Equity Research

March 9, 2015 Equity Research

Chip Weekly: New Chips At Mobile World Congress

• Last week at the Mobile World Congress trade show, Intel, Qualcomm and MediaTek made chip announcements which we think establish how these three companies are establishing their leadership positions in tablet and smartphone chips. We hosted investor meetings with Intel in London and Paris. NXP Semiconductors announced an offer to acquire Freescale.

• Last week at the Mobile World Congress trade show, Intel announced its integrated modem/processor product, SoFIA, for smartphones and low end tablets; highlighted its 14nm Cherry Trail standalone processor and announced its 3rd generation standalone 4G modem, the 7360, with Cat 10 LTE capability. Qualcomm stated that its next generation Snapdragon processor, the 820, will be manufactured on leading edge FinFET technology with a Qualcomm proprietary core (Kryo). Mediatek introduced a new integrated smartphone modem/processor product and a standalone tablet processor. • Last week, we sat in on a number of investor meetings in London and Paris with Intel’s CFO and investor relations. Intel highlighted its expectations for high growth in its highly profitable data center business, the value of its desktop and notebook business as a source of cash flow and intellectual property, its new products for smartphones and tablets and breadth of capabilities and products suitable for the internet of things (IoT). • Semtech reported January quarter sales of $130.4 million (down 12% sequentially and up 3% yr/yr). The sequential decline was mostly seasonal softness coupled with incremental weakness from Korean handset customers and lower channel wireless infrastructure spending. Semtech guided April quarter sales to the $130- 136 million range (midpoint=+2% sequentially). Ambarella reported January quarter sales of $64.7 million (down 1.5% sequentially and up 61.9% yr/yr). Ambarella guided April quarter revenue to the $64-68 million range (midpoint=+2% sequentially). • NXP Semiconductors and Freescale Semiconductor announced an agreement whereby NXP will acquire Freescale. The terms of the agreement call for Freescale shareholders to receive $6.25 in cash and 0.3521 on an NXP ordinary share for each Freescale common shares held at the close of the transaction. The transaction is expected to close in the second half of 2015. • In the coming week, Xilinx is hosting its 2015 Investor & Analyst Meeting in New York City. We expect month of February Taiwanese electronics sales numbers will show large month over month drops in all our composites because February is a short month in addition to factory shutdowns related to the Chinese New Year holiday which commenced on February 18.

David Wong, CFA, PhD, Senior Analyst (212) 214-5007 [email protected] Amit Chanda, Associate Analyst (314) 875-2045 [email protected] Parker Paulin, Associate Analyst (212) 214-5066 [email protected] Charles E. Long, Associate Analyst (212) 214-8017 Please see page 12 for rating definitions, important disclosures [email protected] and required analyst certifications All estimates/forecasts are as of 03/09/15 unless otherwise stated.

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.

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

Our View: Qualcomm/MediaTek/Intel – leaders in mobile chips, Micron - DRAM pricing risk

At the Mobile World Congress (MWC) trade show last week:

• Intel announced its integrated modem/processor product, SoFIA, for smartphones and low end tablets; highlighted its 14nm Cherry Trail standalone processor which we think is primarily for mid- range and high end tablets; and announced its 3rd generation standalone 4G modem, the 7360, with Cat 10 capability. o We see SoFIA as the key to Intel eliminating subsidies for low end tablets and expanding its addressed market in smartphones to include the majority of smartphone that use integrated modem/processor chips.

• Qualcomm stated that its next generation Snapdragon processor, the 820, will be manufactured on leading edge FinFET technology with a Qualcomm proprietary core (Kryo). This product is expected to begin sampling in 2H2015. o We think that Qualcomm’s problems with its current generation chips could create a competitive headwind for Qualcomm’s chip division through 2015 and possibly much of 2016. We think that the next generation products with the Kryo core may be key to Qualcomm regaining its competitive momentum in smartphone chips.

• Mediatek introduced a new integrated smartphone modem/processor product and a standalone tablet processor.

• Marvell announced the ARMADA Mobile PXA 1826 modem chipset targeted for LTE market supporting carrier aggregation.

These product announcements were much in line with our expectations and, we think, consistent with our view on how the competitive landscape is shaping up in tablet and smartphone chips: • We think that Intel and MediaTek are emerging as the leaders in the merchant tablet processor space (excluding Apple which makes processors for its own use). We believe that Qualcomm might lose some momentum in this segment through 2015 and 2016 (see our chip weekly dated 3/2 for more data and discussion on this topic). • While we think that Qualcomm’s LTE share is likely to drop from its current level of close to 80%, we expect Qualcomm will remain the clear share leader in LTE while MediaTek establishes itself solidly in the #2 position and Intel builds out its product offerings to battle with Marvell for the #3 merchant market share position – we think that Intel might have more advanced technology capability while Marvell has built a solid market share position in China.

We are reiterating our Outperform ratings on Intel (INTC, $33.19) and Qualcomm (QCOM, $71.51), which are both on our Priority Stock List.

For more details and discussion please see our note dated 3/2/2014

After briefly stabilizing in the first half of February, it appears the DRAM spot prices began to slide again in the last two weeks. DRAMexchange data suggests that the spot price of a 4Gb DDR3 chip dropped to $3.36 by the end of last week, compared to $3.38 at the end of the prior week before and $3.39 the week before that (see figure A). Data on Bloomberg (quoting Inspectrum) suggests that the DRAM contract price decreased to $3.30 in March from $3.45 in February and $3.59 in January for a 4Gb DDR3 chip. DRAMexchange numbers also show DRAM contract prices have been falling in recent months. We remain negative on Micron (MU, $28.50) with an Underperform rating. We think that the investment community may have overly optimistic projections for memory pricing and Micron’s margin potential. Our FY16 GAAP EPS estimate of $2.53 is a substantially below the consensus GAAP EPS estimate of $3.90.

