SURF THE NEW WAVE Display Supply and Demand Outlook

SURF THE NEW WAVE Display Supply and Demand Outlook 2016 Korea Display Conference 박진한, JinHan Ricky Park Director, IHS Markit Technology

2 Changes on demand area forecast Review 2016-FPD demand area YoY 4.7% 185.4 Share of H1 16 YoY 3.4% 183.0 183.5 As of Q1 16 As of Q4 15 184.4 As of Q2 16 As of Q3 16 47.5% 46.9% 177.0 FPD demand area(million square meter) Q1'16 Q2'16 Q3'16 Q4'16 As of Q4'15 42 45 48 48 As of Q1'16 41 45 48 49 As of Q2'16 41 45 50 49 As of Q3'16 41 46 50 49 FPD demand area(million square meter) 2015(A) 2016(E) Source: IHS Markit, Display long-term demand forecast tracker

3 Changes on capacity forecast Review 2016-TFT area capacity YoY 5.3% YoY 5.9% 267.0 266.0 252.6 As of Q4 15 As of Q3 16 TFT area capacity(million square meter) Q1'16 Q2'16 Q3'16 Q4'16 As of Q4'15 65 66 67 68 As of Q3'16 65 67 67 67 TFT area capacity(million square meter) 2015(A) 2016(E) Source: IHS Markit, Display supply demand and equipment tracker

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5 Main reason for panel shortage Unexpected capacity changes Production issues Earthquake effect from Tainan, Kumamoto and Taoyuan. Lower production yield for MMG process: 43/21.5-inch, 65/32-inch, 45/23.6-inch from G8 Lower glass efficiency for larger sized products: 65(84%@G6, 64%@G8), 75(75%@G7), 85(72%@G8) Remodeling Converting electrode materials to Cu: SDC, AUO, INX, CSOT and BOE Adopting 0.4T glass for cost down and curved: SDC and AUO BCS for cost down and better aperture ratio: SDC Restructuring Reduce IT capacity and enforcing TV and AMOLED products Shut down TFT-LCD FAB Switch to AMOLED equipment

6 FPD Demand Forecast

7 Expectation is just recovered Real GDP growth rate forecast 2017 GDP Updated in Real GDP growth (worldwide) 3.1 2.6 2.5 2.7 2.7 2.4 2.8 3.1 '11 '12 '13 '14 '15 '16 '17 '18 1.3 0.6 0.2 0.8 1.8 1.8 1.1 1.3 Russia 6.3 6.3 6.2 6.3 2.9 2.8 2.4 2.2 Eurozone 7.7 7.6 US 7.4 7.4 India China 1.2 0.6-0.7-0.8 Brazil Source: IHS Markit, IHS Global Economic Forecast

8 Silent consumer market in the long-term Consumer electronics shipment forecast CAGR( 15-20) 2.6% -1.4% 2.4% -1.9% 2015 2016 2017 2018 2019 2020 Source: IHS Markit

9 Area demand is steadily growing by key factors FPD demand area forecast Demand for larger size for TV, Monitor and Tablet Demand for Higher resolution: FHD for IT, UHD & 8K for TV Demand for advanced technology: AMOLED, LTPS and Oxide Demand for fancy design: Flexible, Ultra slim, narrow bezel and detachable design Demand from niche market: Curved TV and monitor Million square meter 250.0 200.0 150.0 100.0 50.0 0.0 5.0% 2014 2015 2016 2017 2018 2019 2020 Others Smart Watch Public Display OLED TV Mobile Phone Mobile PC LCD TV Desktop Monitor Automobile Monitor CAGR 11% CAGR 15% CAGR 78% CAGR 6% CAGR-1% CAGR 5% CAGR 1% Source: IHS Markit, Display long-term demand forecast tracker

10 2017, expecting to be better FPD demand forecast Panel demand unit Million unit 2015 2016 2017 LCD TV 274 264 266 Desktop Monitor 140 138 135 Notebook PC 180 164 164 Tablet 272 229 214 Smartphone 1,548 1,606 1,713 2,413 2,402 2,492 Panel demand area Million m 2 2015 2016 2017 LCD TV 124 132 141 Desktop Monitor 19 19 20 Notebook PC 10 9 9 Tablet 6 5 5 Smartphone 10 11 13 169 177 187 YoY 2016 2017-3% 1% -1% -2% -8% 0% -16% -7% 4% 7% 0% 4% YoY 2016 2017 6% 7% 3% 2% -10% 0% -11% 3% 9% 10% 4% 6% Source: IHS Markit, Display long-term demand forecast tracker

