September 4th 2014

Investordagen Høsten 2014 Trondheim

Company overview

Svein-Egil Nielsen, Chief Technology Officer

September 4th 2014

3

Nordic Semiconductor (OSE: NOD)

Texas Instruments (acquired Chipcon in 2006 for MUSD 200)

Silicon Labs (acquired Energy Micro in 2013 for MUSD 170)

Thin Film Electronics (OSE: THIN)

Atmel Semiconductor

ARM

Welcome to «The Silicon Fjord»

Major semiconductor companies with IoT research in Norway

Co

mp

any

Overview

Norway’s semiconductor research center for the Internet of Things

4

Presentation highlights

Nordic Semiconductor is the market leader in short-range wireless solutions with ultra-low power consumption

200 million semiconductor units sold in 2013

Proprietary wireless and Bluetooth Smart technologies

Dominant competitive position (est. 60%+ market share) in key product segments such as wireless PC mice / keyboards and fitness monitors

This market is expected to grow rapidly as Bluetooth Smart wireless technology is integrated into a rapidly growing range of products (aka the “Internet of Things”)

IoT creates vast new market opportunities for wireless connectivity solutions

Bluetooth Smart will be a central part of the IoT infrastructure, as an inexpensive and low power standard for connecting to billions of smartphones and other devices.

Nordic Semiconductor is very well-positioned for these growth opportunities, based on its industry-leading wireless solutions and market position

Leading technology for battery powered wireless applications

Chairman of Bluetooth organization (20,000+ member companies), and key contributor to Bluetooth Smart wireless standard.

Co

mp

any

Overview

5

This is Nordic Semiconductor

Nordic Semiconductor is a leading developer of semiconductors for short-range wireless applications.

Founded in 1983, listed on OSE during 1996

Specializes in 2.4 GHz RF technology for ultra-low power wireless applications

Sold 200M semiconductor units during 2013

MUSD 124 revenue (2013)

Chairman of Bluetooth SIG / Key contributor to Bluetooth Smart standard

Key wireless markets include:

PC accessories

Fitness monitors

Bluetooth Smart mobile accessories

Many other diverse products

Organization of 250 people, of which 179 work in R&D

Headquarters in Norway, with offices in US, Europe, Asia

Fabless business model: TSMC manufactures wafers, Amkor / ASE are partners for assembly and test

Physical distribution handled via a global network of electronics distributors

The market leader in ultra-low power wireless solutions Co

mp

any

Overview

6

Defining the ultra-low power wireless category

Key parameters

Data transfer rate Power consumption

Cost

Higher

• WiFi / WLAN • Bluetooth “classic”

(2.4 GHz)

Lower

• Infrared • Lower frequency radios

(sub-1 GHz)

Ultra-low power wireless solutions

• Wireless technology for low-cost, battery-powered applications (e.g., sensors, remote controls)

• Short-range (10-30 meters) and high performance (2.4 GHz RF)

• Ultra-low power consumption (1 year+ battery life on AA, AAA, or coin cell batteries)

Co

mp

any

Overview

7

Nordic sales history C

om

pan

y O

verview

0

30

60

90

120

150

180

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E*

Group revenue by year, 2002 –2014E* (MUSD) 2002 – 2007:

Launch of 1st generation product platform (NRF01)

First major design wins.

2007 – 2012:

Launch of 2nd generation product platform (NRFL01)

Revenue explodes as Nordic captures dominant market share in wireless mice/keyboards, then declines with PC market

2012 - :

Launch of 3rd generation product platform (NRF51), optimized for BT Smart

Return to revenue growth from 2H 2013

* Consensus analyst estimate for 2014

Nordic Semiconductor’s revenue has grown rapidly since the launch of its first ultra-low power wireless solution in 2002

ALL revenue growth has been organic

8

Growing market within the «Internet of Things»

Nordic’s wireless solutions are now being integrated into an expanding range of products, collectively known as the “Internet of Things”*

Co

mp

any

Overview

Consumer benefits of wireless solutions

Control: remote use of electronic devices

Security / ID: secure, track and find anything

Monitoring: monitor your health, family and living environment

Information: receive targeted information based on your location

Convenience: simplify activities (wireless payments, charging, etc)

Entertainment: interactive gaming in the physical world

* ”Internet of Things” definition: the collection of smart, sensor-enabled physical objects, and the networks, services and servers that interact with them (source: ARM)

