Will polarizer supply fully meet rising demand?

IHS Market Tracker Display Materials & Components Will polarizer supply fully meet rising demand? September 2014 ihs.com Irene Heo, Principal Analyst, +82 31 8039 8763, Irene.heo@ihs.com

Contents EXECUTIVE SUMMARY 5 CHAPTER 1. POLARIZER MARKET AND INDUSTRY 7 1. Overview 8 1.1. Research methodology 8 1.2. Research scope and definitions 9 1.3. Revisions made in the H2 2014 report 10 2. Polarizer market forecast 11 2.1. Overall polarizer market forecast, 2013 2018 11 2.2. Polarizer market forecast by display type 12 2.3. Polarizer market forecast by application 13 3. Mid- to long-term polarizer demand forecast 18 3.1. Overall polarizer demand forecast, 2013 2018 18 3.2. Polarizer demand forecast by display type 19 3.3. Polarizer demand forecast by application 20 3.4. Polarizer demand forecast by region 25 3.5. Polarizer demand forecast by display mode 26 4. Short-term polarizer demand forecast 27 4.1. Overall polarizer demand forecast, Q3 2013 Q2 2015 27 4.2. Polarizer demand forecast by display type 28 4.3. Polarizer demand forecast by application 30 5. Analysis of polarizer production capacity 35 5.1. Polarizer production line and capacity 35 5.2. Overall production capacity, 2009 2016 39 5.3. Polarizer production capacity by manufacturer 40 5.4. Polarizer production capacity by region 41 5.5. Polarizer production capacity by group 42 5.6. Short-term analysis of polarizer production capacity, Q3 2013 Q2 2015 43 5.7. Short-term analysis of polarizer production capacity by manufacturer 44 2

Contents 6. Status of major polarizer companies 45 6.1. Nitto 45 6.2. Sumitomo Chemical 46 6.3. LG Chem 46 6.4. Samsung SDI (Formerly Cheil Industries) 47 6.5. Sanritz 47 6.6. BenQ Materials 48 6.7. CMMT 48 6.8. Others 49 6.9. Supply chain of sub-films 50 6.10. Revenue by manufacturer 51 7. Status of polarizer supply chain 52 7.1. Overall large TFT-LCD polarizer 52 7.2. Notebook PC-use polarizer 53 7.3. Monitor-use polarizer 54 7.4. TV-use polarizer 55 7.5. Tablet PC-use polarizer 56 8. Polarizer demand/supply and price trends 57 8.1. Polarizer supply and demand 57 8.2. Polarizer demand and supply by region 59 8.3. Polarizer price trends 61 8.4. Polarizer production cost (Bill of materials, BOM) 63 CHAPTER 2. POLARIZER SUB-FILM MARKET AND INDUSTRY 64 1. Polarizer structure and sub-film 65 1.1. Polarizer structure 65 1.2. Polarizer production process 66 3

Contents 2. PVA film 67 2.1. PVA film market forecast, 2013 2018 67 2.2. PVA film production capacity 68 3. PVA protection film: TAC/Acryl/PET 69 3.1. Overall PVA protection film market forecast, 2013 2018 69 3.2. PVA protection film market forecast by location and use 71 3.3. PVA protection film market forecast by base film 73 3.4. PVA protection film production capacity 75 4. Compensation film 76 4.1. Compensation film market forecast, 2013-2018 76 4.2. Compensation film market forecast by base film 77 4.3. Compensation film market forecast by display mode (TFT-LCD polarizer) 78 4.4. Compensation film market share by film type 79 5. Surface treatment film 80 5.1. Surface treatment film market forecast, 2013 2018 80 5.2. Surface treatment film market forecast by film type 81 5.3. AG film market forecast by base film 82 6. PET protection film/release film 83 6.1. PET protection film market forecast, 2013 2018 83 6.2. Release film market forecast, 2013 2018 84 4

