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Winning in China

Patrick Kung Member Executive Committee Royal Philips and CEO Philips Greater China

Morgan Stanley China Industrials Summit, Beijing, PR China June 18th, 2014

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Key takeaways Winning in China

China is a large and important market for Philips

2nd largest market of Philips globally

China has been a ‘global home’ for Philips since 2010

Over 17,500 employees

Operations in over 600 cities

Strong local innovation competence

Philips Research lab in Shanghai is the second largest globally (over 2,000 R&D staff)

Annual R&D investment of over EUR 110 million

Marketing innovations with award winning Air and Beauty apps

Philips has a strong brand position in China

#2 in China Brand Equity ranking1

2014 is the fourth consecutive year that Philips won the “Super Brand” award in China2

1 In Philips relevant competition pool (source: Heartbeat 2013) 2 Source: Superbrands China Benchmarking Report 2014

3 1 Energy Management Contract

We strive for operational excellence

Continue to drive operational excellence with LEAN and our End2End (E2E) and Business/Market Combination (BMC) approaches

Philips continues to invest in China

Chengdu LED Lighting Factory in Chengdu

Lighting Application Center in Chengdu

Energy service company in Wuhan to develop EMC1 business

Imaging Products Creation Center in Shenyang

Strategic Partnerships

Signed MOU with Alibaba on May 29, 2014 to cooperate on cloud computing and big data

Established connected road lighting JV with the China Electronics Corporation (CEC) group in 2013

Key takeaways Winning in China

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• Air and Domestic Appliances • Professional Lighting Systems and Services for indoor and outdoor • Integrated Healthcare services and solutions

• Energy efficient Lighting Solutions

• Mother and Childcare, Oral Healthcare • Advanced eye-care desk light • Preventive, therapeutic and monitoring Healthcare products

• Connected Air (award winning Philips Air app), iGroom (Male Grooming)

• Connected lighting • Clinical informatics solutions

• Personal Health Solutions • Healthcare Value Segment to address rising healthcare costs

Greater China will remain a major value creator for Philips Our business domains play well into Chinese mega trends

Urbanization

Aging population

Concern for health & wellbeing

Digitalization

Environment

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• Relentless focus on building innovative, locally relevant and customer-centric offerings

• Build digital capabilities that drive unique cross-sector and sector-specific areas of competitive advantage

• Developed a deep pool of local talent with global capabilities and relentless winning spirit

• Execute innovation programs more closely linked to local businesses, ensuring long-term competitive positioning as a technology leader

• Expand commercial and industrial footprint to lower tier cities

• Leveraging on our strong, award winning brand

Greater China will remain a major value creator for Philips We are enabled by strong capabilities

Deep Customer Insights

Technology & Business

Innovation

Geographic Footprint

The Philips Brand

Our People

Our capabilities

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Local R&D Key Research Areas in China

Healthcare

Ultrasound and MRI

Chronic disease management

Clinical informatics and analytics

Community and home care propositions

Sleep and respiratory solutions

Advanced clinical research

Lifestyle

Asian cuisine: nutrition extraction and sensory quality management

Skin Care and Male Grooming for China market Air Purification and Personal Care

Lighting

LED applications and standardization in consumer and professional lighting

Intelligent lighting solutions for indoor and outdoor, tailored for Chinese needs

Light Sources and Electronics

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We have strong market leadership in China

Continued rise of the middle class in China will drive growth for our categories

Accelerate retail coverage into lower tier cities

Invest and drive online sales and e-marketing

Winning with our End2End approach

Category market leadership

• Shaver • Hair Care • Oral Healthcare • Air • Garment Care • Floor Care

Consumer Lifestyle Improving people’s lives through meaningful innovation

Businesses

Personal Care Health & Wellness Domestic Appliances

• Leading in 6 categories

• Upper-middle-class will grow from 44 million in 2012 to 200 million by 2020

• Expected 170 million new migrants from rural areas by 2020 • We cover over 90% of cities in China

• Opened 3,100 new counters in past 3 years (over 8,000 counters in

total) and doubling the coverage in lower tier cities

• Online sales grew 4X since 2011

• Doubled Air Purifiers growth in 2013

• Launched 8 dedicated Male Grooming entry level products, shortened

time to market by 60% with lower costs

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Lighting Improving people’s lives through meaningful innovation

