September 24, 2017 | Equity Research

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 Last week Intel discussed its 10nm technology at an event in China, and separately highlighted its collaboration with Waymo on autonomous driving in a website posting. Apple began selling its iPhone 8 worldwide and we published our quarterly mobile chip report in which we discuss how handset chip makers have guided from strong sequential growth in the September/October quarter. DRAM spot prices continued to rise - last week the spot price for an 8Gb DDR4 chip increased to $7.95 compared to $7.68 at the end of the prior week. We remain positive on Micron (MU, $36.07, Outperform) ahead of Micron’s earnings report in the coming week.

 At its Technology and Manufacturing Day in China Intel highlighted its progress on 10nm, claiming that its 10nm technology is a generation ahead of technologies by other manufacturers labeled 10nm. Intel introduced code name “Falcon Mesa” for its next generation of FPGAs using 10nm process technology. Intel announced that it is shipping its 64-layer triple level cell (TLC), 3D NAND SSD (solid state drive) for data center applications. Separately, in a posting on its website Intel highlighted its collaboration with Waymo on autonomous driving technology, and can equip Waymo’s vehicles with advanced processing power required for level 4 and 5 autonomy. Waymo’s latest self-driving Chrysler Pacifica hybrid minivans utilize Intel-based technologies for sensor processing, general compute and connectivity.

 A report from CNBC on September 20 quoted a source in saying Tesla is developing its own chips for autonomous driving in cars, using AMD IP (intellectual property). Currently, we have no additional information either confirming or refuting this. Nevertheless we do think that AMD’s processor and graphics expertize and semi-custom chip design organization are a unique combination of capabilities that may well be of interest to companies with various artificial intelligence needs such as autonomous driving.

 Last week, Apple began selling its iPhone 8 worldwide, and we published our quarterly mobile chip report. September/October quarter guidance from handset chip companies is showing a clear seasonal pickup. In the RF component space content increases are driving solid year/year growth for Broadcom and Skyworks, and Qorvo is expecting a sharp sequential jump in sales in the September quarter. Qualcomm remains the leading LTE baseband supplier.  North-American semiconductor equipment data from SEMI David Wong, CFA, PhD (Semiconductor Equipment and Materials International) showed that Senior Analyst|212-214-5007 the 3-month average of billings decreased 4% month/month and [email protected] increased 28% year/year to $2.18 billion in August 2017. Amit Chanda Associate Analyst |314-875-2045  In the coming week, Micron is scheduled to report earnings. We think [email protected] that continuing memory pricing strength could drive sales and margin Keith Kan, CPA growth in the August and November quarters. In month of August US Associate Analyst|212-214-5066 Durable Good data, we expect the technology-related segments will [email protected] show a continuation of the relatively flat trend seen recently. Joy Zhang Associate Analyst |212-214-8017 [email protected]

Please see page 9 for rating definitions, important disclosures and required analyst certifications. All estimates/forecasts are as of 09/24/17 unless otherwise stated. 09/24/17 16:29:05 ET

Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision. Semiconductors Equity Research

Our View - AMD has improved its competitive position in microprocessors and graphics

We believe that AMD’s several new product launches this year have significantly improved the company’s competitive position in graphics, server and desktop processor segments. Last week, we published a note in which we provide commentary and performance data from a variety of sources comparing AMD’s new products to competing product offerings from Nvidia and Intel. We think that the data suggests AMD’s new products do offer comparable performance and performance/price to corresponding chips from Nvidia and Intel. We believe AMD’s stronger product position will help AMD gain market share, driving growth and margins. We are reiterating our Outperform rating on AMD (AMD, $13.30, Outperform).

Figure A is a summary of AMD’s new products and the competing chips that, in our view, these products match in terms of performance and performance/price.  In graphics, we think AMD’s Vega products (Vega 64 and 56) offer comparable performance and price to Nvidia’s offerings in the $379-$599 range.  On the server front, AMD’s EPYC processors offer performance and performance/price that is comparable to Intel’s latest Skylake generation server processors in the 2-way server space, up to the $4000 price point.  In our opinion, AMD’s latest Ryzen desktop processors compete well against Intel’s desktop chips across all price segments.

For more details please see our AMD note dated 9/22/2017.

