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Joe Harlan Presentation Joe Harlan Presentation Presentation Transcript

  • Electro & Communications Business Joe Harlan – Executive Vice President Positioned For Accelerating Growth © 3M 2008. All Rights Reserved. 2008 3M Investor Conference 2008 3M Investor Conference
  • Electro & Communications Business Positioned for Accelerating Growth… Stronger business footprint has yielded stronger financial results Growth initiatives materializing nicely Operational excellence embedded in ECB culture Market dynamics in infrastructure and electronics favor 3M technologies…time for offense Lots of Work on the ECB Transformation… Opportunities Abound 2 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • ECB Key Financial Data Revenues Operating Income +5% +14% $700 $3.5 CAGR CAGR YoY% Chg $2.8 $3.0 $600 $2.7 $533 $2.5 $464 $2.5 $500 $413 $ Millions +15% $ Billions $2.0 $400 +12% $1.5 $297 +44% $300 $1.5 $200 $1.0 +13% $100 $0.5 $0 $0.0 2005 2006 2007 1H '08 2005 2006 2007 1H '08 V% 4 6 4 9 OI Margin 16.5% 17.5% 19.3% 20.1% 2007 Revenues by Geographic Area LAC 9% U.S. 29% Europe 23% 3 APAC 39% © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • ECB Portfolio Footprint Balanced Platform Portfolio… Characteristics Integrated materials science & processing technologies Participating in “hot” markets 30% 22% Infrastructure Infrastructure build / upgrades Electronics market momentum Go-to-market via OEM, channel pull / push & “Bench-to- Electronics 5% Bench” selling (ODMs, CMs) 23% 20% …And Balanced Proportionately to Global Opportunities LAC Strong positions in expanding / upgrading infrastructure 9% (Europe, LAC, APAC) U.S. Asia driven by electronics…EE emerging 29% Europe 23% Servicing transnational customers globally Opportunities Across Multiple Platforms and Geographies APAC 4 39% © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electrical Markets Division Applications Power Generation Transmission Distribution Solutions Tape Cold Shrink & Heat Shrink Connectors & Terminals Splices & Terminations Flexible Insulation Key Capabilities Vinyl electrical tapes for insulating and sealing Insulating tapes and papers Connecting and terminating underground cables Specialty high voltage overhead cable EMI / RFI shielding and absorbing Resins and conductive tapes 5 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Communication Markets Division Applications C e n tra l C e n tra l Cam pus O ffic e O ffic e C u s to m e r P r e m is e s Solutions Copper and Fiber Optic Structured Cabling Central Office Connectivity Copper Aerial Closure Copper Splicing Modules & Connectors DSL Test Equipment Fiber Optic Closures Fiber Optic Splices Key Capabilities Copper & optical fiber cable… Connectivity - Splicing, terminating, and cross connecting of cable facilities Management – Routing, labeling, identifying, and managing cable facilities Protection – Junction points in a network, facilities security, passive and active elements in a network 6 Copper media layer diagnostics – Identifying and locating faults in a media layer © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electronic Solutions Division Applications Solutions High Speed Backplane Fiber Optic Carrier & Cover Flex Circuits Inkjet Cartridge Cable Solutions Solutions Tape Assemblies Key Capabilities Flexible fine-pitch interconnect Component transport and testing High-performance electronic substrate materials Static control and protection Embedded capacitance 7 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electronics Markets Materials Division Applications Solutions Tapes & Bonding Thermally Gaskets & Films Chemicals & Conductive Adhesives Gases Semiconductor Materials Materials Key Capabilities Specialty fluids & gases Plastic bonding & hot melt solutions Sintered & fixed abrasives Form-in-place gaskets Battery materials Thermal management 8 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • 3M Touch Systems Applications Retail Industrial Gaming Food Service Transportation Financial Solutions Capacitive – ClearTek II Sensors & EX II Electronics Touch Monitors Dispersive Signal Technology (DST) Key Capabilities Capacitive sensing technology expertise Glass-based product manufacturing Bending wave technology Coating and optics expertise Touch electronics and software Gaming & retail touch markets expertise