Capital Market day at Mycronic A Swedish high-tech company offering unique production solutions to the electronics industry 20 November, 2014

Agenda – Mycronic capital market day 08.30 Company overview Introduction Lena Olving Financial overview & goals Per Ekstedt Operational excellence Charlott Samuelsson Questions

The electronics industry – an overview Niklas Edling

The SMT business Growth from SMT business Robert Göthner SMT Demo introduction Simon Sandgren Questions

10.30 SMT demo/Coffee break incl video session

Nanomaterials technology for future electronics production Johan Liu, Professor at Chalmers

The PG business Growth from PG business Magnus Råberg The PG cleanroom environment and Raimo Kortelainen uniqueness of display mask writers Henrik Bondestam

Questions

12.30 Wrap up and lunch

2

References to videos shown

A day of made of glass: Enabling a future of communication, collaboration and connectivity

A video made by Corning Incorporated, the world leader in specialty glass and ceramics

Link: https://www.youtube.com/watch?v=PfgmlVxLC9w

Large size photomask production: The processes of manufacturing large size photomasks and displays

A video made by SK Electronics, a world leading company in advanced photomask production

Link:http://www.sk-el.co.jp/en/company/movie.html

SK Electronics has provided the video giving us the opportunity to show the manufacturing processes of photomasks and displays.

3

Capital Market day at Mycronic An introduction and company overview Lena Olving, CEO

Mycronic operates in a growing market 1,678 BUSD industry

5

* Expected growth

Source: Prismark, 2014

2,500

2,000

500

1,500

1,000

0

2007 2018

Billion USD

Contributing to everyday life – today and in the future

Mycronic contributes to everyday life

6

Our technology contributes to the manufacturing of displays at a value corresponding to 25% of Sweden’s GDP

Our technology produces around 100 million PCBs corresponding a value of 30 BUSD

Technology trends – driving market

LED lighting CAGR above 30%

Wearable electronics 500 million devices sold 2018, CAGR 50% Trends

Internet of things 20 to 50 billion connections 2020, CAGR 20%-35%

Automotive electronics 244 BUSD 2018, CAGR 6.6%

7

Mycronic in the electronics industry

8

>2,200 customers

supported by solutions from

two business areas SMT and PG. - SMT for mounting components on PCBs - PG for the production of photomasks

520 employees in 11 countries, whereof one third in product development

50 countries market coverage through subsidiaries and distributors

98 % of total revenues

from exports

40 years of high-tech innovation

experience

420 patents strong IP portfolio

Mycronic – our strengths

9

Power of innovation

Global market

coverage

Enabler in the

electronics industry

Strong financial position

Operational excellence

Strong brand

Mycronic main goal and means

Profitable growth

target to reach 2 BSEK

Means

10

Product road map

Sourcing in LCC

COGS down

Go-to-market

Financial targets For long term growth and profitability Per Ekstedt, CFO

12

Financial goals and dividend policy

The objective is to provide both returns and value growth.

Between 30 and 50 percent of net profit will be distributed

to the shareholders.

Net sales will reach

SEK 2 billion at the

end of the business

plan period.

Over time EBIT will

exceed 10 percent of

net sales over a

business cycle.

Net debt will be less

than 3 times the

average EBITDA.

Financial summary Q3, 2014

• Strong order intake and order backlog of MSEK 740

• Including seven mask writers in five different segments of the photomask market

• Continued positive SMT sales development

• Stable gross margin

• Profitable at EBIT level five quarters in a row

• Strong cash position

• Product launches

• Launch of MY200 completed

• MY600

• Prexision-80

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0,0

0,4

0,8

1,2

1,6

2,0

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314

Sales Order intake Book-to-bill

Order intake and net sales Rolling 4 quarters

14

• Order intake rolling 4 quarters at 1,784 MSEK

• Book-to-bill ratio over 1 during 5 quarters in a row

Order intake/sales, MSEK

Book-to-bill

Long-term goal Net sales will reach 2 BSEK at the end of the business plan period.

