Nordic Semiconductor

Investor Presentation • Jan 20, 2016

Smarter Things

OUTSTANDING EMEA SEMICONDUCTOR COMPANY

Capital Markets Day

Frankfurt, 20^th February 2015 Svenn-Tore Larsen, CEO

Agenda

• Introduction (13.00-13.30) 1.
• Nordics Strategic Direction: Svenn-Tore Larsen (CEO)
• 1. Bluetooth Smart's Position in the Fast Growing IoT (13.30-14.45)
• External Perspective: Lee Ratliff (IHS)
• 1. Nordic's Market Opportunities and Competitye Edge (15.00-16.15)
• Thomas Bonnerud and Kjetil Holstad (Product Management) $\bullet$
• Sales Strategy (Svenn-Tore Larsen) $\bullet$
• 1. Financial Ambitions and Wrap up (16.15-17.00)
• Financial Update: Pål Elstad (CFO) $\bullet$
• Key Takeaways: Svenn-Tore Larsen (CEO)

A leading vendor of wireless connectivity and embedded processing solutions for internet connected things

WAN $(lkm+$ LAN

$(100m+)$ PAN $(10m+)$

Things we wear

... we carry around

... around us at home

• ... around us at work
• ... around us in the city

... around us in the country side

Things - not infrastructure, ... not PCs, ... not phones ... not tablets

Today the Leader In PANs with Bluetooth Smart, Investing in Long Range wireless solutions for tomorrow

Finland is about Long-Range Low Power

Unique experience and track in record in 2G, 3G, and 4G cellular connectivity

Powerful synergy with Nordic's ultra low power DNA

Foundation for our expansion into the Low Power Wide Area Networks (LPAWAN) market

Investing to Ensure leadership with today's and tomorrows products

Employees

Split on competency

R&D Team

$11%$ Phd

73%

Master degree

16% Bachelor degree

Bluetooth Smart design wins accelerating growth

Source: IHS January 2016

... driven by an incredible breadth and many diverse customers

Great design wins with great companies

Dexcom

Never been in a better position for growth Recap of 2015

• Large pipeline of design wins across segments that is still to turn to revenue
• Several top tier customer design wins in place
• Solid product pipeline in 55nm
• Great launch and customer reception of the latest device nRF52 family
• The best Bluetooth Smart device in the market
• Build incredibly strong teams across the organization
• New Finland organization with an extremely experience base of engineers from mobile chipset development
• Established an IoT Lab on the West Coast

Nordic established as undisputed leader in low power wireless with a dominant position in Bluetooth Smart

CES 2016 was a great show for Nordic

Market and Product Update

Opportunities and Solutions for Bluetooth® Smart and Beyond

Capital Markets Day February 2016 Thomas Embla Bonnerud Kjetil Holstad

Introduction

Thomas Embla Bonnerud, Director of Product Management

Incredible Breadth Fueling Growth

Remotes

Beacons

Smart Home

Automotive

Industrial

Established Verticals

Emerging Verticals

Long Tail

Established product categories Significant volume

Significant design-in activity First wave of products

Fast paced innovation Massive amount of designs

Fundamental Enabler and Drivers

Mobile and PCs

TV/STB

Home Hubs and Routers

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Adoptions in Hubs

Ease and cost of Adoption

Enabling new verticals Driving innovation

Internet Connectivity Smarter Things, Smarter Services Fuels innovation Drives breadth

Evolving Technology Driving Growth

Accelerating Ecosystem Adoption

Apple Home Kit, Health Kit, and iBeacon

AirFuel™ Alliance Wireless Charging Google Weave, Physical Web, Edystone, Fit

Samsung S-Health SmartThings, Artik

Nordic with the Leading Solution

Breadth of Offering

Cutting Edge Technology

Broad range of ICs

Advanced Software Stacks

Reference Designs

Easy to use Development tools

Power and Performance

Size and eBOM

Level of Integration and solution cost

Advanced IC and Software Features

nRF52 Series - the new Benchmark

Sampling Since Mid 2015

Industry Leading

Lowest Average Current

Most Advanced Power Management

Record Breaking Performance

Smallest Size Most Integrated

ARM Cortex-M4F DSP and Floating Point

Radio Link Budget

Up to $3X$

On-chip Flash and Balun Interfaces and NFC

3x3.2mm CSP

nRF52 Ramping Volume Now!

