companies (TPMC) face major challenges. First, current demand was weak in May and will likely continue to be weak throughout June. Second, their demand and inventory is weighted towards DDR2 but the supply flow from DRAM companies is now weighted towards DDR3. Channel demand has trailed in its transition to DDR3, as we discussed earlier. Third, the result is a buildup of their inventory because of the weak demand, the need to hold DDR2 for current demand, and acceptance of DDR3 to preserve strategic supplier relationships (Exhibit 11). We expect TPMC inventory to expand from May through September and to be much higher than 1H 2010 levels. 26. The Solution. The solution to these challenges entails: a) stimulating DDR3 demand by bringing DDR3 prices below DDR2; and b) reducing DDR2 as a percentage of the inventory mix. This will allow them to buy higher levels of DDR3 and increase sales while maintaining reasonable levels of inventory. This is easier said than done. DDR2 prices remain much lower than DDR3 prices, keeping DDR2 demand resilient and preventing demand from moving to DDR3 quickly (Exhibit 12 and 13). DDR3 costs are also much higher than DDR2 costs; promoting DDR3 demand through lower prices would result in reduced profits or loss. 27. Temporary Reduction of Module Company Purchases. The solution has limited implementation options given current market conditions. There would be more options if overall demand were strong. We believe TPMCs will have to reduce their DDR2 purchases sharply not just to prevent an inventory buildup but also to reduce DDR2 stock and its share of overall inventory. We also believe that TPMCs will have to constrain their purchases of DDR3 temporarily in an attempt to bring DDR3 costs down. These actions will allow them to raise DDR2 prices above lower DDR3 prices as DDR2 inventory levels fall. The actions also allow them to lower DDR3 prices while preserving profits. The desired result is to bring DDR2 prices above DDR3 prices and encourage channel demand to shift from DDR2 to DDR3. Eventually, the TPMC demand, inventory, and supply flow will be all weighted towards the DDR The temporary reduction of DRAM buys by module companies will: a) weaken the demand perceived by DRAM companies; and b) cause DRAM supplier inventory levels to rise. The impact on OEM prices will depend on how high supplier inventory becomes. Our analysis, later in this report, shows that supplier inventory stays very low, well below normal levels. Therefore, channel price movements are more likely to be decoupled from OEM prices in the coming months.

10 The DRAM Market Advisor 9 PRODUCTION MIX CHANGES IN 2H 2010 WILL LIMIT PRICE PRESSURES 29. The DRAM production environment will change consistent with what we discussed in previous reports and presentations (Exhibit 14). a. Q/Q Bit Growth. We expect DRAM bit output to increase 14% sequentially in Q310 (4.1B 1Gb equivalents) and 10% in Q410 (4.5 1Gb equivalents). The bit output of computer-bound DDR2 and DDR3 will increase 12% sequentially in Q310 and 10% in Q410. The difference is because wafer capacity will shift aggressively to mobile DRAMs especially at the 50nm node. This will affect the bit output growth of the 1Gb DDR3. b. Growth from the 4Xnm and 2Gb DDR3. The 4Xnm will be the primary driver of bit growth, implying that most of the will come from a limited number of suppliers, mostly Samsung and Hynix. The 2Gb DDR3 will be the main product at the 4Xnm node and will surpass the bit output of the 1Gb DDR3 in Q410. We believe that OEMs have rushed the qualification of 2Gb-based modules. The 2Gb DDR3 will enter early into 2GB-based modules because of limited 4GB SODIMM demand. c. The Valuable 1Gb DDR3. Bit production of the 1Gb DDR3 will peak in Q210 and decrease through 2H The manufacturing of the 1Gb DDR3 will be squeezed, on one end, by wafer transfers to the mobile DRAM and, on the other end, by 2Gb dominance in the 4Xnm. The 1Gb DDR3 will become a valuable product for 1GB modules without the availability of a 128Mx16 (2Gb) device. As of May, 1GB SODIMMs made up 29% of the megabyte demand of major-brand notebooks in developed markets and 49% in emerging markets. These percentages are likely to remain high if GB/PC growth slows. The 1Gb DDR3 can have a premium price if its demand exceeds supply in 2H 2010; in the near term, that remains to be seen and is unlikely. In any case, module companies will consider it a low-risk product that can be stocked for future business. d. The Shrinking DDR2. Declining demand and the threat of excessive DDR2 inventory will, we believe, force DRAM companies to move wafers away from DDR2 as quickly as possible. A large part of the supply of DDR2 in 2H 2010 will be from inventory rather than from the production lines. Eventually, this will make DDR2 a premium product and a valuable inventory item. e. The Mobile DRAM. We estimate that the mobile DRAM s share of DRAM bit output will increase from 8% in Q110 to 12% in Q410. Demand will come not just from smartphone but from a variety of other mobile handsets and devices. We believe some customers are advancing money to ensure supply support for this product through the year. LOWER DRAM PRODUCTION COSTS IN 2H A major justification for raising prices in 1H 2010 was that operating profits and cash could not be adequately raised if bit growth was low and costs were not improving. This justification will be less valid in 2H We expect DRAM manufacturing costs to decrease substantially in 2H 2010 as leading suppliers move to the 4Xnm and good yields of the 2Gb DDR3. We also expect Taiwanese DRAM producers to move to the Elpida 65XS and Micron s 50nm processes quickly.

