Components. G. Kleisterlee Chairman & CEO Philips Components and member of the GMC

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2 Components G. Kleisterlee Chairman & CEO Philips Components and member of the GMC

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4 PD Components Scope Portfolio Development Display Businesses Summary Anal99 3

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6 Value Shift Drivers End user Features Mass Customization Short Lifecycles Click-On Functions System Requirements Functional Integrations Technology Potential Anal99 5 Base Materials Process Technologies Integration Capabilities Mass Customization

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10 Mission Statement Philips Components aims to be: A technology partner of choice for leading global players in : Consumer electronics (Digital) EDP Telecommunications (Mobile) Automotive electronics (Infotainment) Top 3 player in each of the selected segments Anal99 9

11 Philips Components Global Product Range Display Components Flat Display Systems Optical Storage Advanced Ceramics & Modules General System Components Color Television Tubes Color Monitor Tubes Large Flat Displays Key Components Active Matrix LCDs LCDs Cells & Modules Poly-LEDs Reflective LCDs Software & Electronics CD Audio/Video CD ROM CD Read / ReWritable Optical Pick-up units Discrete Ceramics Yoke Rings Soft Ferrites Integration Automotive Playback Modules (APM) Inpact (WWC) Electronic Power Modules (EPM) Micro Electronic Modules (MiMo) Imaging & Optical Modules (IOM) Anal99 10

12 Turnover per Business Group 1998 Display Components 51% Advanced Ceramics 15% and Modules General System 7% Components Flat Display Systems 10% Optical Storage 17% Anal99 11

13 Key Financials EUR mln Sales 3,385 3,864 4,349 5,099 5,261 Intern 36% 36% 34% 28% 27% IFO Capex Employees 39,193 39,696 41,995 46,131 42,613 Anal99 12

14 Market Philips Components Developments per Region Sales 80 EUR bln 6 5 EUR bln Divestm. Asia Pacific S. America N. America Europe Divestm. Asia Pacific S. America N. America Europe Anal99 13

15 PD Components 6 5 EUR bln Total Sales Thds Total Employees Others Storage Display Others Storage Display Total Factories Others Storage Display 20 Anal

16 Divestments 1997 and 1998 Sales : EUR 623 mln Employees : 7,033 Business lines : 17 Factories : 25 Anal99 15 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

17 Display Portfolio

18 Philips CRT Business 30 USD bln Market PHILIPS USD 3.5 bln revenue Nr. 1 in TV Nr. 3 in PC monitor Vertical benefits Anal % 15% 16% 14% Market share

19 CRT Issues A. Extra-ordinary price pressure from imbalance supply/demand 150 Supply/Demand parameters CMT and TVT CMT if supply equals demand : ratio = NLG Price Development 15"-CMT 125 TVT % decrease 100 normative balance Anal99 18

20 Responses Capacity control Philips response New product offering Consolidate manufacturing base in low cost areas Reduce vertical integration Anal99 19

21 Philips Display Business 70 USD bln New LCD CRT successor Even larger vertical benefits Critical for PD-future value portfolio "Philips" brand Need to build top position CRT USD 3.5 bln revenue Nr. 1 in TV Nr. 3 in PC monitor Vertical benefits Anal

22 Philips LCD Business 1400 Sales NLG mln Market share 42% % % % 18% 12% C&M FPD C&M FPD 200 6% 0 0% Anal

23 AM-LCD Applications Mil. US$ (panel) From 1 to multiple applications History : - 15 years notebook = 6 Bil$ value Future : - 7 years multiple applications = 15 Bil$ value - Total growth = 7.5% year - Total growth = 15% year - Total growth new.appl. = 25% year TV- APPLications Handheld PC DigCamera Port.video Automotive FPM Notebooks Total TFT-LCD Anal

24 Vertical Impact of AM-LCD in Philips Brand value - PC monitors - Handheld - TV Integrated product roadmap for leading/differentiated products Volume availability for market position AM-LCD product value 50%of CE product value CE AM-LCD Basic Research Integrated product roadmaps for leading/differentiated products Semicon product value 25/30% of AM-LCD product value Anal99 23 Semicon Technology platforms IPR Product innovation potential

25 AM-LCD sales 1998 Sharp NEC Samsung Toshiba/DTI IBM/DTI Hitachi LG Matsushita Fujitsu Mitsubishi/ADI Tottori/Sanyo HAPD Seiko Epson Casio Hyundai USD mln Anal99 24 Breakthrough?

26 Philips & LG Joint Venture Nr. 1 player Global reach 2 x Brand support Excellence & low cost manufacturing Complementary to HAPD Profitable & fast growing Anal99 25

27 Competitive Overview Anal Share of Gen -2+ Glass Input in Square-meters LG-LCD/HAPD Sharp Samsung Hitachi DTI NEC Chi Mei ADT (Acer ) Tottori Sanyo HannStar CPT Unipac ADI Matsushita Fujitsu Torisan ST-LCD Toshiba (p-si ) Hyundai Prime View Assumes that only Fabs in construction will be ready for 2003 output 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

28 Summary Philips Components We are well positioned to be a leading player in a number of fast growing High Volume Electronics Applications We will build value by accelerating our focus programs: Anal99 27

29 Summary Philips Components Focus Dimensions Few key technologies Selected functions in fast growing applications Providing integral solutions Partnering with leading customers Anal99 28

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