Q&A Spotlight with Bruce Berkoff, Chief Marketing Officer & Executive Vice President of Marketing, LG.Philips LCD

1. How does the LCD business look for the next sixth months?
By Christmas 2005 we believe some major brand name 32-inch LCD TVs should hit the sweet spot price of $1499, with so-called “no-name” brands priced even lower— positioning LCD TVs as truly mass market products. Widespread consumer acceptance of LCD TV, however, will be driven not only by attractive pricing, but also the increasing availability of high definition (HD) broadcast TV and the upcoming launch of full HD optical disks (like HD-DVDs) and full HD capable gaming platforms—a trend that we see gaining further strength by early next year. This emerging HD content will essentially make the high resolution offered by widescreen LCD TVs, all of which offer at least HD resolution (1366x768 or one megapixel) and some of which already offer full HD resolution (1920x1080 or two megapixels), a requirement rather than a luxury. To meet this growing market demand, LG.Philips LCD’s Gen. 6 TFT-LCD fab, “P6”, came online last year making 32- and 37-inch panels, and our Gen. 7 fab, “P7”, will come online in the first half of 2006 producing 42- and 47-inch panels—these advanced facilities provide better economies of scale to deliver higher volumes of large and wide full HDTV panels at attractive price points.

2. Why are size standards for TV sets / panels so important?
Size standards mean that there is less confusion among consumers, and that manufacturers are able to realize cost savings that translate into more attractive retail prices. In fact, every company in Taiwan that has announced a Gen. 6 or Gen. 7 factory has announced the exact same substrate size as LG.Philips LCD. This is important because these companies can then use the same size equipment, which saves money, and these cost savings can be passed on to the consumer. Thus, LG.Philips LCD has helped set the industry standard flat panel TV sizes of 26-, 32-, 37-, 42- and 47-inches, which most major players have followed both in terms of their product mix and factory substrate sizes.

3. What do you see as the trends and spending patterns over the holiday season?
We certainly think that the trend is for LCD TV set prices to continue reaching sweet spot prices (such as $1499, $1999, and $2499). In fact, LG.Philips LCD’s world’s largest Gen. 6 factory, “P6”, is enabling this trend in the jumbo-sized 30-inch+ category. Thus, with such large growth in 32- and 37-inch panel volume over the past few quarters, we expect to see affordably priced 32- and 37-inch LCD TV sets under a lot of Christmas trees this year.

4. What do you think are some of the main misperceptions about LCD TVs?
Two of the main perceived weaknesses of LCD TVs are related to viewing angles and contrast ratios. However, LG.Philips LCD’s Super IPS technology has almost completely overcome the viewing angle problem that plagued other LCD TVs in the past, delivering a great image at almost any viewing angle, with little or no color shift. Regarding contrast ratios, this is actually one of the most discussed and least understood TV specifications, and a lot of this confusion arises from silly specmanship. While plasma display panel (PDP) companies often talk about 10,000:1 contrast ratios, these ratings are usually measured in dark laboratory conditions with a single spot of light on the screen. In actual usage conditions like a lighted living room and with any normal content displayed, PDP TVs generally achieve contrast ratio of only about 100:1 or so, and the picture can be difficult to see due to high screen reflectivity. Under the same conditions, LCD TVs that report contrast ratios of 500:1 or more retain a significantly higher actual ambient contrast ratio of at least 200:1—thus, LCD TVs have superior real-life brightness and contrast. Regardless, some companies often use misleading specs.

The bottom line is that consumers should judge flat panel TVs for themselves in real-life viewing conditions rather than blindly trusting spec sheets. We believe that when you personally compare flat panel TVs, especially with high definition content, higher resolution LCD TVs using LG.Philips LCD’s Super IPS technology will certainly stand out from the crowd.

5. What is LPL’s main focus over the next year?
As I mentioned earlier, in late 2005/early 2006 we see full HD content becoming more widespread, making full HD sets a market requirement. In addition to our full line-up of TFT-LCDs for notebook PCs, desktop monitors and other mobile and medical applications, we will continue to focus on the HDTV sector. LCD is uniquely suited to meet full HD flat TV requirements, as all of LG.Philips LCD’s wide format LCD panels for TV are at least HD resolution (1366 x 768 or one megapixel) and 37-, 42-, 47- and 55-inch panels are available at full HD resolution (1920 x 1080 or two megapixels). We feel this is a key differentiator in comparison to other flat panel solutions for TVs that face many technical challenges in achieving full HD resolution (you’ll notice, for example, that no PDP below 60-inches can yet come close to full HD resolution).

Looking head to 2006, LCD TVs should continue to expand in market share, not only based on the resolution advantage, and a full size range, but also the fact that they offer low power consumption, long lifetime, better real-life contrast ratio and brightness, and many aspects of superior image performance and design innovations.