11 The DRAM Market Advisor 10 A VIEW INTO 1H A convergence of events in Q111 argues that DRAM prices will begin a major downturn. First, demand will likely decrease in Q111. PC units will be seasonally down and GB/PC will be relatively flat. Second, production bits will surpass demand as the move continues to the 4Xnm. Third, production mix issues will be minimal. The transition to the 2Gb will be well on its way and the DDR3 penetration will be complete. Fourth, more immersion scanners will be delivered and installed in 2H 2010 and will lead to a higher growth of bit output in late Q111 and in Q211. The expectation of higher bits from the fab will influence DRAM prices in Q111. Fifth, channel inventory will experience pressure coming into the seasonally slow period. We expect supply to be pushed back to DRAM supplier inventory. We expect inventory levels to go well above normal levels by the end of Q111 and lead to an extended period of price reduction. Exhibit 9. PC Unit Shipment and Production Forecast /0!1234!563/78245!*!98:;! /0!1234!563/78245!*!.1:;48;! /0!1234!/;<=1043<2!*!.1:;48;!!((#%###!!!'##%###!!!"#$%&'(%)#*)+,)$'-!%)!(##%###!!!-#%###!!!,#%###!!!)#%###!!!$#%###!!!")'%$()!!!+##%###!!!"'$%#"(!!!"#$%&''!!!"##%###!!!&##%###!!!(##%###!!!"#$%&'(%)#*)+,)$'-!%)!'#%###!!.(#-!.&#-!."#-!.+#-!.((#!.&(#!."(#!.+(#!.(((!.&((! &##-! &#(#! &#((!!*!!!!