Incredible and record fast design-in momentum across the Market Segments

Burning hot supply chain to meet customer demand for H1 2016

Meanwhile... some of our competitors are still not sampling what they announced 9 months ago

Uniquely Positioned for the Future

Biggest and Most Dedicated Team

Live and breathe Bluetooth In house software development Relentless focus on Quality

Market Leadership

Leading Customers and Partners Biggest Developer Community Broadest Market Reach

Leading Solutions and Technology Platforms

Breadth and Cutting Edge Foundation for new products High Barrier of Entry for competition

Established Markets

Kjetil Holstad, Product Manager Ultra Low Power Wireless

Continued Strong Growth in Wearables

Through New Categories

Connected Watches Smart Clothes Jewlery and Fashion

Through Product Innovation

Advanced Sensors and Capabilities Wearable for Payments Health Monitoring

Nordic is the Market Leader

Since early 2000s

Nordic #1 Since Day One From Proprietary and ANT Captured BT Smart Explosion

Solutions

From the Very Basic To the Most Advanced Leading in SoftWare

Huge Customer Base

Massive Success with nRF51 Upping the Game with nRF52 Working with all Major Players

nRF52 - Pushing the Envelope

Ultimate Single Chip Solution for Wearables

• Massive Leap Forward in Performance
• Barrier Breaking Power Efficiency
• Smallest Size, Lowest Power and Cost

Beacons Transform the Retail Experience

Push and Pull

$((\varphi))$

In-Store Experience

Behavioral Patterns

Geo-Fencing & Positioning

Personal Recommendation

Targeted Advertisements

Payment Systems

Explosive Growth Beyond Retail

Airports, Hotels and Hospitals

Theme-parks & Stadiums

Transport

Asset Tracking Maps and Location Services Access Control

Promotional Campaigns Maps and Navigation Enhanced Multimedia Experience

Customer Information Behavioral Patterns Public Services

Major Players Lay the Foundation

Tight iOS Integration Proximity

Physical Web Initiative Cross-Platform Open Source

Nordic is Number One in Beacons

Leading Position

Leading Solutions

Strategic Partnerships Number of Customer Engagements

nRF5 SDK Supporting All Beacon Formats Reference Designs For Basic and Advanced Beacons Over-The-Air Device Firmware Upgrade

Smarter Remotes with BT Smart

HUB devices already enabled with

Bluetooth^® Smart

Siri Integration

Advanced Sensor Motion

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nRF52 - Most Advanced Single Chip

• Lower Bill-of-Material $\mathcal{L}_{\text{max}}$
• Lower Power-Consumption $\mathcal{L}_{\mathcal{A}}$

Nordic Offers Complete RC Solution

Strong Momentum in Market

nRF51 in Volume Production Working with Large RC Manufacturers on nRF52

Voice Input Motion Sensing / SensorFusion Multi-Touch / Gesture

Complete Reference Platform

New Categories Driving Growth in HID

Gaming

Tablet Keyboards

New Types of HID Devices

BT Smart Enabled in Consoles and PCs

Accessories for Tablet / Phablet

Pens Goes Mainstream

Strenghtening Our Position in PC HID

Traditional PC Peripherals

Nordic is the Market Leader

• >10 Years of Experience

Transition to BT Smart

• Getting Rid of the Dongle Working Close with all Major Players Multi-protocol 2.4GHz & BT Smart

Nordic Dominating the HID Market

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Strong IC Portfolio and Roadmap

Turn-key Reference Designs

Long Relationships with all Key ODMs

BT Smart Fuels More Intelligent Toys

Remote Controlled

Interactive

Play $\boldsymbol{\odot}$ Control Drones Robots RC Cars

Nordic Uniquely Positioned for Toys

nRF51 Widely Deployed in Toys

DWIN at Major Toy Companies More Optimized Solutions in the Pipeline

Highly Versatile Portfolio

Basic Connectivity Advanced Real-Time Processing Attractive Solutions Cost

Emerging Markets

Thomas Embla Bonnerud, Director of Product Management

Cutting the Last Wire...

Resonant Wireless Charging Multi-Device Different Size Freedom of Charging Placement Devices

Bluetooth^® Smart for Device - Charger Communication

Wireless Charging goes Mainstream

Built-in

At home, in the office, in cars, in public places, in public transport....

Stand-alone

Pads. Bowls. Mats...

Convenience... Sealed Devices... Mechanics...

Massive Opportunity for Nordic

AirFuel™ Resonant and/or Multi-Standard

Chargers

Stand-alone and built-in

Covers and Battery Packs

Retro-fit solutions

Mobile Devices

Laptops, tablets, phones, E-readers etc...

Rechargeable Devices

Wearables, Remotes, HID, Cameras, Toys, etc...

