Outlook for TFT-LCD Glass

Transcription

1 Outlook for TFT-LCD Glass James P. Clappin President, Corning Display Technologies March 15, 2006

2 Forward Looking And Cautionary Statements Certain statements in this presentation constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of Such forward looking statements are based on current expectations and involve certain risks and uncertainties. Actual results might differ from those projected in the forward looking statements. Additional information concerning factors that could cause actual results to materially differ form those in the forward looking statements is contained in the Securities and Exchange Commission filings of the Company.

3 Agenda Glass Demand Outlook and Drivers Customer Capacity Corning s Expansions Glass Price and Cost History Summary

4 Corning s updated view of the LCD glass market Market Glass Demand % CAGR ( 05-07) Glass volume up ~85% by 07 MM sq.ft LCD Glass 06 market growth 40-50% overall > 150% above Gen Corning to grow faster than total market Source: Corning

5 Growth in color mobile phones primary driver in small applications Market Glass Demand CAGR ( 05-07) 37% Small Size Current View ( 05 07) MM sq.ft Small 21% Source: Corning Unit growth of small applications with LCD displays Color mobile phone PDA Digital camera Avg. screen size Glass demand (million sq.ft.) 26% 30% 8% 13%

6 Notebooks continue to gain share of the overall PC market Market Glass Demand CAGR ( 05-07) 37% Notebook Current View ( 05 07) 1200 Underlying PC unit growth 9% MM sq.ft NB % of PCs LCD penetration 31% ~37% 100% Source: Corning Notebooks Small 15% 21% Avg. screen size Glass demand (million sq.ft.)

7 LCD monitors approaching full penetration Market Glass Demand CAGR ( 05-07) 37% Monitor Current View ( 05 07) MM sq.ft Monitors 20% Underlying monitor growth (CRT+LCD) LCD penetration Avg. screen size 6% 69% ~86% Source: Corning Notebooks Small % 21% Glass demand (million sq.ft.)

8 LCD TVs will build upon the momentum gained in Market Glass Demand CAGR ( 05-07) 37% LCD TV Current View ( 05 07) MM sq.ft TV Monitors 77% 20% Underlying TV unit growth (all technologies) LCD penetration Avg. screen size 4% 11% ~29% Source: Corning Notebooks Small % 21% Glass demand (million sq.ft.)

9 In the 1960s, color TV became mainstream when it hit the 3X price threshold vs. B&W TV 80% $600 Color vs. B&W TV Average Retail Price Penetration rate 60% 40% Set price $500 $400 $300 $200 $100 $0 ~3X Color Color TV ~3x TV B&W Color TV Penetration 20% 0% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr Source: CEA, Corning

10 Likewise, LCD monitors hit the 3X threshold vs. CRTs in 2000 initiating rapid substitution Penetration rate 80% 60% 40% Set price $1,500 $1,200 $900 $600 $300 $0 LCD 15 vs. 17 CRT monitor Average Retail Price ~3X ~3x LCD 15" LCD CRT 17" CRT LCD Monitor Penetration Color TV Penetration 20% 0% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr Source: NPD, Corning

11 With LCD TV vs. CRT price 3X threshold broken in 2004, we expect similar consumer adoption Penetration rate 80% 60% 40% Set price $5,000 $4,000 $3,000 $2,000 $1,000 $0 HD LCD 32 vs. 32 HD CRT TV Average Retail Price ~3X ~3x LCD 32" LCD CRT 32" CRT LCD Monitor Penetration Color TV Penetration 20% LCD TV Penetration 0% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr Source: NPD, Corning

12 While Japan leads LCD TV adoption, Europe is now the largest market LCD TV Penetration by Region LCD TV Unit Sales by Region % of Total LCD Units 12% Japan Japan Western Europe North America ROW Worldwide Source: Corning 48% 24% 17% 3% 11% 62% 41% 28% 7% 19% 73% 57% 39% 13% 29% Million Units % 15% 39% 21% 23% 40% 25% 27% 28% 12% 21% Western Europe North America ROW (China, Asia Pacific, and others)

13 LCD technology continues to expand its reach, targeting the sweet spot of TV demand Million Units % of units are < TV Sales 190 million units Rear Projection Plasma LCD CRT 2005 Penetration 3% 3% 11% 83% 20 0 Source: Corning 10"-20" 21"-29" 30"-39" 40"-49" 50"+ Screen size (diagonal)

14 LCD technology continues to expand its reach, targeting the sweet spot of TV demand TV Sales 205 million units 80 Million Units % of units will be < Source: Corning 10"-20" 21"-29" 30"-39" 40"-49" 50"+ Screen size (diagonal)

15 LCD technology continues to expand its reach, targeting the sweet spot of TV demand Million Units TV Sales 205 million units Rear Projection Plasma LCD CRT % 3% 11% 83% Penetration Rate 2006 ~2% ~4% ~19% ~75% 2007 ~2% ~6% ~29% ~63% 20 0 Source: Corning 10"-20" 21"-29" 30"-39" 40"-49" 50"+ Screen size (diagonal)

16 Migration to larger screen sizes accelerates growth in glass demand Screen size (diagonal) % Glass in each display +3.0 sq.ft. (sq.ft.) %

17 and requires larger substrate sizes for efficient production Glass Market Demand by Gen Size CAGR ( 05-07) % MM sq.ft Gen 5.5 Gen 8 101% 600 Gen 5 18% Gen %