12 The DRAM Market Advisor 11 Exhibit 10. Commercial & Consumer GB per Notebook PC Exhibit 11. Forecast of Bit Inventory -./01/1!23/456/! 7899/4:;5.!<8=/>88?!./01! ! 1:;357!<:=4>?679! /!0,$&'$!+123&1#"#4,*#1&/!$-#)2&!)#'&%!!!)#$*"!!!"#'($!!!"#$"%&'()*+!,,!&"-)&.)/0!%-1)!()'$$!!!()&$$!!!()%$$!!!()#$$!!!()$$$!!!'$$!!!&$$!!!%$$!!!#$$!!!"#$%&!! *! &! +!,$!,,!,"!,! "! )! %!!"!!!! ($!((!(#! (! #! *! %! +! &!,! '! -! ($!((!(#! (! #! *! %! +! &! "$,$! #$($! #$((! Exhibit 12. Module Company DDR2 v. DDR3 Cost (Spot Price) Exhibit 13. Module Company DDR2 v. DDR3 Retail Price +12"-*#$33"2'4(#&#"'&54$6"3&#$4("0'$)&"78-#9" %+&%% %*&%% %#&%% %)&%% %(&%% %"&%% %'&%% "67%889"%:9;<=% "67%889(%:9;<=% $%8;>>=9=?<=% &$%!#$%!'&$%!'#$%!"&$% %!%%!"#$% '%#%+% ''% '(% '#% ',% "'% "#% "+% ",% "%)%-% '&% '"% '*% '-% ""% ")% "*% "%)%-% '&% '"% '*% '-% ""% ")% "*% (&% '%#%+%,% '(% '#% ',% "'% "(% "+% ",% (%#%+% ''% '(% '+% ',% "'% "#% "+% ('% "%)%-% '&%./0% 123% 4/5% "&'&%!"#$%%&'&()&"*%"##'+"",-."##'/"0'$)&" +12"-*#$33"3*#45&")*306(7")*-8"" 926-&#"*("-0*8"0'$)&:" %+&%% %*&%% %#&%% %)&%% %(&%% %"&%% %'&%% "67%889"%:9;<=% "67%889(%:9;<=% $%8;>>=9=?<=% '&$% #$% &$%!#$%!'&$%!'#$%!"&$% %!%%!"#$% '%#%+% ''% '(% '#% ',% "'% "#% "+% ",% "%)%-% '&% '"% '*% '-% ""% ")% "*% "%)%-% '&% '"% '*% '-% ""% ")% "*% (&% '%#%+%,% '(% '#% ',% "'% "(% "+% ",% (%#%+% ''% '(% '+% ',% "'% "#% "+% ('% "%)%-% '&%./0% 123% 4/5% "&'&%!"#$%%&'&()&"*%"##'+"",-."##'/"0'$)&"

13 The DRAM Market Advisor 12 Exhibit 14. Forecast of DRAM Bit Production by Major Product Groups!(&#$$!! *,-!../(! ',-!../(! %,-!../(!../'! !,../5! 61789:4;!!"#$%&'(%)*(+*(%,$'--')./%)0%1&'(/2%!(&$$$!!!'&#$$!!!'&$$$!!!%&#$$!!!%&$$$!!!#$$!!!"!!!! )*! )%! )'! )(! )*! )%! )'! '$$+! '$%$! '$%%!

14 The DRAM Market Advisor 13 FORECAST OF DEMAND & SUPPLY CONDITIONS 32. Our forecast assumes that the channel will reduce DDR2 and DDR3 buys from DRAM companies in June and, to a less extent, in July. Reducing DDR2 purchases will decrease module-company inventory more quickly and allow them to stop the price declines and raise prices in the short term (Exhibits 15). Reducing DDR3 purchases and demand will reduce spot prices further and bring down module-company costs, allowing them to lower their DDR3 resale prices and stimulate DDR3 channel demand. Both actions allow module companies to bring DDR3 prices below the DDR2 and shift their demand and inventory mix to DDR3 (Exhibit 16). Without a stimulation of DDR3 demand, the revenue growth of both third-party module and DRAM companies will be limited in 2H We expect the reduced buying by module companies to be temporary, occurring mostly in June and part of July. Overall bit inventory levels in the DRAM market are still low and will remain low even after the reduced channel buys (Exhibit 17). We believe that module companies will have to resume their DRAM purchases in short order. Demand from OEMs and module companies will likely be balanced for most of 2H Bit inventory of DRAM companies will therefore rise in June and beyond but weeks of inventory will remain low as module companies resume their buys (Exhibit 18). DRAM companies have a strong chance of isolating the OEM market from the changing events and prices in the channel because of their low inventory and strong PC unit production growth in Q Our models show that DDR3 bit production will exceed DRAM-company demand in November and December (Exhibit 19) and through the first half of 2011, if current demand and production trends remain unchanged. We believe that DRAM companies will experience unacceptable inventory buildup and levels by the end of February 2011 and into March These pressures can push DRAM prices down for an extended period of time. As prices fall, we expect module-company inventory levels to remain at or below normal levels. Under these conditions, inventory accumulation by module companies will be unnecessary (DRAM companies are holding inventory) and risky (devaluing inventory value). Exhibit 15. Forecast of DRAM Third Party Module Company Inventory Weeks by Product Group../*!0!../#! /7!8944:;<!../*! /7!8944:;<!../#! /7!8944:;<!!""#$%&'%()*++",%-+."+/&01%!)%$%!!!($%!!!'$%!!!&$%!!!#$%!!!"!!!! )%! ))! )#! )! #! *! &! +! '!,! (! -! )%! ))! )#! )! #! *! &! +! '! #%)%! #%))!