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

Figure A. DRAM Chip Pricing $4.50 $4.40 $4.30 $4.20 $4.10 $4.00 $3.90 $3.80 $3.70 $3.60 Spot Price $3.50 $3.40 $3.30 $3.20 $3.10 $3.00 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15

4Gb DDR3 contract 4Gb DDR3 spot

Source: DRAMexchange, Wells Fargo Securities, LLC

I on Intel

March 4 and 5, 2015. Investor meetings in Paris and London. We sat in on a number of investor meetings in London and Paris with Intel’s CFO and investor relations. Intel highlighted its expectations for high growth in its highly profitable data center business, the value of its desktop and notebook business as a source of cash flow and intellectual property, its new products for smartphones and tablets and breadth of capabilities and products suitable for the internet of things (IoT). • Intel’s order of priorities for use of cash are: (1) Investing in its business. (2) Paying a dividend to shareholders. Intel targets paying out 40% of free cash flow in dividends. (3) Buying back stock. • In 2014 Intel’s data center segment contributed about $14 billion in revenue at an operating margin of about 50%. Intel believes that its data center business can grow at mid teems percent per year in the future. Intel’s rising ASP for its data center processors in recent years has been driven by mix, with customers choosing to move to higher priced processors. • Intel considers its desktop and notebook business to be an important source of cash flow. The division also generates microprocessor designs and other intellectual property that are useful for Intel’s other business in data center, tablets, smartphones and internet of things (IoT). • SoFIA is Intel’s first integrated modem/applications processor product. The first product in the SoFIA family, a dual-core applications processor with a 3G modem, is currently sampling to customers. A 4G version of SoFIA is expected in 2H15 and Intel also highlighted its alliances with Rockchip and Spreadtrum involving these companies designing tablet and smartphones products based on SoFIA. • Recent technology transitions have required greater capital intensity at a wafer level, which Intel has neutralized by achieving incremental scaling at a transistor level and by reducing die size. Intel has continued to achieve continued reductions in cost/transistor in recent technology transitions which it thinks might distinguish it from some companies it competes with for foundry business.

March 2, 2015. Intel at Mobile World Congress. At Mobile World Congress Intel announced its integrated modem/processor product, SoFIA, for smartphones and low end tablets; highlighted its 14nm Cherry Trail standalone processor which we think is primarily for mid-range and high end tablets; and announced its 3rd generation standalone 4G modem, the 7360, with Cat 10 capability. Details of Intel’s announcements included: • Atom Processors - Intel discussed its Atom x3 processor, which was previously referred to as SoFIA, for smartphones and value tablets. Atom x3 comes in three SKUs: o Atom x3-C3130 – Dual core with integrated 3G modem o Atom x3-C3230RK – Quad core with integrated 3G modem, designed as part of Intel’s alliance with Rockchip o Atom x3-C3440 – Quad core at 1.2Ghz (1.4GHz burst) with integrated LTE modem • XMM Modems - Intel also introduced its 3rd generation Cat 10 LTE modem, the XMM7360, which supports: LTE-TDD/FDD, TD-SCDMA, LTE broadcast, all major carrier aggregation combinations,

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

VoLTE, and dual-SIM. Intel said that the device is tested and pre-validated with operators for faster time to market. The XMM 7360 is expected to ship in devices in H2 2015. • Connectivity Devices - In addition to announcing processor and modem devices, Intel also introduced a number of connectivity devices including: Wireless-AC 8x70 – 28nm multi-radio solution for applications such as video streaming and gaming. Wireless-GNSS 2x00 – A location solution with support for GPS, GLONASS, Beidou, Galileo, QZSS, WAAS, and EGNOS. Wireless-NFC 4000 – NFC controller for payment card emulation, tag reading/writing, and device pairing. Intel’s new connectivity products are pre-integrated with XMM 726x and 7360 modems and as well as the SoFIA LTE product, Intel said they will also be offered in with future Atom processors and as discrete solutions.

We see SoFIA as the key to Intel eliminating subsidies for low end tablets and expanding its addressed market in smartphones to include the majority of smartphone that use integrated modem/processor chips. For additional details please see our March 2 note.

Data Roundup

Memory Pricing

Spot Market Last week DRAM and NAND spot prices declined according to DRAMeXchange (see figure 4). The spot price for a 4Gb DDR3 chip was $3.36, versus $3.38 at the end of the prior week, while the 64GB NAND spot price was $2.45 compared to $2.54 at the end of the prior week. • DRAM spot prices have declined substantially over the last 7 months, from above $4.40 for a 4Gb chip in July 2014 to below $3.40 today. Contract Market According to DRAMeXchange, the DRAM contract price dropped to $3.38 for a 4Gb DDR3 chip in the first half of February from $3.59 in the first half of January. The contract price for a 64Gb NAND chip dropped to $2.66 in the second half of February from $2.74 in the first half of February.

Data on Bloomberg (quoting Inspectrum) suggests that the DRAM contract price decreased to $3.30 in March from $3.45 in February and $3.59 in January for a 4Gb DDR3 chip, while the contract price for a 64Gb MLC NAND chip dropped to $2.00 in March from $2.08 in February.

