Slide 1: Cellular IoT: Investor and analyst brief
Cellular loT Investor and analyst brief Noreic Sen coe’ ASA
Slide 2: Introduction
Slide 3: Today is all about Cellular IoT
Today is all about Cellular loT Low power LTE The market Our strategic technology opportunity investment Fundamental concepts Fundamental drivers Product and market strategy Shaping the future of loT Size and growth potential Product development
Slide 4: Proven track record - years into cellular IoT
Proven track record - 2 years into cellular loT Proprietary 2.4GHz Bluetooth 5 years 4 years to reach first revenue to reach first revenue
Slide 5: Today's speakers
Today's soeakers Thomas Embla Svein-Egil Juha Bonnerud Nielsen Heikkila Director of Strategy and IR Chief Technology Officer Head of Nordic Finland 15 year+ with Nordic Started in 2001 > 20 years in cellular Last 10 in Product Management Responsible for R&D organization chipset development Product a
Slide 6: Today's agenda
© 280 SECON Today's agenda #1 Technology and ecosystem #2 ~~ Cellular loT market #35 Product and market strategy #4 Product develooment #5 Q&A
Slide 7: Technology and ecosystem
Slide 8: Cellular - a unique value proposition for IoT
Cellular - a unique value proposition for lot Connectivity anywhere Existing network infrastructure
Slide 9: The emergence of low power LTE
The emergence of low power LTE Cost/size/power Higher LTE Cat 1+ Low power LTE Lower (LTE-M, NB-loT) Lower throughput Higher throughput
Slide 10: New low power LTE technologies
New low power LTE technologies LTE-M NB-loT Also known as “LTE-MTC”, “LTE Cat-M1” “LTE Cat-M2”,"LTE Cat-NB1” Max throughput - 375kbps - 30/60kbps Range Up to 4x Up to 7X Mobility Yes Limited Frequency deployment LTE In-band LTE In-band, guard band and GSM re-purposing Deployment density Up to 200,00
Slide 11: More than low power...
More than low power... Broader coverage Massive deployments Smaller size Lower cost Rural areas Higher density Space constrained Module cost Deep indoor deployments devices Subscription cost
Slide 12: Low power LTE vs. unlicensed LPWAN
Low power LTE vs. unlicensed LPWNA Low power LTE Unlicensed LPWAN (NB-loT, LTE-M) (SigFox, LORA...) Open standard Yes, 3GPP No, proprietary Frequency bands Licensed Unlicensed, sub 1-GHz ISM Infrastructure Existing LTE New Max throughput Up to 375kbps Up to 6kbps Reliability and QoS (+++) © Security
Slide 13: Cellular IoT ecosystem and players
Cellular loT ecosystem and players =~ Cellular enabled thing I SONY / RF Front-end Chipset Modules Infrastructure Carriers Cloud a NOKIA Nei olan SKYWORKS: NORDIC @oiox verizon amazon gemalto” 4 Qorvo. SEQUANS smresson FEE Rib vicrosot azure Zs : Quatcomm’ Telit Wn HANNE! A Google Cloud i) i) G2) G2
Slide 14: The importance of modules for IoT
The importance of modules for loT Barriers for chipset integration Complexity of integration Tele-regulatory approvals Standard compliance Carrier certification Regional variants
Slide 15: Anatomy of a cellular module
Anatomy of a cellular module LTE module for M2M 37x50x5.3mm, USD ~40 cost = Chipset Baseband Processor, Radio = RF Front-end PA, LNA, Switches, filters ++ = Memory RAM. Flash = Power Management IC (PMIC) Source: IHS Technology Teardown Service, 2015 15
Slide 16: Region and carrier specific frequency bands
Region and carrier specific frequency bands w olf & = 44 LTE frequency bands ’ a ge = Low Bands (Sub 1GHz) . 9 | oe o. Joe * Mid Bands (2GHz) 7 2,412,137... : = High Bands (>2GHz) = Lower frequency longer range = Country specific bands oN .* = Operator specific bands
