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Components

G. KleisterleeG. KleisterleeChairman & CEO Philips Components and memberChairman & CEO Philips Components and member

of the GMCof the GMC

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PD Components

•• ScopeScope

•• Portfolio DevelopmentPortfolio Development

•• Display BusinessesDisplay Businesses

•• SummarySummary

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System RequirementsSystem Requirements

HH Base MaterialsBase MaterialsHH Process TechnologiesProcess TechnologiesHH Integration CapabilitiesIntegration CapabilitiesHH Mass CustomizationMass Customization

HH End user FeaturesEnd user FeaturesHH Mass CustomizationMass CustomizationHH Short LifecyclesShort LifecyclesHH Click-On FunctionsClick-On Functions

Value Shift Drivers

Functional IntegrationsFunctional Integrations

Technology PotentialTechnology Potential

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Mission Statement

Philips Components aims to be:

• A technology partner of choice for leadingglobal players in :– Consumer electronics (Digital)– EDP– Telecommunications (Mobile)– Automotive electronics (Infotainment)

• Top 3 player in each of the selected segments

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Global Product RangeGlobal Product Range

DisplayDisplayComponentsComponents

•Color TelevisionTubes

•Color MonitorTubes

•Large FlatDisplays

•Key Components

AdvancedAdvancedCeramics &Ceramics &

ModulesModules

•DiscreteCeramics

•Yoke Rings•Soft Ferrites•Integration

GeneralGeneralSystemSystem

ComponentsComponents

•AutomotivePlaybackModules (APM)

•Inpact (WWC)•Electronic Power

Modules (EPM)•Micro Electronic

Modules (MiMo)•Imaging & Optical

Modules (IOM)

Flat DisplayFlat DisplaySystemsSystems

•Active MatrixLCDs

•LCDs Cells &Modules

•Poly-LEDs•Reflective LCDs•Software &

Electronics

OpticalOpticalStorageStorage

•CD Audio/Video•CD ROM•CD Read /

ReWritable•Optical Pick-up

units

Philips Components

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Turnover per Business Group1998

Display Components 51%Advanced Ceramics 15%and ModulesGeneral System 7%ComponentsFlat Display Systems 10%Optical Storage 17%

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Key Financials

EUR mlnEUR mln19941994 19951995 19961996 19971997 19981998

SalesSales 3,3853,385 3,8643,864 4,3494,349 5,0995,099 5,2615,261 Intern Intern 36%36% 36%36% 34%34% 28%28% 27%27%

IFOIFO 162162 300300 316316 267267 4444

CapexCapex 342342 378378 466466 381381 275275

EmployeesEmployees 39,19339,193 39,69639,696 41,99541,995 46,13146,131 42,61342,613

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Sales

Philips ComponentsDevelopments per Region

Market

0

20

40

60

80

1995 1996 1997 1998

Divestm.Asia PacificS. AmericaN. AmericaEurope

EUR bln

0

1

2

3

4

5

6

1995 1996 1997 1998

Divestm.Asia PacificS. AmericaN. AmericaEurope

EUR bln

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PD ComponentsTotal Sales

0

1

2

3

4

5

6

1995 1996 1997 1998

Others

Storage

Display

EUR bln

Total Employees

0

10

20

30

40

50

1995 1996 1997 1998

Others

Storage

Display

Thds

Total Factories

0

10

20

30

40

50

60

70

80

90

1995 1996 1997 1998

OthersStorage

Display

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Divestments 1997 and 1998

• Prof. Syst. Klagenfurt• Motors Dordrecht• Dry reed switches• Rare earth• FSM• Photonics• OF-Dordrecht• HDD• MH&M

• Hard Ferrites• Powder Uden• Film capacitors• Electrolytic caps• Leaded ceramic caps• Fixed linear resistors• Variable reistors• Non-linear resistors

Sales : EUR 623 mlnEmployees : 7,033Business lines : 17Factories : 25

Display Portfolio

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Philips CRT Business

0

5

10

15

20

25

30

1989 1991 1993 1995 1997 1999 2001 2003 2005

USD bln

Market

Market share15%15% 14%

16%

PHILIPS

• USD 3.5 bln revenue

• Nr. 1 in TV

• Nr. 3 in PC monitor

• Vertical benefits

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CRT Issues

A.A. Extra-ordinary price pressure fromExtra-ordinary price pressure fromimbalance supply/demandimbalance supply/demand