Figure 4: Memory Chip Prices 4Gb DDR3 64Gb NAND MLC Date Spot Contract Spot Contract 03/06/2015 $3.36 $2.45 02/27/2015 $3.38 $2.54 02/20/2015 $3.39 $2.55 02/13/2015 $3.39 $2.55 $2.66 02/06/2015 $3.51 $2.50 01/30/2015 $3.52 $3.38 $2.44 $2.74 01/23/2015 $3.57 $2.45 01/16/2015 $3.60 $2.44 $2.75 01/09/2015 $3.62 $2.43 12/31/2015 $3.68 $3.59 $2.42 $2.76 12/26/2014 $3.68 $2.43 12/19/2014 $3.69 $2.47 12/12/2014 $3.70 $3.59 $2.54 $2.80 12/05/2014 $3.74 $2.58 11/28/2014 $3.75 $3.66 $2.65 $2.81 11/21/2014 $3.69 $2.70 11/14/2014 $3.82 $3.66 $2.76 $2.96 11/07/2014 $3.83 $2.82 10/31/2014 $3.85 $3.78 $2.86 $3.00 10/24/2014 $3.88 $2.92 10/17/2014 $3.89 $2.96 10/10/2014 $3.86 $3.78 $2.98 $3.05 10/03/2014 $3.87 $2.98 Source: DRAMeXchange, Wells Fargo Securities, LLC

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

Other News Items:

March 6, 2015. MediaTek shows large decline in February sales. DigiTimes reported consolidated February sales for MediaTek fell 44.6% sequentially to NT$9.67 billion. The company attributed the lower sales to smartphone OEMs transition from older to newer products, seasonal trends and fewer working days due to Chinese New Year. Previously, MediaTek guided March quarter consolidated sales to the NT$45.5- NT$49.9 billion range (down 10-18% sequentially).

March 5, 2015. Nvidia introduces new Shield device and Titan X GPU. Nvidia introduced the Shield Android TV console, which features a Tegra X1 processor with 256-core Maxwell GPU with 3GB RAM, as well as 4K playback ability and wireless connectivity. The device is expected to be available in May for $199. Nvidia also introduced the Titan X GPU, which has eight billion transistors and a 12GB framebuffer. The company said it would disclose more details at its GPU Technology Conference (March 17th).

March 5, 2015. Dot Hill reports December quarter results. Dot Hill reported December quarter sales of $68.2 million (up 31% sequentially and up 14% yr/yr). Server OEM revenue fell 6% sequentially due to 8% sequential decline at the company’s largest server customer. Inventory increased about $5 million sequentially to $11.3 million in the December quarter driven by new customer product launches. March quarter revenue is expected to be in the $55-59 million range (midpoint=down 16% sequentially).

March 5, 2015. Texas Instruments introduces 65-V synchronous step down converter. Texas Instruments introduced a 65V synchronous step down converter that provides isolated bias supplies up to 15W. The LM5160A improves power density and targets industrial and automotive applications. The newest fly buck converter is available now in volume production and is priced at $1.80 in 1,000 unit quantities.

March 5, 2015. Xiaomi forecasts sales to exceed $16 billion in 2015. The Wall Street Journal reported Xiaomi forecasts sales and smartphone shipments to each expand by more than 30% in 2015, according to the company’s CEO. Xiaomi forecast sales to exceed 100 billion yuan (roughly $16 billion) in 2015 compared to 74.3 billion yuan in sales for 2014. Unit shipments for smartphones are expected to reach 80-100 million units in 2015 compared to 61 million units in 2014.

March 5, 2015. Details on AMD’s semicustom business. Fudzilla reported that AMD is looking to launch a couple of new semicustom customers and expects the customers to account for a billion dollars of revenue starting in 2016 with one of the products being ARM based. Fudzilla also noted that AMD is looking to expand its semicustom business outside of the gaming space.

March 5, 2015. Spansion introduces 1.8V high speed serial NOR flash memory. Spansion introduced its newest 512Mb density member of the FS-S serial NOR flash family. The Spansion S25FS512S targets mid to high end wearables, automotive infotainment and telematics, tolling systems and FPGAs and wireless base stations. Spansion’s S25FS512S is currently sampling and will be fully qualified in April 2015.

March 4, 2015. Semtech reports January quarter results. Semtech reported January quarter sales of $130.4 million (down 12% sequentially and up 3% yr/yr). The sequential decline was mostly seasonal softness coupled with incremental weakness from Korean handset customers and lower channel wireless infrastructure spending. During the quarter, Semtech experienced an increase in demand from the industrial end market, while demand from the enterprise computing, high end consumer and communications end markets all declined sequentially. In January 2015, Semtech acquired EnVerv for $5 million. Semtech divested its defense and microwave communications infrastructure business due to concerns about time to revenue. Bookings improved throughout the January quarter, although the book to bill ratio was slightly below 1. Inventory increased 22% sequentially to $73.6 million in the quarter. Days of inventory increased from 88 days in the prior quarter to 107 days in the January quarter due to preparation of the company’s transition to its new ERP system in the fiscal first quarter of 2016. Total company distribution POS declined slightly on a sequential basis and distributor inventory increased slightly by 3 days sequentially to 74 days, which is within the company’s target 70-80 days channel inventory model. The company’s protection, power and hi-reliability product group declined 15% sequentially as weakness in the high end consumer market contributed to most of the sequential decline, while the industrial end market showed sequential growth. The protection business declined sequentially driven by lower demand from Korean smartphone customers, which was offset slightly by solid growth from Chinese smartphone customers. Semtech’s power and high reliability business grew 8% sequentially. Demand for power management increased across all end markets, particularly in the industrial end market supported by automotive applications. The signal integrity product group showed a 9% sequential decline in revenue. Modest strength in the PON business was offset by lower sales from the China wireless infrastructure build out. Semtech’s wireless, sensing and timing product group showed a 13% sequential decline in revenue. Revenue from the industrial and communications end markets both increased sequentially. Semtech guided April quarter sales to the $130-136 million range (midpoint=+2% sequentially).

