Nov. 2012

NPUs for Smart Networks NPUs for Smart Networks

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Safe Harbor StatementSafe Harbor StatementSafe Harbor StatementSafe Harbor Statement

This presentation contains forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Forward-looking statements are statements that areSecurities Litigation Reform Act of 1995. Forward looking statements are statements that arenot historical facts and may include financial projections and estimates and their underlyingassumptions, statements regarding plans, objectives and expectations with respect to futureoperations, products and services, and statements regarding future performance. Theseforward-looking statements, which are subject to risks, uncertainties and assumptions, mayforward looking statements, which are subject to risks, uncertainties and assumptions, mayinclude projections of our future financial performance based on our growth strategies andanticipated trends in our business. These statements are only predictions based on our currentexpectations and projections about future events. There are important factors that could causeour actual results, level of activity, performance or achievements to differ materially from the, y, p yresults, level of activity, performance or achievements expressed or implied by the forward-looking statements. Those factors include, but are not limited to, the impact of competitiveproducts, product demand and market acceptance risks, customer order cancellations, relianceon key strategic alliances, fluctuations in operating results, delays in development of highly-y g , p g , y p g ycomplex products and other factors indicated in EZchip’s (formerly LanOptics) filings with theSecurities and Exchange Commission (SEC). For more details, please refer to EZchip’s SECfilings and amendments thereto, including its Annual Report on Form 20-F filed on March 31,2012 and its Current Reports on Form 6-K. We undertake no obligation to update forward-p g plooking statements to reflect subsequent occurring events or circumstances, or to changes inour expectations, except as may be required by law.

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EZchip OverviewEZchip OverviewEZchip OverviewEZchip Overview

Company Profile

Fabless semiconductor company, NASDAQ listed (EZCH)

Leading provider of Ethernet Network Processors (NPUs) to the Carrier Ethernet (CE) market especially for edge routersCarrier Ethernet (CE) market, especially for edge routers

Transition to Ethernet and explosive use of video and mobile devices driving strong Carrier Ethernet market growth

EZchip is a strategic supplier to the top Carrier Ethernet vendors and the highest placed and fastest growing NPU vendor

Current design wins quadruple growth potential by 2016 Current design wins quadruple growth potential by 2016

Recently announced the NPS, a revolutionary line of NPUs for the next wave of smart carrier and data center networks

Founded in 1999; 180 employees, 140 in R&D in Israel

Global offices in Israel (HQ); San Jose, CA; Boston, MA; and China

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Strong growth in revenues and profitability; $160M in cash, no debt

EZchip Products and RoadmapEZchip Products and RoadmapEZchip Products and RoadmapEZchip Products and Roadmap

Flexibility

Carrier Edge & Data Center Carrier Edge & Data Center Layers Layers 22--77 CC ProgrammableProgrammable

ThroughputNPS-400400G-800G

C C ProgrammableProgrammable

NP-6

NPS-200200G-400G

ThroughputCarrier Edge & Access Carrier Edge & Access Layers Layers 22--33

400G-800G

NP-5200G-400G

Microcode Microcode programmable programmable

NP-330G NP-4L

NP-4100G

NPA-05G

NPA-1/2/310G

30G

NP-215G

Production

NP-4L50G

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2005 2008 2011 2014 2017

Targeting the Carrier Ethernet MarketTargeting the Carrier Ethernet MarketTargeting the Carrier Ethernet MarketTargeting the Carrier Ethernet Market

CoreCoreMetroMetroAccessAccess

Ethernet SwitchVideo

Ethernet Aggregation

Ed

TransportSwitch

BusinessEthernet

VPNInternet

VOIP

VDSLModem DSLAM

EdgeRouter

CoreRouter

Residential

Access/Cable

TransportSwitch

Transport

ONT

InternetVOIPIPTV

Residential

DSLAM

EdgeR t

EdgeRouter

TransportSwitch

ONU

VPNVOIPVideo

InternetVOIPIPTV OLT

splitter

Business

EPON/GPON

Router

TransportSwitch

TransportSwitch

Internet

EthernetSwitch

Ethernet Aggregation

CoreRouter

Base Stations

Eth Transport

EdgeRouter

Switch

MicrowaveEthernet

gg gEth

Eth

Wireless Backhaul

EdgeRouter

TransportSwitch

5

Yellow coloring denotes equipment targeted for EZchip’s NPUs

The Carrier Ethernet Market SegmentsThe Carrier Ethernet Market SegmentsThe Carrier Ethernet Market SegmentsThe Carrier Ethernet Market Segments