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Market leader in China

• No. 1 position in China lighting market, both conventional and LED

• Outright leadership in all B2B and B2C measured categories 3

• Leading transformation towards LED solutions and services

• Covering almost 1,600 cities with 30,000 outlets

2 Source: Global Intelligence Alliance, 2012-2013 competitor tracking report 2 China Electronics Corporation 2 Source: Heartbeat 2013

Businesses

Professional Lighting

Solutions

Automotive Light Sources &

Electronics

Consumer Luminaires

Lumileds

Significant growth opportunities for lighting in China

Winning in Professional Lighting Systems and Services

Winning in Consumer Luminaires

Accelerating growth in LED Lamps, Modules and

Drivers

• #1 in conventional and LED lighting1

• 2X the size of nearest competitors (both local and international), and significantly outgrowing them

• Strong LED growth in outdoor (55% of Philips sales) and locally relevant

propositions in indoor (33% of Philips sales) • JV with CEC2 group on connected road lighting

• Dedicated local portfolio like Chinese ‘Memories’ range

• Retail footprint of 500+ branded stores and 2,400+ shop-in-shops

• LED Lamps grew 4X since 2011

• LED Modules and Drivers grew more than 3X since 2011

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Top 3 brands in China

Ultrasound

Patient Monitoring Solutions

Cardiovascular X-ray

Digital Radiography

AED

Oncology Simulation and Planning

Outright leadership in 8 out of total 11

measured categories 1

Healthcare Improving people’s lives through meaningful innovation

1 Source: Heartbeat 2013

Businesses

Imaging

Systems

Home

Healthcare

Solutions

Customer

Services

45%

Patient Care

& Clinical

Informatics

Accelerate locally relevant innovation leveraging global platform and China spearhead

Build differentiated Value Segment model

Become the “go-to” partner for integrated services/solutions

Expansion into Clinical Informatics

Philips Healthcare China Academy

• Established Suzhou Healthcare Campus in 2009 which has introduced 10 new products since its inception

• Unique position leveraging our brand with the go-to-market model of a

local player (Goldway)

• Providing solutions through the continuum of care from preventive,

therapeutic, diagnosis, treatment and monitoring to chronic care

• Provide data driven services to improve access to and quality of care

through clinical informatics solutions

• Providing value added training to our customers

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Financing Solutions

Products

Clinical Informatics

Customer Service

Training & Education

Healthcare Value Segment Established a dedicated “Business - Market Combination” team to develop the winning strategy in China

Introduced 0% financing solutions for primary care providers

Over 10 new products introduced by Suzhou Campus

RHIN1 platform to county level hospitals

Optimizing customer service network and customer care program

Education program to healthcare practitioners in rural areas

Key distinctive differentiation

• Localized and cost-efficient Customer Services model to service key accounts in value segment

• Dedicated and cost-efficient go-to-market model built on Goldway platform

• Speedy, locally-relevant products

1 Regional Healthcare Informatics Network

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Environment

• Donating energy saving lamps for 264 rural schools in Yunnan, Gansu, Guizhou, Henan, Shanxi and Shandong

• Co-developed solar energy-powered LED street lighting project with Climate Group and Guiyang Municipality, which was awarded by UNFCCC as top 10 global models for Public-Private-Partnership

Healthcare

• Trained over 4,000 township doctors for women breast and cervical cancer screening program in rural areas

• Donations benefitting 1,500 children from families with severe financial difficulties

Education

• 17 Philips Hope Schools

• 264 Philips Goodwill Classrooms

• “One Small Step to Happiness” - nutrient breakfast program was carried out in rural primary schools in Yunnan, which helped 800 students who faced hunger and malnutrition

Commitment to Sustainability and CSR Focus on healthcare, environment and education

Sustainability

• Philips was honored as “Ambassador for Poverty Alleviation” by the China Foundation for Poverty Alleviation in 2014

• Philips was honored the 2014 AmCham Corporate Social Responsibility Innovation Award

• Philips was ranked 23rd among the Top 50 Best Global Green Brands by Interbrand in 2013, moving up 8 places from last year

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We are well positioned in all 3 Sectors to maintain sustainable growth in China

• Leading brand with key category leaderships

• Local innovation capability in R&D and marketing

• Strong End2End value chain locally

• Continued distribution/service network and online expansion

• Strategic partnerships with Alibaba and CEC

• Commitment to Sustainability and CSR

Key takeaways Philips in China

Will get photos with better resolution

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