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March 4, 2015. Semtech announces acquisition of Triune Systems. Semtech announced it completed the acquisition of Triune Systems, a privately held supplier of wireless charging and power management platforms targeted at high and low power, high efficiency applications. Under the terms of the agreement, Semtech acquired all outstanding equity interests of Triune Systems for an aggregate purchase price of $45 million consisting of $35 million cash paid at closing, with an additional cash consideration of $10 million to be paid in six months and additional contingent considerations depending on achieving particular future financial goals.

March 3, 2015. The PlayStation 4 is Sony’s fastest selling game console. The Wall Street Journal reported Sony sold 20.2 million units of the PlayStation 4 game console as of March 1, 2015. Sony said the PS4 represents its fastest selling game console. The PS4 was launched in November 2013. By comparison, Nintendo sold 9.2 million units of its Wii U console between November 2012 and December 2014 and Microsoft’s Xbox One sold 10 million units in the twelve months ending in November 2014.

March 3, 2015. Marvell introduces ARMADA Mobile PXA1826 5 mode 4G LTE Release 10 modem. Marvell announced the ARMADA Mobile PXA 1826 modem chipset targeted for LTE market supporting carrier aggregation. The modem chipset is multimode LTE R10 CAT7 and supports TD-LTE, FDD- LTE, TD-SCDMA, WCDMA and GSM. The chipset integrated the ARM Cortex A7 up to 1.2GHz.

March 3, 2015. Ambarella announces January quarter results. Ambarella reported January quarter sales of $64.7 million (down 1.5% sequentially and up 61.9% yr/yr). January quarter auto revenue increased sequentially and yr/yr. Infrastructure revenue increased sequentially, but declined year-over-year. Inventory increased to $21.7 million or around 72 days, compared to $14.8 million or 53 days in the prior quarter. Inventory increased in high volume parts to support anticipated customer product launches across various markets. Ambarella guided April quarter revenue to the $64-68 million range (midpoint=+2% sequentially).

March 3, 2105. Acer launches first Windows 8.1 smartphone. Acer unveiled its Liquid M220 smartphone at Mobile World Congress. The phone runs on Windows Phone 8.1 and features a 4in 233ppi display with a 5MP back-end camera and 2MP front-end camera. The phone is expected to become available in April in the EMEA, starting at €79.

March 2, 2015. Samsung introduces new universal flash storage. Samsung Electronics announced that it is mass producing 128GB ultra-fast embedded memory based on the Universal Flash Storage (UFS) 2.0 standard for smartphones. The new UFS embedded memory conducts 19,000 IOPS for random reading (2.7x faster than eMMC 5.0 and 12x faster than a typical 1,500 IOPS high-speed memory card) and 14,000 IOPS for random writing (28x as fast as a conventional external memory card). Samsung’s offerings come in 128GB, 64GB and 32GB versions. In addition, Samsung's UFS embedded memory package represents a new embedded package on package solution that can be stacked directly on top of a logic chip in order to take up less space.

March 2, 2015. Spansion adds RAM to HyperBus. The EE Times reported that Spansion has introduced a companion RAM device, known as HyperRAM, that is designed for use in SoCs and microcontrollers where RAM and flash are connected to the same HyperBus interface; Spansion views the product as an alternative to SRAM and PSRAM. Spansion is expected to begin sampling 64Mb HyperRAM in the June quarter of 2015. The new HyperRAM features read throughput of up to 333MB/s and 36ns array read/write latency.

March 2, 2015. Micron breaks ground on Singapore expansion. Micron announced that it has begun the expansion of its Singapore NAND flash memory fabrication facility. The ~255,000 sq. ft. expansion is expected to facilitate implementation of 3D NAND production at the Singapore facility and give Micron the flexibility to add incremental capacity in response to market requirements. The space is expected to enable production of storage class and other memory technologies. Micron expects initial manufacturing output from the facility to occur in FY’17. Micron anticipates spending ~$50 million in FY’15 for initial design and construction. Micron expects the total cost for the expansion to be ~$4 billion at completion, incurred over a number of years starting in FY’16. Micron’s capex guidance for fiscal 2015 remains unchanged at $3.6 billion to $4 billion.

March 2, 2015. NXP and Freescale announce merger. NXP Semiconductors and Freescale Semiconductor announced an agreement whereby NXP will acquire Freescale. The terms of the agreement call for Freescale shareholders to receive $6.25 in cash and 0.3521 on an NXP ordinary share for each Freescale common shares held at the close of the transaction. The transaction represents a total enterprise value of roughly $16.7 billion including Freescale’s net debt, based on NXP’s closing share price as of February 27, 2015. The transaction is expected to close in the second half of 2015. NXP expects to fund the transaction with $1 billion in cash from its balance sheet, $1 billion of new debt and around 115 million NXP ordinary shares. Post transaction, Freescale shareholders will own around 32% of the combined company.

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

March 2, 2015. Qualcomm unveils Snapdragon 820. At Mobile World Congress, Qualcomm announced its Zeroth platform that uses its next-generation processors including the Snapdragon 820. Qualcomm did not disclose much about the Snapdragon 820, but noted that it is designed on a leading edge process FinFET process node and features a new 64-bit custom Kryo processor core. The Snapdragon 820 processor is expected to begin sampling in the second half of 2015002E.