9

Recent technology trends enable the «IoT»

Mobile computing (“hubs”):

Huge growth of smartphones and tablets, enabling instant access to wireless and software apps

Smart sensors / accessories (“nodes”):

Very low power and low cost microcontrollers, sensors and MEMS to capture and process data

Connectivity technology:

Ultra-low power wireless solutions to transfer data Rapid adoption of new Bluetooth Smart standard for

connecting billions of devices

“App” ecosystem:

Enormous popularity of smartphone apps – users enjoy engaging and interacting with their phones

Cloud Computing:

Cloud / Big Data services can manage end applications, and store and process data captured at the nodes

Key technology trends are driving the integration of wireless solutions into a growing range of products and sensors

Co

mp

any

Overview

10

Bluetooth Smart wireless technology will play a critical role in connecting the «Internet of Things» Bluetooth Smart (aka low energy) is a new standard for ultra-low power

wireless communication adopted as part of Bluetooth version 4.0

Offers compatibility with a huge ecosystem of Bluetooth devices (Approx. 2 billion Bluetooth devices sold per year – moving to version 4.0 or later)

Designed specifically for short-range sensors and accessories

Ultra-low power consumption Low unit cost Strong performance across other wireless metrics (Data rate, range, reliability)

Co

mp

any

Overview

Bluetooth Smart Sensors and Accessories

Sense environment Control accessories

Web access Storage Data analysis

BT 4.0 control unit Smartphone, tablet, etc.

«The Cloud» Data services

User interface Collect sensor data Process data (app)

11

Nordic’s history with Bluetooth Smart technology

• Nordic launches first generation ultra-low power 2.4GHz RF solution (NRF01)

• Nordic gains first major design wins in wireless PC accessories and wearable Sports monitors

2005

Phase 2: Nokia launches strategy for connecting phones with ultra-low power wireless accessories

Phase 1: Nordic pioneers ultra-low power wireless category

2002

2003-5

Phase 3: Bluetooth SIG takes over Wibree -- new technology launched as Bluetooth Smart

2006

• Nokia invites Nordic to become first member of “Wibree” research initiative for connecting phones with ultra-low power wireless accessories

• Nordic contributes core technology and expertise to Nokia Wibree initiative

• Nokia announces Wibree technology in press release

• Wibree connects ultra-low power wireless devices with modified Bluetooth chips in mobile phones

2007

2010

• Bluetooth SIG merges with Wibree, plans to launch technology as a new Bluetooth standard (renamed Bluetooth Smart)

• Bluetooth SIG launches Bluetooth version 4.0, with Bluetooth Smart as hallmark technology

• Apple begins supporting Bluetooth 4.0 in iPhone 4S and later devices (including iPads and Macs).

• Microsoft Windows 8 OS and Google Android launch support for Bluetooth 4.0

2011

2012-3

Phase 4: Bluetooth Smart takes off as core technology for connecting with the “Internet of Things”

Co

mp

any

Overview

12

Nordic Semiconductor has been a member of the Bluetooth SIG Board of Directors since 2011

Nordic currently serves with Apple, Ericsson, Intel, Lenovo, Microsoft, Motorola, Nokia, Toshiba, LG and CSR on the Bluetooth SIG Board

The Bluetooth SIG organization drives the development of Bluetooth wireless technology and consists of more than 20,000 member companies

Nordic as Chairman of Bluetooth organization

Nordic R&D executive Svein-Egil Nielsen has been appointed Chairman of the Bluetooth SIG from December 2012

Co

mp

any

Overview

13

The Internet of Things begins by connecting smartphones to wireless sensors and accessories

The smartphone is the ideal device for connecting with wireless sensors and accessories

It’s sold in huge volumes (1+ billion in 2013)

It’s personal, always on, and carried everywhere

It has a great screen and touch interface

It has a powerful processor

It offers easy access to downloading and operating new software applications

It’s connected to the cloud

The smartphone will be the dominant user access point to the «Internet of Things»

Co

mp

any

Overview

14

Bluetooth Smart + Smartphones = innovation

The combination of smartphone apps and Bluetooth Smart wireless solutions is unleashing a wave of innovative new products and services

The 1st generation of smartphone apps enabled access to data and services in the “cloud”