Worldwide customer & engineering support Global presence & brand recognition 9 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • An Improved Business Footprint… New Strategy Addressed Our ‘1-Trick’ Pony…Flex ‘02 - ‘07 Change Revenues % of % of Total Margin Total % of ($ Millions) (5%) +15 Pts. $603 Total 22 % of Total 22 $534 CMD 27 $579 +7% +3 Pts. 30 $843 24 $581 EMD $495 23 42 Electronics +9% $995 +22 Pts. 32 41 $705 $1,132 18 Flex $403 12 $287 (11%) (19) Pts. 7 $184 2002 2004 2007 Flex % of OI 87% 43% 11% Flex Decline Dampens Business Performance…But Balanced Portfolio Management Overcomes the Impact 10 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Portfolio Management Yields a Stronger Financial Footprint… Core ECB Revenues growth 8% ($ Billions) excluding $2.8 R Flex CAG $2.7 +5 % (7% $2.5 ) $2.4 $2.4 $2.2 $2.2 2001 2002 2003 2004 2005 2006 2007 OI% 8% 11% 11% 12% 17% 18% 19% ROIC 7% 11% 11% 13% 18% 18% 21% Ideally Situated to Pursue Growth Opportunities… “Offense vs. Defense” in Growth Markets 11 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Infrastructure Markets Electrical Markets in the “Sweet Spot”… Initial Build Phase O ptim ization Phase Replacem ent Phase Building up reliable and cost O ptim izing the grids for power D eveloping in a new com petitive efficient electrical infrastructure quality and power-flow efficiency environm ent Capital Expenditures Tim e Fram e: 15-30Years 10-15Years 10-15Years Source: Siemens 2006, Boston Consulting Group M arket R esearch Sources: U BS Investm ent R esearch, T &D and Internal Dynamics Aging infrastructure in developed countries & new infrastructure in developing countries driving massive global investment Transmission & distribution spend expected to grow at 13% CAGR through 2010 Energy Demand Drives Bright Electrical Core Outlook 12 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Infrastructure Markets Telecom Markets Steady… Telecom Customer & Broadband Investments $29B $31B $63B $13B $24B Dynamics Worldwide broadband subscribers will double by 2012 to 500 million driving investments Consolidation continues…but cyclical spending is still a challenge Telecom “Hangover” has Passed…Spending Normalized 13 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electronics Markets…Perpetual Growth Instrument Business Industrial Est. 2008 Size Est. CAGR Segment ($ Billions) ('06 - '11) Communication Business $37 6% Communication 439 11% Gov't / Military Consumer 206 10% Auto 131 12% Computer 542 12% Gov't / Military 173 6% Industrial 170 8% Consumer Instrument 116 8% TOTAL $1,814 10% Source: Electronic Outlook Corp., Electronics Industry Outlook Q4 2007 Computer Auto Electronics is a $1.8 Trillion Market Growing at 1.5-2X GDP… No Longer Dominated by Computer 14 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • ECB Has Improved Business & Financial Footprint… …Driven by a Simple Strategy Market focused / Customer centric go-to-market structure Growth Successful NPI program based on VOC and technical differentiation Aggressive geographic expansion (Customers) Selective acquisitions Supply chain shift…Closer to the customer Competitiveness Productivity: Lean Six Sigma, supplier management, indirect costs, cycle time reduction (Shareholders) Maniacal focus on service and channel partner intimacy Engaged International human capital investments Employees Leadership localization Technology driven growth…back to “3M DNA” (Energized) Simple Approach has Yielded Good Results…Full Speed Ahead 15 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • ECB Market-Focused / Customer-Centric Approach EMMD Focused on Key Electronic Segments / Customers… Segment Market Semi-conductor HDD MHH Display Printer TSMC Seagate Nokia LG HP Customer Examples Intel Western Digital Motorola Philips Lexmark IBM Hitachi Apple Samsung Canon Freescale Samsung Sharp Brother …Yielding Growth at 2x Market Rates… Revenue $625 $556 $501 +14% $452 CAGR $367 $ Millions 2004 2005 2006 2007 2008E Incorporating “Classic 3M Technology” into VOC Based Customized Technology Differentiated Solutions… Running with the Winners 16 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Accelerating ‘VOC’ Based New Product Growth Re-Engineered the NPI Effort… $800 + 5-Year New Product Sales* +25% $656 CAGR $ Millions $491 $457 $336 $255 $206 2002 2003 2004 2005 2006 2007 2008E % of Sales 9% 12% 14% 18% 18% 