Winning in light sources

René van SchootenCEO Lamps businessCEO Lamps business

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Key takeawaysKey takeaways

The coming 5 years will bring• The coming 5 years will bring significant opportunities

• We are uniquely positioned to capture the value in conventional li htlight sources

• We have the strengths and strategy g gyto win in LED light sources

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The coming 5The coming 5 years will bring significant

t itiopportunities

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Lamps market expected to grow significantly inLamps market expected to grow significantly in next 5 years

Global light source revenue1

Global light sources market evolution

• Macro economic environment and outlook have improved

C ti l k t i

€ Bln

15 • Conventional market remains large opportunity…

• while LED penetration is• …while LED penetration is increasing in all segments and will fuel tremendous growth

201502010

Conventional light sources

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LED Light sources

1.Excluding AutomotiveSource: Philips Lighting global market study 2009, updated for 2010

LED penetration is increasing in all segments andLED penetration is increasing in all segments and will fuel tremendous growth

Global LED light sources marketIncreasingly powerful drivers Global LED light sources market growing rapidly

Increasingly powerful drivers for LED adoption

Global LED light source revenue1

• Continuously improving total cost of ownership–e.g. parking lot’s, road, corridor lighting

12€ Bln

• Sustainability drive–e.g. Life Cycle Assessment (‘LCA’), US DOE

Energy Star program, CO2 neutral hotels

8

4• Differentiating experience

–e.g. productivity in the office, safety

• Increased availability and awareness 20100

2015

–Increased LED shelf space in virtually all big retail chains, increased A&P spent

• Government stimulus packages

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–e.g. 10K city program in China

1.Excluding AutomotiveSource: Philips Lighting global market study 2009, updated for 2010

Conventional markets remain a large opportunityConventional markets remain a large opportunityGlobal conventional light sources market declining gradually

Key trends

Global conventional light source revenue1

market declining gradually

€ Bln• Increasing number of light points

in emerging markets12

• Mix improvement to higher priced more energy efficient light sources in mature marketssources in mature markets

• Conventional light sources gradually replaced by LED light

2010 20150

gradually replaced by LED light sources

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1.Excluding AutomotiveSource: Philips Lighting global market study 2009, updated for 2010

We are uniquely positioned to capture the value inthe value in conventional light gsources

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Uniquely positioned to capture the value inUniquely positioned to capture the value in conventional light sources

Building on our leading global market position to enhance

Our building blocks Our unique position

g g g pour relationships with our customers

P ti l i tf li t l l i l ti

Global leader

Pro-actively managing our portfolio to leverage legislation and drive up-sellingPortfolio

Successfully growing and gaining share in consumer and professional marketsWinning strategy

Capturing opportunities while successfully managing the life cycle of our conventional assets

Life cycle management

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Building on our leading global market position toBuilding on our leading global market position to strengthen our relationships with our customers

Leading position in light sources globally

Strong position with our distribution partners

• We have strong presence in consumer retail …• No 1 light source company in the world ….

• … as well as with professional distributors

• … with specific strengths in emerging markets

• With leading customer Net Promoter Scores2:– 83% outright NPS leadership– 89% (co)leadership in NPS consumer– 99% (co)leadership in NPS professional

India China Brazil Russia

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99% (co)leadership in NPS professional

1.Based on 2009 results for Philips Lighting Lamps. Excludes Japan. 2.NPS measurements cover 50% of markets by revenue. Data from 2009.Source: Customer panels and Industry associations

Pro-actively managing our portfolio to leveragePro actively managing our portfolio to leverage legislation and drive up-selling

Strategy Achievements

• TL-D Powersaver Set in Europe – saving 30% TL D t d d

Introducing innovative up-lli iti energy over TL-D standard

• CDM Allstart in US, save 20% energy on road lighting versus Quarz Metal Halide

selling propositions

• Remote controllable compact fluorescent launched to consumers in Asia-Pacific and Europe

Reducing Product Costs in Commodity categories

• Reduced Fluorescent product costs by 2-4% through phosphor re-engineering

• Year to date 2010 reduced number of SKU’s in mature incandescent portfolio by more than 35%

Simplifying portfolio impacted by legislation

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Successfully growing and gaining share in consumerSuccessfully growing and gaining share in consumer and professional markets

Consumer markets Professional markets

• Philips ceramic white light outdoor • Strengthened #1 market position in lamps specified for City of Chicago

• This month milestone reached of the 1,000,000th Cosmopolis lamp sales

compact fluorescent in Asia Pacific through focused consumer marketing campaigns, growing share by 1.5%

• Ceramic lamps sales level all time high with 42% growth YTD (China: 62% growth)

• Continuing market share growth in energy efficient lamps in North America

• Growth of T5 Eco and Energy advantage > 100%

• Winning GLS ban in EU27:– Philips strengthened market leading

position in EU27 growing market share by 2% • Key end-users worldwide switching to

T5 Eco, e.g. Tesco, M&S, The Home Depot

share by 2%– Rebuilt 55km of shelves in over

19,500 major stores to promote energy saving lamps

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Capturing opportunities while successfully managingCapturing opportunities while successfully managing the life cycle of our conventional assets

2002 2010 YTD 2015

28(1)

41(1)