Executive summary Polarizer & Optical Films Market Tracker H2 2014 / September 2014 The polarizer market is estimated to increase by 5.3% in 2014 compared to a year ago to $10.3 billion. It is also forecast to rise 5.4% in 2015. In terms of area, in particular, the market is forecast to grow at a compound annual growth rate of 7.5% from 397 million square meters in 2014, to exceed 500 million square meters in 2018. Panel demand is forecast to be particularly strong in 2014 and 2015. This is largely due to the spiked demand during the World Cup; the Brazilian government s subsidy policy; diversification of product line-ups including ultra-high definition (UHD), 3D, and curved TVs; and the scaling up of smart devices. Prices of polarizers are falling steadily, but the average price per unit area is unlikely to drop by large on diversification of premium-class large TV line-ups, including UHD, 3D and curved TVs, and their production increase. As a result, they are expected to maintain a CAGR of 4.0%, in terms of value. There are two issues stemming from such a robust panel demand. First, there are concerns on the shortage of polarizer supply. IHS expects polarizer supply to become tight from the second half of 2014 and go through a shortage beginning 2015. The biggest reason is demand for polarizer, in terms of area, is forecast to grow at a CAGR of 7%, but the supply is expected to grow only at a CAGR of 2% due to a lack of new operating lines. (Please refer to page 56.) Another issue is tariffs from China. China has hiked tariffs on polarizers to 8% this year and it may hike them again to 11% next year. Such a tariff increase means polarizers will lose price competitiveness. China-based panel makers will also likely depend more on polarizer supplies in China rather than importing them. But supplies in China absurdly fall short of meeting the panel demand in China. LG Chem Ltd., which already built a new line in China, and Chi Mei Materials Technology Corp. (CMMT) are expected to greatly benefit from the rise in panel demand in China. (See p.60.) In this context, Nitto Denko Corp. and China s Shenzhen SAPO Photoelectric Co. (SAPO) are believed to have reached a business pact. 5

In terms of sub-films, adoption of acryl film, which has strong durability, and COP film is rising on an increase in open-cell business. PET-used polarizers produced by Samsung SDI Co. are also steadily being adopted, albeit at a small quantity. An increase in adoption of IPS mode and the start of adoption of Nitto s resin-type PVA polarizers, the ultimate thin polarizer, will bring a big change in the polarizer sub-film market in the future. IHS analyzed the polarizer market forecasts from 2013 to 2018, production line status by manufacturer, supply chain, and price trends. It also tried to enhance understanding of the polarizer market in which competition of high value-added film production has begun in full scale, through an analysis of optical sub-films, such as TAC, PVA, PET protection, release, anti-reflection, and compensation films. 6

Chapter 1. Polarizer market and industry 7

1. Overview Polarizer & Optical Films Market Tracker H2 2014 / September 2014 1.1. Research methodology Data collection The data used in this report has been collected and analyzed through various methods. The most important, basic data regarding supply was collected through Q&A sessions with major suppliers and research. Also, IHS has been collecting information continuously including materials from industrial and academic conferences, various display industry-related exhibitions, companies' earnings and analysis reports, press releases, and Internet search. Data analysis The collected data has been analyzed under the methods of cross fact-checking and correlating the information as well as through diachronic/synchronic studies by using existing analysis data. In particular, past demand/supply conditions and technology comparisons have been using the industry forecasts and regular/irregular reports released by IHS Technology as the fundamental basis of analysis. Demand for polarizers and sub-films This is based on panel makers shipment results and their plans to raise production capacities, collected through various methods and routes from panel makers and polarizer companies. Polarizer and sub-film supplies This is based on polarizer makers shipment results and their plans to raise production capacities, collected through polarizer-use sub-film companies shipment results and supply chains. Polarizer and sub-film markets and prices IHS has researched global prices of polarizers and sub-films every quarter. The entire amount market is calculated by collecting and calculating average prices of quarterly polarizer shipments and supply prices by product. 8

