Growth or Stagnation? - Opportunities & Challenges in Display Industry

Jongchan Yoo Vice President Displaybank Co. Ltd., [email protected] URL : www.displaybank.com

All contents of this file are copyright by the author and Displaybank Opportunities & Challenges Opportunities & Challenges

Oversupply Economic CrisisComponent Shortage CHALLENGES

y str du In lay sp Di Emerging Market FPTV Digital BroadcastingLED LCD TV e-Reader LCD Monitor Mini Note 3D TV AMOLED OPPORTUNITIES Smart Phone Smart TV Flexible

All contents of this file are copyright by the author and Displaybank 2 Contents Opportunities & Challenges in Display Industry

Challenges

• External Impact : Undermined Economy • Unbalance of Supply & Demand • Over-Investment of TFT LCD • Shortage in Key Component

Opportunities

• Strong Demand for LED LCD TV • 3D, New Criterion of Display • Various Personal Mobile Application • AMOLED, as post-TFT LCD?

All contents of this file are copyright by the author and Displaybank Challenges Challenges

•• ExternalExternal ImpactImpact :: UnderminedUndermined EconomyEconomy

•• UnbalanceUnbalance ofof SupplySupply && DemandDemand

•• OverOver--InvestmentInvestment ofof TFTTFT LCDLCD

•• ShortageShortage inin KeyKey ComponentComponent

All contents of this file are copyright by the author and Displaybank 4 External Impact : Undermined Economy Undermined Economy

KRW/US$ Trend

A survey taken in the last week of August by the polling firm StrategyOne suggests that fence sitting by home buyers will dramatically increase in the fourth quarter. Some 87 percent of consumers say they do not plan to make a big-ticket purchase (such as a house or car) in the next 3 to 4 months. Nearly half, 49 percent, say they have already delayed making a big-ticket purchase during the past few months. Only 13 percent said they plan to make a big purchase during the balance of the year.

As they brace for a second downturn, Americans are cutting their spending and preparing for an extended financial siege. Just 5 percent think there will be a full economic recovery by the end of this year, and only another 21 percent see recovery taking place by the end of 2011. Half of all Americans polled (50 percent) see a recovery not coming until sometime after the end of 2011, and about a quarter (23 percent) doubt our economy will ever fully recover.

Almost two in three Americans (65 percent) say a double-dip recession -- defined as a recession followed by a short-lived recovery, followed by another recession -- is now likely to happen. Among those who expect a double-dip recession, nearly half (44 percent) fear it will be worse than the first one, with 21 percent worried it will be "much more severe." Just 24 percent think the second recession will be less severe.

As far as their personal finances, only one of four Americans expects to recover by the end of the year. Nearly half, 46 percent, don't expect to recover until the end of 2011 or later; 26 percent say they will never recover financially.

"The American public -- characteristically optimistic and resilient -- is looking around and seeing more and more dark storm clouds approaching on the horizon," said Bradley Honan, senior vice president of StrategyOne. "Not only has confidence in the economy been severely undermined, there are now real, significant doubts emerging about our country." (Source : UPI, 9th Sep 2010, quotation from StrategyOne survey) (Source : KEB, Sep 2010)

All contents of this file are copyright by the author and Displaybank 5 LCD Panel Over Supply Over Supply

Worldwide TFT LCD Panel Demand & Supply

OverOver SupplySupply

00 ~~ 8%8% BalanceBalance Q1'09 Q1'10 Q1'11 Q1'12 Q1'13 Q1'14

Demand Supply Glut

(Source : ‘Large Area TFT-LCD Panel Supply & Demand Analysis’, Displaybank, Jun. 2010)

All contents of this file are copyright by the author and Displaybank 6 ‘Glut’ effected to Price and Profit Over Supply

Panel Price (US$)

Glut Ratio(%)

Q1'04 Q1'05 Q1'06 Q1'07 Q1'08 Q1'09 Q1'10 * OPM (Operating Profit Margin) : Sum of SEC, LGD, AUO, CMO and Sharp

(Source : ‘Large Area TFT-LCD Panel Supply & Demand Analysis’, Displaybank, Jun. 2010)

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OPM(%) Over Investment to China Over Investment

2010 2011 2012 2013 Korea LGD - Gen8 (120K) SEC- Gen8 (70+30K)

LGD- Gen8 (60+30K)

Taiwan CMI - Gen8 (30K) AUO- Gen8 (50+30K)

Japan IPS - Gen8 (45K) BOE- Gen6 (90K) China BOE- Gen8 (90K)

Supply Capacity Trend CEC- Gen6 (60+20K)

LongFei- Gen8 (90K)