• We have a clear strategic roadmap for our required industrial footprint, based on market trends and controlled closures:

− From 2002 to 2009, we have closed 8 incandescent operations, 2 fluorescent tube operations and 3 other lamps operations(2)

− In 2010 YTD we closed another 2 incandescent operations and 2 fluorescent tube operations(2)

• Our remaining production facilities for conventional technologies are selected based on key control points (e.g. glass on site), cost leadership (e.g. scale, low wage) and proximity of markets

• We will retain flexibility to facilitate market share gains

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Notes: 1) Indicates the number of geographical industrial locations at the end of the year2) Please note that 1 industrial location may include several technology production operations

We have theWe have the strengths and strategy to win in LED light sourcesLED light sources

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We have the strengths and strategy to win in LEDWe have the strengths and strategy to win in LED light sourcesO b ildi bl k O i iti

Lumileds adding value in our LED value chain

Our building blocks

Lumileds

Our unique position

Lumileds adding value in our LED value chain

B ildi t iti i li hti

Lumileds

LED l Building on our strong position in lightingLED lamps

Leveraging our control pointsTLED

Using our applications knowledge and scaleLED systems

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Lumileds adding value in our LED value chainLumileds adding value in our LED value chain

Leader in LED technology

Our strengths

• Superior lighting quality through Lumiramicstechnology

Achievements

Expanding in

• Designed into majority of our current LED Lamps portfolio

• Growing customer base in indoor and outdoor p gillumination segments

gillumination using LUXEON Rebel as the Power LED solution

• Strong increase in illumination revenue and design-in wins

Operational excellence

g

• Aggressive cost down through technology and process improvements

• Ability to comply with strict industry standards

Strong distribution partnership

y p y y(e.g. automotive)

• Exclusive relationship with Future Lighting Solutions a leading provider of LED lighting

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partnership Solutions a leading provider of LED lighting components and support services

Building on our strong position in lighting to win inBuilding on our strong position in lighting to win in LED lampsOur strengths Achievements

Using distribution power Teaming up with leading distributors around the world g pand brand leadership

B d LED f li

g p glike Sonepar, Rexel and Grainger to jointly drive market development

M h i D E d d i hBroad LED portfolio to cater the varied needs of our customers

More than twice as many DoE approved products with Lighting Facts certificate than runner up.

Leading the innovation in LED lamps

Being first and still only submitter of DoE L-Prize contest. Sept 2010: launch of 1st 60W incandescent equivalent in Europe and NA

Strong value chain partnerships

Establishing global assembly blue-print with leading contract manufacturers such as Elcoteq to address market needs of all regions

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market needs of all regions

Leveraging our control points to win in TLEDLeveraging our control points to win in TLED

Our strengths Achievements

Strong foothold in TL • Significant wins with leading retailers in applications world wide (‘beacon of trust’)

Strong IP positions

Indonesia and Singapore e.g. HERO Giant hypermarket Indonesia

• Industry leading patent portfolio in TLED technology g p

Structural cost advantages in TLED

y g p p gy

• Comprehensive heritage of all aspects of TL production including world (cost-volume) leadership

Aggressive costs down

p g ( ) pin glass tube manufacturing and superior glass and phosphor processing expertise

• First general lighting products in the market inAggressive costs down • First general lighting products in the market in applications with attractive TCO

• 2 year pay-back projected for high volume applications in 2012 - 2013

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Using our applications knowledge and scale to win inUsing our applications knowledge and scale to win in LED systems

Our strengths Achievements

Leveraging our Brand • In Europe 124 OEMs have designed in ourLeveraging our Brand and distribution strength in OEM channel

In Europe, 124 OEMs have designed in our Fortimo modules. North America and Asia are following suit

Platform approach to drive scale and cost down

• Fortimo family based on LED platform with Fortimo Twist as low cost derivative

Leveraging our deep application knowledge to serve our customers

• Developed roadmaps and launched LED systems specific for Office, Outdoor and Retail segmentserve our customers

Leading the industry in standard setting

Retail segment.

• Founding member of Zhaga consortium that aims to standardize module interfaces The consortium

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standard setting initiatives

to standardize module interfaces. The consortium selected Philips’ Fortimo Twist as the first platform to standardize.

Winning in consumer and professional marketsWinning in consumer and professional markets

Consumer markets Professional markets

• We are launching a new • Major retailers like Tesco and• We are launching a new, differentiated LED lamps portfolio in the consumer channel in Europe

• Major retailers like Tesco and Ahold are converting freezers over to Philips Freezer Lights

• Philips is number 1 player with LED Lamps in hospitality

• We are increasing our Advertising and Promotion efforts to accelerate the LED Lamps in hospitality

segment. Key hotel brands with Philips LED Lamps installed: Hilton, Ibis, Novotel, Marriott, Sheraton, Crown Plaza

consumer market development.

• We are leveraging our multi-channel retail distribution Sheraton, Crown Plazachannel retail distribution across the world. • Philips will supply all of the LED

drivers in Los Angeles LED street lighting project.

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Key takeawaysKey takeaways

The coming 5 years will bring• The coming 5 years will bring significant opportunities

• We are uniquely positioned to capture the value in conventional li htlight sources

• We have the strengths and strategy g gyto win in LED light sources

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