1.2. Research scope and definitions Research scope: Market sizes are calculated based on area as polarizers are provided in the form of films. Research item: Polarizer Researched companies: Manufacturers of the above item and its raw materials. Research period: Third quarter of 2014 Long-term forecast: Markets from 2013 to 2018 Supply chain: Calculated based on the second quarter of 2014 Units and Abbreviations - Y/Y Growth: Year-on-year growth - Q/Q Growth: Quarter-on-quarter growth - CAGR: Compound annual growth rate - L.TFT: Large TFT ( 9-inch or larger, including tablet PCs) - S/M TFT: Small/Medium TFT - Dongwoo: Dongwoo Fine Chem. - LGD: LG Display - SDC: Samsung Display - CMMT: Chi Mei Materials Technology - BQM: BenQ Materials (Formerly Daxon) - CSOT: Shenzhen China Star Optoelectronics Technology - CEC: Nanjing CEC-Panda LCD Technology - PLD: Panasonic Liquid Crystal Display - INX: Innolux Display - TAC: Tri-acetyl cellulose - PVA: Poly-vinyl alcohol - PET: Polyethylene terephthalate - COP: Cycloolefin polymer - AG: Anti-glare - LR: Low reflection - HC: Hard coating - TN mode: Twisted nematic - VA mode: Vertical alignment - IPS mode: In-plain switch 9

1.3. Revisions made in the H2 2014 report Changes in classification of small- and medium-sized panel applications Divided the mobile phone into two: Smartphone and mobile phone (feature phone). Integrated the DSC and the camcorder into the camera. Integrated PND, DPF, PMP, and portable DVD into the portable. Revised down the polarizer price per unit area. H1 2014 pricing trend Technology 2012 2013 2014 2015 2016 2017 2018 AMOLED 131 124 119 114 110 105 101 Large TFT-LCD 35 31 29 28 27 26 25 S/M TFT-LCD 105 101 95 89 84 83 79 H2 2014 pricing trend Technology 2012 2013 2014 2015 2016 2017 2018 AMOLED 112 55 47 45 43 42 40 Large TFT-LCD 35 28 26 25 24 23 22 S/M TFT-LCD 95 71 68 65 62 60 57 Revised up effective area, cutting rates, and yields that are applied when calculating polarizer demand. Previous: Effective area (95%) x cutting rates (85~88%) x yields (93~95%) = 75~79% Revision: : Effective area (95%) x cutting rates (90~95%) x yields (93~95%) = 80~86% Please note that the polarizer value market in the H2 2014 report fell from that in the H1 2014 report due to the revisions in demand area and prices. 10

2. Polarizer market forecast Polarizer & Optical Films Market Tracker H2 2014 / September 2014 2.1. Overall polarizer market forecast, 2013 2018 The polarizer market is estimated to grow 5.3% in 2014 compared to a year ago to $10.3 billion. It is forecast to rise 5.4% in 2015 as well. Polarizer prices have been falling despite the brisk panel market, but the average price is unlikely to fall sharply on the diversification of premium-class TV line-ups like 3D and UHD, maintaining a CAGR of 4.0% from 2013 to 2018. Overall polarizer market forecast (Revenue) Billions of dollars 14 12 10 8 6 4 2 SAMPLE www.ihs.com CAGR : 4.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0 2013 2014 2015 2016 2017 2018 Revenue 9.8 10.3 10.9 11.3 11.6 11.9 Y/Y Growth 3.9% 5.3% 5.4% 3.5% 2.9% 2.9% 0.0% 11

