Copyright © 2011 NPD DisplaySearch

Authorized Users may not provide this report, or any part, to non-Authorized Users (internal or external) as stated in the Terms & Conditions. Copyright © 2013 NPD DisplaySearch

Authorized Users may not provide this report, or any part, to non-Authorized Users (internal or external) as stated in the Terms & Conditions.

FPD industry and Market Outlook

Yoonsung Chung

Research Director, NPD DisplaySearch Korea

Copyright © 2011 NPD DisplaySearch. Authorized Users may not provide this report, or any part, to non-Authorized Users (internal or external) as stated in the Terms & Conditions.

Global Display market trends

3

[Quarterly FPD Supply/Demand and Capital Spending Report]

TFT-LCD Supply & Demand

Balance or sligtly tight were expected but..

- Over supply in 1H’13 Continue in 2H’13

- Inventory issue, slower demand amplifying worries in 2H’13

Take 1- Inventories Adjustment in 2013 Over-shipments in 2010. 2011 was the first year LCD TV panel shipments declined Y/Y.

In 2012, panel makers shipped a lot and raised the Panel/Set index for TV.

IT panels, poor demand, production also reduced better Panel/Set index in 2013.

Technology transition for IT panels also accelerates production shrinkage.

How to clean up inventory in 1H’13 is key issue.

LCD TV 2007 2008 2009 2010 2011 2012 2013(F)

Panel 92 113 163 221 210 230 230

Set 79 106 145 192 205 203 213

Panel >Set 16% 7% 12% 15% 2% 13% 8%

Monitor +AIO

2007 2008 2009 2010 2011 2012 2013(F)

Panel 177 174 177 199 197 181 169

Set 166 171 168 183 184 170 165

Panel > Set 7% 2% 5% 9% 7% 6% 2%

Notebook+Mini-Note

2007 2008 2009 2010 2011 2012 2013(F)

Panel 115 151 177 214 223 232 210

Set 109 146 171 198 215 218 207

Panel > Set 6% 3% 4% 8% 4% 6% 1.4%

* DS WWF report, GTV report, QMPC report, QDM report

4

Take 2 - China TV market China TV market obvioulsy growing market and where industry relies on. But…

It looks like Q313 demand is gone. Why?

- Subsidy program is gone. No driver for Q313.

- Pulled in too many panels last 6 months.

5

China TV Seasonality influences the World

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

LCD TV Sell-Through China TV Makers' Panel Purchase

China TV Makers' Production (Top 6)

Unit: Millions

China is the largest TV market in the world. China TV panel purchase is the largest in the world.

The seasonality in China has started to change the global LCD supply demand balance.

Panel up and down cycle is always one or two months ahead of the production and sell-through.

Panel

Set

Retail

6

Panel makers inclease volumes in 2013 especailly China makers.

Considering set demand, hard to achive Panel makers’ Buienss plan.

118M TV panels were shipped in 1H’13. Forecasting indicates it looks like 50:50 or 51:49.

- 112M in 2H’13 looks more reasonable. 123M, hard to expect.

First activity to protect BP is lowering price. If it doesn’t work or hard to take it, next is lowering UT.

Couple of scenarios are there but worst scenario becomes bigger possibility.

7

Take 3 – Hard to drive volumes

M units 2012 2013(F)

AUO 32.5 36

BOE 11.6 18

CEC-Panda 3 3.6

Innolux 45.7 42

CSOT 11 20

LG Display 56.8 54

Panasonic 5.6 4.1

Samsung Display 54.6 51

Sharp 8.8 13.2

Total 229.6 241.9

[LCD TV panel makers’ BP]

[LCD TV set/panel ratio forecasting]

Where’s 11.9M?

Makers 2013 plan clearly showing “Area growth”

- lack of G7 capacity, 42”MMG(+ 21.6”) and 40”MMG(+ 23”) in G8

Jumbo size(60”+), players are very aggressive.

- many new sizes(58”, 60”, 65”, 75”, 85”, 98”) including 4K2K strategy.

- Sharp&Honhai alliance ignites low cost 60” war. 60” $599 in 2013 BF?

- China local brands rush to jumbo sizes too.

8

Take 4 - Driving Bigger sizes

[Panel makers 2013BP]

Everybody understands tablet will dominate mobile PC.

- It is expected that Tablet will catch up note PC within 2013.

Tablet becomes key device for TV business.

- Possibly tablet can lower second TV demand.

- Apple TV, one of key function should be “Air Play” between TV and smart device.

- Once customers get used to certain OS via tablet, will chose TV based on same OS.

1st tier brands start to have bundle business.

- Thinks winner for smart device will take TV market.

- Samsung has relatively high tablet 2013 target.

9

Take 5 - Tablet, key device for TV business

[Apple, Air play]

Nobody doubts high resolution trends in mobile PC

But we can say “It’s the power consumption, stupid”

It is quite sure demand surging for “Oxide, LTPS” from now.

