Darmstadt, Germany – June 26, 2013
LCDs – A high hurdle for new large
display technologies
Merck Information Day 2013 – A ...
Remarks
All comparative figures relate to the corresponding last year’s period.
Important information
This presentation do...
LCD and OLED displays: Status quo
Strengths of LCDs versus strengths of OLED displays
Market projections for LCDs versus O...
4
LCDs and OLED displays are fundamentally different
1. Backlight (CCFL or LED) emits white light
2. Color filters transfo...
5
LCDs have squeezed all other large display
technologies nearly out of the market
For consumers
 Price and thinner frame...
6
Despite the launch of an 11 inch device already
in 2007, OLED TVs are still very expensive rarities
11” Sony 15” LG 55’’...
2007 Display Search 2010 Display Search 2012 Display Search
7
Past market research overexcited, underestimating
challenges...
Agenda
LCD and OLED displays: Status quo
Strengths of LCDs versus strengths of OLED displays
Market projections for LCDs v...
LCD OLED
9
Future advancements of LCDs will further raise
commercial as well as technology barriers for OLED
Expected deve...
10
Though OLED TVs may lower the cost gap to LCDs,
significant technology barriers remain
Agenda of technology development...
11
High quality and low cost of LCD TVs limit
significant near-term cannibalism from OLED
 Picture qualities of LCDs and ...
Agenda
LCD and OLED displays: Status quo
Strengths of LCDs versus strengths of OLED displays
Market projections for LCDs v...
13
The overall display market is expected
to continue growing in volumes
 Flat panel display surface area
expected to con...
14
LCD expected to remain the dominant display
technology until 2019 and beyond
 LCD technology expected to dominate
TV m...
15
Relative to LCD, production capacities of OLED
displays will remain at moderate levels mid-term
 LCD capacities expect...
16
OLED can provide a unique selling point in
rollable displays
Display potential of LCDs versus OLED displays
Due to a fa...
Agenda
LCD and OLED displays: Status quo
Strengths of LCDs versus strengths of OLED displays
Market projections for LCDs v...
18
OLED displays are much more likely to enlarge the
display market mid-term rather than replace LCDs
LCD is likely to rem...
LCDs – a high hurdle for new large display technologies (A Deep Dive into Merck's LC & OLED Business)
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LCDs – a high hurdle for new large display technologies (A Deep Dive into Merck's LC & OLED Business)

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LCDs – a high hurdle for new large display technologies
Thomas Kietzke (Director Strategy and Market Intelligence)

Additional info: http://www.merckgroup.com/en/investors/information_day_LC_OLED.html

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LCDs – a high hurdle for new large display technologies (A Deep Dive into Merck's LC & OLED Business)

