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Bourgon Frederic/Tina Tsai / Shirley Lu Feb., 2009

February ESS Business Interlocks Foxconn / hp Inventory concerns and actions on high valued parts Status update. Bourgon Frederic/Tina Tsai / Shirley Lu Feb., 2009. Summary. January results. Obsolescence Risk - CPU $396K,$66K decreased from Dec. Memory $34K flat compared to Dec.

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Bourgon Frederic/Tina Tsai / Shirley Lu Feb., 2009

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  1. February ESS Business InterlocksFoxconn / hpInventory concerns andactions on high valued partsStatus update Bourgon Frederic/Tina Tsai / Shirley Lu Feb., 2009

  2. Summary • January results • Obsolescence Risk - CPU $396K,$66K decreased from Dec. Memory $34K flat compared to Dec. - Inventory Level - High DOI across the board. - Layering cost - Jan layering CPU $114K and memory $401K owned to Foxconn.

  3. Inventory Level • Intel chipset DOI increased from 27 days (Dec) to 46 days as the 1st month • consumption was 20% decreased from Dec. • NA AMD CPU DOI flat compared with Dec. • Memory WW high DOI resulted from DL380G & DL160G5 forecast drop. • HDD CZ DOI was improved compared with Dec and will further improve after Feb. • rebalancing to Wistron.

  4. Layering Cost • Microprocessor • 6 AMD PNs had price drop in Jan. $0.6K $17K Total layering $114K -Raw material :$33K -FGI:$81K $76K • No price drop expected in March. • Memory • Price drop on Jan. 1st. Total layering $401K. - Raw material :$341K - FGI:$60K • 18parts price drop in March. $114K $401K $600.2K

  5. Back up

  6. Hub V.S. ODM Locations Hub Original warehouse ODM site Amsterdam (Intel/AMD CPU) Brno (HDD RR Donnelly) Pardubice (FCZ) Dallas (AMD CPU) HDD RR Donnelley Foxconn China Houston Intel CPU FHS Costa Rica (Intel CPU 20% non hub parts ) HDD RR Donnelley Penang (Intel Chipset) AMD CPU Singapore Parts Buffered in hub

  7. Memory- supplier region warehouse Assumption: Parts available in warehouse

  8. Questions from Sep. Interlock • DOI Calculation - DOI is in calendar days Provided by HP RBU according to expected service level & transportation lead time Formula: ODM QOH/(4 week FCST demand/30 days); FCST is provided by HP • Why CPU DOI target is different in NA and EMEA? - Target DOI is provided based on transportation lead time. Transportation Lead time is a function of ODM V.S. Hub location. • Need to be sure all regions are ok with target DOI - Yes, all regions are ok with target DOI. However, it may change in the future. • Include PCA, Chassis and PSU in inventory review ? - No, because of no layering impact on HP. Should be ODM focus

  9. Obsolescence Risk - CPU total 396K. $95K return to AMD in end of Jan.

  10. Obsolescence Risk - Memory total $34K will rebalance.

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