- Beyond FHD, 4K2K mobile PC accelerates.

Better Power consumption = High Premium

- Shipment # is not a factor anymore. Technology advantage becomes important.

Korean makers are now dominating high resolution(over 200PPI) mobile PCs.

But Japanese brands rushing with Oxide/LTPS technology.

Korean wants to keep the initiative but it will be decided by technology power.

10

Take 6 - High resolution via high-tech.

[High resolution Mobile PC, 2.5M 4.9M] a-si TFT

Oxide TFT

[Oxide allows to have better power consumption]

2012 2013

*Q313 DS QLA report, over 200PPI

Taiwan/China makers ignite 4K2K market

- Full line-up(39/46/50/55/58/65/85/110)

- Accelerate price crashing.

- Different atmosphere by region. Booming in China market but..

Panel business is package deal. Can’t ignore 4K2K demand from China.

- Turning to be aggressive(Korean players)

4K2K, Bridge for missing link between LCD TVs and AMOLED TVs.

- Who rushes 4K2K? why?

- Becomes commodity soon but increases demand for Jumbo size(60”+) TVs.

11

Take 7 - High Resolution, 4K2K in TVs

[Panel makers 4K2K plan]

Makers Line-up MP

A 4X/55/65/75/8X/9X Q313

B 55/65/8X Q313

C 55/65 Running

D 39/50/58/65 Running

E 55/85/110 Soon

F 55 2H13

G 60/70/80 Soon

[4K2K panel pricing down forecasting]

Lowest 기준

(倍)

The smart phone resolution is a way of no return as end users have used to the high resolution.

Touch function play a key in requiring the smart phone panel to have higher resolution.

>350 PPI Smart Phone panel is all FHD, and using LTPS LCD, Oxide LCD, AMOLED technologies.

Smart Phone, move to >350 PPI FHD

PPI 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

300-500 28% 39% 39% 43% 45% 47% 49% 51% 53% 54%

350-500 0% 14% 26% 32% 35% 36% 38% 39% 40%

Source: DisplaySearch Quarterly Worldwide FPD Shipment and Forecast Report

12

In Tablet PC, >250 PPI is 100% 1920x1200 (WUXGA) and above resolution, and it will be mainstream in the long term.

Tablet PC Panel : >250 PPI

PPI 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

250-350 0% 30% 17% 30% 35% 39% 44% 49% 53% 56%

300-350 5% 17% 22% 25% 29% 33% 37% 39%

Source: DisplaySearch Quarterly Worldwide FPD Shipment and Forecast Report

13

Viewing of Applications by Device Type per Household

• 15,000 end users in 15 countries surveyed by NPD DisplaySearch in 2013.

• 88% of tablet PC owners and 82% of smartphone owners in 15 countries surveyed use their devices at least some of the time while they watch TV. Email, Web browsing, texting, Facebook, and weather were among the top applications accessed while watching TV.

• Email, Facebook, Youtube, Gaming are the key applications. Youtube (or similar) is especially high viewing in TV. This will determine the display features the end users request.

Source: NPD DisplaySearch Quarterly Multi-Screen Usage Study

14

Copyright © 2011 NPD DisplaySearch. Authorized Users may not provide this report, or any part, to non-Authorized Users (internal or external) as stated in the Terms & Conditions.

LCD panel makers’ strategies

16

Korean LCD makers’ strategies

Focusing on Area growth drive with ultra jumbo sizes. Take back 4K2K initiative How to improve(recover) China TV panel busienss. Increasing productivity without additional investment.

TV

New sizes, High-end MNT Keep initiative for Tablet panel business High resolutions with high technologies - Oxide/LTPS backplane, Cu process etc.

IT

SDC moves to AMOLED more aggressvely - Outsourcing high-tech S/M LCDs. Samsung-Sharp investment. LGD, Focusing on own high-tech S/M LCDs. LTPS/Oxide, AH-IPS. - More focusing on China S/M market.

S/M

LCD dominates TV market longer than thought. Pay more resources to LCD.

AUO Business Strategy • BriView will be a key BMS, with open cell supplied by AUO and Other Panel Makers. • BriView is 100% own by AUO, doing operations including “backlight, module and semi-set”. • AUO’s smart phone AMOLED development schedule is delaying, will focus more on LTPS.