March 2, 2015. Broadcom introduces Wifi combo chip and UltraHD SoCs. At Mobile World Congress, Broadcom introduced a 5G WiFi combo chip with dual band support. Broadcom announced a 5G WiFi 2x2 Multiple Input Multiple Output (MIMO) combo chip with real simultaneous dual band (RSDB) support for mobile devices. The BCM4359 enables devices to transmit and receive over two bands simultaneously. With RSDB support, the BCM4359 can connect to the 5GHz and 2.4GHz bands simultaneously. Broadcom also introduced the BCM43455, an integrated 1x1 5G WiFi combo chip for mass market smartphones. Both devices are now sampling. In addition, Broadcom announced the BCM7448S and BCM7449S UltraHD SoCs for home gateways and IP clients, featuring integrated MoCA 2.0 interface for cable home networking, dual core ARMv7 CPUs, and support for Ultra HD HEVC. Both devices are currently sampling.

March 2, 2015. MediaTek introduces tablet and smartphone processors. MediaTek introduced tablet and smartphone processors in conjunction with Mobile World Congress. The Quad-core MT8173 tablet processor features a 64 bit quad core processor (2x Cortex-A72 and 2x Cortex-A53) at up to 2.4GHz, Imagination PowerVR GPU, Ultra HD 30fps H.264/HEVC(10-bit)/VP9 hardware video playback. The MT8173 is available now and is expected be featured in commercial tablets in H2 2015. The Octa-core MT6753 smartphone processor is designed for the mid-range market, features eight Cortex-A53 64-bit processors at up to 1.5GHz, Mali-T720 GPU, integrated Cat. 4 FDD/TDD LTE, DC-HSPA+, TD-SCDMA and EDGE are supported for legacy 2G/3G. Supports dual-band Wi-Fi and Bluetooth 4.0. The MT6753 is sampling now with the first commercial devices to be available in Q2 2015.

Upcoming Events.

February 1-10, 2015. Month of February Taiwanese electronic sales. We expect there to be large month over month drops in all our composites because February is a short month in addition to factory shutdowns related to the Chinese New Year holiday which commenced on February 18th.

March 10, 2015 Xilinx Analyst Day. Xilinx is hosting its 2015 Investor & Analyst Meeting in New York City.

Inventory Monitor

March 5, 2015. Dot Hill. Inventory increased about $5 million sequentially to $11.3 million in the December quarter driven by new customer product launches.

March 4, 2015. Semtech. Inventory increased 22% sequentially to $73.6 million in the quarter. Days of inventory increased from 88 days in the prior quarter to 107 days in the January quarter due to preparation of the company’s transition to its new ERP system in the fiscal first quarter of 2016. Total company distribution POS declined slightly on a sequential basis and distributor inventory increased slightly by 3 days sequentially to 74 days, which is within the company’s target 70-80 days channel inventory model.

March 3, 2015. Ambarella. Inventory increased to $21.7 million or around 72 days, compared to $14.8 million or 53 days in the prior quarter. Inventory increased in high volume parts to support anticipated customer product launches across various markets.

February 26, 2015. OmniVision. Inventory increased 7.8% sequentially to $366.4 million. Annual inventory turns were 2.5 times (or 148 days) compared to 3.6 times (102 days) in the prior quarter. OmniVision continues to reduce its inventory.

February 25, 2015. Avago. Avago’s inventory level declined 3% sequentially in the quarter and days of inventory fell 3 days to 67 days. Avago reduced its inventory level in the quarter to support strong growth in its wireless segment. Industrial resales declined sequentially in the seasonally weak January quarter. Industrial revenue shipped into distributors declined consistent with resales, with less than 2 months of net inventory. Avago expects a sequential recovery in the industrial segment in the April quarter driven by need to replenish low level of distributor inventory.

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February 19, 2015. Marvell. Inventory decreased about $48 million sequentially to $308.1 million in the quarter.

February 19, 2015. Dialog Semiconductor. Inventory decreased $49 million sequentially to $99 million to roughly 38 days of inventory (down 50 days).

February 19, 2015. SunEdison Semiconductor. Internal inventory levels declined 6% sequentially to $122.1 million. February 17, 2015. Analog Devices. ADI’s internal inventory level was flat sequentially at $367.2 million. Days of inventory were 126 days in the quarter compared to 115 days in the prior quarter. Distributor inventory was 8 weeks during the January quarter compared to 7.5 weeks during the prior quarter and was in line with the company’s target model of 8 weeks. On a dollars basis, distributor inventory was flat sequentially.

February 17, 2015. ANADIGICS. Inventory declined by $1.5 million sequentially to $13.8 million, or 82 days sales of inventory.

February 11, 2015. Nvidia. Inventory increased 18.3% sequentially in the quarter to $483 million. Inventory days during the quarter were 80 days, up from 68 days in the prior quarter. The sequential increase in inventory included the ramping of Maxwell-based GPUs and Tegra SoCs and Shield devices.

February 11, 2015. Diodes. Inventory decreased $7 million sequentially to $182 million in the quarter. Inventory days were 112 in the quarter compared to 108 days in the prior quarter. OEM sales were down 3.6% sequentially, while distributor POP and POS were down 4.7% and 5.4%, respectively. Distributor inventory increased 1.3% sequentially.

February 11, 2015. Applied Materials. Inventory increased 4.7% sequentially to $1.64 billion.

February 11, 2015. EZchip reports December quarter results. EZchip reported December quarter sales of $22 million, up 16% sequentially and up 11% yr/yr. Inventory increased 50% sequentially to $6.5 million. For the March quarter EZchip guided sales to the $25.5-$27.5 million range (midpoint=+20% sequentially).

February 9, 2015. Inphi. Inventory increased to $26 million, up 183% sequentially. Inventory days were 88 in the quarter and inventory turns was 4.1 in the quarter.