CoreCoreAccessAccess MetroMetro

Carrier EthernetCarrier Ethernet

Ethernet Switch

VPNInterne

t

VOIPVideo

Ethernet Aggregation

EdgeRouter

Core

TransportSwitch

BusinessEthernet Access/

Cable

Cable VDSLCable VDSLt

Internet

VOIPIPTV

VDSLModem DSLAM

CoreRouter

Residential

DSLAMEdge

R t

TransportSwitch

TransportSwitch

Cable, VDSL Cable, VDSL & Ethernet Access (EADs)& Ethernet Access (EADs)

Internet

VOIPIPTV

ONT

t

OLTSplitter

Residential

EPON/

EdgeRouter

Router

Transport

TransportSwitchPONPON

P i O ti l N t kP i O ti l N t k

CESRCESRCarrierCarrier

Ethernet Ethernet S it hS it h

Transport Transport SONET/SDH SONET/SDH

& WDM& WDMONU

VPNInterne

t

VOIPVideo

t

CoreRouter

Business

Base Stations

EPON/GPON

pSwitch

Edge

Passive Optical NetworksPassive Optical Networks Switches Switches & Routers& Routers

& WDM& WDM

EthernetSwitch

MicrowaveEthernet

Ethernet Aggregation

Base Stations

EthEth

Wireless Backhaul

TransportSwitch

EdgeRouter

Microwave Microwave Wireless Backhaul Wireless Backhaul

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Ethernet

Eth

EdgeRouter

EZchip’s Target CustomersEZchip’s Target CustomersEZchip’s Target CustomersEZchip’s Target Customers

CESR MicrowaveTransport PON Others(1)

CESR, especially Edge Routing, is EZchip’s main market

- -- -- -

)

-- -- -

t Ven

dors

(2)

-

- - -

-- - -er E

ther

net

-- -- --

-

- - -Top

Car

ri

- - -- -

--

7Sources: Infonetics Research and EZchip, April 2012.(1) Others include cable, VDSL and Ethernet access. (2) Represents vendors who have >5% market share for each segment.

Six of the seven leading Edge Routing vendors are EZchip’s customers

Expected Growth in Edge RoutingExpected Growth in Edge RoutingExpected Growth in Edge RoutingExpected Growth in Edge Routing

2011 Actual 2016 Forecast

No. ofPortsNo. ofPorts

PotentialNo. of NP-2/3

PotentialNo. of NP-2/3

No. of PortsNo. of Ports

PotentialNo. of NP-4

PotentialNo. of NP-4

1.9M1.9M1GE Ports & Chips1GE Ports & Chips

10GE Ports & Chips10GE Ports & Chips

190K (10 ports/NP-2)190K (10 ports/NP-2)

1.1M1.1M 1.1M (1 port/NP-3)1.1M (1 port/NP-3) 7.3M7.3M 2.1M (3.5 ports/NP-4)2.1M (3.5 ports/NP-4)

1.7M1.7M 43K (40 ports/NP-4)43K (40 ports/NP-4)

10GE Ports & Chips10GE Ports & Chips 1.1M1.1M 1.1M (1 port/NP 3)1.1M (1 port/NP 3) 7.3M7.3M 2.1M (3.5 ports/NP 4)2.1M (3.5 ports/NP 4)

100GE Ports & Chips100GE Ports & Chips ---- ---- 20K20K 40K (2 NP-4/port)40K (2 NP-4/port)

Edge Routing TAM in NPUsEdge Routing TAM in NPUs 1.3M (NP-2/3)1.3M (NP-2/3) 2.2M (NP-4)2.2M (NP-4)3M3M 9M9M

The number of ports in edge routers is expected to triple by 2016

8Sources: Infonetics Research and EZchip, April 2012.