TCL Gen8 (60K) - SEC - Gen7.5 (100K)

CEC - Gen8 (90K)

AUO - Gen7.5 (90K)

CMI - Gen8 (60K) Operating or under construction Decided the construction LGD - Gen8 (60+60K) Under discussion (Not fixed) BOE - Gen8 (60K)

All contents of this file are copyright by the author and Displaybank 8 Key Component Shortage Component Shortage

. LED BLU(LGP, LED Chip, Reflector...), Driver IC, Glass, POL... . Factor – Fast Demand Growth Lead to Shortages on Raw Material and Production Capacity – Small-scale Productions on Various Products (Diversified Specs - Frame rate, BLU) – Due to Worsened Cost Competition, Avoids Supply

Diversified Product Lineup

HD CCFL 60Hz FHD FHDFHD LED LED 60Hz 60Hz HD CCFL 60Hz HD CCFL 120Hz CCFL 120Hz LED 120Hz

HD HD 3D 240Hz3D 240HzCCFLCCFL 3D 3D120Hz 120Hz

All contents of this file are copyright by the author and Displaybank 9 BLU Key Components Supply Chain Component Shortage

BLU Components Supply Chain

Optical Component

Film LGP Diffusion Plate

Back Coating/Cutting Cutting/Polishing/Patterning Cutting

Light Source CCFL (Ass’y) BLU Maker LCM TFT-LCD Module

LED Chip LED PKG LED Module

Others Electric Components Structures (Tape, etc) (Inverter, Driver, etc) (Chassis, Mold Frame, etc)

New Components for Edge Type LED LCD TV

(Source : ‘Light Guide Plate (LGP) for LED LCD TV 2010 ‘, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 10 LGP Shortage Situation Component Shortage

LGP Manufacturing Process & Shortage

Extrusion Patterning Sheet Cutting/ MMA PMMA (Printing/ BLU Maker (Casting Polishing Laser) Sheet)

Raw material stage Process stage

Large size Companies Specialized to Chemical Area Small/Medium size Companies Specialized to Process Area

Shortage and takes rather longer Shortage and takes rather shorter to ease the situation to ease situation (Big investment amount and (Rather smaller investment amount and longer time to secure capacity) rather shorter time to secure capacity) Serious Shortage Shortage

(Source : ‘Light Guide Plate (LGP) for LED LCD TV 2010 ‘, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 11 LED Weather Forecast by Segment Component Shortage

LED Weather Forecast by Segment

Short-term Long-term Price Trend Remarks Balance Balance

Ingot makers increasing capacity but takes Ingot Shortage Shortage  On a rise time to catch up rising demand Despite no problem with the capacity, Substrate Shortage Shortage On a rise  there is a shortage of ingot Wafer and chip makers increasing capacity Wafer/Chip Balance Balance~oversupply On a fall by adding rapid MOCVD reinforcement

Not enough growth engine Package Balance Balance~oversupply On a fall except for large-size BLU

Application Balance Balance On a fall Lighting market’s growth is not fast enough

Serious

Not good situation

OK

Good situation

(Source: ‘LED Package Market & Industry Outlook’ Displaybank, Q2’10)

All contents of this file are copyright by the author and Displaybank 12 WW LED Packaging Demand Forecast Component Shortage

Worldwide LED Packaging Demand, (Bil.Units)

(Source: ‘LED Package Market & Industry Outlook’ Displaybank, Q2’10)

All contents of this file are copyright by the author and Displaybank 13 Opportunities Opportunities

.. StrongStrong DemandDemand forfor LEDLED LCDLCD TVTV

.. 3D,3D, NewNew CriterionCriterion ofof DisplayDisplay

.. VariousVarious PersonalPersonal MobileMobile ApplicationApplication

.. AMOLEDAMOLED ,, asas postpost--TFTTFT LCD?LCD?

All contents of this file are copyright by the author and Displaybank 14 TV Mega Trend Transition LED & 3D TV

Smart TV Network

3D TV Connected TV

Ultra Slim New Experience LED BLU

Frame Rate Better Picture Quality , 120Hz/240Hz Slim Design Save Energy (Green)

Full HD Improve Resolution Response Time Flat Panel Display Larger Size Better Picture Quality

(Source: ‘3D TV Industry Analysis and Market Forecast’, Displaybank, Q2’10)

All contents of this file are copyright by the author and Displaybank 15 WW TV Market Forecasts LED & 3D TV

Worldwide TV Market & GDP Forecast

166 176 184 192 197 201 207 227 242 255 267 277 Mil.Units

(Source: ‘Worldwide TV Shipment and Forecast’, Displaybank, Q3'10 / ‘World Economic Outlook’, IMF, Jul. 2010)