11 Why not? Larger size TV Potential market for super large size TV Living room TV SET ASP(US$) 4,000 3,000 55" 65" 75" Viewing distance Screen size(inch) Distance (meter) 55 2.3 65 2.7 75 3.1 85 3.5 95 3.9 100 4.1 Screen diagonal size 2,000 Dwelling size(m 2 ) USA 139 EU 96 Gemany 94 1,000 France 94 China 108 China-Urban 94 China-Rural 144 0 Source: Viewing distance(society of motion picture & television engineers) Average size of dwelling(united States Census, National Bureau of Statistics of China, Eurostat) TV ASP(IHS, TV Set market tracker)

12 Why not? Larger size TV Over 60-inch TV share 24% 26% 27% 29% 30% Revenue share 14% 13% 9% 9% 4% 4% 21% 19% 19% 18% 17% 16% 15% 13% 12% 5% 6% 7% 7% 8% 9% 20% 21% 10% 10% Area share Unit share 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: IHS Markit, Display long-term demand forecast tracker

13 Maximize the efficiency & differentiation TV Size competition by panel suppliers Share by size in 46-50 inch category 46~48-inch 50-inch 49-inch Current suppliers Gen 7: AUO, INX, LGD Gen 8: BOE, CSOT, SDC Gen 7: LGD, AUO Additional suppliers + INX, HKC, CEC Gen 8.6 + AUO Gen 8 + BOE Gen 10.5 + CSOT Gen 10.5 Share by size in 40-45 inch category 42-inch 2014 2015 2016 2017 2018 2019 2020 45-inch 43-inch 39.5/40-inch Gen 8: INX + Sharp Gen 10 + INX, HKC, CEC Gen 8.6 Gen 7: AUO, LGD Gen 8: BOE, CSOT + LGD Gen 8 + SDC Gen 8 + BOE Gen 10.5 + CSOT Gen 10.5 Gen 7: SDC, INX + Sharp Gen 10 Source: IHS Markit, Display long-term demand forecast tracker

14 FPD Supply and Demand Outlook

15 Aggressive investment for Larger FAB & AMOLED FAB investment plan in China Manufacturer Factory Gen Application Phase Probability Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 AUO FVO Kunshan L6K LTPS 6 LCD 1 100% 5 10 13 13 13 13 13 13 13 2 90% 7 10 12 12 12 12 BOE BOE B7 Chengdu LTPS 6 AMOLED 1 90% 2 6 8 12 15 2 60% 5 8 3 30% 5 BOE Chongqing B8 8.5 LCD 4 100% 15 25 35 35 35 35 35 35 35 35 35 35 BOE Fuqing B10 8.5 LCD 1 90% 25 60 60 60 60 60 60 2 90% 20 40 60 60 BOE Hefei B9 10.5 LCD 1 90% 15 25 30 30 2 90% 5 20 30 BOE Ordos B6 LTPS 5.5 LCD+AMOLED 2 90% 5 10 20 30 30 30 30 30 30 CEC Panda PND Chengdu 8.6 LCD 1 70% 30 40 50 CEC Irico Irico Xianyang 8.6 LCD 1 75% 30 50 55 China Star CSOT Shenzhen T2 8.5 LCD+AMOLED 2 100% 22 52 60 60 60 60 60 60 60 60 60 CSOT Wuhan LTPS T3 6 LCD 1 100% 8 12 15 15 15 15 15 15 15 15 LCD+AMOLED 2 100% 5 10 15 15 15 15 15 15 15 CPT Vibrant Display Tech Fuzhou 6 LCD+AMOLED 1 90% 5 10 15 25 30 HKC HKC Chongqing 8.6 LCD 1 100% 35 65 70 70 70 70 70 LG Display LGD Guangzhou 2 8.5 LCD 1 100% 15 47 50 50 50 50 50 50 50 50 50 2 90% 25 40 40 40 45 50 50 Samsung Display SD Suzhou 8.5 LCD 3 100% 15 45 60 60 60 60 60 60 60 60 60 60 Tianma TNM Xiamen 2 LTPS 6 LCD 1 100% 7 10 15 15 15 15 15 15 15 15 2 100% 5 10 15 15 15 15 15 15 15 TNM Zuoling Wuhan LTPS 6 AMOLED 1 90% 2 6 10 15 2 74% 5 Truly TLY Huizhou A 4 LCD+EWD 1 100% 5 10 20 40 50 50 50 50 50 50 50 TLY Huizhou B SEC L4 LTPS 4 AMOLED 1 100% 5 10 15 15 15 20 25 30 30 TLY Shanwei 2 SEC L5 5 LCD 1 90% 10 20 40 50 Visionox GoVSX Kunshan LTPS 5.5 AMOLED 1 100% 2 4 5 5 5 5 7 7 7 7 2 80% 4 8 8 8 8 Royole Ryl Shenzhen 1 5.5 AMOLED 1 78% 3 6 Mainly for large display Mainly for small medium display Source: IHS Markit, Display supply demand & equipment tracker