EZchip’s Potential in Edge Routing EZchip’s Potential in Edge Routing EZchip’s Potential in Edge Routing EZchip’s Potential in Edge Routing

2011A t l2011

A t l2016

F t2016

F tGrowth P t ti lGrowth P t ti l

No. of NPUs in Edge RoutersNo. of NPUs in Edge Routers

ActualActual ForecastForecast

1.3M (NP-2/3)1.3M (NP-2/3) 2.2M (NP-4)2.2M (NP-4)

PotentialPotential

1.7X1.7X

EZchip's Edge Routers Market Share EZchip's Edge Routers Market Share 30%30% 50%-60%50%-60%

EZchip's ASP (NP 2/3 NP 4)EZchip's ASP (NP 2/3 NP 4) 11 1 51 5

1.6X-2X1.6X-2X

1 5X1 5XEZchip s ASP (NP-2/3 vs. NP-4) EZchip s ASP (NP-2/3 vs. NP-4) 11 1.51.5 1.5X1.5X

4X-5X4X-5XTotal Growth PotentialTotal Growth Potential

EZ hi ' 4 5 ti b 2016EZchip's revenues can grow 4-5 times by 2016

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NPS: Doubles EZchip’s TAMNPS: Doubles EZchip’s TAMNPS: Doubles EZchip’s TAMNPS: Doubles EZchip’s TAM

A new breed of LA new breed of L22--7 7 CC--programmable NPUs for Smart networksprogrammable NPUs for Smart networks

NPS in our current market (Edge Routers)– For next generation L2-7 smart line cardsFor next generation L2 7 smart line cards

– Leapfrogs merchant and in-house NPUs with L2-7 and C-programming

NPS opens a new market (Data Center) p ( )– For high speed security, DPI, SDN, virtualization

– Leapfrogs multi-core CPUs with 10X performance increase

Based on strongly differentiated technology– 10-fold faster and smaller CTOPs (C-programmable Task Optimized

P )Processors)

– 256 CTOPs, 4K virtual processors (threads)

– Integrates EZchip’s highly differentiated TM technology

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Integrates EZchip s highly differentiated TM technology

BackgroundBackgroundBackgroundBackground

Carrier, data center and cloud networks are under constant pressure to

scale in bandwidth and servicesscale in bandwidth and services

Network equipment needs smarter and greater processing capabilities

Today two types of processors are available for network equipment: Today two types of processors are available for network equipment:

– NPUs with optimized cores, fast layer 2-3, high integration, microcode

programming limited to L2 3 and use microcodeprogramming – limited to L2-3 and use microcode

– CPUs (single or multi-core) with general processing, C-programmability,

layer 4-7 but at reduced throughput – limited performancelayer 4-7 but at reduced throughput – limited performance

NPS breaks the barriers imposed by traditional NPUs and CPUs

NPS is a data plane C programmable processor optimized for layer 2 7– NPS is a data-plane C-programmable processor optimized for layer 2-7

packet processing with unmatched performance and flexibility

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NPS: Architected for HighNPS: Architected for High--Speed LSpeed L22--77NPS: Architected for HighNPS: Architected for High--Speed LSpeed L22--77

Control-plane CPU:Executes millions of lines of code

Functionality

Executes millions of lines of code for general processing and management

Based ongeneral processors

ControlPlane

CPU

CPU

DataPlaneL2 7

CPUL2-7

CPUL4-7

NPU

NPSL2-7

Based onTask Optimized

Processors & TM

SpeedLow High

L2-7 NPUL2-3

& TM

Low High

Data-plane NPS:Optimized for layer 2-7 packet processing

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p y p p gwith unmatched performance and flexibility