  1. 1. Darmstadt, Germany – June 26, 2013 LCDs – A high hurdle for new large display technologies Merck Information Day 2013 – A Deep Dive into Merck’s LC&OLED Business Dr. Thomas Kietzke Director Strategy and Market Intelligence
  2. 2. Remarks All comparative figures relate to the corresponding last year’s period. Important information This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities in the United States. The shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from such registration. Note regarding forward-looking statements The information in this document may contain “forward-looking statements”. Forward-looking statements may be identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words of similar meaning and include, but are not limited to, statements about the expected future business of Merck KGaA resulting from the proposed transaction. These statements are based on the current expectations of management of Merck KGaA and E. Merck KG, and are inherently subject to uncertainties and changes in circumstances. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are factors relating to satisfaction of the conditions to the proposed transaction, and changes in global, political, economic, business, competitive, market and regulatory forces. Merck KGaA and E. Merck KG do not undertake any obligation to update the content of this presentation and forward-looking statements to reflect actual results, or any change in events, conditions, assumptions or other factors. All trademarks mentioned in the presentation are legally protected. Disclaimer
  3. 3. LCD and OLED displays: Status quo Strengths of LCDs versus strengths of OLED displays Market projections for LCDs versus OLED displays Summary Agenda
  4. 4. 4 LCDs and OLED displays are fundamentally different 1. Backlight (CCFL or LED) emits white light 2. Color filters transform white light into RGB colors 3. Liquid crystals block or enable light transmission Setup of an Organic Light Emitting Diode display OLEDs directly generate lightLiquid crystals selectively modulate light 1. OLEDs convert electric energy into RGB light, a separate OLED material is needed for each color Acronyms: ITO = Indium Tin Oxide; TFT = Thin-Film Transistor; CCFL = Cold Cathode Ion Source; LED = Light-Emitting Diode; RGB = Red-Green-Blue Polarizer Glass substrate ITO film Liquid crystal ITO film Glass substrate Polarizer Unpolarized white light TFT Orientation film Color filter Orientation film Setup of a Liquid Crystal Display
  5. 5. 5 LCDs have squeezed all other large display technologies nearly out of the market For consumers  Price and thinner frames  Higher resolution in all sizes  Proven track record of extreme reliability For manufacturers  Price and scalability  Production capacities  Production costs LCD leadership foundationMarket share by display technologies LCDs have created highest technological and commercial entry barriers 0% 20% 40% 60% 80% 100% 2002 2005 2009 2012 LCD Plasma OLED CRT ~93% Source: DisplaySearch, Quarterly Worldwide Flat Panel Forecast Reports Relative display surface area
  6. 6. 6 Despite the launch of an 11 inch device already in 2007, OLED TVs are still very expensive rarities 11” Sony 15” LG 55’’55” LG 2007 Price of OLED TV 2010 2012 2014 Price of LCD TV ~ $80 per square inch ~ $4 per square inch Price of OLED TV Price of LCD TV ~ $25 per square inch ~ $1.5 per square inch Price of OLED TV Price of LCD TV ~ $10 per square inch ~ $1 per square inch Price of OLED TV Price of LCD TV ~$5 per square inch < $1 per square inch ? The progress in OLED TV development is still uncertain Source: DisplaySearch, Quarterly Global TV Shipment and Forecast Report, Q1 2013
  7. 7. 2007 Display Search 2010 Display Search 2012 Display Search 7 Past market research overexcited, underestimating challenges in commercial production  First commercial launch of an 11 inch OLED TV in 2007  Financial crisis in 2009 held back investments in OLED technology  Until today, sales of OLED TVs were always significantly behind initial expectations AnalysisMarket research estimates for OLED TV sales after each OLED TV introduction After each OLED TV launch there has been overexcitement in the market in [units] 1,070 247,000 3 683,000 ? After 11” OLED After 15” OLED After 55” OLED 2013 Estimate 1,186,000 Source: DisplaySearch 2010 Estimate 2012 Estimate 2012 Actual 2010 Actual Estimates Actuals
  8. 8. Agenda LCD and OLED displays: Status quo Strengths of LCDs versus strengths of OLED displays Market projections for LCDs versus OLED displays Summary
  9. 9. LCD OLED 9 Future advancements of LCDs will further raise commercial as well as technology barriers for OLED Expected development of average sales price of large displays by technology *Based on white OLED Cost/ inch² time Key drivers of LC development Cost reduction Progress in technology Reduction of display components Higher transmission Faster tact time in production Larger displays Higher resolution (e.g. 4K2K) Higher color gamut Immersive 3D
  10. 10. 10 Though OLED TVs may lower the cost gap to LCDs, significant technology barriers remain Agenda of technology development in the display industry Display trend Technology Requirements LCD TV OLED TV* Larger displays Higher resolution (4K2K) Higher color gamut Immersive 3D Scalable production technology 4x higher pixel density Narrow emission light source Holography Status for mass production technologically possible, not available yet technologically impossible *RGB OLED
  11. 11. 11 High quality and low cost of LCD TVs limit significant near-term cannibalism from OLED  Picture qualities of LCDs and OLED displays at similar high levels  Unknown lifetime of OLED displays versus LCD (>15 years)  Maximum size of LCDs two times larger than of OLED displays  Thickness of LCD displays only ~1 mm thicker than OLED display  OLED TVs prices significantly higher: ~ $10,000 versus ~$1,500 for 55 inch TVs Key takeawaysKey characteristics of displays OLED TV displays are not a revolution and are not highly differentiated Picture quality Long-term reliability Maximum size Display thickness Energy consumption* Cost Characteristic Customer relevancy LCD versus OLED *Based on white OLED Pro LCDPro OLED
  12. 12. Agenda LCD and OLED displays: Status quo Strengths of LCDs versus strengths of OLED displays Market projections for LCDs versus OLED displays Summary
  13. 13. 13 The overall display market is expected to continue growing in volumes  Flat panel display surface area expected to continue growing in the next years  Average growth mid to high single digits driven by various trends  Regional growth in Emerging Markets  Increase in average display size  New display features (e.g. 3D, 4K2K) Display growthDisplay industry forecast Flat panel display surface area expected to increase by >50% until 2019 Source: DisplaySearch, Quarterly Worldwide Flat Panel Forecast Report, Q1 2013; CAGR = Compound Annual Growth Rate 2012 2019 ~140 ~215 CAGR ~ 6-7% Display surface area [km²]
  14. 14. 14 LCD expected to remain the dominant display technology until 2019 and beyond  LCD technology expected to dominate TV market for many years to come  Customer needs well met  Proven technology with high level of maturity and reliability  Strong cost leadership  Plasma likely to exit market while OLED expected to emerge LCD technology positionDisplay industry forecast by technology Market penetration of OLED TVs impacted by comparatively high prices 94% 96% 92% 87% 2013 2015 2017 2019 CRTLCD-TV Plasma OLED Source: DisplaySearch, Quarterly Worldwide Flat Panel Forecast Report, Q1 2013 215143 171 195 Display surface area [km²]
  15. 15. 15 Relative to LCD, production capacities of OLED displays will remain at moderate levels mid-term  LCD capacities expected to increase along with anticipated growing demand  Build-up of OLED production capacities in line with anticipated penetration of the display market, staying <5% in 2015  No commercial emergence of additional display technologies expected Display trendsDisplay industry forecast by annual production capacities Moderate market uptake of OLED displays confirmed by build-up of production capacities Source: DisplaySearch, Quarterly FPD Supply/Demand & Capital Spending Report, Q1 2013 0 50 100 150 200 250 300 2010 2011 2012 2013 2014 2015 LCD Plasma OLED Display surface area [km²]
  16. 16. 16 OLED can provide a unique selling point in rollable displays Display potential of LCDs versus OLED displays Due to a favorable price-benefit ratio, LCDs are likely to dominate a large part of the display market Display form factor LCD Non-flexible Bendable/Curved Rollable OLEDRelative market share* + + + + - + +++ *Company estimate
  17. 17. Agenda LCD and OLED displays: Status quo Strengths of LCDs versus strengths of OLED displays Market projections for LCDs versus OLED displays Summary
  18. 18. 18 OLED displays are much more likely to enlarge the display market mid-term rather than replace LCDs LCD is likely to remain the dominant display technology at least until 2020 OLED needs to overcome significant technology challenges to gain substantial display market share OLED has its highest potential for differentiation in applications where LCD is not used

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