18 Agenda Glass Demand Outlook and Drivers Customer Capacity Corning s Expansions Glass Price and Cost History Summary

19 Panel makers have expanded capacity in line with our expectations Customer Sharp G6 JP IPS Alpha TMDT KR Samsung LG. Philips G7 G6 AUO G6 T a i w a n Chi Mei HannStar Quanta Chunghwa Innolux Toppoly G3.5 G4 G4.5.5 G6 G4.5 G6 SVA-NEC CH BOE-Hydis InfoVision Source: Customer announcements

20 and continue to build capacity to meet demand Customer Sharp G G JP IPS Alpha G6 TMDT G4.5 KR Samsung LG. Philips G7 G6 G7.5 G4.5 G8 AUO G6 G7.5 T a i w a n Chi Mei HannStar Quanta Chunghwa Innolux Toppoly G3.5 G4 G4.5.5 G6 G4.5 G6 G7.5 SVA-NEC CH BOE-Hydis InfoVision Source: Customer announcements

21 and continue to build capacity to meet demand Customer Sharp G G JP IPS Alpha G6 TMDT G4.5 KR Samsung LG. Philips G7 G6 G7.5 G4.5 G8 AUO G6 G7.5 T a i w a n Chi Mei HannStar Quanta Chunghwa Innolux Toppoly G3.5 Glass size 2,160 2,400.5 mm Capacity 30K pcs/month (Phase 1) Major G6 LCD TV G4 products G G6 Investment G4.5 $1.3B G7.5 SVA-NEC CH BOE-Hydis InfoVision Source: Customer announcements

22 However, we expect ongoing adjustments to panel maker plans 2,500 Glass Demand million sq.ft. 2,250 2,000 1,750 1,500 1,250 1, Announced plans Capacity range Corning's view of end market Source: Customer announcements, Corning

23 China glass demand is currently a small, but certain dynamics create strategic opportunities MM sq.ft. Market Glass Demand 1600 % 2007 China 2% Taiwan 42% Korea 39% Japan 17% Source: Corning China a leader in assembly of monitors and TV Emerging panel production capability strongly supported by regional and central governments Surprisingly strong consumer market for monitor and TV applications

24 Agenda Glass Demand Outlook and Drivers Customer Capacity Corning s Expansions Glass Price and Cost History Summary

25 We are pacing expansions carefully, in line with end market demand Tainan, Taiwan March 2004 December 2005

26 We are pacing expansions carefully, in line with end market demand Taichung, Taiwan Today

27 We are also expanding to sustain our leadership in large Gen sizes Shizuoka, Japan Gen 8 Facility July 2005 January 2006

28 Improving capital efficiency Announced Capital Expansions ( 04-05) February 2004 July 2004 $600 million $750 million 100% 80% 60% Capital Efficiency ($/sq.ft.) >50% Improvement 40% October 2004 $326 million 20% 0% October 2005 $425 million

29 Agenda Glass Demand Outlook and Drivers Customer Capacity Corning s Expansions Glass Price and Cost History Summary

30 LCD glass historic average selling price 1.0 Gen 4 Gen 5 Gen 6 Gen 7 Gen 7.5 /sq.ft. index (Base year 1996) ASP 5% CADR ( 96-05) Range of year-over-year price changes 7% 12% '96 '97 '98 '99 '00 '01 '02 '03 '04 '05

31 Manufacturing cost has been declining faster than average selling price 1.0 /sq.ft. index (Base year 1996) 0.5 ASP 5% CADR ( 96-05) Mfg. cost 14% CADR ( 96-05) 0.0 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05

32 improving gross margin 1.0 GM% +43% pts /sq.ft. index (Base year 1996) 0.5 ASP 5% CADR ( 96-05) Gross Margin % Mfg. cost 14% CADR ( 96-05) '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 0

33 Several factors can influence LCD glass pricing Influencing factors 2006 Outlook Introduction of new products Larger Gen sizes New glass compositions Glass supply and demand Gen6 Gen7 Customer pressure Competitive advantage Product quality and supply reliability Improving competitive capability in large sizes Gen 6

34 We have many manufacturing cost-reduction opportunities a key focus of R&D Scale Effects Plant sizes increasing Gen sizes increasing Learning Curve Effects Increasing output of existing assets Improving yield Automation Extending equipment life Advanced glass compositions Factor Costs Labor (Taiwan advantage) Packaging Shipping Production equipment

35 Corning has been first to market with new product innovations Motivations for launching new compositions Enable thinner and lighter displays Reduce costs in Corning and customer processes More environmentally friendly Extend IP protection Corning 7059 Corning 1737G EAGLE APT Corning 1737 EAGLE 2000 New composition announcement

36 Agenda Glass Demand Outlook and Drivers Customer Capacity Corning s Expansions Glass Price and Cost History Summary

37 Take aways 2006 glass market volume growth 40-50% Gen 5.5 and above >150 % Positive end market outlook Sustained growth in monitor and notebook Breakthrough year for LCD TV Pacing expansions with end market demand Improving capital efficiency Strong cost-reduction portfolio

38 Forward Looking and Cautionary This presentation contains forward looking statements that involve a variety of business risks and other uncertainties that could cause actual results to differ materially. These risks and uncertainties include the possibility of changes or fluctuations in global economic conditions; currency exchange rates; product demand and industry capacity; competitive products and pricing; availability and costs of critical components and materials; new product development and commercialization; order activity and demand from major customers; capital spending by larger customers in the telecommunications industry and other business segments; the mix of sales between premium and non-premium products; possible disruption in commercial activities due to terrorist activity and armed conflict; ability to obtain financing and capital on commercially reasonable terms; acquisition and divestiture activities; the level of excess or obsolete inventory; the ability to enforce patents; product and components performance issues; and litigation. These and other risk factors are identified in Corning s filings with the Securities and Exchange Commission. Forward looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events.

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