24% 30+% Prioritizing on high probability VOC projects Capitalizing on international human capital investment (Tech) 3M Technical Expertise Providing Differentiated Products / Solutions to Customers 17 *Sales of products released within past 5 years. © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Focusing on 2-Year New Product Sales*… Ensuring the Sustainability… $407 2nd Year NPI % Origin 1st Year $311 216 5-Year 2-Year $ Millions $237 ’07 ’08 Chg. ‘08 181 120 U.S. 64 47 39 Asia 22 31 37 191 130 117 Europe 11 18 21 LA/C 3 4 3 2006 2007 2008E Lab Headcount: U.S. 44% 38% 32% Int’l 56% 62% 68% Int’l Revenue 70% 71% 74% Shifting Activities Closer to Customers: - Local ‘Centers of Excellence’ - Platform Specific Technology Roadmaps 18 *Sales of products released within past 2 years. © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Global Centers of Excellence Investments in 2008 Neuss High Speed Interconnect China Regional Applications Dev. Russia Electronic PSA Tapes Indoor Copper Connectors Tech Service Component Transport Security Systems Low-Cost I/O Intercon Resins High Voltage Acc. MV Splices Passive Cabinets Poland Tech Service Tilton Korea Paper EMI/EMC Tapes Insulation Russia Battery Matls. Germany Poland OCAs Korea St. Paul, MN France Tilton, NH St. Paul Japan Austin, TX China Composite Conductor Semicon Finishing Electronic Adhesives MHH Interconnect FC Fluids India Consumer Circuits Cluses Battery Mtls. Taiwan Fiber Connectors Cross-connect blocks Textool Gels & Greases Austin Singapore Closures MV Cable Accessories Taiwan Elec. Tapes/Supplies Semicon pkg Copper & Fiber Connectors OEM Tapes Test & Measure Instrumentation Singapore Brazil E-Cabinets Closures Consumer Circuits India Specialty Circuits SC Liquid Adhesives Heat Shrink Brazil Static Control Electronic Adhesives MV Acc. Rubber Tapes CMP Abrasives FTTH PVC Tapes Technology & Development Expertise Close-to-the-Customer…SPEED to Drive Growth 19 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Technology Roadmaps – EMC… Market (Customer) Priorities Regulations broadening from 0-1GHz to 0-3GHz. Miniaturization causing greater EMI issues Driving need for multi functional component EMI Metal Particle Pads and Foams EMC Hybrid EMD Sheets & Films NTF EMC New Foam EMD Mesh & Sleeving EMI Metal Oxide Conductive Cushion EMI New Foam Gasket Particle EMD Gaskets & Cushions Film Impedance Focused roadmaps for each Low Frequency Advanced EMC Material Absorber EMI Absorbers RFID Absorber Liquid EMC Material High Frequency Hybrid product family… Absorber Absorber AB5000 Compressible Multi-layer Adhesive Adhesive Structural EMC Adhesive Hybrid Adhesive EMC Adhesive Thin Adhesive High Pitch Acid Free Adhesive Adhesive Transfer Clearly maps out technologies Transparent EMI Tape Single Coat and EMD Foil & Fabric Tapes EMC Absorbing Tape EMI Label EMD Anti-Static Tape EMC Conformal & In- in-house, being developed, Mold Solutions 300PL Foil Shield EMI/EMC Engineered EMD High Temp Tape Flex Circuits Cap Shield Z-Axis Acrylic, Epoxy and what we need to go get Particle based XYZ-Axis Legend Tape Conductive Foam Tape XYZ-Axis Acrylic, Si Post Launch/Core NPI/Development Measure 2 mil XYZ-Axis Tape Advanced Modeling Test & Basic Material & Computation Concepts Property Testing Engineered Design Idea Hopper Capability Technology Advanced Product & Performance Legend Precision Particle Alignment Multilayer Manufacturing Test Capability Gaps Existing EMI Functional Transparent EC Polymers Precision Pattern Coating Complex Converting In-Development In- Nano Layers Capability Need/Gap Corrosion Electrochemistry Galvanic Series Materials Metallurgy Expertise Expertise Expertise 20 Core 2007 20083M Investor Conference2009 2011 2010 © 3M 2008. All Rights Reserved. 2008
