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3M Display & Graphics Business 2008 3M Investor Conference 1 Optical Film Update Mike Kelly, Executive Vice President, Display and Graphics Building a Sustainable Business In Light Management Films © 3M 2008. All Rights Reserved. September 9, 2008
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Page 1: Mike Kelly Presentation

3M Display & Graphics Business

2008 3M Investor Conference

1

Optical Film UpdateMike Kelly, Executive Vice President, Display and Graphics

Building a Sustainable BusinessIn Light Management Films

© 3M 2008. All Rights Reserved.

September 9, 2008

Page 2: Mike Kelly Presentation

2

3M Display & Graphics Business

2008 3M Investor Conference

OpticalSystems

Traffic Safety Systems

TechnologyPipeline

Commercial Graphics

Display & Graphics Business

Film Mfg &Supply Chain

Projection Systems

© 3M 2008. All Rights Reserved.

Page 3: Mike Kelly Presentation

3

3M Display & Graphics Business

2008 3M Investor Conference

Optical Systems DivisionLeading global supplier of brightness enhancement films that transform the display of information anytime, anywhere

Handheld devicesComputer displaysLCD TVEmerging applications – Ultra mobile PC, Automotive, Digital signs

“Enhancing the Way You See the World”© 3M 2008. All Rights Reserved.

Page 4: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Optical Film Strategies for LCDs

• Energy savings• Uniformity improvement• LCD system cost reduction

• New value films

1995 – 2007

2008 – 2009

Future

• Brightness enhancement

© 3M 2008. All Rights Reserved.

Page 5: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Recent Changes in the LCD TV Segment

LampsLamps

Diffuser plate2x Diffuser

DBEFLCD Panel

LampsLamps

LCD Panel

Transmission Up 30%

Brightness Up 15-20%

Spec Down 20%

Brightness SpecBrightness = 500 - 550

95% Color GamutBrightness = 400 - 450

75% Color Gamut

DBEF 60% Brighter

Lamps

Diffuser plate3x Diffuser

LCD Panel

Decline in DBEF demand due to:Decline in DBEF demand due to:•• Reduction in TV brightness specifications in order to reduce cosReduction in TV brightness specifications in order to reduce coststs•• Panel transmission increasesPanel transmission increases•• Improved bulb performanceImproved bulb performance

Recent Past Current as of 2008

© 3M 2008. All Rights Reserved.

Page 6: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Steady Improvements in LCD Performance

Panel Transmission

4% – 6%

As panel transmission increases, the need for brightness enhanceAs panel transmission increases, the need for brightness enhancement film ment film decreases. However, the need for uniformity solutions may incredecreases. However, the need for uniformity solutions may increase.ase.

Graphic illustration from Scientific American

© 3M 2008. All Rights Reserved.

Page 7: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

But…. Our Film Value Propositions Vary by LCD Segment

Plug-in: Monitor & TVCustomer needs: Recent shift in priority from brightness to uniformity and low power~1 enhancement film per displayValue proposition has weakened over timeGrowing interest in reducing power consumption

Battery Operated: Handheld & NotebookCustomer needs: Sustained priority on thin, uniformity, low power, brightness2 or more enhancement films per displayFilms have substantial impact on power consumptionStrong enhancement film value proposition

© 3M 2008. All Rights Reserved.

Page 8: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

“Plug-in” LCDs

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2007 2008 2009 2010 2011

000

m^2

0%10%20%30%40%50%60%70%80%90%100%

% G

row

th

-

5,000

10,000

15,000

20,000

25,000

30,000

2007 2008 2009 2010 2011

000

m^2

0%5%10%15%20%25%30%35%40%45%50%

% G

row

th

TV Panel Area

Monitor Panel AreaDisplaysearch

Displaysearch

TVIndustry area growth rate slowingLower brightness specificationsFewer films / TV3M competitiveness has declinedDBEF use stabilizing

Lower pricingEnergy savings impactUniformity

MonitorSingle digit area growth rateIntense prism film competition3M competitiveness had declined substantially, but has recently improvedDBEF use growing

Lower pricingEnergy savings impact

© 3M 2008. All Rights Reserved.