75

100

125

150

1995 1996 1997 1998 1999 2000 2001 2002 2003

Supply/Demand parameters CMT and TVT

TVT

CMT

if supply equals demand : ratio = 100

normative balance

0

50

100

150

200

250

300

350

1995 1996 1997 1998 1999 2000

Price Development 15"-CMT

NLG

65%decrease

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Responses

•Capacity control•Philips response

–New product offering–Consolidate manufacturing base in low

cost areas–Reduce vertical integration

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Philips Display Business

0

10

20

30

40

50

60

70

1989 1992 1995 1998 2001 2004

LCD

CRT

USD bln

• USD 3.5 bln revenue• Nr. 1 in TV• Nr. 3 in PC monitor• Vertical benefits

• CRT successor• Even larger vertical

benefits• Critical for PD-future value

portfolio• "Philips" brand• Need to build top position

New

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Philips LCD Business

0

200

400

600

800

1000

1200

1400

1995 1996 1997 19980%

6%

12%

18%

24%

30%

36%

42%

C&M

FPD

C&M

FPD

Sales NLG mln Market share

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AM-LCD Applications

0

5000

10000

15000

20000

25000

30000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Mil.

US

$ (p

anel

)

TV-APPLicationsHandheld PC

DigCamera

Port.video

Automotive

FPM

Notebooks

Total TFT-LCD

- From 1 to multiple applicationsHistory :- 15 years notebook = 6 Bil$ valueFuture :- 7 years multiple applications = 15 Bil$ value- Total growth 93-97 = 7.5% year- Total growth 98-05 = 15% year- Total growth 98-05 new.appl. = 25% year

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Vertical Impact of AM-LCD in Philips

CE

AM-LCD

Semicon

Basic ResearchBasic Research

•• Technology platformsTechnology platforms•• IPRIPR•• Product innovationProduct innovation

potentialpotential

• Brand value - PC monitors- Handheld- TV

• Integrated product roadmapfor leading/differentiatedproducts

• Volume availability for marketposition

• AM-LCD product value 50%ofCE product value

• Integrated product roadmapsfor leading/differentiatedproducts

• Semicon product value 25/30%of AM-LCD product value

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AM-LCD sales 1998

Breakthrough ?Breakthrough ?

0 250 500 750 1000 1250

Hyundai

Casio

Seiko Epson

HAPD

Tottori/Sanyo

Mitsubishi/ADI

Fujitsu

Matsushita

LG

Hitachi

IBM/DTI

Toshiba/DTI

Samsung

NEC

Sharp

USD mln

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Philips & LG Joint Venture

•• Nr. 1 playerNr. 1 player

•• Global reachGlobal reach

•• 2 x Brand support2 x Brand support

•• Excellence & low cost manufacturingExcellence & low cost manufacturing

•• Complementary to HAPDComplementary to HAPD

•• Profitable & fast growingProfitable & fast growing

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Competitive Overview

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Prime ViewHyundai

Toshiba (p-Si )ST-LCDTorisanFujitsu

MatsushitaADI

UnipacCPT

HannStarTottori Sanyo

ADT (Acer )Chi Mei

NECDTI

HitachiSamsung

SharpLG-LCD/HAPD

2003

Sha

re o

f Gen

-2+

Gla

ss In

put i

n S

quar

e-m

eter

s

Assumes that only Fabsin construction 1999-2000

will be ready for 2003 output

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Summary Philips Components

•• We are well positioned to be a leadingWe are well positioned to be a leading

player in a number of fast growingplayer in a number of fast growing

HHigh igh VVolume olume EElectronics Applicationslectronics Applications

•• We will build value by accelerating ourWe will build value by accelerating our

focus programs:focus programs:

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Summary Philips ComponentsFocus Dimensions

•• Few key technologiesFew key technologies

•• Selected functions in fast growingSelected functions in fast growing

applicationsapplications

•• Providing integral solutionsProviding integral solutions

•• Partnering with leading customersPartnering with leading customers

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