The changes to Components. Arthur van der Poel Executive Vice President and Member of the Board of Management

Transcription

1 The changes to Components Arthur van der Poel Executive Vice President and Member of the Board of Management

2 Agenda Rationale for the changes at Components A closer look at Mobile Display Systems (MDS)

3 Agenda Rationale for the changes at Components A closer look at Mobile Display Systems (MDS)

4 Starting points for Components in 2000 The starting points in 2000 were: Large Displays in JV s with LG Healthy, fairly self-contained, Key Module Businesses (Optical Storage, Mobile Displays) Develop from Components supplier to become a Systems Solutions provider

5 Changes in the Business Environment Severe market issues in the PC and Mobile Phone markets Limited financial room for new initiatives

6 Issues with the Systems Solutions Concept Smiling Curve even more explicit for digital than for analog products Cross PD alignment of R&D resources, priorities, roadmaps and customer alignment Location of PD Headquarters in Sunnyvale more challenging than anticipated Financial underperformance, particularly in Optical Storage

7 Summary of Decisions taken in October Discontinuation of the PD Components Restructuring of Optical Storage (POS) Restructuring/reorganisation charge of approx 175 M Euro Sell some businesses Re-allocate remaining businesses

8 The positions on the maturity curve Accumulated Value creation MDS POS Tuners RC LCD TV Pronto PLED LCoS time

9 Components and the smiling curve High Value Competitive Advantage = Profit Components LCoS panels LCD-TV PLED Projector Systems Mobile Displays Pronto Connectivity RC s Optical Storage Tuners Analogue Digital Low value Components Semiconductors IP Process technology NOC/ R&D intensive Set makers Assembly Asset light Brand Distribution Services Migration of competitive advantage and profit

10 Components and the smiling curve High Value Move to Research : Important company level investment Still at early stage Competitive Move to Semi: Advantage Focus on chip-level = Move to Semi: Profit Single customer interface Integration of speakers & displays Roadmap alignment LCoS Move to CE: panels To accelerate product LCD-TV PLED introduction Focus Projector on Address R&D overlap Connectivity restructuring Systems Mobile and return Prontoto Displays profit RC s Divest Optical Storage Tuners Low value Components Semiconductors IP Process technology NOC/ R&D intensive Set makers Assembly Asset light Brand Distribution Services Migration of competitive advantage and profit

11 Summary of Restructuring (as % of sales 2002) Post-Restructuring Components Optical Storage Corp Investments 15% 100% Semiconductors CE 10% 35% 40%

12 Moving forward: Financial Performance Improvement For POS: within 2 quarters from substantial losses to break even For the sum of the former Components businesses the target is: black figures for 2003 possibly break-even including the technology investments (LCoS, PLED)

13 Agenda Rationale for the changes at Components A closer look at Mobile Display Systems (MDS)

14 Market Outlook 2002 Telecommunications gloomy outlook still prevails - investments in 3G infrastructure still not picking up Market outlook for 2002 around 400mpcs Q4 will be traditionally major launching season: This year for first color phone rollouts outside Japan

15 Subscriber growth and replacement rates Worldwide subscribers Subscriber growth 21% 16% 13% 11% 10% New subscribers Replacement rates 25% 25% 26% 27% 27% Corresponding market size (mpcs) Source: MRT Cellular Team, October 2002 forecast Crucial assumption Is replacement rate 1% = 10mpcs

16 Technology drivers Monochrome: MSTN: Low cost End users with no interest for functions/services/applications CSTN Color for color: color is cool Price advantage compared to TFT/LTPS Gaming (limited) Still pictures A-Si TFT: Advanced gaming Moving pictures/videoclips LTPS: Advanced gaming Moving pictures/videoclips Smaller displays with higher resolutions, f.e QVGA 2 display

17 Mobile Display Systems: where do we stand today? Q3 02 revenue growth y.o.y of 26% Returned to 20 % market share % of revenue generated in 2002 from projects ramped up in Cost of Organisation reduced by 18% while revenue grew. Successful consolidation of assembly capacity in China Successful ramp of STN panel manufacturing in China and TFT in Japan In Q about 40% of revenues expected from color displays Continued investing in color display capability (CSTN, TFT, PLED)

18 The transition to Color 2002 Sales Revenue Philips versus the market 100% Philips % Philips 2002 Market % 80% 60% 60% 40% 40% 20% 20% 0% Q1 Q2 Q3 Q4 0% Total Total MSTN CSTN TFT

19 The transition to Color (continued) 2003 Philips versus the market (Revenue Forecast) Philips 2003 Market % 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% Q1 Q2 Q3 Q4 0% Q1 Q2 Q3 Q4 MSTN CSTN TFT/LTPS

20 Partnerships allow flexibility and limit capital risk. Asset turns have improved from 2.7 in 2001 to 3.8 in 2002 Bi-pane Semi- Finishing Bonding Finishing (Module Assembly) MSTN & C/STN TFT(amsi & Ltps) In House - Shanghai Partner Supply In House - Kobe Partner Supply In House - Shanghai Partner supply In House Shanghai/Shenzen Partner supply In House (contract labour) In House (contract labour)

21 MDS What is our competitive edge what is it built on? Competitive edge: Design and supply of customised, high volume, display modules optimising display performance, size, power consumption at a competitive price, on time. Built on Application know-how with leading players in the market Very close relationship with leading customers Leading edge design of display modules (Panel, IC, illumination), used as a platform for more integration (Sound, Camera etc.)

22 Competitive edge, built on 4) Cost Effective Manufacturing (15% to 50% outsourced) In-house assembly in China is state-of the art. First Chinese front-end process for STN A-Si TFT capability for small displays is leading edge Partner relationships support ability for rapid reaction to market volumes (up to 100% quarter to quarter) 5) Technology Base Single technology focus (MSTN) led to a very weak position 2 years ago, substantially repaired since that time. Significant IP position in CSTN, AMLCD and PolyLED

23 Customer Intimacy & Integration Philips offering Straight LCD screen module + keyboard light guide + chip-on-glass + dome sheet + battery + elastomer connect + loudspeaker + consumer face plate + spring connector

24 A Display Module as per today

25 MDS believes that there is a real opportunity to differentiate on the basis of increased functional modularity - The Mobile Window TM Ambient dependent lighting Very low power rf/tf AMLCD High cd/m 2 front/back-lighting Speaker, earpiece Microphone, buzzer, vibrator Bluetooth, antenna,... Processing, controls, codecs up Camera Touch input Soft-keys + menu Biometrics scroll key dome sheet Video Input / output High bandwidth video input Bus protocol in production Q4

26 MDS believes that there is a real opportunity to differentiate The Mobile Window TM Ambient dependent lighting Very low power rf/tf AMLCD High cd/m 2 front/back-lighting Speaker, earpiece Microphone, buzzer, vibrator Bluetooth, antenna,... Processing, controls, codecs up Bus protocol Camera Touch input Soft-keys + menu Biometrics scroll key dome sheet Video Input / output High bandwidth video input in production Q4 In designs/development 2003

27 Summary Mobile Display Systems Showing continuous progress in a difficult market continuous market share gains Leading position in many major volume color programs going forward Well positioned in the color game: all relevant technologies Flexible manufacturing using partners for speed and asset light approach Building additional value into the display module when needed by customers Margins continue to improve with tight cost control.

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