All contents of this file are copyright by the author and Displaybank 16 Major TV Makers’ Business Plan in 2010 LED & 3D TV

TV Business Plan by Major Brand (Mil.Units) 2009 2010 (Business Plan)

LCD TV LCD TV LED LCD TV 3D TV LED LCD TV (%, in Max Case)

Samsung 26.8 38 13 2.3 34%

LG 16.3 28 6~7 1.0 23%

Sony 15.1 23 62.3 26%

Sharp 9.8 12 60.3 50%

Philips 7.2 10 4~5 0.1~0.2 45%

Toshiba 8.5 12 3~4 0.3 29%

Panasonic 6.3 10 2~3 0.0 25%

Vizio 5.9 8 3~4 0.5 44%

Total 95.9 147 44~49 6.9 31%

2009 2010 (Business Plan)

Plasma TV Plasma TV 3D TV 3D Plasma TV (%, in Max Case)

Panasonic 5.7 7.5 1.2 15.6%

Samsung 3.5 4.4 0.3 6.8%

LGE 3.1 4.0 0.1 2.5%

(Source: ‘LED LCD TV Makers Roadmap & Market Forecast’, Displaybank, Q2'10)

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” ” x1.3 TV

LCD Magic Price Magic Price “ “ LED

$1,000 ~ $1,500 $1,000 ~ $1,500 x1.5 right by the author and Displaybank port -port Q1’10) TV’, Displaybank, & Module LCD All contents of this file are copy x1.6 (Source: ‘FPD TV Cost Analysis & Forecast Re & Forecast Analysis TV Cost (Source: ‘FPD x1.8

40”FHD LED TV (120Hz)

40”FHD CCFL TV (60Hz) 40” FHD LED TV (120Hz) VS CCFL (60Hz) Price Forecast x2.0 2009 2010 2011 2012 0 TV Retail Price forecast (CCFL vs. LED) 500 (US$) 2,500 2,000 1,500 1,000 LED LCD TV Market Forecast LED LCD TV

LED LCD TV Market (Mil.Units) LED LCD TV Market (Bil.US$)

CCFL LCD TV CCFL LCD TV LED LCD TV LED LCD TV 120 209 84% LED (%) LED (%) 113 80%

101 74% 169 68% 56% 63%

130 74 50%

40% 85 28% 34

17% 31

7 3 7% 2%

2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014

(Source: ‘Worldwide TV Shipment and Forecast’, Displaybank, Q3'10)

All contents of this file are copyright by the author and Displaybank 19 3D TV Manufacturing Cost Comparison 3D TV

240Hz & 3D Premium Comparison 2D TV vs. 3D TV Cost Comparison – 46” & 55”

46" LED LCD TV 55" LED LCD TV Product (Edge) (Edge) Frame rate 120Hz 240Hz 120Hz 240Hz 46” LED LCD 46” LED LCD 2D TV 3D TV 2D TV 3D TV 120Hz 240Hz LCD Module $645.0 $730.0 $895.0 $990.0 Tuner (Combo) $5.1 $5.1 $5.1 $5.1 Panel 100 113 Video Processor $19.5 $22.0 $19.5 $22.0 Audio Processor $6.5 $6.5 $8.1 $8.1 TV Cost 100 112 Other Circuit $81.8 $83.8 $110.4 $112.4 Circuit sum $112.8 $117.3 $143.1 $147.6 Set 100 170 Mechanical sum $73.2 $80.5 $124.3 $134.4 etc. (CKD Pack+Tax+Freight+Loss+H/C) $117.9 $126.1 $144.6 $153.0 Material cost $948.8 $1,053.9 $1,306.9 $1,425.0 Manufacturing O/H $195.0 $231.0 $233.0 $272.0 Total Manufacturing Cost $1,143.8 $1,284.9 $1,539.9 $1,697.0 Additional Cost $141.1 $157.1 Retail Price $1,529.9 $2,599.9 $2,499.9 $3,499.9

(Source: ‘FPD TV Cost Analysis & Forecast Report - LCD Module & TV’, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 20 3D TV Market Forecast 3D TV

3D TV Market (Mil.Units) 3D TV Market (Bil.US$)

2D TV 2D TV 3D TV 3D TV 3D (%) 3D (%)

54%

77 67 43% 84 31% 47 59 28% 23% 28 33 17%

16 13% 12 9% 6 7% 0 3% 0 0% 0% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014

(Source: ‘3D TV Industry Analysis and Market Forecast’, Displaybank, Q3'10)

All contents of this file are copyright by the author and Displaybank 21 Personal Mobile Application Mobile Appl.

