The Conspirators

Make sure your device uses Samsung Memory

Battery Brutus

Fiona Freeze

Loading Ball Larry

DISCLAIMER

The materials in this report include forward-looking statements which can generally be identified by phrases such as Samsung Electronics (SEC) or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar implications. Similarly, such statements that describe the company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. All such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the presentation files above. For us, particular uncertainties which could adversely or positively affect our future results include: The behavior of financial markets including fluctuations in exchange rates, interest rates and commodity prices Strategic actions including dispositions and acquisitions Unanticipated dramatic developments in our major businesses including CE (Consumer Electronics), IM (IT & Mobile communications), DS (Device Solutions) Numerous other matters at the national and international levels which could affect our future results These uncertainties may cause our actual results to be materially different from those expressed in this report.

1. Paradigm Shift
- Transition from PCs to Mobile

2. Strategic Direction
- Stay One Step Ahead as Ecosystem Leader - Exploit Breakthroughs in Technology - Extend Core Competencies

Memory Market Evolution

PC Mobile
Smartphone Tablet

Big Data
Datacenter

W/W Memory rev.($B)

PC

41

Card SSD

Enterprise Mobile DRAM

(PC SSD)

NAND PC DRAM
1985 1990 1995 2000
1/34

2005

2010

2015

(Source: isuppli, Samsung)

Product Cycle
Business cycle accelerates in mobile era
3-4 year product cycles
Major Upgrade (Ver.)
Lynnfield Win8 Win7

Annual product cycles

Major Upgrade (Ver.)

PC CPU & OS
Cedar Pentium4 Pentium Pro Win98 Win95 WinXP

Mobile OS
5 ICS Honeycomb Gingerbread Eclair 3 4 6

iOS 7

2 iOS 1 v1.0

96

00

04

08

12

08

12

PC DRAM
SDR DDR DDR2 DDR3 DDR4

Mobile DRAM
MDDR LP2 LP3 LP4

Faster standardization, development and enabling Changes every every 2 years 4 years
2/34

Product Compatibility
Interchangeable Customized
Memory Vendor
A B A

Memory Vendor
B

Pin-to-pin compatible = Simple SCM*

Non-interchangeable = Complicated SCM*

More difficult in managing raw material and work-in-process

* SCM : Supply Chain Management
3/34

Value Chain
The mobile value chain is more horizontal - Value more evenly distributed amongst key players
PC: Vertical Ecosystem CPU OS Memory Set Rule setter Bulk of value Mobile: Horizontal Ecosystem

Memory

Rule follower Commodity provider

Mobile OS

De facto standard by leading players

Shared Value

Mobile CPU

More opportunities for value capture

4/34

Handset

Selective Relationship
Supply interruptions possible during memory shortages
PC Makers Handset Makers

Tier1

Tier2,3 Alternative supply under shortage

Spot market

Tier1

Tier2,3 No alternative under shortage

Spot market

Memory Vendors

Memory Vendors Danger of production halt under shortage

5/34

Pricing
Tapered Pricing for visible and predictable memory supply
Volatile Pricing (PC DRAM)
Price

Tapered Pricing (Mobile DRAM)

Price

Price Density

Maintain BOM

Price Density

Increase BOM

Volatile
Time

Predictable
Time

Commodity product Predictable

priceCustomized and product continued cost innovation required

6/34

Winner Takes All

Design-in at each vendor, 1st mover takes all
Memory vendors share for PC maker A Memory vendors share for handset maker B
No.3

Others

No.3

(20~30%)

No.2

(40~50%)

No.1

No.2
(~10%)

(70~80%)

No.1

Need to be a first mover, Not just fast follower

7/34

Technology & Capex

Technology complexity driving greater CapEx
Tech. complexity
50nm 100nm
Turn Around Time

20nm

x1.8
x2.0

x1.0
x1.5

x1.1

CapEx

Need to improve ROI - Minimum input maximum output

8/34

Product Quality
PC memory is modular, but Mobile memory is embedded - Product quality becomes more important
Module type Embedded type