Figure A: AMD Product Launches and Performance Reviews Products Launch Date Comparable to Addressed Markets Vega 07/30/2017 Nvidia GTX 1080 and GTX 1070 High-End Graphics ($350-$600) graphics EPYC 7000 06/20/2017 Intel Skylake 2-way server products 2-way server (up to $4000) Ryzen 07/30/2017 Intel i9-7900X, i7-6950x, i7-7820X Top end (gaming) Desktop Threadripper (>$500) Ryzen 7 02/22/2017 Intel i7-7700K, i7-6900K, i7-6700K High-Performance Desktop ($300-$500) Ryzen 5 04/11/2017 Intel i5-7600K, i5-7600, i5-7500, i5- Mainstream Desktop ($180- 7400 $300) Ryzen 3 07/27/2017 Intel i3-7100, i3-7300, i3-7320 Budget/Entry Level Desktop ($0- 180) Source: Company Reports and Wells Fargo Securities, LLC.

I on Intel

September 21, 2017. Intel partners with Blueprint Reality for mixed reality solution. Intel and Blueprint Reality are partnering up to power MixCast, a mixed reality solution to show virtual experience on two-dimensional screen. The MixCast Studio application is available now as a monthly subscription on Steam.

September 19, 2017. Intel announced Nervana DevCloud. At O’Reilly Artificial Intelligence Conference, Intel announced the Intel Nervana DevCloud, a cloud-hosted hardware and software platform to accelerate AI development with free compute cloud access powered by Intel’s Xeon Scalable processors. Intel Nervana DevCloud will be available to 200,000 members of the Intel Nervana AI Academy in October; pre-registration submissions are now being accepted. Intel also announced that it is working with Tata Consultancy Services to create an Artificial Intelligence Center of Excellence to help accelerate AI. The AI center will enable Intel Nervana AI Academy members access to machine learning and deep learning frameworks, tools and libraries optimized for Intel Xeon Scalables, Xeon Phi processors and Nervana AI technologies.

September 18, 2017. Andrew Wilson elected to Intel’s Board of Directors. Intel announced that Andrew Wilson has been elected to Intel’s Board of Directors, which now has 12 directors. Wilson, 43, has been Electronic Arts’ CEO and a director of EA since September 2013. Prior to his CEO role, Wilson held several leadership roles at EA, including executive vice president of EA Sports. In addition, Wilson serves as chairman of the board for World Surf League.

September 18, 2017. Intel is collaborating with Waymo on Autonomous Driving Technology. In a posting on its website Intel highlighted its collaboration with Waymo on autonomous driving technology, and can equip Waymo’s vehicles with advanced processing power required for level 4 and 5 autonomy.

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Waymo’s latest self-driving Chrysler Pacifica hybrid minivans utilize Intel-based technologies for sensor processing, general compute and connectivity. According to Intel, Waymo cars equipped with Intel technology have already processed 3 million miles of real-world driving, which represents more self- driving car miles than any other autonomous fleet in the US.

September 18, 2017. Intel invested more than $1 billion to advance AI. According to Intel, it has invested more than $1 billion in artificial intelligence companies and invested in in startups such as Mighty AI, Data Rebot, and Lumiata in its Intel Capital portfolio. Intel noted that its Nervana AI portfolio features Intel Xeon Scalable family (highly scalable processors for AI workloads and “Lake Crest” purpose-built silicon for deep learning training), Intel Mobileye (vision technologies for areas like active safety and autonomous driving), Intel FPGAs (Field Programmable Gate Array), and Intel Movidius (low-power vision technology).