Component Array

Cell OEM

Brand

In-house

OGS Touch (OGS=One Glass Solution)

LED & LED

Lighting

LCD Module JV with OEM Ultra-Slim NB

Tablet PC

IPS/FFS (Gen5)

Smart Phone Panel

“eTP”

For Notebook

Backlight

LCD Module

System OEM

Solar Downsize

Backlight

Module

Semi-Set OEM

Cell

Cell

LCD TV OEM

OLED TV Technical Co-Work Oxide TFT Backplane

(Gen6, Gen8)

OLED TV

Co-Work

Semi-Set

Optical

films

17

Innolux & Foxconn Business Strategy

UV2A Know-how

and Licensing

$$$ License Fee

LCD TV OEM

Cell

Small Medium Size IPS

Know-how and Licensing

$$$ License Fee

Panel OEM

Module

Century (深超)

Gen5 a-Si LTPS

Tian-Yi (天億)

Gen6 LTPS Investment

Investment 47% of Gen10 (SDP)

14% of Innolux

Pending

Investment

Foxconn Japan

RD Co., Ltd

LCD TV OEM

LCD TV OEM

LCD TV OEM

Investment

IPS Tablet PC & Smart Phone New Business

18

To increase efficiency, G5/G6 would focus on 10.1” below products, while B4 would focus on Tablet/NB from 2014 on; B8 G8 would focus on NB and TV panels mainly while B5 focus on MNT & TV panels.

BOE Capacity Plan & Product Mix Strategy

Mobile

1.77”~4.x”

APP.

4.3”~9”

Mobile

1.45”~4.x”

Mobile

3.9”~5.2”

Tablet

7”~10.1”

NB

10.1”~15.6”

MNT

18.5”~21.5”

LCD TV

32”~55”

84”/110”

MNT

18.5”~21.5”

NB

15.6”

LCD TV

26”

32”~55”

MNT

18.5”~21.5”

Mobile

3.5”~6.2”

Tablet

5”~10.1”

LCD TV

32”/55”

LCD TV

32”~55”

LCD TV

32”~55”

NB

10.1”~15.6”

Mobile

3.5”~6.2”

Tablet

5”~10.1”

B1 B2 B3 B4 B5 B6 B7 B8 B9(Beijing) (Chengdu) (Hefei) (Beijing) (Hefei) (Ordos) (Beijing) (Chongqing) (?)

Gen G5 G4.5 G6 G8 G8 G5.5 G8 G8 G6

MG Size 1100x1300 730x920 1500x1850 2200x2500 2200x2500 1300x1500 2200x2500 2200x2500 1500x1850

a-Si 45k/m a-Si 90k/m a-Si 30k/m a-Si 40k/m

LTPS 5k/m Oxide 10k/m Oxide 30k/m Oxide 40k/m

Investment $1.25billion $0.45billion $2.56billion $4.18billion $4.5billion $3.38billion ? $4.52billion ?

MP Timing Feb’05 Sept’09 Oct’10 Sept’11 Jan’14 Mar’14 May’16 (?) Apr’15 Jan’17 (?)

Product

Mix

LTPS 60k/mTech. &

Capa

AMOLED

80k/mLTPS 20k/ma-Si 120k/ma-Si 110k/m

19

CEC-Panda & Sharp

CEC-Panda 2013 TV Customer Base

Sharp,

0.2

Hisense,

0.3

Skywort

h, 0.3

Haier,

0.3

Changho

ng, 0.4

Konka,

0.4

OEM -

TPV, 0.5

Others

(incl. OEM),

1.2

Unit : M pcs

2010 Gen6 & UV2A Technology

2015 : Gen8 Joint Venture

92% 8% 37%

TV Technology &

Possibly IGZO

Royalty License Fee

OEM for many

TV brands

Sold to CEC

CEC is a direct government own electronics corp. and has many government resources.

CEC-Panda intends to build a “Crystal Valley” together with Nanjing government.

Investment Share

CEC CEC-Panda Nanjing Government

Sharp

Gen6 19% 51% 30% Tech. Shares

Gen8 92% - - 8%

57%

100%

20

CSOT– New Fab & Capacity Increase Plan

Fab1 G8 a-Si

Reserved Fab2

Fab2 G8 a-Si +Oxide - Capa: 60k/M - MP: Apr’14 - Shenzhen Government would still be biggest investor

Fab3 G6 LTPS - Capa: 60k/M - MP: 1H’16 - Location Choice: Wuhan/Huizhou

Fab1 G8 a-Si Investment Shares - Shenzhen Government 55% - TCL 30% - Samsung 15%

-Stock Shares TCL 85% -Samsung 15%

Change in 2013

Shenzhen Government transfer its 55% Fab1 G8 stock share to TCL in Apr’13, make TCL the dominant controller of ChinaStar, and also the biggest customer of China Star.

China Star is also planning 2 more fabs, 1 G8 in Shenzhen and 1 G6 in Huizhou or Wuhan, local city government would still play important roles in these new fab plan.

21

Copyright © 2011 NPD DisplaySearch. Authorized Users may not provide this report, or any part, to non-Authorized Users (internal or external) as stated in the Terms & Conditions.

AMOLED industry outlook

Korean AMOLED CapEx Trends SDC finalized A2 extension equipment installation in 1H’13.