February 5, 2015. ON Semiconductor. Inventory grew 1% sequentially to $729.9 million. Days of inventory were 116 days, down 7 days sequentially. The distributor inventory level increased by a week sequentially to around 10 weeks.

February 5, 2015. NXP Semiconductor. Inventory grew 1% sequentially in the quarter. Sales in the distribution channel increased 1% with sales out of distribution up 10% sequentially. Total months of inventory in the distribution channel were 2.3 months, below the company’s long term target and down from 2.6 months in the prior quarter.

February 4, 2015. Monolithic Power Systems. Internal inventory levels declined 1.6% sequentially. Inventory days decreased to 107 days compared to 105 days in the prior quarter. Days of inventory in the distribution channel declined sequentially in the December quarter and were at the lowest level in the past two years.

February 3, 2015. Lattice Semiconductor. Inventory declined 0.3% sequentially to $64.9 million. Months of inventory was 5.2 in the quarter compared to 5.6 months in the prior quarter.

February 2, 2015. IDT. Inventory grew $3 million sequentially to $40.9 million. Days of inventory remained at 64 days sequentially. Channel inventory at distributors declined again to the low end of the historical range.

February 2, 2015. M/A-COM Technology Solutions. Inventory grew 21% sequentially to $89.2 million. Inventory turns were 2.4 in the quarter compared to 2.9 turns in the prior quarter.

Upcoming Microprocessor Product Introductions.

The following is a list of scheduled new processor product introductions that we have seen suggested in press and web articles including articles on Fudzilla, SemiAccurate, CPU World, TweakTown, X-Bit Labs and DigiTimes.

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

Q1 2015. AMD possibly releasing: o Carrizo-L for entry level notebooks (replacing Beema and Mullins APUs). Q1 2015. Intel possibly releasing: o 14nm Morganfield processors o Broadwell K Q2 2015. Intel possibly releasing: o Xeon-D (Broadwell-DE based) microserver processors Xeon D - 8 cores, Server, 45W TDP, Q2 2015 o Haswell-EX CPUs for Mission Critical and Enterprise Class applications, 4-way servers. Xeon E7 v3, Jordan Creek 2 Scalable Memory Buffers, C602J chipset Xeon E7-4809 v3, Xeon E7-4820 v3, Xeon E7-4830 v3 Xeon E7-4850 v3 Xeon E7-8860 v3 Xeon E7-8867 v3 Xeon E7-8870 v3 Xeon E7-8880 v3 Xeon E7-8880L v3 Xeon E7-8890 v3 Xeon E7-8891 v3 Xeon E7-8893 v3 o Xeon E5-4600 v3 (Haswell processors for 4-way server applications) E5-4610 v3 E5-4620 v3 E5-4640 v3 E5-4650 v3 E5-4660 v3 E5-4627 v3 E5-4655 v3 E5-4667 v3 E5-4669 v3 o Xeon E3-2400 v3 o Single core Liffy Island Quark SoCs (instead of Dublin Bay SoCs) with improved security features and TDPs around the same range as current Quark X1000 products June 2015. AMD possibly releasing: o Radeon R9 380X GPU H1 2015. AMD possibly releasing: o Kaveri Refresh: Athlon X4 850 - 4 cores, 2.9 GHz, 4 MB L2 cache, 65W Athlon X4 870K - 4 cores, 3.5 GHz, 4 MB L2 cache, 95W A4 PRO-8350B - 2 cores, 3.0 GHz, 1 MB L2 cache, Radeon R5 GPU, 65W A6 PRO-8550B - 2 cores, 3.1 GHz, 1 MB L2 cache, Radeon R5 GPU, 65W A6-8550K - 2 cores, 3.1 GHz, 1 MB L2 cache, Radeon R5 GPU, 65W A8 PRO-8650B - 4 cores, 2.9 GHz, 4 MB L2 cache, Radeon R7 GPU, 65W A8-8650 - 4 cores, 3.2 GHz, 4 MB L2 cache, Radeon R7 GPU, 65W A8-8650K - 4 cores, 3.2 GHz, 4 MB L2 cache, Radeon R7 GPU, 95W A10 PRO-8750B - 4 cores, 3.0 GHz, 4 MB L2 cache, Radeon R7 GPU, 65W A10-8750 - 4 cores, 3.0 GHz, 4 MB L2 cache, Radeon R7 GPU, 65W A10 PRO-8850B - 4 cores, 3.7 GHz, 4 MB L2 cache, Radeon R7 GPU, 95W A10-8850K - 4 cores, 3.7 GHz, 4 MB L2 cache, Radeon R7 GPU, 95W H1 2015. Intel possibly releasing: o 22nm Haswell-E HEDT platform, known as Lituya Bay o Qualification samples of 47W TDP Broadwell H mobile/desktop SKUs are expected to begin in week 6 of 2015 with production beginning in weeks 11-16 of 2015, and shipments beginning at some point in mid-May to the end of June (possibly delayed to weeks 29-36 along with S-variants). Mid 2015. AMD possibly releasing: o Carrizo APUs for mainstream performance notebooks (replacing Kaveri APUs) with four 28nm Excavator cores and support DDR3-2133 memory. Q3 2015. Intel possibly releasing: o 14nm Braswell entry-level desktop chips – 2-4 Airmont cores, 8th gen graphics, 16 execution units, 1-2MB of L2 cache, dual-channel DDR3 memory, support for Windows 8.1, Windows 7, Android, Chrome, & Linux (possibly delayed to June- August, from an original Q1’15 expectation)