September 18, 2017. Intel Technology and Manufacturing Day in China. At its Technology and Manufacturing Day held in Beijing, China, Intel provided updates for its 10nm process and plans for its first 10nm FPGA, and announced that it is shipping 64-layer 3D NAND for datacenter applications.  Intel noted that it has been and will continue to be leader in driving Moore’s Law and currently has about a three-year lead in process technology. Intel noted that its 10nm, created with hyper scaling, is a full generation ahead of other 10nm technologies in terms of both transistor density and transistor performance; hyper scaling refers to the 2.7x logic transistor density improvement achieved on Intel’s 14nm and 10nm processes. At its Technology and Manufacturing Day in China, Intel displayed a 10nm “Cannon Lake) wafer.  Intel provided power and performance updates for its 22FFL low power FinFET technology for mobile applications, which included CPU performance of more than 2GHz (gigahertz) with ultra- low power of more than 100x lower leakage. Intel also showed a 22FFL wafer.  Intel introduced code name “Falcon Mesa” for its next generation of FPGAs using 10nm process technology. Falcon Mesa FPGAs will support demands of datacenter, enterprise and networking environments. Intel said it will provide more details about its Falcon Mesa product availability later.  Intel displayed a 10nm test chip wafer containing ARM Cortex-A75 CPU cores, featuring performance in excess of 3GHz.  Intel announced that it is shipping its 64-layer triple level cell (TLC), 3D NAND SSD (solid state drive) for data center applications. Intel noted it has been shipping its new product to select top- tier cloud service providers since August. Intel noted that the new product will be more broadly available by the end of 2017.

Data Roundup iPhone 8 Teardown published by iFixit. This teardown was performed in Sydney, Australia. Chips found include:  Apple’s A11 Bionic chip (applications processor) with embedded M11 motion coprocessor  SK Hynix 2GB LPDDR4 RAM  Qualcomm MDM9655 Snapdragon X16 LTE modem  Qualcomm WTR5975 Gigabit LTE RF transceiver and MPD9655 PMIC  Skyworks SkyOne SKY78140  Skyworks 77366-17 quad band GSM power amplifier module  Skyworks 3760 3576 1732 RF Switch  Skyworks SKY762-21247296 1734 RF switch  Avago 8072JD130  Broadcom 59355 wireless charging chip  P215 730N71T believed to be an envelope tracking chip  NXP 80V18 NFC module  NXP 1612A1 tristar chip  Apple WiFi/Bluetooth/FM radio module  Apple PMIC  Toshiba TSBL227VC3759 64 GB NAND flash.

Wireless Handset Chips 2Q17 Final: Solid Seasonal ramp expected in 3Q. In this quarterly mobile chip report we attempt to provide a comprehensive overview of the baseband modem, smartphone applications processor and wireless handset RF component markets. Following comments from some companies such as Broadcom earlier this year that the ramp at Apple might be delayed, September/October quarter guidance from handset chip companies is showing a clear seasonal pickup. We think this presents both opportunities and risks for the chip companies, especially those with high exposure to iPhone. iPhone-related chip demand in 4Q will be affected by whether the iPhone X launches, as scheduled, in November, the split between demand for iPhone 8 and iPhone X, and overall sell through of the new iPhones. In the RF component space Skyworks’ solid year/year growth, while Broadcom is gaining significant content in iPhone. Chip companies are seeing a solid seasonal pickup in handset-

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related demand. Qorvo guided for overall sales to jump 26% sequentially (midpoint) in its September quarter. Skyworks expects 9% sequential growth in September. Broadcom expects very strong sequential growth in the October quarter (up 30-40% qtr-qtr). Qualcomm expects to ship 205-225 million chipsets in the September quarter (midpoint up 15% sequentially). Qualcomm remains the leading LTE baseband supplier. Strategy Analytics estimates Qualcomm’s LTE baseband unit share was 44.3% in the June 2017 quarter, down 1.1pp sequentially and still significantly ahead of the #2 LTE baseband provider MediaTek which commanded 24.5% share. Several announced 10nm chip processors for handsets. Earlier this month, Huawei introduced the Huawei Mate 10 and Mate 10 Pro smartphones, both of which feature Huawei’s new Kirin 970 processor manufactured on 10nm FinFET process technology at TSMC. Apple’s new iPhones are powered by Apple’s new 64-bit six core A11 Bionic applications processor, which is manufactured on TSMC’s 10nm node. In February, MediaTek announced the availability of its MediaTek 10nm Helio X30 system on chip targeting high end smartphones and Samsung announced the Exynos 9 Series 8895, which will be manufactured using the most advanced 10nm FinFET process. In January Qualcomm announced its Snapdragon 835 processor manufactured on a 10nm FinFET process node at Samsung. Many new flagship smartphones for 2H17. Apple’s iPhone 8 began shipping this month and the iPhone X is scheduled to ship in November. Samsung’s Galaxy Note 8 began shipping this month. Huawei expects to launch the Huawei Mate 10 and Mate 10 Pro smartphones on October 16th. For additional details, please see our report dated September 22nd.

