The Emergence of LCD TV and its Impact on Glass James B. Flaws Vice Chairman and Chief Financial Officer January 10, 2006
Forward Looking and Cautionary Certain statements in this presentation constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward looking statements are based on current expectations and involve certain risks and uncertainties. Actual results might differ from those projected in the forward looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the Securities and Exchange Commission filings on the Company and at the end of this presentation. 2
Emergence of LCD TV Big Picture: Overall Display Market LCD TV Market Impact on LCD Glass 3
Overall Color TV Market Retail Sales in Billions $100 $80 $60 $40 $20 $0 $106 $79 $54 $24 LCD TV LCD TV 2005 2007 Source: Corning Estimates 4
Overall LCD Glass Market Glass Demand 1400 1200 1000 41% CAGR (04-07) Glass volume almost triples by 2007 MM sq.ft. 800 600 LCD Glass Expecting ~60% growth from 2004 to 2005 400 200 0 2004 2005 2006 2007 5 Source: Corning
Small LCD display applications are increasing 1400 1200 Glass Demand CAGR (04-07) 41% Small Size Current view ( 04 07) MM sq.ft. 1000 800 600 400 Growth of small applications with LCD displays Color Mobile phone PDA Digital Camera 28% 32% 19% 16% 200 Avg. screen size 2.38 2.36 Small 25% 0 2004 2005 2006 2007 6 Source: Corning
Growing notebook popularity creates a solid base of LCD glass demand 1400 1200 Glass Demand CAGR (04-07) 41% Notebook Current view ( 04 07) 1000 Underlying PC unit growth 9% MM sq.ft. 800 600 NB % of PCs 27% ~35% 400 LCD penetration 100% 200 Notebook 17% Avg. screen size 14.4 14.9 0 Small 25% 2004 2005 2006 2007 7 Source: Corning
LCD monitors have become the standard choice for desktop displays 1400 1200 Glass Demand CAGR (04-07) 41% Monitor Current view ( 04 07) MM sq.ft. 1000 800 600 400 Monitor 28% 200 Notebook 17% 0 Small 25% 2004 2005 2006 2007 Underlying monitor growth (CRT+LCD) LCD penetration Avg. screen size 7% 53% >80% 16.7 17.9 8 Source: Corning
LCD TV emerging as the third wave of LCD glass demand 1400 1200 Glass Demand CAGR (04-07) 41% LCD TV Current view ( 04 07) MM sq.ft. 9 1000 800 600 400 200 Notebook 17% 0 Small 25% 2004 2005 2006 2007 Source: Corning TV 89% Monitor 28% Underlying TV unit growth (all technologies) LCD penetration Avg. screen size * Includes Signage 4% 5% ~20-25% 20.6 27.3
Emergence of LCD TV Big Picture: Overall Display Market LCD TV Market Impact on LCD Glass 10
LCD technology continues to expand its reach, targeting the sweet spot of TV demand MM Units 100 80 60 40 94% of units are <40 2005 TV Sales 192 MM units Rear Projection Plasma LCD CRT 2005 Penetration ~3% ~3% ~10% ~84% 20 0 10"-19" 20"-29" 30-39" 40-49" 50"+ 11
LCD technology continues to expand its reach, targeting the sweet spot of TV demand 100 2007 TV Sales 209 MM units 80 MM Units 60 40 91% of units are <40 20 0 10"-20" 20"-29" 30"-39" 40"-49" 50"-59" 60"+ 12 Source: Corning
LCD technology continues to expand its reach, targeting the sweet spot of TV demand MM Units 100 80 60 40 90% of units are <40 2007 TV Sales 209 MM units Rear Projection Plasma LCD CRT 2005 Penetration ~3% ~3% ~10% ~84% 2007 Penetration ~3% ~6% ~20-25% ~66-71% 20 0 10"-19" 20"-29" 30-39" 40-49" 50"+ 13
Our forecast assumes 30 is the fastest growing LCD TV segment MM Units 50 45 40 35 30 25 20 15 10 5 0 Average Screen Size LCD TV Units by Screen Size (Unit) 1.8 6.2 4.1 3.9 9.6 9.8 7.4 11.8 18.1 10 14.1 2004 2005 2006 2007 20.6 23.2 25.5 27.3 50-59 40-49 30-39 21-29 10-20 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% LCD TV Units by Screen Size (%) 15% 19% 65% 4% 5% 23% 21% 52% 32% 24% 39% 1% 6% 40% 22% 31% 2004 2005 2006 2007 50-59 40-49 30-39 21-29 10-20 14
Rate of LCD TV adoption differs by region LCD TV Penetration by Region 50 LCD TV Unit Sales by Region % of Total LCD Units Japan 2004 27% 2007 58% 40 ROW China, Asia Pacific, and others 28% Western Europe North America 7% 6% 31% 29% MM Units 30 20 Western Europe 32% ROW 1% 6% 10 North America 28% Worldwide 5% 21% 0 Japan 2004 2005 2006 2007 13% 15 Source: DisplaySearch Source: Corning estimates