3.5. Polarizer demand forecast by display mode Demand area of TFT-LCD-use polarizers including both s/m and large-sized will reach 394.7 million square meters in 2014. By LCD display mode, twisted nematic (TN) mode will account for 47 million square meters, or 12%, while wide view panel-use VA and IPS are likely to account for a combined 348 million square meters, or 88%. IPS mode is increasingly used in applications like monitors, notebook PCs, tablet PCs, and smartphones. Market share of IPSuse mode will increase to 41% in 2018, while VA mode is likely to take about 50%, and TN mode 9% of the total market in 2018. Polarizer market forecast by display mode (Area) Millions of square meters 300 250 200 150 100 50 0 2013 2014 2015 2016 2017 2018 TN 58 47 44 42 43 43 IPS 115 135 157 174 191 207 VA 188 213 230 241 247 251 SAMPLE 100% www.ihs.com Polarizer market share by display mode (Area) % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013 2014 2015 2016 2017 2018 VA 52% 54% 53% 53% 51% 50% IPS 32% 34% 36% 38% 40% 41% TN 16% 12% 10% 9% 9% 9% 12

5. Analysis of polarizer production capacity 5.1. Polarizer production line and capacity Polarizer production line status, Ksqm/Year Makers Region Line Width(mm) Operation 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nitto Kameyama L1 1475 Oct 2004 9,000 9,000 9,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 L2 1330 Mar 2006 9,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 Onomichi L1 1330 Apr 1996 4,000 4,000 6,000 6,000 6,000 6,000 6,000 7,000 7,000 7,000 7,000 7,000 7,000 L2 1330 Oct 1999 4,000 4,000 6,000 6,000 6,000 6,000 6,000 7,800 7,800 7,800 7,800 7,800 7,800 L3 1330 Sep 2000 4,000 4,000 6,000 6,000 6,000 6,000 6,000 9,000 9,000 9,000 9,000 9,000 9,000 L4 1330 Sep 2003 6,000 6,000 6,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 L5 1330 Oct 2003 6,000 6,000 6,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 SAMPLE L6 1330 Oct 2004 6,000 6,000 9,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 L7 1330 Aug 2005 6,000 9,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 L8 1475 Jun 2006 9,000 9,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 www.ihs.com L9 1475 Sep 2006 9,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 L10 1475 Jun 2007 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 10,800 L11 1475 Jun 2007 9,000 9,000 9,000 9,000 18,000 18,000 18,000 18,000 18,000 18,000 L12 2000 Jun 2008 10,000 10,000 10,000 18,000 18,000 18,000 18,000 18,000 18,000 Korea L1 1475 Jul 2014 10,800 10,800 10,800 Nitto Total 39,000 54,000 84,000 108,000 118,000 118,000 118,000 153,400 153,400 153,400 164,200 164,200 164,200 Sumitomo Japan Okura 1330 Oct 2000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Okura 1490 Q4 2014 9000 9000 9000 (Ehime) L1 1330 Oct 2000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 L2 1490 Nov 2006 6,000 6,000 6,000 7,000 7,000 7,000 9,000 9,000 9,000 9,000 9,000 L3 1960 Q1 2008 10,000 10,000 10,000 10,000 14,000 14,000 14,000 14,000 14,000 Korea L1 1490 Oct 2003 4,000 4,000 4,000 4,000 6,000 6,000 6,000 6,000 9,000 9,000 9,000 9,000 9,000 (Dongwoo) L2 1490 May 2005 4,000 4,000 4,000 8,000 8,000 8,000 8,000 9,000 9,000 9,000 9,000 9,000 L3 1490 Jun 2006 6,000 7,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 L4 1490 Jun 2006 6,000 7,000 9,000 9,000 9,000 9,000 10,800 10,800 10,800 10,800 10,800 L5 2000 May 2008 14,000 14,000 14,000 14,000 16,000 16,000 16,000 16,000 16,000 Taiwan L1 1330 Jun 2004 4,000 4,000 4,000 4,000 7,000 7,000 7,000 7,000 9,000 9,000 9,000 9,000 9,000 (Sumica) L2 1490 Jun 2005 4,000 4,000 4,000 7,000 7,000 7,000 7,000 9,000 9,000 9,000 9,000 9,000 L3 2000 May 2011 21,000 21,000 21,000 21,000 21,000 21,000 Sumitomo Total 16,000 24,000 42,000 44,000 84,000 85,000 85,000 106,000 123,800 123,800 132,800 132,800 132,800 13