  • International Expansion…Our Biggest Opportunity Shifting Assets Closer to the Customer… Capex Human Capital 120 +725 800 $102 (Cumulative) $93 100 700 600 $76 Headcount 80 $ Millions +415 $63 500 60 400 $46 +300 $43 300 $34 40 200 20 100 0 0 '06 '07 '08E '02 '03 '04 '05 '06 '07 '08E OUS 2/3 of $ CapEx Int’l 90% of Additions Int’l US International growth plus competitiveness Building global technical expertise Establishing regional sources of supply Strong local leadership development Rationalized / sold 7 facilities 75% of electronics business moved to Asia ‘Lean’ mentality everywhere NPI no longer dependent on US Provides Local Customer Intimacy, Source of Supply, and Speed to Market 21 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • International Growth Investing in Higher Growth Regions…Close to the Customer APAC Sales Europe Sales L.A. / Canada Sales +9% CAGR* +8% CAGR* +28% CAGR* ’05 ’06 ’07 ’08E ’05 Europe /’07 ’08E ’06 ’05 ’06 ’07 ’08E LA/CAN APAC MEA Key Subs CAGR Key Subs CAGR Key Subs CAGR China 15% CEE 17% Canada 14% India 59% Middle East 36% Brazil 22% Taiwan 8% Germany 3% Columbia 17% Korea 7% France 4% Venezuela 30% Singapore * 5% Spain 12% Chile 13% Japan * 6% UK / Ireland * 5% Mexico 2% *Excludes Recent Investments Gaining Traction…Growth Continues as Flex Sales Organizational Competencies Develop 22 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Opportunistic M&A Expanding Electronics Footprint… ’08E Rev. Static Control (Sanford / Santa Cruz) $35 Medical Flex (Siemens) $20 …Adjacent Markets… Innovative Paper Technology $30 …Geographic Expansion Mahindra & Mahindra $8 Giglio $25 Watching Environment Closely…in Parallel with ECB Growth Strategy 23 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • ECB Performance Improvement – 2004 to 2007 Lean Six Sigma Benefits… …Supplier Management Savings… $155 $44 $42 $39 $36 $147 $147 $144 '04 '05 '06 '07 '04 '05 '06 '07 % to Rev. 6% 6% 6% 6% % of Buy 6% 6% 5% 5% …Drives Lower Factory Costs… …And High ROIC% 21% 60% 18% 18% 57% 56% 55% 13% '04 '05 '06 '07 '04 '05 '06 '07 1 Point is Worth ~ $26 Million Productivity Critical to Maintain ECB Competitiveness 24 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • ECB Service Initiative Correlates to Growth Electrical Markets Example… ’99 – ’04 ’05 – ‘08 100 15% 12% 97 Rev. CAGR 0% 12% 11% LC Rev. Growth % OTIF 81% 95% 95 10% 10% 95 OTIF % 4% 90 5% 1% 1% 1% 1% 0% 90 83 85 0% 82 81 81 85 80 80 80 -5% -8% 75 -10% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08E OTIF LC Rev. Growth % Share Gains Continue in 2008… Analysis indicates 1/3rd of growth Customers Cust. Growth 3M Growth Difference Commercial 5% 19% +14 Pts. attributable to OTIF improvement Utility 2 21 19 OEM 8 50 42 Service now a 3M differentiator Acq. (IPT) 0 28 28 Core OEM (2) 2 4 Service Benefits Growth, Cost, and Cash 25 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • A Healthier Platform Provides Opportunities High Capacity Conductors Fiber Solutions Novec™ Fluids Form in Place Gasket Lithium Ion Batteries Optically Clear Adhesives Electromagnetic Compatible (EMC) Materials Transport Tape / Universal Cover Tape Wind Farms / Solar / Mining Key Components in a Robust Product Line 26 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • High Capacity Conductors Emerging Market Demand for Power Transmission… Unique technology enabling 2x transmission with 50% sag vs. traditional cable Value add applications Constrained transmission corridors Aging infrastructure Lower installation costs Long river / gorge crossing $1B addressable market today with 6% CAGR …3M Uniquely Positioned as Scale-up Increases +43% $ Mfg Cost / Foot Revenues +17% +50% (38%) $ Millions +167% (36%) (22%) (21%) 2004 2005 2006 2007 2008E 2004 2005 2006 2007 2008E Production Scale-up & Cost Productivity will Drive Market Leadership in Transmission Cable 27 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Fiber Solutions…An Emerging Platform ECB accelerated organic development for core fiber and connectivity platforms in 2004 $2.3B market with 20% CAGR Expanding geographic and product footprint Full functioning Euro & APAC labs Transitioning from supplier to consultant CMD Solid in Copper…Cash Cow… …With Growing Fiber Presence… Sales CAGR Sales CAGR $600 20% $200 25% ’04–’07 = 1% ’04–’07 = 19% 20% ’08–’12 = 5% ’08–’12 = 20% $500 15% $150 Rev ($ Millions) Rev ($ Millions) 15% $400 10% $100 10% $300 5% $50 5% $200 0% $0 0% 2004 2005 2006 2007 2012E 2004 2005 2006 2007 2012E Copper Sales Copper OI% Fiber Sales Fiber OI% Organic Position Capitalizing on 3M NPI Expertise…Classic 3M DNA 28 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Novec Fluids…Unique Technology in High Tech Apps Fluorinated fluids for semiconductor manufacturing, electronics processing, and fire suppression Safe, sustainable, responsible chemistry Halon replacement technology Best EHS position vs. competitors Growing 20+% in $1B, 3% CAGR market Revenue +13% +14% 2006 2007 2008E New Applications in