Mike Kelly Presentation

3M Display & Graphics Business

Optical Film Update
Mike Kelly, Executive Vice President, Display and Graphics

Building a Sustainable Business
In Light Management Films

September 9, 2008
1

© 3M 2008. All Rights Reserved. 2008 3M Investor Conference

Commercial Graphics

Display & Graphics Business
Optical
Systems
Film Mfg &
Supply Chain

Projection Systems
Traffic Safety Systems

Technology
Pipeline
2



Optical Systems Division
Leading global supplier of brightness enhancement
films that transform the display of information
anytime, anywhere
Handheld devices
Computer displays
LCD TV
Emerging applications – Ultra mobile PC,
Automotive, Digital signs

“Enhancing the Way You See the World”
3



Optical Film Strategies for LCDs

1995 – 2007
• Brightness enhancement

• Energy savings
2008 – 2009
• Uniformity improvement
• LCD system cost reduction

Future
• New value films
4



Recent Changes in the LCD TV Segment

Brightness Spec
Brightness = 500 - 550 Brightness = 400 - 450
Spec Down 20%
95% Color Gamut 75% Color Gamut

LCD Panel
LCD Panel LCD Panel
Transmission Up 30%
DBEF 60% Brighter
DBEF
2x Diffuser 3x Diffuser
Diffuser plate Diffuser plate
Lamps
Lamps Lamps
Lamps Lamps
Brightness Up 15-20%
Recent Past Current as of 2008

Decline in DBEF demand due to:
• Reduction in TV brightness specifications in order to reduce costs
• Panel transmission increases
• Improved bulb performance
5



Steady Improvements in LCD Performance

Panel
Transmission
4% – 6%

As panel transmission increases, the need for brightness enhancement film
enhancement
decreases. However, the need for uniformity solutions may increase.
increase.
Graphic illustration from Scientific American
6



But…. Our Film Value Propositions Vary by LCD Segment
Plug-in: Monitor & TV
Customer needs: Recent shift in priority from brightness to
uniformity and low power
~1 enhancement film per display
Value proposition has weakened over time
Growing interest in reducing power consumption

Battery Operated: Handheld & Notebook
Customer needs: Sustained priority on thin, uniformity, low
power, brightness
2 or more enhancement films per display
Films have substantial impact on power consumption
Strong enhancement film value proposition
7



“Plug-in” LCDs
TV
TV Panel Area
70,000 100%
Industry area growth rate slowing
Displaysearch 90%
60,000
Lower brightness specifications
80%
50,000 70%
Fewer films / TV

% Growth
000 m^2

60%
40,000
50%
3M competitiveness has declined
30,000 40%

DBEF use stabilizing
30%
20,000
20%
Lower pricing
10,000
10%
Energy savings impact
- 0%

Uniformity
2007 2008 2009 2010 2011

Monitor
Monitor Panel Area
30,000 50%
Displaysearch 45%
Single digit area growth rate
25,000
40%
35%
Intense prism film competition
20,000
% Growth
000 m^2

30%
3M competitiveness had declined
15,000 25%
20%
substantially, but has recently improved
10,000 15%

DBEF use growing
10%
5,000
5%
Lower pricing
- 0%
Energy savings impact
2007 2008 2009 2010 2011
8



“Battery-Operated” LCDs
Notebook
Notebook Panel Area
18,000 50%
Displaysearch
45%
Double digit area growth to continue
16,000
40%
14,000
LED backlight usage increased
35%
12,000

% Growth
significantly
30%
000m^2

10,000
25%
3M has remained competitive
8,000
20%
6,000
DBEF use growing
15%
4,000 10%
Lower pricing
2,000 5%
Improved battery life
- 0%
2007 2008 2009 2010 2011

Handheld Panel Area
Handheld
8,000 45%
Displaysearch
40%
7,000
Area growth rate slowing
35%
6,000
30%
% Growth

3M has strong competitive position
5,000
000 m^2

25%
4,000
DBEF use growing
20%
3,000
15%
BEF RP (DBEF + BEF multi-function)
2,000 10%
Improved battery life
1,000 5%
- 0%
2007 2008 2009 2010 2011
9



Enhancement Film Industry
Area Revenue
Market Size Sq Meters

Market Size $
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

Revenue CAGR -9.2%
Area CAGR +10.0%

Enhancement Film Industry includes: DBEF, Prism, Micro Lens, Diffusers & Reflectors
10 3M Estimate

11
Sales (000's USD)
Q
1
Q '01
2
Q '01
3
Q '01
4
Q '01
1
Q '02
2
Q '02
3

HandHeld
Q '02

© 3M 2008. All Rights Reserved.
4
Q '02
1
Q '03
2

Q '03
3
Q '03
4
Q '03
1
Q '04
2
Q '04
3
OSD LCD Sales History

Q '04
4
Q '04

LCD Notebooks
1
Q '05
2
Q '05
3
Q '05

2008 3M Investor Conference
4
Q '05
1
Q '06
2
Q '06
3
Q '06
4
Q '06
1
LCD Monitors

Q '07
2
Q '07
3
Q '07
4
Q '07
1
Q '08
2
Q '08
3
Q '08
LCD TV

4
Q '08
1
Q '09
2
Q '09
3
Q '09
4'
09



1995 – 2007

• Energy savings
2008 – 2009

Future
• New value films
12


Vikuiti™ DBEF TV Energy Savings

Removed
8 CCFLs

40” Common LCD-TV 40” Ultra Low Power LCD-TV
Brightness: 350 nits Brightness: 350 nits
Without DBEF With DBEF
20 CCFLs 12 CCFLs
Power: 195 Watts Power: 92 Watts
Retail Proposition: Reduced energy consumption + GREEN
Consumer Proposition: Energy Savings of approximately $100 over 5 years
Energy savings initiatives create the need for uniformity solutions
13



Second Half 2008 Industry Outlook

LCD Industry
Q3 volume will be ~10% lower than earlier expectations
Q4 volume close to earlier expectations unless economy worsens

Enhancement Film Industry
Stable industry prism film use at lower prices
Trend toward energy savings and LED use drive slightly higher
DBEF use, and we expect this trend to continue

14



2008 Actions

Organization restructure
New leadership team
Business leadership moved to Asia – closer to the customer
Strengthened key account management

Differentiated products that are relevant to customers

Cost down focus and operational optimization
15



1995 – 2007

• Energy savings
2008 – 2009

Adjacencies 3M Products
LED backlight components Air Guide, Film Light Guide
Future Privacy Filters
• New value films Computer filters
Other optical films Front Surface Films

Expansion into adjacencies doubles market opportunity size
16



Thank You

17


Mike Kelly Presentation

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