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

o Broadwell-E – Core i7 6xxx, 140W TDP o Broadwell H processors o Braswell budget and ultra-thin notebook SoCs o Broadwell-EP Xeon E5-2600 v4 microprocessors, 8-12 cores, up to 2.6 GHz, TDP range of 85W-135W. o Xeon D - 8 cores, Server, 45W TDP o Xeon D - 8 cores, Embedded, 35W & 45W TDP o Xeon D - 6 cores, Server, 45W TDP o Xeon D - 6 cores, Embedded, 35W TDP o Xeon D - 4 cores, Server, 45W TDP o Xeon D - 4 cores, Embedded, 25W & 35W TDP o Xeon D - 2 cores, Embedded, 25W TDP o Pentium - 2 cores, Embedded, less than 20W TDP Q3 2015. AMD possibly releasing: o Nolan x86 tablet platform o Amur HSA Android/Linux tablet platform (with ARM Cortex A57 processors) H2 2015. Intel possibly releasing: o 14nm Sky Lake desktop platform using Sunrise Point (100-Series) chipsets. Within Sky Lake, desktop variants are expected to be available in 35W & 65W dual-core and 35W, 65W, & 95W quad-core options, while H series variants are expected to be available in 45W, 55W, 65W, & 95W quad-core options, U series variants are expected to be available in 15W & 25W dual-core options, and Y series variants are expected to be available in 4.5W dual-core options. o Skylake processors may have been delayed from an early-Q3’15 release to a late- Q3’15-to-early-Q4’15 release. o Xeon E3-1200 v4 – mid-2015, Broadwell Architecture, compatible with Denlow platform and C220 chipsets, up to 4 CPU cores, up to GT3 graphics with 128MB of embedded DRAM, LGA package, support for up to 32GB of DDR3 and DDR3L memory. o Xeon E3-1200 v5 – Greenlow platform, C230 chipsets, LGA package, compatible with socket 1151, up to 4 CPU cores, up to GT2 graphics, DDR3 and DDR4 compatible, up to 64MB of RAM. o Xeon E3-1200 v5 – end of 2015/beginning 2016, BGA package, up to GT4 GPU with 128MB of embedded DRAM, 4 CPU cores, only DDR4 memory support. 2015. AMD possibly releasing o Project Skybridge 20nm products, Puma+ cores and ARM57 cores. o Toronto server SoCs 3Q 2016. AMD possibly releasing: o Zen x86 architecture - up to 8 CPU cores, support DDR4 memory, TDPs up to 95W, FM3 socket, manufactured on either Samsung or Globalfoundries’ 14nm process o Bristol Ridge processors - 28nm, up to four Excavator cores, DDR4 support, 95W TDP 2H2016 onwards. AMD possibly releasing: o Radeon R9 400 Series Artic Islands GPUs 2016. AMD possibly releasing: o K12 64-bit ARM processors 2016. Intel possibly releasing: o single core Seal Beach Quark SoCs, which are expected to feature improved performance as a result of added support for SSE2 instructions and integrated 2D/3D graphics controllers o Skylake-U Core i5 and i7 processors in Q1’16.

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

Stocks we cover/Dividend monitor:

Price Annual Annualized Company Name Ticker 03/06/15 Dividend Yield Rating Altera ALTR $35.78 $0.72 2.0% Outperform Advanced Micro Devices AMD $2.92 - - Outperform Analog Devices ADI $57.93 $1.60 2.8% Market Perform Broadcom BRCM $44.33 $0.56 1.3% Underperform Intel INTC $33.19 $0.96 2.9% Outperform Linear Technology LLTC $47.65 $1.20 2.5% Outperform Maxim MXIM $35.67 $1.12 3.1% Market Perform Micrel, Inc. MCRL $15.40 $0.20 1.3% Outperform Micron Technology MU $28.50 - - Underperform Microsemi MSCC $33.18 - - Market Perform Monolithic Power MPWR $51.72 $0.60 1.2% Market Perform Nvidia Corporation NVDA $22.55 $0.34 1.5% Market Perform Qualcomm QCOM $71.51 $1.68 2.3% Outperform Spansion CODE $36.99 Market Perform SunEdison Semiconductor SEMI $24.40 - Outperform Texas Instruments TXN $57.64 $1.36 2.4% Market Perform Xilinx XLNX $40.58 $1.16 2.9% Outperform Source: FactSet, Wells Fargo Securities, LLC

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I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report.