Figure 1. Baseband Unit Shipments By Generation 700.0 650.0 600.0 550.0 500.0 450.0 400.0 350.0 300.0

units) 250.0 200.0 150.0 100.0 50.0

-

Global Shipments of Baseband Units (millions of Baseband of Units (millions Shipments Global

4Q12 3Q14 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

4G (LTE) 3G 2.5G and earlier

Source: Strategy Analytics, Wells Fargo Securities, LLC

North-American Semiconductor Equipment: North-American semiconductor equipment data from SEMI (Semiconductor Equipment and Materials International) showed that the 3-month average of billings decreased 4% month/month and increased 28% year/year to $2.18 billion in August 2017 (see figure 2).

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Chip Weekly: New iPhones Drive Chip Ramp Equity Research

Figure 2. North American Semiconductor Equipment Billings Data (Three-Month Rolling Average)

$4,000

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000

$500

$0

Jun-97 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

Billings

Source: Semiconductor Equipment and Materials Institute and Wells Fargo Securities, LLC

Memory Pricing

Spot Market Last week, DRAM spot price increased while NAND spot prices remained flat, according to DRAMeXchange (see Figure 3).  The spot price for an 8Gb DDR4 chip increased to $7.95 compared to $7.68 at the end of the prior week.  The 128Gb MLC (multi-level cell) NAND spot price remained flat at$6.96, compared to the end of the prior week.  The 256Gb MLC (multi-level cell) NAND spot price remained flat at$14.31, compared to the end of the prior week.

Contract Market

The contract price for an 8Gb DDR4 chip remained flat at $6.81 in the second half of August 2017 compared to the second half of July 2017, though this was up up from $6.50 in the second half of June 2017, the second half of May 2017, and the second half of April 2017.

The contract price for a 128Gb NAND chip increased to $5.78 in the second half of August 2017 compared to $5.68 in the second half of July 2017.

Current quarter bit growth expectations:  For the September quarter, Samsung expects DRAM market bit growth to increase high-single digit range and Samsung’s bit growth to increase in the low teens range. For the September quarter, Samsung expects NAND market bit growth to be in the mid-teens range and Samsung’s NAND bit growth to demonstrate about 20% growth.  For the September quarter, SK Hynix expects DRAM bit shipments to grow in the low 10% range sequentially and NAND bit shipments grow in the mid-20% range sequentially.

Figure 3. Memory Chip Prices 256Gb NAND 4Gb DDR4 8Gb DDR4 128Gb NAND MLC MLC

Date Spot Contract Spot Contract Spot Contract Spot 09/22/2017 $3.97 $7.95 $6.96 $14.31

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09/15/2017 $3.79 $7.68 $6.96 $14.31 09/08/2017 $3.65 $7.44 $6.96 $14.17 09/01/2017 $3.65 $3.25 $7.34 $6.81 $6.94 $5.78 $14.03 08/25/2017 $3.61 $7.25 $6.93 $13.61 08/18/2017 $3.58 $7.25 $6.99 $13.10 08/11/2017 $3.53 $7.28 $7.29 $13.10 08/04/2017 $3.53 $7.28 $7.31 $13.10 07/28/2017 $3.55 $3.25 $7.34 $6.81 $7.24 $5.68 $13.10 07/21/2017 $3.52 $7.22 $7.21 $13.00 07/14/2017 $3.45 $7.01 $7.20 $12.80 07/07/2017 $3.39 $6.79 $7.16 $12.80 06/30/2017 $3.28 $3.09 $6.55 $6.50 $7.09 $5.55 $12.68 06/23/2017 $3.27 $6.51 $6.98 $12.65 06/16/2017 $3.22 $6.41 $6.90 $12.63 06/09/2017 $3.22 $6.39 $6.82 $12.60 06/02/2017 $3.22 $6.39 $6.84 $12.60 05/26/2017 $3.22 $3.09 $6.39 $6.50 $6.92 $5.52 $12.60 05/19/2017 $3.22 $6.39 $6.92 $12.60 05/12/2017 $3.23 $6.38 $6.86 $12.35 05/05/2017 $3.24 $6.37 $6.78 $12.25 Source: DRAMeXchange, Wells Fargo Securities, LLC

News Items:

September 22, 2017. 12-inch Silicon Wafer Supply reportedly expected to remain tight through 2019. Digitimes cited industry sources in saying that global supply of 12-inch silicon wafers are expected to tighten over the next two years when Chinese fabs come online. The sources indicated that transition to 3D NAND, China-based memory startups’ new fab projects and logic IC (integrated circuit) foundries’ capacity expansions mainly in China have driven demand for 12-inch silicon wafers; 12-inch wafer prices have rose as high as 50% since 2017. The sources noted that only a few silicon wafer suppliers plan to expand product capacity for 12-inch wafers substantially despite of the short supply, and the silicon wafer suppliers expect shortage to expand.

September 22, 2017. AMD expected to launch 13 Vega-11 based graphics cards. According to WCCFTech, AMD is preparing to launch 13 Vega-11 based graphics cards, which have reportedly passed their final manufacturing certification. The graphics cards are expected to be based on AMD’s Vega 11 XT and Vega 11 Pro GPUs (Graphics Processing Units), and replace AMD’s Polaris 10/20 GPUs, which are used in RX 480/470 and RX580/570 graphics cards. WCCFTech noted that AMD is also preparing new Radeon Pro and Radeon Instinct accelerators based on the new GPU. WCCFTech noted that 13 Vega-11 based graphics card variants passed their RRA (National Radio Research Agency) certification in South Korea, meaning they are now ready to enter market. In addition, WCCFTech indicated that while Vega 10 was exclusive for desktops, Vega 11 will be the first HBM-based graphics cards for notebooks.

September 21, 2017. Microsemi’s new SyncServer S650 SAASM Time and Frequency Server. Microsemi announced its new SyncServer S650 SAASM server using a Selective Availability Anti-Spoofing Module (SAASM) to provide time and frequency platform for synchronizing applications in the defense end markets, such as satellite communications and defense operational infrastructure. The new product is designed for use the U.S. Department of Defense and other government agencies. The new product will be available for purchase in December 2017.

September 21, 2017. Qualcomm Snapdragon supports Gigabit connectivity in the Asus ZenFone 4 Pro. Qualcomm announced its Qualcomm Snapdragon 835 mobile platform will power the ASUS ZenFone 4 Pro with gigabit connectivity. This phone features Gigabit LTE and 802.11ad multi-gigabit Wi- Fi technologies. The integrated Snapdragon X16 Gigabit LTE modem offers faster download speeds over 4G LTE. Qualcomm’s 11ad Wi0Fi enables users to download and share 4K videos in seconds. The

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ZenFone 4 Pro offers Wi-Fi connectivity using Qualcomm’s integrated 802.11ac 2x2 MU-MIMO technology. The phone uses Qualcomm’s Adreno 540 GPU.

September 21, 2017. Broadcom introduces dual frequency GNSS receiver for consumer LBS applications. Broadcom announced its dual frequency GNSS receiver device, the BCM47755, for enhanced location based services (LBS) applications for mobile phones, tablets and fitness wearables. The BCM47755 offers higher level of location accuracy and meets battery power and footprint needs for mobile phones. Broadcom is sampling the BCM47755 dual frequency GNSS receiver to early access partners and customers.

September 20, 2017. DRAM bit growth expected to reach 19.6% in 2018, according to DRAMeXchange. According to DRAMeXchange, DRAM bit production is expected to grow 19.6% in 2018. DRAMeXchange noted that DRAM suppliers have opted to slow down capacity expansion and technology migrations in order to keep 2018 prices at the same high level as the second half of 2017, in order to sustain strong profit margins. DRAMeXchange predicts that DRAM bit demand will grow by more than 20.6% in 2018, with tight supply to continue in 2018. DRAMeXchange expects an increase in memory content in smartphones and demand from server and datacenter to help drive DRAM demand up in 2018.

September 20, 2017. CNBC reports Tesla is working on autonomous driving chips using AMD capability. A report from CNBC on September 20 quoted a source in saying Tesla is developing its own chips for autonomous driving in cars, using AMD IP (intellectual property). Currently we have no additional information either confirming or refuting this. Nevertheless we do think that AMD’s processor and graphics expertize and semi-custom chip design organization are a unique combination of capabilities that may well be of interest to companies with various artificial intelligence needs such as autonomous driving.