Wafer Cleaning & High Boilers… 29 Plus Geographic Share Gains (APAC) Drives Growth © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Optically Clear Adhesive (OCA) Provides optical bonding for consumer electronic products in touch and key pad applications Enables OEMs / ODMs design flexibility for thinner, more attractive devices with improved contrast / brightness Provides cost savings in processing due to fewer layers in display stack $350M market with 20% CAGR Revenue +21% +850% 2006 2007 2008E New Applications with Opportunity for Larger Format Applications 30 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Lithium Ion Battery Materials Growing rapidly with expansion of multiple 3M products and technology platforms Fluorinated electrolytes NMC Cathode powders Electrolyte Silicon alloy anodes Micro porous films Strong IP positions provides licensing on manufacturing options Revenue +44% +50% 2006 2007 2008E Continued Development of Specialty Formulations & Additives in $3.8B Market 31 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electromagnetic Compatible (EMC) Materials Classic 3M tape and adhesive technology applied to rapidly growing EMC & RFID Current applications in consumer electronics, security, medical, and industrial markets Customized applications in $1.5B, 9.5% CAGR market Revenue +13% +89% 2006 2007 2008E Growing Opportunity Across Multiple Divisions 32 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Transport Tape / Universal Cover Tape Packaging media for surface mount technologies High quality / High performance market position Enhancing portfolio to capture mid-tier performance market Revenue +6% (3%) 2006 2007 2008E $300M Market Growing at 6% CAGR 33 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Wind Farms Tailor made applications for electrical construction Penetrating the global market with cable accessories and supplies in wind farm networks Opportunities from design to build phase: Premium performance products 1 2 7 3 4 Technical training expertise Splicing Terminating Grounding Value-add custom kits 5 8 9 Taping Securing & Labeling Marking & Locating Just the Beginning…$12M 2008E Revenue in a Market Growing at 20% 34 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Solar Objective is to become the preferred global solar solutions provider Integrated with “Big 3M” solar effort ‘Bench-to-Bench’ technical support System Ingot, Wafer & Module / Panel Installation & for improved module efficiency Cell Manufacture Operation Manufacture through integrated materials technology On-grid utility and installation • Conductive & Insulation Tapes support • Wafer Process • Environmentally Aides • Splices Protective Resins Offering customized solutions in a • Terminations • Wafer / Cell • Electrical Transport Connectors • Wire dynamic environment • Light • Anti-static Management Concentration Solutions Solutions • Optically Clear Adhesives $600M Market Growing at 30%... • Thermal Management Massive Opportunity for 3M • Interconnect 35 solutions © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Mining Opportunity for the electrical construction market Increased global penetration of tapes, cable accessories, and splice solutions Expanded portfolio of new products Solving cable repair, splicing, and insulation needs ECB service differentiation compliments product technology $225M Market Opportunity… $31M in 2008 ECB Revenues 36 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electro and Communications Business Positioned for Accelerating Growth… Stronger business footprint yields stronger financial results… Core revenues forecast at 5-8% CAGR Since 2004…Factory cost down 5%, OI up 7%, and ROIC +12% Growth initiatives materializing nicely New products at 30+% of revenues…strong pipeline Geographic asset shift yielding top line and productivity (RSS) Legacy assets pruned…replacing with selective acquisitions Operational excellence embedded in ECB culture Continued productivity gains imperative Market dynamics in infrastructure and electronics favor 3M technologies…time for offense Focusing on the Customer…Driving to be the Supplier of Choice for Our Industries 37 © 3M 2008. All Rights Reserved. 2008 3M Investor Conference
  • Electro & Communications Business Positioned For Accelerating Growth © 3M 2008. All Rights Reserved. 2008 3M Investor Conference 2008 3M Investor Conference