$00 for DRAM module High only risk of $000 for entire board

RMA* cost and lost business

9/34

* Return Material Authorization

Memory Market
Paradigm shift is reflected in memory market

100%

158% 78% 40 51% 38% 57% -1% 35 27 17 11 -23% 25 73% 27 % -12% 33 26

-58%

-23% 23 7 8 9 13

10% -36% 26 15 32 -64%

39-25% 29

Memory market gets more stable (Source: isuppli) due to diminished players and PC DRAM portion
10/34

4 2

Paradigm Shift
Radical change of business paradigm
Mobile era PC era

Strategy

Mobile era

Shorter lifetimeLonger lifetime Product Customization Commodity Characteristics Only One Number One Make-to-order Make-to-stock Biz Tapered pricing Volatile market pricing Model Winner takes 2ndall mover has opportunity Scaling limitations Continuous scaling Technology Lower ROI Manageable CapEx Higher RMA cost Reasonable quality
11/34

Stay One Step Ahead Shorter lifetime as an Ecosystem Leader

- De factoCustomization standard

Only One

Exploit Technology Make-to-order Breakthroughs

Tapered pricing - Sustainable memory demand growth takes all Winner Scaling limitations Lower ROI - Organization, Open innovation, Higher RMA cost System knowledge, SCM, Quality

Extend Core Competencies

Strategic Direction
- Stay One Step Ahead as Eco-system Leader

Solutions for One Step Ahead

Green Memory
- Value maximizing solution for datacenters

5th Generation

DRAM
20nm class DDR4
12/34

SSD
10nm class PCIe SSD

Green Memory Benefits

Combined benefits of Green Memories provide up to 105% greater operational efficiency

5th Generation
Concurrent User support

105% 62%
Green Solution Green Solution

Current configuration

Same CapEx

Same space

Green Memory solution

13/34

Creating Shared Value

Creating $3 Billion value
100% Green
3.1 Billion Dollars

Reduction*

45TWh

(Singapore Area x4.6)

800M Trees

(Area of Hawaii x2)

Solar Heat Power Station

The World Population can use handset within 1.8 years

* Assumes 14 W/W Server & high-end storage change to 100% Green Memory
14/34

Thermoelectric power plant 7.7 units Reduction

One Step Ahead

Continue to secure price premium via tech leadership
Mobile DRAM Price Price Only 1 in LPDDR3 Competition Only 1 in LPDDR4 LPDDR4 LPDDR3

Premium
LPDDR2

Premium

Time
15/34

One Step Ahead

Continue to secure price premium via tech leadership
High Density Mobile DRAM Value Worlds 1st Competition Worlds 1st

3GB
Samsung

3GB
4Gb

Premium
2GB
Competitor
4Gb x 6ea = 3GB

Premium

Premium 6Gb
6Gb x 4ea =3GB

2GB

Chipset validation complete Handset evaluation finished Mass production ready Time

16/34

De facto Standard
Cultivate de facto standard via ecosystem leadership
Mobile DRAM
20nm class 4Gb LPDDR3

De facto standard
Memory

LPDDR3
Wide IO

by leading players
Mobile OS Handset

De facto standard

Mobile CPU

Open standard

LPDDR2

NAND Storage Solution

De facto standard
Open standard
eMMC 4.5

20nm class 4Gb LPDDR3

eMMC 5.0
UFS* *Universal Flash Storage

17/34

Enabling Tech for One Step Ahead

Worlds first 3-bit NAND flash SSD
Overcome Trade-off
Higher Performance

- Comparable performance at a value price

840 (12) 840 EVO (13)

with superior solution technology

Im continually amazed by Samsung's rise to power in the SSD space. - Anandtech 1-bit NAND 2-bit 3-bit Lower Cost

The performance increase is profound. Writes shoot up, while the read results shoot up - Tom's Hardware as well.
18/34

Strategic Direction
- Exploit Technology Breakthroughs

Technology Paradigm Shift

Memory process technology no longer lithography dependent
Technology
Litho-dependent Scale-down = Higher density Lower cost krF Better performance
V-NAND

Breakthrough

New Structure

ArF Immersion
Litho contribution to CapEx : Planar 45% V-NAND 15%

Tech. Limit?