Slide 17: Band support for chipset and modules
Band support for chioset and modules —— Chipset Transceiver support for multi-band Cost and complexity impact eLU bee 7 ome) Module RF-front-end support for multi-band Significant cost and complexity impact Typically 2 - 5 bands
Slide 18: Device band support
Device band support 4G data modem 1-3 bands Limited to a carrier and region Lower complexity and cost Modern smartphone 25+ bands Worldwide roaming Higher complexity and cost
Slide 19: SIM and subscription
SIM and subscription SIM SIM is needed for network access Unique information / process for network identification Specialized secure microcontroller and memory Mini-SIM. Micro-SIM ‘SIM eSIM is key for lol SIM card not practical for loT application eSIM is chip Over-the-air provisioning Remotely mana
Slide 20: Low power LTE standardization
Low power LTE standardization SOS LTE-M NB-loT A GLOBAL INITIATIVE Standardization body Part of Release 13 Part of Release 13 GSM, UMTS and LTE Completed Completed 20
Slide 21: Certification complexity
Certification complexity Standard compliance — 3GPP requirements Tele-regulatory - Regional variations, \ / Cost & effort \ FqC, ETSI, Telec etc. \ \ Region/carrier specific products ——~_____ Carrier specific certification Additional and more stringent requirements Varies between carriers 21
Slide 22: Evolution path to 5G
© 280 SECON Evolution oath to 5G Ultra high throughput Higher frequency (>26GHz) Massive loT Evolution of LTE-M and NB-IOT Ultra reliable loT Zero outage, low latency 22
Slide 23: Cellular IoT market
Slide 24: Cellular IoT market opportunity
Cellular lol market opportunity Existing and fast Low power LTE Complements growing market a key driver Bluetooth market Excludes phones, tablets and PCs Continued growth > 2022 Different type of applications ~ 400M connection in 2015 Diversification of the market A few overlaps 27% CAGR* (*Source:
Slide 25: Low power LTE-M, NB-IoT
Low power LTE-M, NB-loT LTE Lower throughput - Power, size, coverage, cost Broad range of applications r | ~ 2G6/3G LTE GSM, UMTS, CDMA LTE Cat 1+ Maturity, coverage and cost Future proof, high throughput Network to be phased out High throughput applications 25
Slide 26: Low power connectivity redefined
Low power connectivity redefined ‘..° No local Mobility area network & roaming Existing infrastructure Ubiquitous connectivity Independence from local area network Security and reliability Ease of use 26
Slide 27: Key use cases in cellular IoT
Key use cases in cellular loT Remote monitoring ,@ >. Cloud connectivity Predictive maintenance Cost savings ] Business efficiency Remote maintenance Remote operation nn 27
Slide 28: A diversified market opportunity
A diversified market opportunity Low power LTE market Y 2017 - 2021 Logistics @ i Buildings Utilities = > - ah la os ww a = Cpe Home City Transport Consumer > \aB ] 1 ad. a: * B Mm 8 " — Industry Healthcare Enterprise and retail Agriculture & environment 28
Slide 29: Product-as-a-service unlocking consumer
Product-as-a-service unlocking consumer Cellular subscription part of the service Services built on top of connectivity Cloud, big data, machine learning Per “use” and/or recurring 29
Slide 30: Low power LTE coverage is key enabler