1200 SmartphoneSmart Phone Market Market (Munits) (Mil.Units) e-ReaderE-Reader Market Market (Mil.Units) (Munits)

1000

800

600 400 e-Reader 200 0 Kindle2 2008 2009 2010 2011 2012 2013 2014 2015 i-PAD (Source: Company Data, Displaybank Estimated, Q1’10) Kindle Sony Reader

(Camera,+Function MP3, DMB ...) Smart Phone

(Fold,+ Slide,Design Slim...)

Mobile Phone Touch

DSC, MP3, PMP, Car Navi ...

All contents of this file are copyright by the author and Displaybank 22 Full Touch Phone: Resistive to Capacitive Mobile Appl.

Resistive Capacitive TSP Market Forecast by Technology (Mil.Units)

Apple iPhone Google Nexus One Motorola Motoroi Samsung Omnia LG Cookie

Samsung Galaxy HTC Desire LG Maxx Samsung Haptic Motorola ROKR

LG New Chocolate Samsung Blue Earth LG Crystal

(Source: ‘Touchscreen Panel Market & Issue Analysis’, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 23 Why Capacitive? Pros and Cons Mobile Appl.

Characteristics Comparison: Resistive Touch vs. Projected Capacitive Touch

Resistive (Analog) Capacitive (Projected)

Input Method Anything can push Finger Only

Multi-touch No Yes  Capacitive: Slim & Light Poor Excellent “Soft & Multi” Life Span Poor Excellent

Transmittance Fair Very Good

Stable Calibration No Yes

Cost Low High

Structure Comparison: Resistive Touch vs. Projected Capacitive Touch

 Capacitive: “Need More infra and time for technology mature

(Source: ‘Touchscreen Panel Market & Issue Analysis’, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 24 AMOLED Investment Trend AMOLED

 SMD - World Best AMOLED Panel Supplier - 2.1 Bil.US$ for 5.5G - 70K Substrates per month from Jul.’11 (Source : SMD)  LGD S/M AMOLED Shipment - 2H’10 : 4G with monthly CAPA of 4K sheet (Mil.Units) - 2H ’11 : 250 Bil.Won to triple the capacity (Source : LGE) - Acquires IPs and Business of Eastman Kodak - AMOLED TV Launch : 15”(2009)  30”(2011)

 AUO - 3.5G LTPS Q3’10. (Source : AUO) - Acquire TMD Subsidiary, AFPD  Secure 4.5G LTPS Line with 45K/Month Capacity - Consider 5.5G plant Construction

 Panasonic - Through its subsidiary, IPS-α, Consider Investing on 4~5G AMOLED Fab.

 Sony - Under Large-size AMOLED TV, high possibility of investment to large-area Fab. over 3~4G (Source : ‘AMOLED Investment Trend & Technical Issue’, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 25 AMOLED Issues AMOLED

Technical Issues for AMOLED

(Source : Sony, UDC)

(Source : Samsung) Future AMOLED (Source : Samsung) Large AMOLED S/M AMOLED Applications • OLED Light Size Enlarging Issues • 3D OLED TV • Improved Production Efficiency Present Issues • Transparent OLED • Secure Price Competitiveness • Secure AMOLED Application Area • Flexible OLED • Stabilized TFT Uniformity (Smart Phone, NB PC, Tablet PC, etc.) • Secure large-area plating process • Stabilized Panel Supply • Improved Life-time • Secure Competing Edge Against LCD • Secure Encapsulation Technology

All contents of this file are copyright by the author and Displaybank 26 AMOLED Market Forecasts AMOLED

AMOLED Shipment by Application AMOLED Revenue by Application

(Mil.Units) (Mil. US$)

(Source : ‘AMOLED Investment Trend & Technical Issue’, Displaybank, Q1’10)

All contents of this file are copyright by the author and Displaybank 27 Summary

• As challenges of current display industry, Displaybank points out undermined economy, unbalance of TFT LCD Panel supply & demand, over- investment of TFT LCD, and shortages in Key Components. • As opportunities of current display industry, Displaybank points out strong demand for LED LCD TV, 3D display, various personal mobile applications, and AMOLED. • These opportunities enable constant growth of display industry despite the challenges like financial crisis. For example, the shipment of 2009 worldwide TV market rose 3.1% on year and is expected to rise 9.4%(YoY) in 2010. • Display industry expected to make constant growth in the middle of IT convergence. And display industry needs to focus on developing next generation device as post-TFT LCD.

All contents of this file are copyright by the author and Displaybank 28 Thank you!

Jongchan Yoo Vice President Displaybank Co. Ltd., [email protected] URL : www.displaybank.com

All contents of this file are copyright by the author and Displaybank 29