15 The DRAM Market Advisor 14 Exhibit 16. Forecast of DRAM Third Party Module Company Bit Inventory by Product Group --.&!/ ! --.'!/ !!"#$%&'()'*+,--./'$-0.-%(12'!#$$!!!(#$!!!($$!!!'#$!!!'$$!!!&#$!!!&$$!!!%#$!!!%$$!!!#$!!!"!!!! %$! %%! %&! %! &! '! (! #! )! *! +!,! %$! %%! %&! %! &! '! (! #! )! &$%$! &$%%! Exhibit 17. Forecast of Total DDR3+DDR2 Bit Inventory by Product and Supplier Group ++,'!-./0.12,3! ++,(!-./0.12,3!./012/3!456!7899:0;/<!./012/3!=>2??;:!7899:0;/<! %! (! #! )! *! %%! %! (! #! )! *! %%! %! (! #!!"#$"%&'()*+!,,!&"-)&.)/0!%-1)!()'$$!!!()&$$!!!()%$$!!!()#$$!!!()$$$!!!'$$!!!&$$!!!%$$!!!#$$!!!"!!!! (! *! +!,! -! ((! (! *! +!,! -! ((! (! *! +! '$$*! '$%$! '$%%! #$$-! #$($! #$((!

16 The DRAM Market Advisor 15 Exhibit 18. Total DRAM Inventory and Inventory Weeks of DRAM Suppliers and Third Party Module Companies./012!334&5334'!670!89:;90/<=! 3))4.%"/%56#'')$%&'()'!"*+%!%$)$!!!+)$!!!*)$!!!()$!!!&)$!!!"!!!! %$! %%! %&! %! &! '! (! #! *!,! +! -! %$! %%! %&! %! &! '! (! #! *! &$%$! &$%%!!#$$!!!(#$!!!($$!!!'#$!!!'$$!!!&#$!!!&$$!!!%#$!!!%$$!!!#$!!!"!!!!!"!#$%&'()'!"*+%,-&$$&"'.%"/%01&!.2% Exhibit 19. Forecast of DDR3 Demand Production Ratio from DRAM Company s Perspective //0-! !/"8!09:;! /0<=! !87;>2?:;@! /0<=! !/6A9@>! --./'-0!*%-12.$-34,"$%'.*,"$'1'' -.*!'2.$-340.'20.&204,"50'!(*.$!!!(*%$!!!(*-$!!!(*#$!!!(*($!!!(*$$!!!$*,$!!!$*'$!!!()&$$!!!()%$$!!!()#$$!!!()$$$!!!'$$!!!&$$!!!%$$!!!#$$!!!"##"$%&'$(')")*+",&'!$*+$!! (! #! -! %!.! &! +! '!,! ($! ((! (#! (! #! -! %!.!!"!!!! #$($! #$((! Note: Demand includes OEM demand and module company purchases.