- 24K capacity/Month is added to current A2 line.

- It seems like SDC is now testing A2 extesion line for MP preparation. MP looks Q313.

SDC will have G6 AMOLED line instead of another G5.5 line(So called A3)

- A3 line initial plan indicates it will adopt new technologies like LITI, no cut evaporation.

- However, it seems like SDC changed the plan and finally decided to go to G6.

- New G6 plan looks already started. MP timing looks middle of 2014.

- On the contrary, SDC G8 AMOLED MP line might be delayed.

LGD is mainly focusing on AMOLED TV productions rather than S/M.

- G8 AMOLED Mass production line(M2) plan is on going. 24K/M,

MP timing looks middle of 2014. The line will locate P9 factory.

- LGD is focusing on flexible AMOLED for Small&medium AMOLED business.

LGD, 55” curved FHD AMOLED TV SDC, A2 factory in Tangjeong

23

24

China AMOLED investment Need to watch BOE, Tianma, Visionox and Hehui

- These makers have government’s support. Others have less interest in AMOLED.

For AMOLED TV, China makers clearly focusing on Oxide+WOLED.

25

AMOLED camp tried Tablet business but stopped the business for a while. - Samsung mobile and Toshiba launched 7.7”AMOLED tablet, panels coming from SDC. - It seems like tablet business is not going well as they initially thought. It seems that Set brands think LCD is better in terms of Price and resolution for a while. - Unlikely smartphone, tablet has no subsidy program so price is very important. - AMOLED also can make higher resolution but cost and price going up together. However, AMOLED will be back to tablet market with unique form factor. - Tablet is great capacity consumer for AMOLED. - Flexible is AMOLED’s unique benefit.

AMOLED tablet will be back?

[AMOLED tablet panel forecasting] Samsung is aggressive for AMOLED tablet - looks like preparing AMOLED tablet targets 2014. - Double targets. LCDs for volume zone, AMOLEDs for High-end.

26

LCD TV market is matured. Slower after 2015.

Business perspective, compensator is required after 2015.

Need to think about AMOLED TV investment from MP timing, 2015.

- How many lines required? guess 200K panels/month in AMOLED G8.

- 4 lines(’16), 8 lines(‘17), 13 lines(‘18), 19 lines(’19)…..

AMOLED TV Demand boosts up…when?

AMOLED cost is 8.2x higher than TFT-LCD’s now.

Major factor is yield rate. AMOLED has low yield rate near to single digit.

panel material portion for AMOLED is much higher while module materials’ for LCD is much higher.

Depreciation portion is key issue for AMOLED. 42%(AMOLED) Vs. 3%(LCD)

55" (1920 × 1080) AMOLED vs. LCD

27

55” FHD Oxide/WOLED 6-Up Manufacturing Costs(total yield 11.1%)

55” FHD a-Si/LCD 6-Up Manufacturing Costs

$2,004.5 (Q1’14F) $3,069 (Q1’13) $326.4 (Q1’14F) $373.1 (Q1’13)

Yield Rate Issue for AMOLED TV Panel Costs Currently 55”AMOLED TV panel’s yield rate is around 11% only while LCD case is over 90%.

Since poor yield rate is major reasons for AMOLED TV panels’ higher manufacturing cost, to have Apple to apple comparison, put the 55” AMOLED TV panel’s yield at 96% then compare its manufacturing costs with 55” TFT-LCD’s.

It shows dramatical changes. The cost gap is decreased from 8.2X to 1.5X. prices.

AMOLED process technology is still innovating, with more possibilities for lower production costs and lower material usage.

28

55” FHD a-Si/LCD 6-Up Manufacturing Costs

$373.1 (Q1’13) $565.6 (Q1’13)

55” FHD Oxide/WOLED 6-Up Manufacturing Costs(@96.1% yield)

1.5x gap

Create “Wow-product” with flexible technologies for making the gap wider.

- Starts Unbreakable AMOLED business this year. For the time being, flexible AMOLED is

adopted to mobile Phone mainly.

- Only 1 model to minimize the risk.

- Volume looks 1~1.2M within this year.

But early stage of flexible AMOLED has meaning of “market test”

after the technology mature(1~2 years), it will be widely adopted even for tablets.

29

Flexible AMOLEDs

An interesting survey in Korea about OLED TV and UHD TV.

Respondents are working in finance and securities company. well educated and relatively high income.

Answer is clear. OLED TV needs to have UHD resolution ASAP.

Also we can see again “most important things in Display are 1)Size 2)Resolution”

30

OLED TV, UHD is mandatory

人數

[If both TVs prices are same at $8,000, which TV you want to buy?]

• $8,000 is estimated by respondent as reasonable price

[Which TV you prefer?]

200人 應答

* Performed by A Korean securities company

31

Thank you! ys_chung@displaysearch.com