DRAM Market Outlook: Worldwide Change in DRAM Underway as Capacitor Scaling Reaches Limit (Based on May MI Update / 2Q14 Diamond)

2014-15 DRAM Market Outlook: Worldwide Change in DRAM Underway as Capacitor Scaling Reaches Limit (Based on May MI Update / 2Q14 Diamond) DRAMeXchange Memory & Storage Division Jun. 5th, 2014

Agenda Supply Demand Sufficiency & ASP Capex and Bit Growth over Years Supply of Each Segment / Application Product Mix by Company Mobile DRAM Supply Update Supply Pattern by Quarter from 2010 to 2013 Unit Shipment Forecast of Each Key Application PC, Ultralike, Server, Smartphone and Others Ultralike Solutions on Mobile DRAM Content per Unit Development Total Consumption Distribution DRAM Revenue YoY over Years 2014 DRAM Industry Outlook Sufficiency Ratio Price Forecast PC DRAM and Mobile DRAM Takeaways ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 2

Limited Capex Leads to Supply Reductions Tech Migration Hits Bottleneck; Suppliers Cautious about Capex Plans 2014 Capex shows another reduction even with the manufacturers intentions to migrate towards 2Xnm technology. This is expected to lead to a healthy and steady level of YoY supply bit growth (which stayed at 20~30% since 2010). *Current projection assumes no one will be making major expansion on DRAM capacity. 26% 62% 36% 33% 30% 67% Supply Bit Growth YoY 48% 95% 56% 15% 59% 50% 29% 27% 27% 32% Total DRAM Capex 174% 21% 61% 21% 28% 30% -27% -27% 28% 30% -43% -65% -32% -27% -30% 10,451 7,580 5,500 6,650 10,732 12,972 16,542 21,440 12,246 4,336 11,897 8,133 5,960 7,654 5,358 6,965 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total DRAM Capex (M/USD) Capex YoY (%) ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 4

Supply Bit Distribution Mobile DRAM Officially Accounts for Majority of Supply in 2014 2014 production forecast PC DRAM: Downside (Samsung 25nm, SK Hynix 29nm from Wuxi and Micron 30nm). Server DRAM: Upside (demand driven). Mobile DRAM: Downside (venders profitability consideration). Graphic DRAM: Upside (driven by game console s growing demand). Year of 2014 DRAM Supply Unit: Millions of 2Gbeqv. % of Total Supply May Version MI Apr. Version MI YoY(%) May Version MI Apr. Version MI PC 7,044 ( ) 7,198 20% 30% 31% Server 4,351 ( ) 4,258 27% 19% 18% Mobile 8,340 ( ) 8,363 45% 36% 36% Graphic 1,683 ( ) 1,671 37% 7% 7% Consumer 2,062 ( ) 2,065 16% 9% 9% ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 5

DRAM Suppliers Production Priority Profitability a Decisive Factor for Product Planning Gross Margin Comparison: - 2014 PC DRAM > Server DRAM > Mobile DRAM 2013 Mobile DRAM > Server DRAM > PC DRAM PC DRAM Server DRAM Mobile DRAM Gross Margin for each Application Current 4Gb ASP (2Q14) Fully-Loaded Cost Gross Margin Contract Price of 4GB US$ 3.72 Contract Price of 8GB US$4.19 Blended ASP of 4Gb LPDDR2 US$3.67 ~ US$2.21 50~60% ~ US$2.53 40~50% ~ US$3.1 Discrete (PoP) 18~23% emcp/ci-mcp 22~28% Calculation Assumptions: Based on current mainstream production node-25~29nm. Net die number- 4Gb (normally in the range of 920~1080 per wafer). Row wafer cost - Range of US$ 1,300~1,500, we use US$1,500 here. Back-end cost - US$ 0.3~0.5, for Mobile DRAM it s higher. ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 6

Product Mix Shift Slows Down With Profitability Consideration, Mobile DRAM Growth will become Limited 2,097 2Gb Equiv. Million units 2014 Bit Growth 37.3% 2,619 2Gb Equiv. Million units 2014 Bit Growth 40.7% Non-PC DRAM 73% Non-PC DRAM 70% 1,368 2Gb Equiv. Million units Non-PC DRAM 70% 1,770 2Gb Equiv. Million units Non-PC DRAM 72% 1Q14 4Q14 1Q14 4Q14 2014 Bit Growth -7.0% 2014 Bit Growth 32.9% 672 2Gb Equiv. Million units 7050 2Gb Equiv. Million units 801 2Gb Equiv. Million units 980 2Gb Equiv. Million units Non-PC DRAM 61% Non-PC DRAM 59% Non-PC DRAM 70% Non-PC DRAM 82% 1Q14 4Q14 1Q14 4Q14 PC DRAM Server DRAM Mobile DRAM Graphic DRAM Consumer DRAM ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 7