10%

20%

30%

40%

50%

60%

Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314

Gross margin, 4 quarters rolling

15

Profitability

• Strong gross margin effects the EBIT margin

• Gross margin in Q3 2014 somewhat affected by unfavorable product mix in PG

-30%

-20%

-10%

0%

10%

20%

Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314

4 quarters rolling

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EBIT margin

Long-term goal Over time EBIT will exceed 10 percent of net sales over a business cycle.

• Positive EBIT for five consecutive quarters

• Profitability also with no PG machines sold

-150

-100

-50

0

50

100

150

200

250

0

100

200

300

400

500

600

Q110Q210Q310Q410Q111Q211Q311Q411Q112Q212Q312Q412Q113Q213Q313Q413Q114Q214Q314

Cash balance Operating cash flow, 12M rolling

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4 quarters rolling

Strong cash flow and financial position Cash

bala

nce

Opera

ting c

ash

flo

w

MSEK MSEK

• Dividend of MSEK 245 paid out 6 August, 2014

• Solid cash balance for future growth, both organic and by acquisitions

• Periodically large PG orders with advance payment from customers affects cash

-50 -100

-150

18

Profitable growth

Technological development, operational excellence, go-to-market model and solid aftermarket are drivers to reach the goals

Net sales will reach SEK 2 billion

at the end of the business plan

period.

Over time EBIT will exceed

10 percent of net sales over

a business cycle.

Operational Excellence For long-term profitability

Charlott Samuelsson, SVP Operational excellence

Operational excellence

Operational excellence function added into Corporate management team in June 2014

• Execution of strategy to reach growth and profitability

• Operational Development to achieve excellence

• Change Management to meet challenges

• ICT (Information Communication Technology) to enable business

• Quality to assure success

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Focus areas to reach operational excellence

21

Strategy execution

Go-to-market

Process support

R&D efficiency

Leadership competence

Total quality cost

Supplier consolidation

Value engineering

New development

Improved Profitability Through reduction of product cost

22

LCC sourcing

Systematic approach

Strategy execution through continuous follow-up

Operational development through measurable tracking

Change management through supporting processes

to reach growth and profitability

23

The electronics industry a growing industry Niklas Edling, SVP Operations and Strategic Product Management

Where is development heading

25

26

The electronics industry value chain

Electronic Equipment 1,678 BUSD

Assembly Service

1,250 BUSD

Electronics Components

681 BUSD

Electronics Materials

134 BUSD

PCB Assembly

SC Assembly

Photomasks

Source: Prismark April 2014

Total electronics industry 2013: 1,678 BUSD Predicted CAGR 2013-2018: 3.8%

Electronics industry forecast

27

403

465

Americas

2018 2013

101 101

2018 2013

Japan

2013 Europe

2018

303 285

1.2% 889

Asia/ROW

5.3% 1,151

2018 2013

• Large sectors of the electronics industry are now mature, future growth expected to be in line with GDP