EZchip’s TAM EZchip’s TAM EZchip’s TAM EZchip’s TAM

2011Actual2011

Actual2016

Forecast2016

Forecast

$950M$950M $1.27B$1.27BNPU TAM (Merchant & in-house NPUs)*NPU TAM (Merchant & in-house NPUs)*

$130M$130M $400M$400MHigh Speed merchant NPU (>20G) SAM High Speed merchant NPU (>20G) SAM

NANA $1.1B$1.1BNPS TAM (TAM of Embedded Processors)NPS TAM (TAM of Embedded Processors)

g p ( )g p ( )

NANA $400M$400MHigh Speed NPS SAM (Carrier & Data Center)High Speed NPS SAM (Carrier & Data Center)

$950M$950MEZ hi ’ T t l TAM (NP & NPS)EZ hi ’ T t l TAM (NP & NPS) $2 4B$2 4B

$130M$130MEZchip’s Total SAM (NP & NPS) EZchip’s Total SAM (NP & NPS) $800M$800M

$950M$950MEZchip’s Total TAM (NP & NPS) EZchip’s Total TAM (NP & NPS) $2.4B$2.4B

$80M$80MEZchip’s NPU Revenues (including Marvell)EZchip’s NPU Revenues (including Marvell)

13Sources: Infonetics Research, The Linley Group and EZchip, Aug 2012.

NPS is doubling EZchip’s TAM and SAM in 2016

*NPU TAM is 3% of the Infonetics Carrier Ethernet equipment market forecast.

EZchip's High Speed Revenue PatternEZchip's High Speed Revenue PatternEZchip's High Speed Revenue PatternEZchip's High Speed Revenue Pattern

NP-3NP 3 t ti l ttNP-3 potential revenue pattern

20112009 2010 2012 2013 2014 2015 2016 20172008

NP-4NP-4 potential revenue pattern

2011 20142012 2013 2015 2016 2017 2018 2019 2020

NP-5 and NPS potential revenue pattern

+ NPSNP-5

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

+ NPS

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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EZchip’s NonEZchip’s Non--GAAP Operating ModelGAAP Operating ModelEZchip’s NonEZchip’s Non--GAAP Operating ModelGAAP Operating Model

20082008 20092009 20102010 20112011 9M/20129M/2012

$33.6M$33.6M

66.6%66.6%

RevenuesRevenues

Gross MarginGross Margin

$40M$40M

72.6%72.6%

$62M$62M

75.2%75.2%

$63.5M$63.5M

77.9%77.9%

$39.5M$39.5M

84%84%

$16.8M$16.8M

16%16%

OPEXOPEX

Operating MarginOperating Margin

$16M$16M

33%33%

$17.4M$17.4M

47%47%

$20.1M$20.1M

46%46%

$15.7M$15.7M

44%44%16%16%

20%20%

Operating MarginOperating Margin

Net MarginNet Margin

33%33%

35%35%

47%47%

49%49%

46%46%

49%49%

44%44%

49%49%

$0.27$0.27EPSEPS $0.54$0.54 $1.14$1.14 $1.09$1.09 $0.65$0.65

Royalty model to Cisco through Marvell expands gross margins

Long term Opex expected to grow slower than revenue growth

C h $160M d bt (S t 30 2012)

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Cash $160M, no debt (Sept. 30, 2012)

Note: Values are non-GAAP.

EZchip’s Major CustomersEZchip’s Major CustomersEZchip’s Major CustomersEZchip’s Major Customers

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Additional Tier-1 vendors can become 10% customers

SummarySummarySummarySummary

Market: The leading provider of network processors for edge routers

Customers: Five of the seven tier-1 vendors selected EZchip’s NP-4

Market share: Expected to reach 50%-60% by 2016 with current wins

Revenues: Can quadruple with NP-4, NPS doubles TAM

Technology: Proven & strongly differentiated, NPS takes it a step further

Financials: Strong operating model, high profitability and cash

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System System designdesigndesign design can be can be hard or hard or

EZEZ

System designSystem designb h db h dcan be hardcan be hard

oror EZEZ18

oror EZEZ