September 20, 2017. Acer increases marketing budget for gaming notebooks. According to Digitimes, Acer is growing its marketing budgets for its gaming notebook business and will sponsor e- sport teams to promote its brand in the gaming notebook market. Acer has been hosting Acer Day promotion activities in markets including China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, New Zealand, Australia and Vietnam in 2017 and is expected to continue the events in 2018. Acer has also been expanding its gaming product lines from PCs to peripherals such as earphones and mice that feature Acer-developed technologies.

September 19, 2017. Asustek focusing on profitability. According to Digitimes, Asustek has implemented a new strategy to improve on its profitability by focusing on high margin orders and concentrating on markets with higher ASPs. The sources quote by Digitimes thinks that before its business reforms that started in June 2017, Asustek has seen declines in demand for its products and was engaged in price wars. The new strategy is meant to rejuvenate Asustek’s business and has seen results thus far – market watchers are expecting to see Asustek’s sales to rebound significantly in 4Q17 and stabilize in the first half of 2018. For 3Q17, it is expected for Asustek’s sales to grow 15-20% sequentially. Asustek is expected to ship around 18 million notebooks in 2017, which is smaller in volume than in previous years, but the company’s gross margin is expected to rise to the past since most of the shipments are mid-range to high-end gaming models, 2-in-1 and ultra-thin devices.

September 18, 2017. MediaTek to introduce 5G prototype chip by the end of 2017. DigiTimes reported MediaTek is expected to introduce its 5G prototype chip by the end of 2017 and is expected to be ready for trials of its 5G solutions in 2018, according to industry sources. Spreadtrum also expects to launch its 5G prototype chip in 2018. Qualcomm recently stated the first mass market 5G smartphones are expected to be commercially available by 2019. Qualcomm just announced its 5G NR mmWave prototype system that will be used in upcoming 3GPP based 5G NR interoperability testing starting in the second half of 2017.

Upcoming Events

September 26, 2017. Micron scheduled to report August quarter earnings. We think that continuing strength in memory pricing could help drive revenue and margin growth in the August and November quarter. In June Micron guided for August quarter sales of $5.7-$6.1 billion and non-GAAP Gross margin to be in the 47% to 51% range (midpoint up 1 percentage point sequentially). On 9/14 we notched up our estimates for Micron’s November 2017 and February 2018 quarter while leaving our August 2017 quarter estimates unchanged.

September 27, 2017. Month of August U.S. Durable Goods data. It appears to us that the multi- month trend in the Computer and Electronics aggregate has been flattish over the last few months, with the year/year growth trend holding stable at a relatively low level. We will be watching the numbers in the coming month for signs that this might be changing.

Mergers and Acquisitions

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The following is a list of what we consider to be some of the more significant mergers and acquisitions in the chip space that have been announced over the last 1-3 years.

Table A: Recent M&A transactions Transaction Date first Date Value Announced Closed Acquirer Target (US$MM) 3/13/2017 8/22/17 Intel Mobileye ~15,300 12/21/2016 05/18/17 TDK Invensense ~1,300 11/21/2016 01/26/17 MACOM Technology Applied Micro Circuits 770 11/02/2016 Pending Broadcom Limited Brocade ~5,900 10/27/2016 Pending Qualcomm NXP Semiconductor ~47,000 9/12/2016 02/24/17 Renesas Electronics Intersil ~3,200 8/17/2016 12/02/16 GlobalWafers SunEdison Semiconductor ~$683 6/27/2016 03/10/2017 Analog Devices Linear Technology ~14,800 07/17/2016 09/05/2016 SoftBank ARM Holdings ~32,000 12/14/2015 12/06/2016 Micron Inotera ~3,200 11/18/2015 9/19/16 ON Semiconductor Fairchild ~2,400 10/21/2015 5/12/16 Western Digital SanDisk ~19,000 10/21/2015 Terminated 10/5/16 LAM Research KLA-Tencor ~11,000 10/05/2015 01/15/16 Microsemi PMC-Sierra ~2,500 09/20/2015 04/04/16 Microchip Atmel ~4,600 09/07/2015 3/16 MediaTek RichTek ~900 06/01/2015 12/28/15 Intel Altera 15,359 05/28/2015 2/1/2016 Avago Broadcom ~34,000 05/07/2015 08/03/15 Microchip Micrel 702 03/18/2015 04/28/15 Microsemi Vitesse 348.6 03/08/2015 12/7/15 NXP Freescale 15,945 10/20/2014 07/01/15 GlobalFoundries IBM Semiconductor (1,500)* 08/20/2014 01/13/15 Infineon International Rectifier 2,255 06/09/2014 07/22/14 Analog Devices Hittite Microwave 2,500 02/24/2014 01/02/15 RF Micro Devices TriQuint Semi 1,646 12/16/2013 05/06/14 Avago LSI 6,600 09/24/2013 Terminated 04/26/15 Applied Materials Tokyo Electron ~29,000 *IBM paid $1.5 billion to GlobalFoundries Source: FactSet, Company Reports and Wells Fargo Securities, LLC