2014 Market Share Comparison (Output) Competitors Act Differently When Penetrating New Market Samsung is dominating (by far) in all categories; its key goal is to regain PC DRAM ASP controlling power in 2014. Therefore, the difficulty of ASP projection for both Server DRAM and Mobile DRAM categories is getting higher since it heavily depends on Samsung (the biggest player) s pricing strategy. PC DRAM 7,044 2Gb in M Samsung SK Hynix Micron Group Others Server DRAM 4,351 2Gb in M Mobile DRAM 8,340 2Gb in M ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 8

Technology Migration Status in 2014 Double-Patterning Strategy before EUV is Ready EUV tech is still far from ready for the mass production stage (DX projected it will only hit trial stage in late 2015); suppliers rely on die shrink of 2Xnm to improve cost savings. As for 2014, SK Hynix is the one with highest 2xnm penetration (Wuxi fab jumped from 38nm to 29nm when recovering from fire). Before EUV is ready, cost reduction from die shrink (30nm to 20nm) will be limited (only 23~27% with net die size comparison). 2Xnm Contribution of Total Output 2014 2015 65% 85% 4Xnm 3Xnm 36% 92% 96% 10% 56% 2Xnm 60% 31% 85% Total 57% 81% 1Q 2Q 3Q 4Q 2014 ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 9

2014 Total Wafer Count Shrinks Capex Is Limited, No Sign of Capacity Expansion for DRAM Production Company Fab Name W.Size Q114E Q2F Q3F Q4F Samsung Fab11A 12 25 25 25 25 Fab11B 12 25 25 25 25 Fab12 12 - - - - Fab13 12 125 120 120 120 Fab15 12 125 120 120 120 Fab 15-2 12 50 50 50 50 Fab 16 12 25 25 25 25 12" total 375 365 365 365 12" equiv. 375 365 365 365 SK Hynix M10 12 135 130 130 130 M12 12 20 5 - - Wuxi 12 125 130 130 130 12" total 280 265 260 260 12" equiv. 280 265 260 260 Micron Group Dominion Fab6 12 25 25 25 25 Fab7(Tech) 12 10 3 3 2 Fab11 (Inotera) 12 120 120 120 115 Fab15 (MMJ)(Elpida) 12 100 100 110 110 Fab16 (MMT)(Rexchip) 12 80 73 77 77 12" total 335 321 335 329 12" equiv. 335 321 335 329 Nanya Fab1 (Sold to VIS) 12 - - - - Fab 3A 12 55 52 52 52 12" total 55 52 52 52 12" equiv. 55 52 52 52 WW Total 12" equiv. 1,117 1,079 1,090 1,084 ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 10

2014 Supply Output Comparison (QoQ) Total Supply Bit Growth: 27% in 2014 and 32% (E) in 2015 12.7% 7.2% 6.9% 8.9% 22.5% 15.6% 2.7% 9.1% 2014 Supply YoY Bit Growth 37.3% 2014 Supply YoY Bit Growth 40.7% (Originally 43.3%) 0.0% 2.7% 2.2% 2014 Supply YoY Bit Growth -7.0% -8.2% 8.6% 10.4% 4.0% 2.1% 1Q 2Q 3Q 4Q 2014 Supply YoY Bit Growth 32.9% 2014 ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 11

DDR4 - New Value Proposition to Market Will Become Source of Profits in 2015 100% 80% DDR4 (next gen of current DDR3) will enter sampling stage in 3Q14, and gradually penetrate the market in 2015. The sequence of penetration is firstly Server and secondly PC categories. 8Gb mono die with 2Xnm is the major combination. DDR4 is projected to cross over with DDR3 at some point in 3Q15. 60% 40% 20% 0% 1Q063Q061Q073Q071Q083Q081Q093Q091Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q16 SDRAM DDR DDR2 DDR3 DDR4 Mobile Graphic ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 12