Leading Solution and Position

Unique, Complete and Proven Solution for nRF5 Series SoCs

nRF5 SDK for AirFuel™ Resonant for Device and Chargers First released in 2013 >1 year ahead of competition

Massive Design Win Momentum

Design wins with Leading Players End Products and Reference Designs Strategic Partnerships First Products on the Market

Finally a Smarter Home....

Enabled by Mobile Devices and Bluetooth® Smart

Cloud Connectivity

Local Connectivity

User Interface

Larger System

Lighting

HVAC

Appliances

Fast Growing Larger Ecosystem

Emerging Hubs with Bluetooth^® Smart Support

Larger Heterogeneous Networks

Nordic Enabling a Smarter Home

Cutting Edge Solutions for the Leading SoCs

nRF5 SDK for Apple Home Kit nRE51 SDK for IPv6 over Bluetooth Smart Broadcast Mesh for nRE5 Support for advanced Security

Major Design Wins Across the Vertical

Leading Players Heavily Engaged in all Ecosystems First Wave of Products

Bluetooth® Smart Changing Healthcare

Continuous Monitoring Always Connected

Disease Management Assisted Living

Glucose

Blood Pressure

Pulse Oximetry

Vital Signs

Activity

Massive Momentum for Bluetooth Smart

Leading Players

Ecosystems

Continua Health Alliance

Apple Health Kit

Google Fit

Microsoft Healthvault

Nordic in Pole Position for Medical

Powering the First Wave of FDA Approved Products

Strong Design-win Pipeline Wide range of Products Closely Engaged with all Leading Players

Cutting Edge Solutions Meeting Stringent Quality Requirements

Power, Size and Features Relentless IC and Software Testing Passed Multiple External Quality Audits

Automotive Adopting Bluetooth Smart

2014 - Tier 2 Aftermarket

2015 - Tier 1 Suppliers

2016 - First OEM Cars

Keyless Entry

Cabin Comfort

Monitoring and Diagnostics

Infotainment

Wireless Charging

Nordic Building Traction in Automotive

Already in Tier 2 After Market Products

Close and strategic engagements with key Tier 1 suppliers and CAR OEMs

Making strategic investments leveraging existing and proven technology platforms

Long Tail

Kjetil Holstad, Product Manager Ultra Low Power Wireless

A Massive Long Tail

Incredible Variety of Applications

Small to Medium Sized Customers

Industrial Consumer Commercial

Triple Digit YoY Growth # Customers

A Different Ballgame

10.000s vs. 100s Fundamentally Different Key to Reaching Broad:

• Right Products, Reference Designs and Kits
• Module Offering and Other Partnerships
• Internet Presence
• Easy, Open and Accesible

More Than Just Consumer Electronics

Ideal for Sensor Devices

OS Penetration & Mobile Solutions

Mature Bluetooth Stack

Long Term Availability In-House Stack Development Portfolio of Reference Designs Cable Replacement

Human Machine Interface

Unmatched Module Offering

Taking Developers Seriously

IORDIC DEVELOPER ZONE ask questions, share info, and be inspired!

More than 8,000 Users & 11,000 Questions >150 Blog Posts and Tutorials

Nordic Semiconductor

Nordic Semiconductor's official GitHub account. ◯ Trondheim, Norway https://devzone.nordicsemi.com

Huge Presence among Kickstarter / IndieGoGo

Product Roadmap

Thomas Embla Bonnerud, Director of Product Management

Aggressive Bluetooth® Smart Roadmap

Expanding our Connectivity Offering

Continued effort on complementary short range wireless technologies

Carefully selected subset - targeting existing and new high growth market verticals

Leveraging existing market position, technology platforms, ecosystem and solutions

Unique Capability in Finland

Extensive experience and track record with 2, 3, and 4G cellular connectivity

النظا

Unique - one of a handful teams in the world with this type of expertise

Most advanced and complex Long-range / Wide Area Network technologies

Taking Nordic to the Next Level

Focusing on a selected combination of LPWAN technologies for IoT

Emerging and fast growing market > 3 billion connections in 2023*

Complementing our short range product offering and market position

Nordic is Geared For Growth

Continued Leadership in Bluetooth Smart

Continued Expansion in Short-range Wireless

Expansion into Low Power Wide Area Network

Fast Growing Market Leading Customers Base Aggressive Roadmap

Wider offering for existing verticals Expansion into new Verticals Leveraging existing platforms

Unique synergy with Finland team Fast Growing market for IoT Complementing Short-range