17 The DRAM Market Advisor 16 PRICE FORECAST HIGHLIGHTS 36. Channel price adjustments to stimulate faster transition to DDR3. Almost all of the price volatility in the short term will be in the DRAM channel (Exhibit 20). Spot prices have to descend through June and probably early July. DDR2 spot prices have to decrease, not only because of weaker demand, but because module companies will, we believe, try to reduce their DDR2 inventory levels. DDR3 spot prices have to decrease to stimulate more demand. After this adjustment period, we expect DDR2 prices to rise (when inventories are low) and DDR3 prices to fall below DDR2 prices. 37. OEM prices still relatively decoupled from channel prices. In the past, falling spot prices would lead to falling OEM prices. Weak spot prices indicated that excess DRAM supply was flooding the channel and would eventually lead to more competition for OEM business. This situation is different if not the reverse. In this case, we see module companies inhibiting their supply flow from DRAM companies in order to correct an imbalance between demand mix and supply mix. And they are doing this in an environment of low overall DRAM bit inventory. Furthermore, the inhibition of supply flow will raise DRAM company inventory but to levels that will be well below normal. Therefore, DRAM companies have a strong chance of isolating OEM prices from the channel s gyrations through most of 2H Strong PC and Mobile Phone Production Growth Helps Isolate OEM Prices in Q310. There is another reason why OEM prices will remain decoupled. Despite current weak demand, OEMs project strong production growth in Q310 for PCs and other electronic systems. PC unit production is expected to increase by 14% from Q210 to Q210. With low overall and DRAM-supplier inventory levels, OEMs are not likely to risk their DRAM allocations at this stage. 39. Will we see DDR3 price increases in 2H 2010? The probability of higher OEM prices in 2H 2010 is generally low. Inventory levels, though low. will be higher in 2H 2010 than in 1H We believe the chances of a price increase are greater in July and September/October. The chances of a DDR3 price increase in July will be hampered by channel attempts to stimulate DDR3 demand. The chances of a DDR3 price increase in September/October will be constrained by potentially negative GB/PC growth and the likelihood of weaker sell-through news. Still, DRAM companies will have low inventory levels and have the ability to raise prices at these times. 40. Server Module Profits Equivalent to PC DIMM. DRAM companies typically want a larger profit margin from servers because of the additional cost of the module and of test. Current profit margins from 1GB to 8GB DDR3 RDIMMs have been equivalent to that of the 2GB DDR3 PC DIMM for several months now. Therefore, DDR3 RDIMM prices are not likely to decrease until PC DIMM prices do. It is also interesting that the priceper-gb across RDIMM densities has flattened out considerably in June compared to the past as DRAM companies prepare the server market for the 2Gb DDR3 device (Exhibit 21). 41. Soft DDR3 prices in 1H We project more dramatic reductions of DDR3 prices in the 1H11. We expect downward momentum to increase through Q211 as production exceeds demand and supplier inventory levels rise to unwanted levels. Low or negative demand growth will be the main reason for the price softness and leverage will shift from DRAM suppliers to DRAM customers. Unlike 2001 and 2009, the demand softening in 2011 will not be pervasive or structural, unless the global economy meets a double-dip recession. Lower DRAM prices will be the cure for the soft demand by restoring a healthy GB/PC growth and pushing

18 The DRAM Market Advisor 17 notebook-pc memory content beyond the 4GB barrier. DRAM price strategies will center around the 4GB DDR3 SODIMM at that time. Exhibit 20. Forecast of 2GB SODIMM/DIMM Prices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

