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39
Operating Results by Business Segments
DRAM Solutions Group ("DSG")
For the year ended 2013 2012 2011
Net sales $ 3,519 $ 2,691 $ 3,203
Operating income (loss) 143 (494) 290
DSG sales and operating results track closely with our average selling prices, gigabit sales volumes and cost per gigabit for
our consolidated sales of DRAM products. (See "Operating Results by Product – DRAM" for further detail.) DSG sales for
2013 increased 31% as compared to 2012 primarily due to increases in gigabits sold partially offset by declines in average
selling prices. DSG's operating margin improved in 2013 from 2012 primarily due to manufacturing cost reductions as a result
of improved product and process technologies partially offset by declines in average selling prices. DSG results of operations
for 2013 included sales of $163 million and operating income of $25 million from the acquired Elpida operations. DSG sales
and operating margins for 2012 were adversely impacted by a $58 million charge for a settlement with a customer.
DSG sales for 2012 decreased 16% as compared to 2011 primarily due to declines in average selling prices partially offset
by increases in gigabits sold. DSG's operating margin declined from 2011 to 2012 due to decreases in average selling prices
mitigated by cost reductions as a result of improved product and process technologies. DSG sales and operating margins for
2012 were adversely impacted by the $58 million charge for a settlement with a customer. In addition, DSG operating income
for 2011 benefited from a $75 million gain from an allocated portion of the Samsung patent cross-license agreement.
NAND Solutions Group ("NSG")
For the year ended 2013 2012 2011
Net sales $ 2,841 $ 2,853 $ 2,196
Operating income 201 205 276
NSG sales and operating results track closely with our average selling prices, gigabit sales volumes and cost per gigabit for
our consolidated sales of NAND Flash products. (See "Operating Results by Product – NAND Flash" for further detail.) NSG
sales for 2013 were relatively unchanged from 2012 as increases in gigabits sold were partially offset by declines in average
selling prices. Increases in gigabits sold for 2013 were primarily due to improvements in product and process technologies.
NSG sells a portion of its products to Intel through our IM Flash joint venture at long-term negotiated prices approximating
cost. All other NSG products are sold to OEMs, resellers, retailers and other customers (including Intel), which we collectively
refer to as "trade customers."
On April 6, 2012, we acquired Intel's remaining ownership interest in IMFS, a joint venture between us and Intel, which
operated a wafer fabrication facility in Singapore. On April 6, 2012, we also acquired the assets of IMFT located at our
Virginia fabrication facility and terminated the IMFS supply agreement. Accordingly, we now obtain all of the NAND Flash
output from our Singapore and Virginia wafer fabrication facilities. Prior to these acquisitions, we sold a portion of the NAND
Flash output from these facilities to Intel, through our consolidated IMFS and IMFT joint ventures, at long-term negotiated
prices approximating cost. On April 6, 2012, we also entered into a new supply agreement with Intel under which we sell Intel
NAND Flash products from us on a cost-plus basis. Aggregate NSG sales to Intel (including sales by IMFT at prices
approximating cost and sales by us under the new cost-plus supply agreement) were $849 million for 2013, $986 million for
2012 and $884 million for 2011. As a result of these April 6, 2012 transactions, in 2013 NSG sales of NAND Flash products to
trade customers increased and sales to Intel at long-term negotiated prices approximating cost decreased.
NSG sales of NAND Flash products to trade customers increased 22% for 2013 as compared to 2012 primarily due to
increases in gigabits sold partially offset by declines in average selling prices. NSG operating income for 2013 was essentially
unchanged from 2012 as manufacturing cost reductions offset declines in average selling prices and increases in R&D costs.
Manufacturing cost reductions resulted primarily from improvements in product and process technologies.