6. Status of major polarizer companies Polarizer & Optical Films Market Tracker H2 2014 / September 2014 6.1. Nitto Nitto posted $xxx million in polarizer revenue in the second quarter of 2014. It owns xx production lines, including one in Pyeongtaek, South Korea. The Japanese company is the world s largest polarizer maker with an annual production capacity of more than xxx million square meters. It has brought in resin PVA production facilities and already has two film manufacturing lines. Currently, this type of polarizers are supplied for Apple products. At the same time, it is providing roll-to-panel (RTP) equipment to Samsung Display Co., AU Optronics Corp. (AUO), www.ihs.com and CSOT, securing more than a certain level of orders. It is leading innovations in polarizer technologies by applying resin PVA and acryl films, and by developing compensation films like the Amond. Each quarter, Nitto is supplying more than xx% of the global demand. Nitto polarizer revenue and market share trend Millions of dollars SAMPLE 3,000 2,500 2,000 1,500 1,000 500 0 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Nitto Sales 750 788 700 736 780 830 810 820 Polarizer Market 2,520 2,685 2,281 2,472 2,506 2,547 2,430 2,562 Nitto share 30% 29% 31% 30% 31% 33% 33% 32% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% * RTP equipment: Roll-to-panel equipment. Polarizer makers provide polarizers in roll to panel makers, and panel makers use the equipment to cut the roll-type polarizer after laminating it. 14

7.3. Monitor-use polarizer In the first half of 2014, LG Chem s share in the monitoruse polarizer market was the largest with xx%, followed by CMMT with xx%, and BQM and SDI with xx% each. Market share of monitor polarizer makers (Area), H1 2014 Nitto 1% Optimax 0% Sanritz 7% SumitomoSDI 2% 13% CMMT 21% SAMPLE www.ihs.com LG Chem 43% BQM 13% Supply chain of monitor polarizer by panel maker (Area), H1 2014 Polarizer Maker AUO BOE CEC CPT HannStar Innolux IVO LGD SDC Sharp Tianma SDI 16% 40% 12% 0% 100% 0% 16% 0% 41% 0% 0% CMMT 0% 0% 58% 0% 0% 82% 61% 0% 0% 0% 0% BQM 59% 24% 16% 0% 0% 0% 0% 0% 0% 0% 40% LG Chem 22% 18% 14% 100% 0% 17% 23% 84% 44% 0% 60% Nitto 2% 0% 0% 0% 0% 0% 0% 1% 0% 100% 0% Optimax 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Polatechno 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Sanritz 0% 0% 0% 0% 0% 0% 0% 15% 15% 0% 0% Sumitomo 2% 18% 0% 0% 0% 1% 0% 0% 0% 0% 0% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 15

8. Polarizer demand/supply and price trends 8.1. Polarizer supply and demand By area, polarizer demand is expected to amount to xxx million square meters in 2014. It is likely to grow at a CAGR of x% to exceed xxx million square meters by 2018. However, the supply will merely grow at a CAGR of xx% due to an absence of new operating lines. The supply will be tight across the board in 2014 and genuinely fall short of demand from 2015. Supply growth rate vs. demand growth rate Polarizer supply and demand % 20% 16% 12% 8% 4% 0% 16% 12% 6% 5% 5% 2% 2% 1% 0% 2012 2013 2014 2015 2016 2017 2018 Y/Y Growth (Supply) 9% 9% 7% 6% Y/Y Growth (Demand) SAMPLE www.ihs.com 5% Millions of square meters 600 500 400 300 200 100 0 20% 18% Balance (10~20%) 13% 2012 2013 2014 2015 2016 2017 2018 Supply 413.1 428.3 447.4 468.2 470.9 476.0 482.0 Demand 343.2 363.2 397.0 433.8 462.8 490.3 516.2 Glut 20% 18% 13% 8% 2% -3% -7% 8% 2% -3% 25% 20% 15% 10% 5% 0% -5% -7% -10% Supply : Design capacity * 80% (maintanance, job changing, etc.) Glut : (S-D)/Demand 16