16 Aggressive investment for AMOLED & restructuring FAB investment plan in Korea, Taiwan and Japan Manufacturer Factory Gen Application Phase Probability Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 AUO AUO Taichung L8B 8.5 LCD 3 100% 17 24 24 24 24 25 25 26 27 27 27 Foxconn Foxconn Kaohsiung LTPS 6 LCD+AMOLED 1 100% 10 20 24 24 24 24 24 24 24 Innolux Corp. CMO Kaohsiung Fab8_b 8.6 LCD 1 100% 15 30 40 40 40 40 40 40 JDI JDI Hakusan D3 LTPS 6 LCD 1 100% 20 25 25 25 25 25 25 25 LG Display LGP Kumi AP3 LTPS (P6) 6 AMOLED 4 100% 3 6 8 8 8 8 8 8 LCD+AMOLED 3 100% 3 8 8 8 8 8 8 8 8 8 8 LGD Paju P9-E6 G6 6 AMOLED 1 90% 5 10 15 15 15 15 2 74% 10 15 15 15 3 40% 10 Samsung Display SD A3 6 AMOLED 1 100% 15 15 15 15 15 15 15 15 15 15 15 15 2 100% 2 12 15 15 15 15 15 15 15 15 3 100% 10 15 15 15 15 15 15 15 4 100% 5 15 15 15 15 15 15 15 5 90% 10 15 15 15 15 15 15 6 90% 3 12 15 15 15 15 15 7 90% 7 12 15 15 15 15 8 90% 10 15 15 15 15 SD A4 (L7-1) 6 AMOLED 1 70% 5 10 15 15 15 2 60% 10 15 15 15 3 50% 10 15 15 4 40% 10 15 5 30% 10 SMD A2 5.5 AMOLED 6 100% 10 20 20 20 20 20 20 20 20 20 SD A2-E (V-1 Pilot) 5.5 AMOLED 1 90% 5 15 15 15 15 15 15 2 30% 5 15 15 Sharp SHP Kameyama 2 Oxide 8 LCD 3 90% 5 10 10 10 20 20 20 20 20 Mainly for large display Mainly for small medium display Source: IHS Markit, Display supply demand & equipment tracker

17 Dispose and restructure FABs TFT FAB shutdown forecast Manufacturer Factory Gen Application End Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 AUO QDI Linkou L3D 3.25 LCD Jul-16 45 45 E Ink PVI Hsinchu Fab1 2 LCD+EPD Sep-16 75 75 48 Innolux Corp. TPO Jhunan Fab1 T3 3.25 LCD+AMOLED Jul-17 255 255 255 255 255 255 JDI HIT Mobara V3 #1 4 LCD Jan-17 174 174 174 174 HIT Mobara V3 LTPS 4 LCD Apr-16 75 STL Higashiura #1 3.25 LCD+AMOLED Apr-16 45 LaiBao PCK Kobe #2 2.5 LCD Jan-17 90 90 90 90 LG Display LGP Kumi P2 3.25 LCD Apr-17 120 120 120 120 120 LGP Kumi P3 3.5 LCD Apr-17 156 156 156 120 120 LGP Kumi P6 6 LCD Oct-17 165 165 165 165 165 165 90 Panasonic LCD IPSA Himeji 1 8 LCD Sep-16 84 75 60 Samsung Display SEC Chonan L6 5 LCD Apr-17 120 105 105 105 75 SEC Tangjong L7-1 7 LCD Dec-16 450 450 450 333 SMD V1 Pilot 8 AMOLED Aug-16 30 30 15 Sharp SHP Tenri CGS-A 3.25 LCD Oct-16 45 45 30 Decreased area capacity by above FABs Decreased area capacity/total area capacity -4.8-15.3 million m 2 2% 6% Source: IHS Markit, Display supply demand & equipment tracker