19 The DRAM Market Advisor 18 Exhibit 21. Forecast of DDR3 Server Module (Registered DIMM) Prices &#$!" &!!!" %$!" $!!" #$!"!" '()" *+,"-(."/0."-(1"'2)" '23" /24"5+0" 678"9:;"<+7" '()" *+,"-(."/0."-(1"'2)" '23" /24"5+0" 678"9:;"<+7" '()" *+,"-(."/0."-(1"'2)" #!!=" #!&!" #!&&" '-.# $-.# +-.# (-.# ',-.# #-./#$"'"# #-0/#$"'"#!'""#!'""#!!"#$"!%&&$'"%()$')"$*+,-)$./0!1$!&%#!%"#!$%#!!"#$"!%&&$'"%()$')"$*+,-)$./0!1$!&%#!%"#!$%#!"# &# (# )#'"#''#'$#'# $# *# +# %#,# &# (# )#'"#''#'$#'# $# *# +# %#,#!"# '()# $()# *()# +()# ',()# $"")# $"'"# $"''#!!"#$"!%&&$(2'2(%-,$

20 The DRAM Market Advisor 19 DRAM INDUSTRY REVENUE FORECAST Revenue of $46 Billion. We estimate a DRAM revenue of $45.7 billion, of which $36.4 billion is from commodity DRAMs (1Gb or higher DDR3 and DDR2) and $9.3 billion is from specialty DRAMs (Exhibit 22). A small portion of commodity DRAMs is used in graphic memory and consumer applications. The highest revenue growth comes from the DDR3 and mobile DRAMs. We expect mobile DRAMs to more than double in revenue from Q110 to Q410. The revenue in 2010 will establish a record high. The closest year was a revenue of $40.8 billion in We do not expect revenue to decrease until Q as price reductions pick up momentum. We believe that 2011 revenue has a strong chance of exceeding $40 billion. Although most historical revenue peaks were followed by deep reductions the year after, the last two peaks were followed by single-digit reductions. Cash generation will be strong. Profits will decline through the year and may hit negative territory in 2H11 but profits will likely be positive for the whole year. Exhibit 22. DRAM Industry Revenue Projections (Millions of US Dollars)!&#$%%%!!!"#$%"&'&()&%*$+,!-%!)$%$$$!!!"#$%"&'&()&%*$+,!-%!($%$$$!!!&%$%%%!! +,-./ !!'$%$$$!! 58829!!#$%%%!! 0,:;41!!&$%$$$!! 882)! 882(!!#$%$$$!!!"!!!! '&! '(! ')! '*! '&! '(! (%&%! (%&&!!"!!!! #*+&! #*+(! #*+,! #*++! #**$! #**&! #**(! #**,! #**+! &$$$! &$$&! &$$(! &$$,! &$$+! &$#$!

21 The DRAM Market Advisor June 2010 Page 20 Table 1: 1GB, 2GB and 4GB DDR3 1066/1333 SODIMM & UDIMM Price Forecast (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. ReproducRon prohibited without prior permission.

22 The DRAM Market Advisor June 2010 Page 21 Table 2: 1GB and 2GB DDR2 800 SODIMM & UDIMM Price Forecast (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. ReproducRon prohibited without prior permission.

23 The DRAM Market Advisor June 2010 Page 22 Table 3: 1GB, 2GB and 4GB DDR3 1066/1333 (1.5 V) RDIMM Price Forecast (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. ReproducRon prohibited without prior permission.

24 The DRAM Market Advisor June 2010 Page 23 Table 4: 1GB, 2GB and 4GB DDR3 1066/1333 (1.35 V) RDIMM Price Forecast (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. ReproducRon prohibited without prior permission.

25 The DRAM Market Advisor June 2010 Page 24 Table 5: 8GB (2 rank) and 16GB (4 rank) DDR3 1066/1333 RDIMM Price Forecast (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. ReproducRon prohibited without prior permission.

26 The DRAM Market Advisor June 2010 Page 25 Table 8: 1Gb DDR2 and DDR3 SDRAM Component Price Forecast (c) 2010 DE DIOS & ASSOCIATES. All rights reserved. ReproducRon prohibited without prior permission.