8.3. Polarizer price trends In 2014, the price per unit area of large TFT-LCD polarizers stood at $xxxx/sqm, s/m TFT-LCD ones at $xxxx/sqm and AMOLED-use at $xxxx/sqm. Polarizer prices by mode, display size ($/set) Polarizer price trends by area $/Set Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1'15 Q2'15 IPS_LR 9.7" 4.63 4.56 4.50 4.43 4.36 4.31 4.26 4.21 TN_HC 10.1" 1.50 1.48 1.47 1.45 1.44 1.42 1.41 1.39 TN_HC 12.1" 2.49 2.45 2.41 2.38 2.34 2.31 2.27 2.24 TN_HC 14.1" 2.41 2.38 2.34 2.31 2.27 2.24 2.20 2.17 TN_HC 15.4" 2.84 2.79 2.73 2.68 2.62 2.57 2.52 2.47 TN_AGWV 15.6"W 3.26 3.23 3.20 3.16 3.13 3.10 3.07 3.04 TN_AGWV 17"W 6.25 6.15 6.06 5.97 5.88 5.79 5.70 5.62 TN_AGWV 18.5"W 6.39 6.29 6.20 6.10 6.01 5.92 5.83 5.75 TN_AGWV 19" W 6.65 6.55 6.45 6.35 6.26 6.16 6.07 5.98 TN_AGWV 20" W 7.34 7.23 7.13 7.02 6.91 6.81 6.71 6.61 TN_AGWV 21.5"w 10.16 10.04 9.92 9.80 9.68 9.57 9.45 9.34 TN_AGWV 22"w 11.17 11.01 10.84 10.68 10.52 10.36 10.21 10.05 TN_AGWV 23"w 11.71 11.54 11.37 11.20 11.03 10.86 10.70 10.54 TN_AGWV 24"W 12.88 12.73 12.58 12.43 12.28 12.03 11.79 11.55 TN_AGWV 26"W 14.36 14.19 14.02 13.85 13.68 13.52 13.36 13.20 VA_AG 26" 7.34 7.23 7.13 7.02 6.91 6.81 6.71 6.61 VA_AG 32" 12.00 11.88 11.76 11.64 11.52 11.41 11.29 11.18 VA/IPS_AG 37" 16.61 16.27 15.95 15.63 15.32 15.01 14.71 14.42 VA_AG 40" 19.32 18.94 18.56 18.19 17.82 17.47 17.12 16.77 IPS_AG 42" 21.55 21.12 20.69 20.28 19.87 19.48 19.09 18.71 VA_AG 46" 25.67 25.16 24.66 24.16 23.68 23.21 22.74 22.29 IPS_AG 47" 26.03 25.51 25.00 24.50 24.01 23.53 23.06 22.60 VA_AG 52" 39.32 38.14 37.38 37.00 36.63 36.27 35.90 35.54 VA/IPS_AG 55" 43.91 42.60 41.74 41.33 40.91 40.50 40.10 39.70 SAMPLE www.ihs.com Dollars per square meter 80 70 60 50 40 30 20 10 0 2013 2014 2015 2016 2017 2018 AMOLED 55.48 47.13 45.28 43.49 41.78 40.13 Large TFT-LCD 27.53 26.31 25.14 24.05 23.06 22.16 S/M TFT-LCD 71.06 68.05 65.18 62.42 59.79 57.27 17