• Asia continues to have strong growth

• Transfers from West to East slowing down

0.1%

Source: Prismark April 2014

Mobile phones

28

Main driver up until now

Volume

Miniaturization

152

310

2013 2008 2018

2008-2013 2013-2018

Revenue +13% +3%

Units +6% +6%

Revenue BUSD

Functionality

Resolution

355

Source: Prismark April 2014

29

Future technology drivers

Trends

Internet of Things 20Bn to 50Bn connections 2020, CAGR 20%-35%

Wearable Electronics 500M devices sold 2018, CAGR 50%

Automotive Electronics 244 BUSD 2018, CAGR 6.6%

LED lighting CAGR above 30%

for the electronics industry

Source: Prismark April 2014

Internet of Things

30

4

11

2020 2014 2008

Billion units Safety

Quality

Cost

50

Source: The Connectivist May 2014

• Computers • Smart watches • Smart metering

devices

• Toothbrushes • Wind turbines • Traffic Lights • Safety systems

Wearable electronics

31

0 30

2018 2008 2013

Million units

Energy consumption

Cost

500

Product variation

Source: Prismark April 2014

Automotive electronics

32

125

178

2018 2008 2013

Revenue BUSD

2008-2013 2013-2018

Vehicle production +4% +4%

Electronic content per vehicle +2% +3%

Safety

Quality

244

Product variation

Source: Prismark April 2014

LED lighting

33

Panel Area

2023 2021 2011 2013 2025 2015 2017 2019

LED lighting Conventional lighting

Process standardization

Growth

Source: Prismark April 2014

Surface Mount Technology For profitable growth

Robert Göthner, SVP Business area SMT

Offerings

• Jet printing (unique)

• Pick & Place assembly machine

• Component storage system

• Advanced software suite

• Service and support

Solutions are designed to offer high-mix customers cost efficient production and high utilization

Leader in high-mix electronics production

jet printing technology

automated storage

agile assembly equipment

intelligent Agilis feeders

powerful SW tools

35

36

The SMT market by customer segments

• 70% of the worldwide market is in Asia - dominated by high volume production

• China represents 50% of worldwide SMT equipment market

• 30% in NA and EMEA. A higher degree of low/mid volume production of high value electronics

Consumer electronics

Handheld devices

LAPTOP/PCs

Automotive

Telecom/Computers

Industrial applications

Medical

Aviation, Military

High Volume 63%

Volume

Mix

Low Medium High

Hig

h

Lo

w

Me

diu

m

SMT equipment market value 4 BUSD 2013 (Pick & Place, screen printing, soldering, inspection equipment)

Mid volume 29%

Low 8%

Pick & Place - Competitive environment

High volume Low volume Medium volume

• Highly competitive market place

• Top 3 players have 60% market share

• Mid players consolidate/merge - Juki/Sony, Yamaha/Hitachi/iPulse

• Mycronic well positioned in high-mix (low to medium volume)

37

Mycronic market position

• Largest markets • North America

• Germany, France, Scandinavia and UK

• Growing in China

• Market coverage in 50 countries • Strong channel partner network

• 3 application centers

• 24/ support worldwide

• More than 4,500 systems at >2,200 customers

• Industry segments • Industrial electronics, automotive,

medical, military, aviation/space

• Even split between OEM and contract manufacturers

Market leader in the high-mix segment

38

Mycronic’s offering to high-mix customers

• High utilization

• Fast change-overs

• Low number of operators

• Effective inventory control

• High accuracy

• Ability to produce all types of boards

39

Market dynamics and trends

40

Effects on PCB assembly process

Cost pressure in electronics manufacturing

• Cost per placement • Higher speed lines • Higher utilization, quality & yield

Build to order • Higher mix and shorter batches • New product turn around time • Logistics and material handling

Increased complexity and miniaturization

• Component range increase – smaller and bigger • More complex boards • Semiconductor – LED, new packaging/devices

Organic growth in Mycronic SMT

• Increase market share in current segments Core business

• Expand addressable Pick & Place market

• Capitalize on Jet printing technology

Expansion

• Invest in market presence in Asia

• New sales approach Go-to-market

41

Technologies for applying fluids

42

stencil printing – solder paste

• Industry standard technology

• Fast cycle time

• Use of stencils

Solder paste printed on a PCB

Technologies for applying fluids

43

Dispensing – glue, silver epoxy, under fill and solder paste

Chipbonder (Loctite 3621) for non-contact dispensing technology

• Primarily used in post assembly process

• Simple platforms

• Very slow

Mycronic jet printing technology

• Jet printing of solder paste and glue

• 2-10 times faster than dispensing

• Stencil free

• Software driven

• High accuracy

the fastest way to deposit fluid

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Solder paste jet printed with high speed and accuracy on a PCB