18 Expect to be tightness Capacity area growth vs. demand area growth Oversupply Oversupply Shortage Tightness 2013 2014 2015 2016 2017 2018 2019 LCD, AMOLED, AMEPD Demand Y/Y% 6% 14% 5% 5% 7% 5% 4% TFT Capacity for AM Applications Y/Y% 5% 5% 7% 5% 2% 6% 6% Notes: Demand includes AMEPD, AMLCD, AMOLED, a-si, LTPS and oxide panels for both large-area and small/medium applications. Capacity includes all ramped capacity for fabs with 30% probability for all applications,, glass sizes and technologies. Source: IHS Markit, Display supply demand & equipment tracker

19 Balanced glut ratio for large display Glut, Inventory and FAB utilization forecast 60.0 Demand Capacity Glut Glut ratio Area (million square meter) 50.0 40.0 30.0 20.0 10.0 0.0 19.9% 12.6% 9.0% 8.2% 12.2% 7.0% 6.4% 7.5% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Glut(%) Balance (0~10%) +0.5w Inventory Normal level(4.0w) -0.5w piles up decreases decreases rebuild piles up FAB Utilization 90% 80% 80% 86% 90% 91% 85-90% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Source: IHS Markit, Display supply demand & equipment tracker Display production and inventory tracker

20 How many TV panel is carried over to next year TV Panel vs. SET shipment comparison LCD TV module vs. set shipment comparison and gap forecast 2,500 10.0% 2,000 TV Set Accumulated Shipment TV Panel Accumulated Shipment Accumulated Gap. 8.0% Million Units 1,500 6.0% 1,000 4.0% 500 2.0% 0 Q1'12 Q1'13 Q1'14 Q1'15 Q1'16 Q1'17 Notes: Accumulated shipment for TV and panel from Q1 2004 Source: IHS 0.0% 2015 IHS Source: IHS Markit, Display long-term demand forecast tracker

21 How many TV panel is carried over to next year TV Panel vs. SET shipment comparison 2014 2015 2016 2017 LCD TV panel shipment 253 274 264 266 Million unit 300 Actual panel shipment SET shipment panel for repair and A/S 3 3 3 3 Open Cell/BMS business 3 4 4 4 China Low-Tier and OEM 3 3 3 3 emerging market 0 1 1 1 250 Others 5 12 10 10 Usage for monitor 6 9 9 9 Usage for public display 8 11 12 12 224 232 225 224 222 221 224 225 Actual LCD TV panel shipment 224 232 222 224 LCD TV Set shipment 225 224 221 225 200 Gap (Panel - SET) -1 8 1-1 Accumulated Gap 1 9 10 8 150 2014 2015 2016 2017 Source: IHS Markit, Display long-term demand forecast tracker

22 Gen10.5 FABs to have an impact on TV market BOE & CSOT s plan for Gen10.5 Gen10.5 (2940x3370) Panel Size Economical Cut Glass Efficiency 43 18 96% 49 12 82% 65 8 96% 75 6 96% 61 (21:9) 10 93% 70 (21:9) 8 91% vs. Panel Size Gen8.5 (2940x3370) Economical Cut Glass Efficiency 43 +21.5 8 + 8 93% 49 8 96% 65 +32 3 + 6 94% 75 +49 2 + 2 80% Market share of production at Gen10.5 (million unit) 43" 65" 75" 2 97% 11 (Production volume at Gen10.5) 21%% (share of production at Gen10.5) 17 8 45% 53 (Panel demand) Source: IHS Markit, Display supply demand & equipment tracker

23 Chaiwan(China + Taiwan) union LeEco + VIZIO Investment Technology TV OEM Share Brand Main Market Channel China No. 7 in 2015 (behind China top-6, ahead of Samsung) Want to penetrate N. America, AP (India) Cash injection (5%) Invest 20% (65%) (15%) China others (15%, 毅昌, 天樂, 歌爾 ) N. America No. 2 in 2015 (behind Samsung) Struggling to penetrate overseas market Invest 8% (15%) (9%) Invest 8% (47%) (29%) Panel Invest 24% INX Sharp CSOT CEC HKC Technology support

24 What is next wave FPD market revenue forecast Next? FPD for Mobile FPD for TV Mobile phone FPD for IT application LCD TV Mobile PC Monitor CRT TV 19981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020

25 Surf the new wave 초대형 TV 시장선점 AMOLED 시장확대 영원한적군도아군도없다

26 READY TO SURF!!!