Retail price gaps continue to narrow, fueling demand HDTV Retail Pricing Historical Monitor Retail Pricing 5,000 1000 4,000 800 US$ 3,000 US$ 600 ~3x 2,000 ~3x 400 ~2x 15" LCD 1,000 ~2x ~1.5x 32" LCD 30" CRT 200 ~1.5x 17" CRT 0 2004 2005 2006 2007 0 2000 2001 2002 2003 2004 LCD Penetration 6% 15% 28% 42% 53% 16 Source: Corning
LCD TV prices in US are now below Plasma 12 US HD TV retail prices ($/sq.in.) 10 $/sq.in. 8 6 4 2 HD LCD 3.4 HD Plasma 1.8 HD CRT 1.9X 17 0 J M M J S N J M M J S N J M M J S N 2003 2004 2005 Source: NPD/CDT analysis
Emergence of LCD TV Big Picture: Overall Display Market LCD TV Market Impact on LCD Glass 18
LCD Glass Attributes Free of particles 1/10 the size viewable by the human eye Clean Stable Flat 19
LCD Glass Attributes Flatness tolerance Substrate requirement 4 inch wave on the Pacific Ocean Clean 4 in 12,000 ft Stable Flat 20
LCD Glass Attributes Dimensional stability Tolerance <1/50 the width of a human hair Clean Stable Flat 21
LCD glass size is expanding rapidly 2006 Gen 8 2004 Gen 7 2003 Gen 6 2002 Gen 5 2000 1995 1993 Gen 4 Gen 3 Gen 2 22
Larger substrates help our customers reduce cost and produce larger displays Gen 7 Gen 6 Gen 5 Gen 4 17 17 23
Larger substrates help our customers reduce cost and produce larger displays Gen 7 Gen 6 32 32 24
Larger substrates help our customers reduce cost and produce larger displays Gen 4 6-up 15 Gen 5 9-up 19 Gen 6 8-up 32 Gen 8 25
Large Gen sizes make up most of the future glass demand, extending Corning s competitive advantage 1,400 Glass Demand by Generation % 07 Demand 1,200 1,000 Gen 6 41% MM sq.ft. 800 600 400 Gen 5 38% 200 < Gen 4 21% 0 2004 2005 2006 2007 Gen 5+ 48% 66% 74% 79% 26 Source: Corning estimates
LCD Glass: A significant opportunity for Corning Display Segment 2002 2003 2004 YTD Q3 2005 Revenue $ 405 $ 595 $1,113 $ 1,224 YOY Change 47% 87% 53% Net Income Wholly-Owned $ 39 $ 91 $ 258 $ 482 Equity Earnings 80 144 288 285 Total $ 119 $ 235 $ 546 $ 767 YOY Change 97% 132% 94% Amounts in Millions 27
Summary Color TV market represents a substantial opportunity LCD technology penetration will be driven by falling retail prices LCD glass is an enabling technology Helps our customers reduce cost and produce larger displays LCD glass represents a significant opportunity for Corning Large size glass requirements provide a key competitive advantage Given the expected the rate of penetration, glass demand for LCD TV in 2007 could be equal to or greater than the entire market in 2004 28
Forward Looking and Cautionary This presentation contains forward looking statements that involve a variety of business risks and other uncertainties that could cause actual results to differ materially. These risks and uncertainties include the possibility of changes or fluctuations in global economic conditions; currency exchange rates; product demand and industry capacity; competitive products and pricing; availability and costs of critical components and materials; new product development and commercialization; order activity and demand from major customers; capital spending by larger customers in the telecommunications industry and other business segments; the mix of sales between premium and non-premium products; possible disruption in commercial activities due to terrorist activity and armed conflict; ability to obtain financing and capital on commercially reasonable terms; acquisition and divestiture activities; the level of excess or obsolete inventory; the ability to enforce patents; product and components performance issues; and litigation. These and other risk factors are identified in Corning s filings with the Securities and Exchange Commission. Forward looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events. 29