Page 9: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

“Battery-Operated” LCDs

-

1,0002,000

3,0004,000

5,000

6,0007,000

8,000

2007 2008 2009 2010 2011

000

m^2

0%5%10%15%20%25%30%35%40%45%

% G

row

th

NotebookDouble digit area growth to continueLED backlight usage increased significantly3M has remained competitiveDBEF use growing

Lower pricingImproved battery life

HandheldArea growth rate slowing3M has strong competitive positionDBEF use growing

BEF RP (DBEF + BEF multi-function)Improved battery life

-2,0004,000

6,0008,000

10,00012,000

14,00016,00018,000

2007 2008 2009 2010 2011

000m

^2

0%5%10%15%20%25%30%35%40%45%50%

% G

row

th

DisplaysearchNotebook Panel Area

Handheld Panel AreaDisplaysearch

© 3M 2008. All Rights Reserved.

Page 10: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Enhancement Film Industry

Area CAGR +10.0%

3M Estimate

Revenue CAGR -9.2%

Area Revenue

2007 2008 2009 2010 20112007 2008 2009 2010 2011

Mark

et S

ize $

Mark

et S

ize S

q Me

ters

Enhancement Film Industry includes: DBEF, Prism, Micro Lens, Diffusers & Reflectors

© 3M 2008. All Rights Reserved.

Page 11: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

OSD LCD Sales History

Q1'01

Q2'01

Q3'01

Q4'01

Q1'02

Q2'02

Q3'02

Q4'02

Q1'03

Q2'03

Q3'03

Q4'03

Q1'04

Q2'04

Q3'04

Q4'04

Q1'05

Q2'05

Q3'05

Q4'05

Q1'06

Q2'06

Q3'06

Q4'06

Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

Q2'08

Q3'08

Q4'08

Q1'09

Q2'09

Q3'09

Q4'09

Sale

s (0

00's

USD

)

HandHeld LCD Notebooks LCD Monitors LCD TV

© 3M 2008. All Rights Reserved.

Page 12: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Optical Film Strategies for LCDs

• Energy savings• Uniformity improvement• LCD system cost reduction

• New value films

1995 – 2007

2008 – 2009

Future

• Brightness enhancement

© 3M 2008. All Rights Reserved.

Page 13: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Vikuiti™ DBEF TV Energy Savings

40” Ultra Low Power LCD-TVBrightness: 350 nitsWith DBEF12 CCFLs

40” Common LCD-TVBrightness: 350 nitsWithout DBEF20 CCFLs

Removed 8 CCFLs

Energy savings initiatives create the need for uniformity solutions

Retail Proposition: Reduced energy consumption + GREENConsumer Proposition: Energy Savings of approximately $100 over 5 years

Power: 92 WattsPower: 195 Watts

© 3M 2008. All Rights Reserved.

Page 14: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Second Half 2008 Industry Outlook

LCD IndustryQ3 volume will be ~10% lower than earlier expectationsQ4 volume close to earlier expectations unless economy worsens

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

© 3M 2008. All Rights Reserved.

Page 15: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

2008 Actions

Organization restructureNew 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

© 3M 2008. All Rights Reserved.

Page 16: Mike Kelly Presentation

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3M Display & Graphics Business

2008 3M Investor Conference

Optical Film Strategies for LCDs

• Energy savings• Uniformity improvement• LCD system cost reduction

• New value films

1995 – 2007

2008 – 2009

Future

• Brightness enhancement

AdjacenciesLED backlight componentsComputer filtersOther optical films

3M ProductsAir Guide, Film Light GuidePrivacy FiltersFront Surface Films

Expansion into adjacencies doubles market opportunity size© 3M 2008. All Rights Reserved.

Page 17: Mike Kelly Presentation

3M Display & Graphics Business

2008 3M Investor Conference

17

Thank You

© 3M 2008. All Rights Reserved.