Strong technology trends

Technology drivers

• Miniturisation

• Mixing large and small components

• Higher density boards

• 3D electronics and boards

• New semiconductor packaging

• New LED technology

• Hybrid packaging/devices

• Flexible boards

drive need for new capabilities on equipment

45

Stencil printers

Dispensers

• Difficult to do everything on the board

• Very slow, not cost effective

• Accuracy challenging

Future opportunities for Mycronic Jet printing

46

Stencil printer

High-end electronics low/mid volume

High volume SMT Smart phone board

Semiconductor LED technology

Stencil printer Stencil printer Dispensing Dispensing

Dispensing Dispensing Dispensing Dispensing

Examples

Summary

• Well positioned in high-mix

• Key trends in our favor Pick & Place

• Strong technology drivers

• Demand for new capabilities

• Leverage our Jet printing technology

Jet Printing

47

Mycronic SMT offering – demo introduction

Simon Sandgren, Marketing director Business area SMT

Electronics production SMT assembly process

solder paste application

component assembly

storage of components

0.4×0.2 to 80×80 mm mg to hg

components

products

49

mm2 to m2

g to kg

circuit boards

Electronics production solder paste application

thousands of interconnects

accurate amount of solder paste

adjust print pattern for quality

a deposit is measured in nanoliter

50

Mycronic jet printing technology the fastest way to perfect solder joints

*dph = dots per hour

• non-contact • 1,080,000 dph* • on-the-fly • optimize print pattern • software driven

51

Electronics production component assembly

100 different parts on a board

up to 1000 placements

10 placements per second vision inspection

micrometer accuracy

accurate force control

52

Mycronic assembly technology agile solutions boosting productivity

MY200 performance series designed for agile electronics assembly at speeds up to 50,000 cph

advanced machine vision

unmatched set-up times

mount any component on any board

software driven ease of use

test before place

53

Nanomaterials technology for future electronics production – a guest lecture

Johan Liu, Professor in Electronics Production

Johan Liu, Professor in Electronics Production Professor Johan Liu graduated with a master and Ph D degree in Materials Science and Engineering from the Royal Institute of Technology, Stockholm, Sweden in 1984 and 1989 respectively. He served in various positions at the Swedish Institute for Production Research (IVF), Gothenburg as project manager, group leader and division manager between 1989 and 1999. He is since then a full professor in electronics production, Chalmers University of Technology, Sweden. As a member of the Royal Swedish Academy of Engineering Sciences, a Fellow of IEEE and a member of the European Nanoelectronics Association (Aeneas), he has published 2 books, 450 papers in journals, conference proceedings and 15 book chapters. He has 45 patents accepted or filed and has given 45 key note/invited talks during the last 20 years. In addition, he is one of the founding members of the SHT Smart High Tech AB and 3Dtro AB and serves on the Scientific Advisory Board for Henkel, Pacific Region.

55

Pattern Generators

For profitable growth

Magnus Råberg, SVP Business area PG

The photomask

the link between design and mass production of electronics

57

Design data file

Mask writer

Display layers

Aligner, copy process

New product idea

End product

Photomask

Display substrates

10-15 photomasks needed to create a display

Mask Shop

Drivers for photomask demand:

New display designs, R&D work and number of production lines

The manufacturing process What drives demand of photomasks

New product idea

Aligner, copy process

5-15 million mobile displays per month

Panel maker

58

Display

Business area PG offerings Unique position in the display segment

59

Prexision series

Semiconductor

Sigma and Omega

Multi Purpose

FPS

Recurring aftermarket business

• Revenue from service contracts and upgrades

• >90% of systems in use are supported by Mycronic

• >80% on annual service contracts

Mycronic’s Prexision-80 delivers nanometer placement accuracy

Mycronic mask writers offering nanometer precision

1 meter 100 mikrometer 10 cm 1 millimeter 1 cm 100 nanometer 1 mikrometer 10 mikrometer 1 ångström 1 nanometer 10 nanometer