EUV?
19/34

Value Proposition of V-NAND

High Endurance High Performance Low Power Consumption

Program/Erase cycle

x10

Write speed

x2

power consumption

40% less

Planar

V-NAND (2-bit)

Planar

V-NAND (2-bit)

Planar

V-NAND (2-bit)

Shipping to datacenter customers and receiving positive feedback

20/34

V-NAND in Enterprise SSD

V-NAND will change the server storage industry
Enterprise SSD bit shipments

V-NAND Planar

2013

2014

2015

2016

2017

21/34

Multi-bit V-Solution
V-NAND can be the most cost effective solution

V-NAND Premium Quality

Samsungs Multi-Bit Solution Technology

2-bit 3-bit

SSD Price

Multi-bit V-Solution
Most Cost Competitive Solution
Current

50%

V-NAND (Multi-bit)

22/34

Creating new demand with V-NAND

V-NAND will boost NAND demand
NAND bit Shipment

In mass production in Korea and to be expanded to Xian, China next year

PC SSD Enterprise SSD

Mobile

V-NAND
Premium Application

Planar 2013 2014 2015

23/34

2016

2017

How to Sustain DRAM Growth?

Leading technologies will be applied to mobile first as necessitated by increased scale
volume at node x
Cost Cost

Specialty

+ Cost Adder Majority

Majority

Mobile

EDP

Mobile
Development timing

EDP
EDP-centric develop. : Mobile Cost > EDP
Development timing
* EDP : Electronic Data Processing
24/34

Economy of Scale, EDP < Mobile Cost, EDP > Mobile

Continuous DRAM Technology Drive

Three-pronged approach to sub 20nm breakthrough
3D TSV-based
Chip #1
#2 #3 #4

Process Tech.

*Through-Silicon Vias

Breakthrough
30nm

: high density solution

TSV-based DRAM module

Solution DRAM
: Error management algorithm : Server-class memory sub-system

20nm Limit?

New Memory
: MRAM, ReRAM, PRAM, etc
PRAM

Sub-20nm?
25/34

Strategic Direction
- Extend Core Competencies

What to Do
To extend core competencies
Organization More customer and market-oriented Reinforcing solution engineers

Core Competencies

Capabilities System knowledge Competitive SCM, Quality Collaboration Open innovation

26/34

Re-align Organization
Establish application/market-oriented organization
Cross-functional Virtual community

Application Dimension System Engineering

Mobile PC/ Tablet Data center

Functional Dimension

Chip Design Package Design

27/34

Excellent Quality
Samsungs Server DRAM, Top-notch quality
Low Server DRAM fraction defective

Statistical methodology, Big data mining Root-cause finding through cross-functional collaboration

[ppm]

x10 lower defective rate

Top-notch quality Leverage for Time competitive mobile DRAM

28/34

Improve SCM
Right product, time and place through improved SCM
- Transformation into manufacturing service provider
Inbound SCM Outbound SCM

Increased Complexity

Differentiated, Dedicated

Raw materials

Memory

Customer

Samsung is truly differentiating obviously providing B more detail than even foundries

A B

proactive C approach to improve C the level of service of which is already great

29/34

Memorylink.samsung.com
Smart online service & support
Information
Service Portal Smartphone trend

Customize
Smart architecture design tool
Customer

Recommend
Alignment with memory solution

Memorylink.samsung.com

Sample Request
Sample order and feedback
30/34

Global R&D Network

Improve solution development capability
Israel
Flash Management S/W

Xian, China
Storage S/W

San Jose, USA

S/W Architecture Research & Enterprise SSD S/W New Tech. Sensing & Product Enabling

Bangalore, India
Mobile S/W Expanding Global R&D Personnel 700 0 2004 500 2013
31/34

2015

More Values via Open Innovation

System, Solution and Software to unlock value
System Knowledge M&A
- Nvelo (SSD S/W), etc.

Identify opportunities

Equity Investment Solution Engineering

Create opportunities
- Storage system start-ups

Overseas R&D Center

- Tech. sensing, Product enabling

Software Capability

Maximize opportunities

Academia Collaboration
- Memory system architecture
32/34

Summary
To align with the paradigm shift

Strategy
Stay One Step Ahead as an Ecosystem Leader
- De facto standard

Paradigm Shift

Exploit Technology Breakthroughs

- Sustainable memory demand growth

Extend Core Competencies

- Organization, Open innovation, System knowledge, SCM, Quality

33/34

Transformation in progress

Unpredictable & Fluctuating Biz

Stable & Steady Growth

34/34

Thank You