© 280 SECON Low power LTE coverage is key enabler Massive worldwide LTE coverage = LTE Cat 3+ = January 2016: 480 networks, 157 countries = Drivers: throughput and spectrum efficiency Low power LTE status and projection = Upgrade of existing LTE infrastructure = Rapid deployment = Test deployments i
Slide 31: Market sizing: public research
Market sizing: Oublic research Ericsson Mobility Report (2015) 15 28 CAGR billion [eileen Cellular loT 27% Non-cellular oT 22% Mobile phones Fixed phones 3 4 % 2015 2021 Connections (million) GSMA (2015) 1000 Current trajectory 2015-20 CAGR 25% 2010 2011 2012 20182014 2015 2016 2017 2018 20192020 31
Slide 32: Modelling unit shipments for low power LTE
Modelling unit shioments for low cower LTE Connections Replacement Low power LTE — Unit shioments rate (%) share (%) Change in number of Replacement of 2G/3G vs. connections General replacement 2G/3G and LTE Cat 1+ 32
Slide 33: Example model: unit shipment 2016 - 2021
DS Se Example model: units shioment 2016 - 2021 Cellular loT device shipment (MU) Dataset and assumptions 450 * Ericsson Mobility Report 2015 400 = 400M connected devices in 2015, mainly 2G/3G 350 = 27% CAGR 300 Replacement rate 250 200 = % of total number of connection 150 = 2% per year 2017 - 2021
Slide 34: Projected chipset ASP 2017 - 2021
© 280 SECON Projected chipset ASP 2017 - 2021 ‘Baseline’ $1 O " Transceiver + Baseband Processor ‘ = Single mode NB-loT or LTE-M i * Single low band support ! = Price erosion > 2021 i Chipset ‘Value add’ orice range = Application Processor . = Memory (Flash/RAM) ; = Power Management * Multimode LTE-
Slide 35: Projected module ASP 2017 - 2021
© 280 SECON Projected module ASP 2017 - 2021 ‘Baseline’ $20 * ‘Thin modem’, low cost LGA ‘ = Single mode NB-loT or LTE-M i * Single low band support ! = Price erosion 2021 i ‘Value add’ Module orice range * Multi-band, high performance RF front-end = Higher value chipset ; = On-board sensors, includ
Slide 36: Modelling market value for chipsets
Modelling market value for chipsets ASP # lowest price Volume distribution Distribution of over the price range customer size Range of price points Market / application depend Market dependent There will be a “value play” 36
Slide 37: Example model: market value 2016 - 2021
Example model: market value 2016 - 2021 Low power LTE chipsets (MUSD) Dataset and assumptions 1400 = Unit per year model earlier slide 1200 (Ericsson Mobility Report) 1000 = Low power LTE only * Flat $5 ASP 800 = Value add integration offsets price erosion 600 = May be to optimistic, may be to pessi
Slide 38: Other market enablers/drivers
Other market enablers/drivers Support for Adoption in Subscription consumer cost / model eSIM y — TaxiCnarge pen Ee, ee Local salos ta 250% 0.20% McTD s2le5 sate excise (7850) ape) 110% Shorter design cycles Drive early volume ramp Cost of ownership Over the air provisioning 38
Slide 39: Product and market strategy
Slide 40: Birdseye view - strategic rationale
Birdseye view - strategic rationale Technology shift Market shift Right expertise Opatt oo High throughput > Specialized > Nordic low power DNA power, size, coverage and cost broad diversified market Broad market model Cellular expertise in Finland 40
Slide 41: Technology strategy
Technology strategy Low power LTE only ae LTE-M and NB-loT . LTE-M first Early US deployments TA Broader range of applications | f O \ Multi-mode LTE-M / NB-loT chipset Incremental approach to a bigger market
Slide 42: Why not unlicensed LPWAN?