PC Improves; Mobile Devices Have Higher Upside China Smartphone the Strongest Demand Driver (1) PC Shipment YoY -8.5% (2) NB Shipment YoY -5.3% (3) NB Shipment 1H:2H = 47:53 2013 2014 (292.5 Mpcs) (169.4 Mpcs) (1) PC Shipment YoY -1.8% (2) NB Shipment YoY -0.8% (3) NB Shipment 1H:2H = 49:51 (287.2 Mpcs) (168.1 Mpcs) (4) DX: Ultralike Shipment of total NB 8.5% (14.3 Mpcs) (5) Tablet PC Shipment YoY 41.5% (6) Tablet PC (including whitebox) YoY 50.2% (239.9 Mpcs) (4) DX: Ultralike Shipment of total NB 15.1% (25.4 Mpcs) (5) Tablet PC Shipment YoY 11.3% (6) Tablet PC (including whitebox) YoY 12.7% (270.3 Mpcs) (7) Server Shipment YoY 14.9% (14.7 Mpcs) Note: (1) Ultralike shipment is included in R-NB. (2) Apple Macbook Air is included in Ultralike segment. ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 14

Ultralike Shipment Penetration Higher Penetration Helps Increase Mobile DRAM Consumption It s projected that Ultralike solutions will account for ~20% of total NB penetration by 4Q14; this will help raise Mobile DRAM consumption (LPDDR3 discrete) instead of PC DRAM. With continuous efforts from Intel and PC venders, we are witnessing the ASP of LPDDR3 becoming lower than that of PC DRAM DDR3 (same density). 17.3% 19.6% Ultralike Shipment & Penetration 14.8% 11.8% 12.6% 4.0% 5.6% 6.8% 6.9% 5.6% 7.5% 8.7% Content Development (Unit: Gb) 1.8 2.8 3.1 3.2 2.2 2.9 3.8 5.4 5.1 6.2 7.5 8.3 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Ultralike Shipments (Mpcs) Ultralike of total NB (%) 3,913 4,056 4,259 4,431 4,454 4,546 4,474 4,813 5,222 5,734 6,554 6,861 Consumption & YoY 179M 2Gb 177% (YoY) 258M 2Gb 44% (YoY) 657 2Gb 155% (YoY) ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 15

Big Data Drives Continuous Server Demand Content/Unit the Major Source of Bit Growth 1.3% System Shipment & YoY 24.3% -3.2% 9.3% 9.5% 14.9% Server unit build is expected to increase 14.9% YoY in 2014. Aside from the upside demand of cloud application, we are seeing growing shipments from portal companies including Google, MS, Facebook, Baidu and Tencent. 8,854 11,007 10,650 11,640 12,749 14,650 2009 2010 2011 2012 2013 2014 Unit : MB Content Per System 71,250 56,750 43,750 35,375 19,250 6,505 2009 2010 2011 2012 2013 2014 Other than shipment growth, content per unit is actually the major factor driving 2014 Server DRAM consumption. In 2014, GB/Unit will grow to 71.3GB, accelerating the migration of 8GB R-DIMM to 16 and 32GB R-DIMM. Server DRAM demand bit growth in 2014 is ~40%, successfully enabling overall sufficiency to reach a more balanced state. ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 16

Smartphone Takes ~30% of Total DRAM Demand Mainstream Segment to See the Most Consumption DX still expects 29.6% YoY shipment increase for Smartphones in 2014. Also, benefiting from strong content growth, overall Smartphone shipments will sustain Mobile DRAM ASP trend in 2014. 199.2 216.4 Smartphone Shipment, 2013 and 2014 2013 Total 927.2 M 2014 Total 1,201.4 M 247.7 263.9 266.9 289.9 317.5 327.1 YoY 29.6% 1Q13 2Q13 3Q13 4Q13 1Q14E 2Q14F 3Q14F 4Q14F High-End Smartphone Mainstream Smartphone Low-End Smartphone Smartphone MB/Box, 2013 and 2014 2013 Avg. 1,098.6 MB 2014 Avg. 1,449.9 MB 1,516.2 1,537.9 1,371.0 1,380.6 1,162.8 1,245.8 969.9 1,012.8 YoY 32.0% 1Q13 2Q13 3Q13 4Q13 1Q14E 2Q14F 3Q14F 4Q14F ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 17