Our Coverage

The following are the stocks we cover.

Table B: Stocks we cover/Dividend monitor: Annualized Price Annual Dividend Company Name Ticker 9/22/17 Dividend Yield Rating Advanced Micro Devices AMD $13.30 - - Outperform Analog Devices ADI $84.92 $1.80 2.1% Market Perform Broadcom Limited AVGO $239.24 $4.08 1.7% Market Perform Intel INTC $37.18 $1.09 2.9% Outperform Maxim Integrated Products MXIM $46.93 $1.44 3.1% Market Perform Micron Technology MU $36.07 - - Outperform Microsemi MSCC $49.90 - - Outperform Monolithic Power Systems MPWR $102.97 $0.80 0.8% Market Perform Nvidia Corporation NVDA $179.00 $0.56 0.3% Under Perform Qualcomm QCOM $52.09 $2.28 4.4% Outperform Qorvo QRVO $71.20 - - Market Perform Skyworks Solutions SWKS $103.08 $1.28 1.2% Outperform Texas Instruments TXN $88.27 $2.00 2.3% Market Perform Xilinx XLNX $69.33 $1.40 2.0% Market Perform Source: FactSet, Wells Fargo Securities, LLC

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STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL

SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.

VOLATILITY RATING V=A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: September 24, 2017

43% of companies covered by Wells Fargo Securities, LLC Equity Wells Fargo Securities, LLC has provided investment banking Research are rated Outperform. services for 46% of its Equity Research Outperform-rated companies. 54% of companies covered by Wells Fargo Securities, LLC Equity Wells Fargo Securities, LLC has provided investment banking Research are rated Market Perform. services for 33% of its Equity Research Market Perform-rated companies. 2% of companies covered by Wells Fargo Securities, LLC Equity Wells Fargo Securities, LLC has provided investment banking Research are rated Underperform. services for 29% of its Equity Research Underperform-rated companies.

Important Disclosure for International Clients

EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. For the purposes of Section 21 of the UK Financial Services and Markets Act 2000 (“the Act”), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive 2007. The FCA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients.

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The ratings stated on the document are not provided by rating agencies registered with the Financial Services Agency of Japan (JFSA) but by group companies of JFSA-registered rating agencies. These group companies may include Moody’s Investors Services Inc., Standard & Poor’s Rating Services and/or Fitch Ratings. Any decisions to invest in securities or transactions should be made after reviewing policies and methodologies used for assigning credit ratings and assumptions, significance and limitations of the credit ratings stated on the respective rating agencies’ websites.

About Wells Fargo Securities Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, Wells Fargo Securities Canada, Ltd., a member of IIROC and CIPF, Wells Fargo Bank, N.A. and Wells Fargo Securities International Limited, authorized and regulated by the Financial Conduct Authority.

This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wells Fargo Securities, LLC, to be reliable, but Wells Fargo Securities, LLC does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wells Fargo Securities, LLC, at this time, and are subject to change without notice. All Wells Fargo Securities research reports published by its Global Research Department (“WFS Research”) are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Additional distribution may be done by sales personnel via email, fax or regular mail. Clients may also receive our research via third party vendors. Not all research content is redistributed to our clients or available to third-party aggregators, nor is WFS Research responsible for the redistribution of our research by third party aggregators. For research or other data available on a particular security, please contact your sales representative or go to http://www.wellsfargoresearch.com. For the purposes of the U.K. Financial Conduct Authority's rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC and Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright © 2017 Wells Fargo Securities, LLC

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