Se eee Why not unlicensed LPWAN? ‘One network A bilion dreams Wi SIGEOX #1 Proprietary - not open standards #2 Limited freedom to play and differentiate RPMA MA EIGHTLESS" #3 Less attractive market opportunity 42
Slide 43: The chipset - a different approach
The chipset - a different aporoach Architected and optimized for LTE-M.and.NB-lot High level of integration NB-loT support enabled with firrnware update NRF9O1xXx Power Size Performance Features Solution cost 43
Slide 44: Off-the-shelf and broad market solution
Off-the-shelf and broad market solution Complete and easy to Lowering barriers Leverage existing use solution of adoption community & ecosystem Strategic partnerships Enable innovation Forum and Developer Zone Hardware, software and tools Drive market growth 3’rd party tools and solutions 44
Slide 45: Focused and incremental go-to-market
Focused and incremental go-to-market F Regions Regional tailored offerings Carrier certifications and partnershios Customers and verticals High volume and growth potential Strong competitive edge Software New features and performance improvements, Meeting focus customer requirements 45
Slide 46: Lead customer momentum
Lead customer momentum Selected verticals —— ---.. Logistics, consumer, utilities Strong interest / Competitiveness of our solution \ Working with Nordic Collaboration on requirements Matching our early offering to their requirements 46
Slide 47: Target sampling and launch
Target sampling and launch Second half Limited sampling General sampling = Lead customers only » Public launch = Pre-production hardware = Pre-production hardware and software and software 47
Slide 48: 2017 - 2018 market entry
© 280 SECON 2017 - 2018 market entry Market awareness oN Technology maturity and maturi y Certification, Interoperability Use cases and applications Highly competitive product offering Ecosystem maturity Coverage Products and services Network support for LTE-M and NB-loT Remote provisioning Ne Subsc
Slide 49: Aligning production with lead customers - 18+ months design-in time
Aligning production with lead customers 9 - 18+ months design-in time Evaluation - development - certifications - production Production ramp linked to sampling schedule 2018 Volume ramp with lead customers Dependent on sampling schedule and design-in time 2019 Lead customers in volume production Vol
Slide 50: Product development
Svein-Egil Nielsen Juha Heikkila
Slide 51: Nordic has six R&D locations
= SNORDICSEMICONOUTOR Nordic has six R&D locations * Trondheim = -230 Engineers . RF/Analog, Digital design, Test, Firmware * Oslo * ~ 35 Engineers . RF/Analog, Digital Design, Firmware = Krakow = ~ 25 Engineers * Firmware * Oulu/Turku * ~130 Engineers * — RF/Analog, Digital/Mixed-Signal, Test, Firm
Slide 52: World class IC design capability
World class IC design capability Leading edge Radio’s «Fully designed in house * Stability and yield in production 0 a « Leading edge performance . Digital I/O > Basic Rate Bluetooth radio typically uses 25 to 35mMA 5 System Peripherals > Nordic 51 radio similar Basic Rate performance uses as low as
Slide 53: Large software teams in place
Large software teams in place Software is a key enabler for silicon sales —— 2-4 WEEKS — Gopyesier © 2005, Mounrain Soar SoTwane How does software add value? *» Making complex hardware simple to use » Adding reliability = Adding security « Adding higher-level functionality = Over-the-Air Device Firm
Slide 54: We are building sustainable competitive edge with R&D
We are building sustainable competitive edge with R&D Tight collaboration with marketing, sales and customers to ensure we make the right products Highly educated and experienced staff low attrition rate selective recruiting Large portfolio of in-house IP that are leveraged in new products, patent p
Slide 55: Committed to customer focused development
Committed to customer focused development Nordic Semiconductor’s R&D Department have a customer focused approach committed to providing off-the-shelf solutions to thousands of customer but at the same time be able to develop targeted solution to key application segments and supporting key customers
Slide 56: Fall of 2014 large layoffs in Finland
Se eee Fall of 2014 large layoffs in Finland Broadcom to stop making phone (A SGACEMRE SOFTWARE SEGURTY TRMSTORMATON DES BUINESS FASO chips—600 jobs to go in Finland say Data Centre » Networks wl ‘The wireless modem maker Broadcom isto shut down its connectivity chip Ericsson follows Broadcom to mod
Slide 57: Come meet us at Radisson Blu Oulu
Come meet us at Radisson Blu Oulu, Tuesday August 12th at 18:00 We are always locking forthe best engineers and offer a working environment where you will be integral to the development of ideas and ‘ecisions. Its an environment where you can make a giference and contribute tothe success of the comp
Slide 58: Saw a great opportunity, action needed fast