100 billion apps downloaded in 2013*

The next generation of apps is enabling people to interact with a vast range of sensors and other products

The possible end products are virtually endless, with a low cost to design and sell

Any local sensor which can transmit information to the smartphone

Any local electronic device which the smartphone can control

Any event which can be activated by your presence or absence

*Source: Gartner

Co

mp

any

Overview

15

Record sales of Bluetooth Smart solutions

0

2

4

6

8

10

12

14

Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14

Total Nordic revenue from Bluetooth Smart, 2012 – Q2 2014 (MUSD)

Sales of Bluetooth Smart solutions increase to MUSD 12.2 in Q2 2014, as demand for «Internet of Things» applications grows

Co

mp

any

Overview

16

Nordic’s sales of Bluetooth Smart solutions

Nordic percentage of revenue from Bluetooth Smart, 2012 – Q1 2014

Sales of Bluetooth Smart solutions have jumped to 30% of revenue in Q1 2014, as demand for «Internet of Things» applications grows

0%

10%

20%

30%

Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14

Co

mp

any

Overview

17

Nordic’s competitive advantages in BT Smart Nordic Semiconductor is the market leader within Bluetooth Smart solutions, with its

best-in-class nRF51 product line, software, and customer experience.

Wireless system-on-chip

performance

Software and Developer

Support

Experience in Ultra-low power wireless category

High radio sensitivity with ultra-low power consumption

ARM Cortex M0 CPU

256kB/128kB Flash memory for application and protocol stacks (non-volatile memory)

Unique multiprotocol functionality (BT Smart, ANT, proprietary RF)

Stable and mature system architecture

Clear market leader – over 1 billion IC’s sold

Major contributor to Bluetooth Smart standard

Board member of Bluetooth SIG from 2011

Chairman of Bluetooth SIG from 2012

Very strong reference customers

Application design and market know-how

Feature rich and stable Bluetooth Smart stack

Unique separation between application and protocol stack – eases product design

Unique DFU (design for upgradability) feature – protects from software bugs and obsolescence

Strong documentation, development tools, application software and reference designs

Co

mp

any

Overview

18

Strong growth opportunities as Bluetooth Smart spreads into many new product categories

• Mice

• Keyboards

• Tablet pens

• Tablet cases

• Game controllers

• Presentation remotes

PC / Tablet Accessories

• Fitness sensors

• Medical monitors

• Proximity sensors

• Smartwatches

• Smartphone controls

• Other wearables

Mobile / wearable devices

• Remote controls

• Game controllers

• Wireless toys

• Smart lighting

• Smart appliances

• Wireless chargers

• Home automation

Home electronics

• RFID • Retail beacons • Mobile payments • Security / locks • Indoor mapping • Smart energy • Environment sensors • Automotive

Installed Sensor networks

Co

mp

any

Overview

19

1 Billion units sold and counting…

Nordic celebrates its 1 billionth chip sold in December 2013

200 million units sold in 2013 alone...

Co

mp

any

Overview

20

Sales

Year

1st Gen: NRF01

wireless

2nd Gen: NRFL01 wireless

4th Gen: Future

IoT

3rd Gen: NRF51

BT Smart

Current growth wave will be driven by Bluetooth Smart technology, where Nordic has been investing since 2006

Future growth wave will be driven by Bluetooth Smart and complementary technologies within the «Internet of Things»

Nordic creating new programs for the next generation of opportunities

Technology portfolio

Strategic partnerships / acquisitions

Intellectual property

Staffing

Incentive programs

Preparing for the next billion(s) of units The «Internet of Things» presents a vast long-term growth opportunity

2002 - 2007 2008 - 2011 2012 +

Co

mp

any

Overview

21

Business Outlook - 2014

Strong growth in revenues, driven by Bluetooth Smart sales

Sales of BT Smart expected to more than triple in 2014 (i.e., MUSD 63+ in Bluetooth Smart sales)

Continued growth in wearable fitness monitors, plus many new designs in emerging product categories

Gross margin of approximately 50% in 2014

Operating expenses including depreciation projected to grow to approximately MUSD 60 - 64 in 2014*

2014 Opex growth driven heavily by accounting items (options / capitalized R&D), which are expected to diminish in 2015

* Assumes NOK / USD exchange rate of 5.90 for remainder of year

Co

mp

any

Overview