Child Hand Hair Red blood cell Bacteria Virus Hemoglobin

60

0

20

40

60

80

100

120

140

160

180

200

2012 2013 2014 2015 2016 2017

Display market expected to grow

Forecast of total display area produced

• Total display market revenue 130 BUSD

• Display market expected to grow over the coming years

• More advanced displays in mobile applications

• Strong TV market

• Additional products with displays continuously increase

Source: DisplaySearch, October 2014

Million

square meter

61

Driving photomask demand

Display trends Current and future…

TV development 4K & 8K

Display size trend Resolution trend in mobile devices

Flexible displays AMOLED displays Display manufacturing in China

62

31

33

38

41

25

30

35

40

45

2005 2010 2015 2020

Display size trend Size continously increasing

Inch Average display size development

• 45 % of the growth of display area in 2015 due to increased display sizes

• New production lines needed to support this trend

• New production lines expected in China

Source: DisplaySearch, October 2014

63

Resolution trend in mobile devices Pixels are getting smaller and smaller

Million units

Number of advanced displays (resolution greater than 400 pixels per inch (PPI))

Source: DisplaySearch, April 2014

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015 2016 2017

Placement accuracy Higher resolution Improved line width

uniformity

64

PPI

Resolution development

25

125

225

325

425

525

625

725

825

2010 2012 2014 2016 2018

0

4 000

8 000

12 000

16 000

2003 2005 2007 2009 2011 2013 2015 2017

Display photomask market Segmentation and trends

Total volume of display photomasks

Source: DisplaySearch and Mycronic

Units

+3%

Advanced displays for TV and smartphones

Launch of ”Retina” display

Top Critical ≈ P8/P80

Critical ≈ P8/P10

Mature ≈ LRS

• The display photomask market is dominated by 5 suppliers

• 10 production facilities

• Japan and South Korea are market leaders

• Increased volumes and trends towards more complex photomasks drives the market

• Development of high value segments

65

Installed base of display mask writers

66

• 65 display mask writers installed since 2000, whereof 25-30 advanced mask writers

• More than 70% are older than 8 years.

• Still a large market for these photomasks

• Systems are used in controlled environments and are regularly maintained

• Over time it will be harder to support older systems

• A replacement strategy has been initiated to address long term demand

The systems will be replaced over

a long time and under controlled circumstances

Mycronic has unique skills in large photomasks

Mycronic has a unique position

67

supplying the entire display industry with mask writers

Photomasks up to 1800x2000 mm

Photo: Courtesy of SKE Electronics

”The mura challenge” - a Japanese word meaning irregularity ”

Pattern Generators

PG production environment

Raimo Kortelainen, Director Technical center PG Henrik Bondestam, Sr Specialist PG

Mycronic cleanroom environment

69

High requirements on cleanliness – without particles

Restrictions on particles even small particles are big in a cleanroom

1 meter 100 mikrometer 10 cm 1 millimeter 1 cm 100 nanometer 1 mikrometer 10 mikrometer 1 ångström 1 nanometer 10 nanometer

Child Hand Hair Red blood cell Bacteria Virus Hemoglobin

70

Cleanroom classification 1: 1 particle of 0.5 micrometer/cubic foot air

Prexision inside

71

Imagine a photomask big as a football field

...on a football field the mask writer would write lines thinner than a hair

…and would place it with an accuracy better than the size of a blood cell

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1 micro- meter line

8 micro- meter

• AMOLED Active Matrix Organic Light-Emitting Diode

• CAGR Compound Annual Growth Rate

• COGS Cost Of Goods Sold

• CPH Components Per Hour

• CRT Cathod Ray Tube

• EBIT Earnings Before Interest and Taxes

• EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization

• EMEA Europe, the Middle East and Africa

• GDP Gross Domestic Product

• kCPH kilo Components Per Hour

• LCC Low Cost Countries

• LCD Liquid Crystal Display

• LED Light Emitting Diodes

• OEM Original Equipment Manufacturer

• PCB Printed Circuit Board

• PG Pattern Generator

• PPI Pixels Per Inch

• ROW Rest Of the World

• SC Semiconductor

• SMT Surface Mount Technology

• TFT-LCD Thin Film Transistor-Liquid Crystal Display

Abbreviations