Chapter 2. Polarizer sub-film market and industry 18

3.3. PVA protection film market forecast by base film TAC film is the most popular base film for a compensation film, such as WV, N-TAC, Z-TAC, and B-TAC. In 2014, the PVA protection film market is estimated at xxxx billion, and likely to diminish to xxx billion in 2018 due to the contraction in the WV film market and the price competition with other compensation films. The market for COP film, which is applied to VA mode and AMOLED-use compensation film, and some IPS-use film, is estimated to amount to xx billion in 2014 and develop to xx billion in 2018. PVA protection film market forecast by base film (Revenue) Billions of yen 300 250 200 150 100 50 0 2013 2014 2015 2016 2017 2018 TAC 242 209 203 201 203 204 Acryl 12 24 27 28 28 29 COP 16 21 24 27 29 29 Others 4 4 8 10 12 15 SAMPLE100% www.ihs.com PVA protection film market share by base film (Revenue) % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013 2014 2015 2016 2017 2018 Others 1% 2% 3% 4% 5% 6% COP 6% 8% 9% 10% 11% 11% Acryl 5% 9% 10% 11% 10% 10% TAC 88% 81% 77% 75% 74% 73% 19

3.4. PVA protection film production capacity Major clients of Hosyung Corporation include SDI, LG Chem, and Dongwoo Fine-Chem. Hyosung recently began operating its second line, but due to the implementation of 3D film-patterned retarder (FPR)-integrated polarizer in the second half of 2103, its TAC supply dropped sharply. Shinkong Synthetic Fiber Corp. also supplies TAC films to BQM, Optimax, and Sumitomo, and started operating its second line in 2014. TAC film production capacity by manufacturer Millions of square meters 1,600 1,400 1,200 1,000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 2015 IPI 30 30 30 30 30 30 30 SK Innovation - - - 60 60 60 60 Hyosung 50 50 50 50 50 110 110 TAC Bright 60 80 80 80 80 150 150 Konica minolta 225 275 275 275 275 330 330 Fujifilm 655 675 710 815 815 815 815 TAC film production capacity share by manufacturer SAMPLE 100% www.ihs.com 90% % 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015 IPI 3% 3% 3% 2% 2% 2% 2% SK Innovation 0% 0% 0% 5% 5% 4% 4% Hyosung 5% 5% 4% 4% 4% 7% 7% TAC Bright 6% 7% 7% 6% 6% 10% 10% Konica minolta 22% 25% 24% 21% 21% 22% 22% Fujifilm 64% 61% 62% 62% 62% 55% 55% 20

4.4. Compensation film market share by film type By film type, N-TAC for VA mode will take xx% of the demand for large-sized TFT-LCD-use compensation film in 2014, Zeonor xx%, B-TAC xx%, Z-TAC for IPS mode xx%, acryl xx%, and WV film for TN mode xx%. Due to a rise in open cell business, polarizer makers wish to increase COP application in VA mode, but because Zeon Corporation s COP film production capacity is limited, its application increase looks to be difficult this year. In s/m TFT-LCD protection film, Z-TAC share will be xx% due to an increase in IPS mode, WV for TN mode xx%, and Zeonor Film for mobile VA xx%. The AMOLED-use compensation film market is competed between Teijin Ltd. s WRF film, COP flim, and Nitto s Amond, but since the Galaxy S5 implemented COP this year, major portion is taken by COP. L. TFT comp film market share, 2014(e), Area SAMPLE S/M LCD comp film www.ihs.com market share, 2014(e), Area AMOLED comp film market share, 2014(e), Area Acryl 14.5% ND(Nitto) 0.3% WV 10.9% I Film 0.1% NV Film 0.0% N-TAC 21.5% Zeonor 15.2% Acryl 7.1% ND IPS 4.0% I-Film 2.7% NV Film 0.8% Z-TAC 39.2% Amond 20.0% WRF 10.0% B-TAC 15.0% Z-TAC 18.1% Zeonor 19.5% WV 30.9% COP 2 sheets type 70.0% 21

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