Demand Bit Contribution by Applications Demand Bit Growth in 2014:25.5% (v.s. 27.1% for Supply). Mobile segment demand B/G increases due to the shipment increase on Smartphone & Tablet PC. Mobile segment s demand B/G has been showing more than 80% increase for 2 consecutive years. Demand YoY Bit Growth of Different Applications Graphic Mobile YoY 97.9% Consumer 2013 Bit Demand 18,585 M 2Gb Equiv. PC YoY 6.3% Consumer of total Demand 8.8% Graphic of total Demand 7.0% Mobile of total Demand 35.8% YoY 43.4% 2014 Bit Demand 23,315 M 2Gb Equiv. PC of total Demand 30.3% YoY 10.3% Server YoY 42.1% Server of total Demand 18.1% YoY 41.0% ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 18

2014/15 DRAM Industry Outlook 2015: 3rd Consecutive Year of DRAM Revenue Improvement 2015: Sales grow another 19% with soft-landing ASP and 32% shipment increase. 2014: Sales increases 33.2% (supply bit growth will reach 27.1% while ASP stays stable) 2013: ASP improves 5.0% YoY (PC DRAM Server DRAM Graphic DRAM) 60% DRAM Supply/Demand/Sales YoY Growth & Sufficiency 40% 36.5% 20% 29.6% 26.6% 33.2% 27.1% 25.5% 19.0% 28.0% 32.0% 4.6% 0.2% 0% 1.5% 2011 2012 2013 2014 2015-20% -40% Sales Growth (YoY) Supply Bit Growth (YoY) Demand Bit Growth (YoY) Sufficiency Ratio ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 20

Supply/Demand Turns Healthier for PC DRAM Spot Price and Contract Price Cross Over Again PC DRAM 4GB Price Forecast, 2013~2014 (F) Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Ave 17.5 19.4 23.3 26.0 27.5 27.5 27.5 27.5 31.5 32.0 32.0 34.0 Trend -- -- -- -- Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Ave 33.0 32.3 31.5 30.5 30 30 31.0 31.0 31.0 31.0 30 29.5 Trend -- -- -- -- $35 $30 $25 Price Range (H & L) 4GB Ave Price 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 21

ASP Projection Review & Outlook Tight Supply Will Persist; ASP to Improve in 3Q 1Q14 2Q14 3Q14 4Q14 PC DRAM Server DRAM Weak PC Shipment Improving PC Seasonality; 2Xnm Yield Issue Limits Supply Peak-Season Effect Supply Increases from 2Xnm Production Server Bidding Period Output Increase from 2Xnm ASP Follows PC DRAM Development DDR4 Maintains ASP Level Mobile DRAM Continuous ASP Correction ASP Declines of Discrete (High Density) Strong Smartphone Seasonality ASP Declines of Discrete (High Density) ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 22

Key Takeaways Supply 2014 supply bit growth: 27.1% Physical limitations and reduced capex investments are leading to constraints on supply. Impact of 2Xnm tech migration on supply stability remains uncertain. The more regulated state of supply is the major reason for the improved sufficiency. With profitability consideration, we see limited further growth for Mobile DRAM supply. DDR4 / LPDDR4 join the pack, maintaining ASP level in 2015. Demand 2014 demand bit growth: 25.5% WW economy improve further throughout all applications. PC OEMs and module houses inventory is lean, indicating a continuous need of stocking. Weak PC demand is well expected; any improvement becomes further upside. Mobile DRAM will continue to dominate consumption in the next 3 years buying strategy and behavior are changing. Sufficiency & ASP 2014 sufficiency: 1.5% Stable ASP help 2014 DRAM sales rise by 33.2% YoY. The uptrend of PC DRAM stimulates the improvement of Server and Mobile DRAM ASP. Since Oligopoly market status is formed, ASP behavior is stable. There s no immediate need for venders to engage in price competition. AS LONG AS there are no major capacity increases in DRAM production, we expect to see a stabilizing price trend and improving profitability in the coming years. ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 23

Thank You DRAM team Ken Kuo kenkuo@trendforce.com Avril Wu avrilwu@trendforce.com NAND Flash team Sean Yang seanyang@trendforce.com Alan Chen alanchen@trendforce.com Data Research team Lavender Shih lavendershih@trendforce.com Angel Liou angelliou@trendforce.com ALL RIGHTS RESERVED. REPRODUCTION PROHIBITED WITHOUT WRITTEN PERMISSION. 5 June 2014 Page 24