Market and Product Update

Opportunities and Solutions for Bluetooth® Smart and Beyond

Capital Markets Day February 2016 Thomas Embla Bonnerud Kjetil Holstad

Why Nordic win

Capital Markets Day

January 20th, 2016

Svenn-Tore Larsen

Solid foundation

Nordic's customer engagement is built around a solid software and hardware platform developed in-house

Clear escalation path and responsibility

• Stack and SDK development, maintenance and support
• Affordable development boards using leading third parties

Nordic Semiconductor focused on distributor training and sales

Frequent training

• $\blacktriangleright$ Products
• Strategies
• Business development

Online prioritized tech support for distributors

Frequent customer meetings with distributors on tier 2 and tier 3 customers

Focus on a single product segment

Nordic scaleability through recognition

Awareness and acceptance by customers is needed to fill pipeline

Awareness through wide engagement

Global Tech Tour 2015 was successful

• More than 4000 engineers participated
• High quality technical sessions
• ▶ 30 global locations
• $\blacktriangleright$ 10 weeks
• ▶ nRF52 Development Kit

...Extensive user base and kit shipments

Development Kits shipped in 1H 2015

$1000s$ of customers in active production and design

Users in an active tech user forum

... Leading partner network

ARM^University

Worldwide Education Program

targets world's top ranking tech universities

Extensive

network of design consultants and ODMs

eases prototyping and development

Nordic ready for take off

Fantastic mix

of Tier1 and tail end customers on the runway"

Financial Ambitions

Capital Markets Days 2016

January 20, 2016

Pål Elstad

CFO

Q4 2015 and 2015 Year Preliminary

Revenue

Q4 MUSD 46-47

BT Smart MUSD 28-29

2015: MUSD 192.5-193.5

BT Smart MUSD 110-111

Backlog MUSD 22 (MUSD 20 in Q4 2014)

Summary Financial Metrics

Revenue

13.5% CAGR (2012-2015) Shift from proprietary to BT Smart Large increase in customer Market diversification

Gross Margins

Gross Margins historically stable at around 50% Any reduction of ASP offset by improved manufacturing Shift in product mix/customer mix

Ebit

Highly operational leverage

Heavy R&D investments offsets effects of operational leverage

Operating Cash Flow

NET CASHFLOW FROM OPERATING ACTIVITIES

$\overline{01}$ $\overline{02}$ $\overline{03}$ $\overline{03}$ $\overline{03}$ $\overline{04}$ $\overline{01}$ $\overline{04}$ $\overline{01}$ $\overline{03}$ $\overline{03}$ $\overline{04}$ $\overline{01}$ $\overline{02}$ $\overline{03}$ $\overline{04}$ $\overline{01}$ $\overline{02}$

Operational Cash Flow sufficient to fund revenue growth and investments in R&D However seasonal variations/product updates in cash flow requires short term funding

1) In 2015, the 2nd largest customer is within BT Smart

Nordic reaches the entire value chain through three unique sales channels

Attributes varies in the different channels

• Customer Relationship
• Nordic's Technical Involvement
• Distribution/Supply Chain
• Average Sales Prices
• Distributor Margins
• ▶ Nordic Margins
• The further down the more leveraged

Operating Expenses

As innovation continues, underlying operating expenses will increase in 2016 in order to capture all possibilities

Finland investment results in a total R&D spend in 2015 of 21% of revenue

Investments in OPEX expected to continue to grow 20% in 2016 based on full effect of Finland

Total employees expected to grow from 454 in 2015 to 550 in 2016.

Strong positive tailwind from weakening of NOK

	2013	2014	2015 est. 2016 est.
Fixed Assets	6.2	4.6	8.4	8
IP	2.3	1.8	5.3	3
Depreciation and Amortization*	3.4	4.6	6.4	7.5

* Depreciation and amortization ex. depre. and amort. On capitalized r&d.

Stable and relatively low capex numbers as Nordic has a fabless operations

Assets mainly related to Lab Equipment and Enterprise Systems

IP normally licensed through Royalty, but some investments required

Finland Operations

Team focuses on Long Range Low Power Wireless, however top wireless talent also considered for other technologies

In Q4 2015, Finland had employed 111 employees, of which approximately 10 work on BT Smart. Expected to increase to max 150 by the end of the year.

Total cost in Q3 2015 of MUSD 3.4. MUSD 4-5 per quarter in 2016

Capex depending on opportunities

Key Financial Highlights

Nordic sales model in Bluetooth Smart drives strong growth and less dependency on a few customers

Continuous strong growth with quarterly variances

High operational leverage however short term masked by high investments in R&D to capture opportunities