Saw a great opportunity, action needed fast We knew it is difficult to build a large competent and experienced team in Norway quickly =" Competencies found in Finland was a great match to our ambitious " Could build a sizeable organization quickly = Cultural and Geographical fit " Needed decision qu
Slide 59: Clear success criteria for establishing a presence in Finland
Clear success criteria for establishing a presence iN Finland = Strong management team. = Recruit efficiently and find great talent. Get up to speed fast with experience people = License key IP to secure schedule and performance of product = Solid integration with other parts of organization - “Not:
Slide 60: Nordic Semiconductor Finland - Oulu Office
Slide 61: Juha Heikkilä, Head of Finland
Juha Heikkilä Head of Finland HR/Finance/Admin Sonja Kusmin Radio SW RF Digital BB Systems Vesa Olli Närhi Pekka Yrjö Pellikka Kotila Kaipainen Project Management Heikki Päivike
Slide 62: R&D Finland
R&D Finland Highly capable organization quickly built = Managment team rapidly built Staff " Have recruited the whole Functions cellular modem competence in house = Resourcing optimized for cellular low power and low cost loT develoment 65 employees in place by start 7 January 2015 , now 135 employe
Slide 63: Highly relevant experience
2&D F Highly relevant experience . R&D Finland Cellular Experience in Years Radio Systems personell with Nokia-Renesas-Broadcom background "Design from very first cellular systems up to highest category LTE modems ae 0-1 1-5 5-10 10-15 15-20 20- Power management, RF and Digital IC and SOC design per
Slide 64: Products developed with cross-functional teams in Finland and Norway
Products developed with cross-functional teams In Finland and Norway R&D Finland tightly integrated with teams in Norway = 80% development in Finland: Cellular technology = 20% in Norway: Low power technology SOC integration = Cross fertilization of best in class knowledge = Scale on specialized ski
Slide 65: Scaling on existing Nordic Semiconductor infrastructure
Scaling on existing Nordic Semiconductor infrastructure = Leveraging existing technology platforms = Internal design processes, Quality systems =» Reuse of technology and design blocks from current Nordic projects » Shared CAD tools » Shared resources for verification *» Common datacenter = Existing
Slide 66: Technology purchasing, licensing and outsourcing vital to development success
Technology purchasing, licensing and outsourcing vital to develooment success Licensed and acquired HW and SW building blocks to speed up development and reduce risk » Microcontrollers, DSP, memory... = RF modules = Software «= OS's Selective outsourcing of key elements to key partners 66
Slide 67: Pre-silicon modelling environments in place
Pre-silicon modelling environments (IC emulation and FPGA) in place RF and Power measurement capability with high level of automatization Automated protocol testing capability RF Shielded champers
Slide 68: Iterated IC development process
Iterated IC develooment process Special function test chips » Analog/RF Full system prototypes for SW development > Debugging/verification, certification/ carrier interoperability > Early customer sampling Mass-production chips » Fixing bugs and issues from prototype chips > Possibly add additional
Slide 69: Software development ongoing
Software development ongoing Software develooment for Cellular IOT products Firmware and RF SW. Ll and L2/L3 protocols Communication protocols Test and verification SW Interoperability and field testing + certification Multiple tools and platforms Emulators FPGA platforms Prototype Chips = Software
Slide 70: Partners in place for interoperability testing and certification
Partners in place for interoperability testing and certification Collaboration with main infrastructure vendors in place = Requirements alignment: technical details, feature roadmap and schedules » Interoperability testing (lab and field testing) Carrier collaboration with selected carriers in place
Slide 71: Overall development flow
Se eee Overall develooment flow Asset development Product Integration and Testing Production RF Tranceiver dev. IC Prototypes IC Production Modem BB dev Production so Test development Interoperability Testing ertification
Slide 72: Significant development progress
Significant develooment progress Multiple succesfull tapeouts = Two RF chips = Full prototype Baseband Chip Software development in good shape = 1.5 million lines of code Partnerships in place = Technology = Infrastrucuture vendors = Carriers Note: Image is not the new Nordic Cellular |OT Chip it is
Slide 73: Summary and Q&A
Slide 74: Today is all about Cellular IoT
Today is all about Cellular loT Low power LTE The market Our strategic technology opportunity investment Fundamental concepts Fundamental drivers Product and market strategy Shaping the future of loT Size and growth potential Product development 74
Slide 75: Q&A
Q&A
Slide 76: Cellular IoT: Investor and analyst brief
Cellular loT Investor and analyst brief Noreic Sen coe’ ASA
Slide 77: Disclaimer
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. This presentation doe