Wells Fargo Securities, LLC maintains a market in the common stock of SunEdison Semiconductor, Ltd., Altera Corp., Nvidia Corporation, Spansion Inc., Intel Corp., Micron Technology, Inc., QUALCOMM Inc., Xilinx Inc., Microsemi Corp., Analog Devices, Inc., Advanced Micro Devices Inc., Broadcom Corp., Maxim Integrated Products Inc., Texas Instruments Inc., Linear Technology Corp., Micrel Inc., Monolithic Power Systems, Inc. Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for Advanced Micro Devices Inc., Micron Technology, Inc., SunEdison Semiconductor, Ltd. within the past 12 months. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from SunEdison Semiconductor, Ltd., Spansion Inc., Nvidia Corporation, Altera Corp., Micron Technology, Inc., Intel Corp., Xilinx Inc., QUALCOMM Inc., Advanced Micro Devices Inc., Broadcom Corp., Analog Devices, Inc., Microsemi Corp., Micrel Inc., Linear Technology Corp., Texas Instruments Inc., Maxim Integrated Products Inc., Monolithic Power Systems, Inc. Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from Advanced Micro Devices Inc., Micron Technology, Inc., SunEdison Semiconductor, Ltd. in the past 12 months. Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of Spansion Inc., Micron Technology, Inc., QUALCOMM Inc., Microsemi Corp., Analog Devices, Inc., Maxim Integrated Products Inc. Advanced Micro Devices Inc., Micron Technology, Inc., SunEdison Semiconductor, Ltd. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to Advanced Micro Devices Inc., Micron Technology, Inc., SunEdison Semiconductor, Ltd. SunEdison Semiconductor, Ltd., Intel Corp., QUALCOMM Inc., Xilinx Inc., Broadcom Corp., Analog Devices, Inc., Maxim Integrated Products Inc., Texas Instruments Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to SunEdison Semiconductor, Ltd., Intel Corp., QUALCOMM Inc., Xilinx Inc., Broadcom Corp., Analog Devices, Inc., Maxim Integrated Products Inc., Texas Instruments Inc. Maxim Integrated Products Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to Maxim Integrated Products Inc. Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from Maxim Integrated Products Inc., Texas Instruments Inc., Analog Devices, Inc., Broadcom Corp., Xilinx Inc., QUALCOMM Inc., Intel Corp., SunEdison Semiconductor, Ltd. in the past 12 months. Wells Fargo Securities, LLC or its affiliates has a significant financial interest in Spansion Inc., Altera Corp., Nvidia Corporation, Intel Corp., Micron Technology, Inc., QUALCOMM Inc., Xilinx Inc., Broadcom Corp., Analog Devices, Inc., Microsemi Corp., Texas Instruments Inc., Linear Technology Corp., Maxim Integrated Products Inc., Monolithic Power Systems, Inc. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from an affiliate of Maxim Integrated Products Inc., Analog Devices, Inc., SunEdison Semiconductor, Ltd. Wells Fargo Securities, LLC or its affiliates managed or co-managed a public offering of securities for an affiliate of SunEdison Semiconductor, Ltd. within the past 12 months. Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from an affiliate of SunEdison Semiconductor, Ltd. in the past 12 months. A member of Research Management currently has a long position in the securities of QUALCOMM Inc.

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

ADI: Company-specific risks include the possibility of gross margin pressures and volatility in the consumer segment. Sector risks include inventory risk and pricing pressures. ALTR: Company-specific risks include the likelihood that Altera's margins might fall in the future, and competition, chiefly from Xilinx. Sector risks include possible slowing in end-market demand, especially in communications. AMD: Company-specific risks include the possibility of market-share losses, a potential inability to keep pace with Intel on microprocessor innovation, potential delays in manufacturing transitions or new product introductions, and a weak balance sheet. Sector risks include the possibility of decelerating PC growth in the current economic environment. BRCM: Company-specific risks include low GAAP operating margin, low GAAP tax rate, the possibility that Broadcom might show a slowing of growth in the future, and the possibility Broadcom might make large, dilutive acquisitions in the future. Sector risks include our belief that some of Broadcom's end markets have relatively low growth prospects. CODE: Company specific risks include uncertainty as to how long it might take Spansion to begin generating revenues from embedded controller products. Sector specific risks include the fact that the NOR market has been in secular decline for several years. INTC: Company-specific risks include competition from AMD and rising capital spending. Sector risks include the possibility of decelerating growth in PC shipments. LLTC: Company-specific risks include the possibility Linear may face a margin/growth trade-off in the future. Sector risks include cycle and inventory risk. MCRL: Company-specific risks include competition from several large analog semiconductor companies, and relatively high exposure to the handset end market. Sector risks include cyclicality of the overall semiconductor market and macroeconomic risks.

MPWR: Company-specific risks include competition from several large analog semiconductor companies and relatively high (albeit declining) exposure to the consumer end market. Sector risks include cyclicality of the overall semiconductor market and macroeconomic risks.

MSCC: Company-specific risks include relatively low GAAP operating margins, exposure to the changes in US defense budgets, and a highly competitive environment in various integrated circuit segments. Sector risks include potential slowing in the semiconductor cycle. MU: Risks include highly volatile pricing for DRAM and NAND flash, the need for relatively high levels of capital investment, and large swings in Micron's profitability that have occurred in the past and which we think are likely to continue in the future. MXIM: Company-specific risks include the possibility Maxim may not be able to effectively balance both healthy margins and growth in the future, and that its high proportion of consumer-related revenue could lead to revenue fluctuations. Sector risks include semiconductor cycle and inventory risks. NVDA: Risks include a highly competitive business environment in both graphics and mobile processor chips, and the question of whether efforts by microprocessor makers to integrate graphics into microprocessor chips might impact the discrete GPU market. QCOM: Company-specific risks include legal and licensing disputes, and technology transitions that could impact Qualcomm's royalty rate. Sector risks include pricing pressures and slowing growth in the handset market. SEMI: Company-specific risks include cyclical business exposure with high fixed cost base can lead to big swings in profitability and SunEdison Semiconductor is exposed to ongoing consolidation in its customber base. Sector risks include cyclicality of the overall semiconductor market and macroeconomic risks. TXN: Company-specific risks include TI's ongoing exit from the wireless baseband business and a number of other segments of TI which we consider to have the risk of declining sales or low growth. Sector risks include the possibility of disruptions in the semiconductor market, including inventory corrections, slowing growth, and pricing pressures. XLNX: Company-specific risks include competition, chiefly from Altera, and competitive pressure to move quickly to each new technology node that becomes available. Sector risks include large cyclical swings.

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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.

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

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: March 8, 2015 44% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Outperform. services for 42% of its Equity Research Outperform-rated companies. 55% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Market Perform. services for 29% of its Equity Research Market Perform-rated companies. 2% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Underperform. services for 33% of its Equity Research Underperform-rated companies.

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WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips At Mobile World Congress EQUITY RESEARCH DEPARTMENT

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