joe harlan presentation

© 3M 2008. All Rights Reserved. 2008 3M Investor Conference

Electro & Communications Business

2008 3M Investor Conference

Joe Harlan – Executive Vice President

For Accelerating GrowthPositioned

2



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

Positioned for Accelerating Growth…

3


ECB Key Financial Data

$2.5$2.7 $2.8

$1.5

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

2005 2006 2007 1H '08

$413$464

$297

$533

$0

$100

$200

$300

$400

$500

$600

$700

2005 2006 2007 1H '08

Revenues Operating Income

V% 4 16.5%6 4 9 17.5% 19.3% 20.1%OI Margin

$ Billi

ons

$ Milli

ons

+12%+15%

+13%

+44%

LAC 9%

Europe 23%

APAC 39%

U.S. 29%

2007 Revenues by Geographic Area

YoY% Chg+5%

CAGR+14%CAGR

4


ECB Portfolio Footprint

23%

30% 22%

20%

5%

APAC39%

Europe23%

U.S.29%

LAC9%

Electronics

Infrastructure

Balanced Platform Portfolio…

…And Balanced Proportionately to Global Opportunities

CharacteristicsIntegrated materials science & processing technologiesParticipating in “hot” markets

Infrastructure build / upgradesElectronics market momentum

Go-to-market via OEM, channel pull / push & “Bench-to-Bench” selling (ODMs, CMs)

Strong positions in expanding / upgrading infrastructure (Europe, LAC, APAC)Asia driven by electronics…EE emergingServicing transnational customers globally

Opportunities Across Multiple Platforms and Geographies

5


Electrical Markets Division

Power Generation Transmission Distribution

Tape Connectors & TerminalsCold Shrink & Heat Shrink Splices & Terminations

Vinyl electrical tapes for insulating and sealingConnecting and terminating underground cablesEMI / RFI shielding and absorbing

Insulating tapes and papersSpecialty high voltage overhead cableResins and conductive tapes

Applications

Solutions

Key Capabilities

Flexible Insulation

6


C a m p u s C e n t r a l O f f i c e

C e n t r a l O f f i c e C u s t o m e r

P r e m i s e s

Communication Markets Division

Applications

Central Office Connectivity

Fiber Optic Closures

Copper Aerial Closure

Fiber Optic Splices

Copper Splicing Modules & Connectors

DSL Test Equipment

Copper and Fiber Optic Structured

Cabling

Copper & optical fiber cable…Connectivity - Splicing, terminating, and cross connecting of cable facilitiesManagement – Routing, labeling, identifying, and managing cable facilitiesProtection – Junction points in a network, facilities security, passive and active elements in a network

Copper media layer diagnostics – Identifying and locating faults in a media layer

Solutions

Key Capabilities

7


Electronic Solutions Division

Flexible fine-pitch interconnectHigh-performance electronic substrate materialsEmbedded capacitance

Component transport and testingStatic control and protection

Flex Circuits Backplane Solutions

Fiber Optic Solutions

Carrier & Cover Tape

Inkjet CartridgeHigh Speed

Cable Assemblies

Applications

Solutions

Key Capabilities

8


Electronics Markets Materials Division

Specialty fluids & gasesSintered & fixed abrasivesBattery materials

Plastic bonding & hot melt solutionsForm-in-place gasketsThermal management

Chemicals & Gases

Tapes & Bonding Films

Thermally Conductive

MaterialsSemiconductor Materials

Gaskets & Adhesives

Applications

Solutions

Key Capabilities

9


3M Touch Systems

Capacitive sensing technology expertiseBending wave technologyTouch electronics and softwareWorldwide customer & engineering support

Applications

Solutions

Key CapabilitiesGlass-based product manufacturingCoating and optics expertiseGaming & retail touch markets expertiseGlobal presence & brand recognition

Retail Industrial Gaming Food Service Transportation Financial

Capacitive – ClearTek II Sensors & EX II Electronics Dispersive Signal Technology (DST)Touch Monitors

10


$403 $287 $184

$705 $995 $1,132

$495$581

$843$579

$534

$603

2002 2004 2007

New Strategy Addressed Our ‘1-Trick’ Pony…FlexRevenues

Flex % of OI 87% 43% 11%

An Improved Business Footprint…

Flex Decline Dampens Business Performance…But Balanced Portfolio Management Overcomes the Impact

CMD

EMD

Electronics

Flex

% of Total

27

23

32

18

% of Total

22

24

42

12

% of Total

22

30

41

7

‘02 - ‘07 Change

+15 Pts.

+3 Pts.

+22 Pts.

(19) Pts.

($ Millions) (5%)

+7%

+9%

(11%)

Margin% of Total

11


$2.4

$2.2$2.2

$2.4

$2.5

$2.7

$2.8

2001 2002 2003 2004 2005 2006 2007

ECB Revenues

OI% 8% 11% 11% 12% 17% 18% 19%

ROIC 7% 11% 11% 13% 18% 18% 21%

Portfolio Management Yields a Stronger Financial Footprint…

+5% CAGR

(7%)

Ideally Situated to Pursue Growth Opportunities…“Offense vs. Defense” in Growth Markets

($ Billions)

Core growth 8% excluding

Flex

12


Infrastructure Markets

Energy Demand Drives Bright Electrical Core Outlook

Cap

ital E

xpen

ditu

res

T ime Frame: 15-30Years 10-15Years 10-15Years

Initial Build Phase Optimization Phase Replacement Phase

Building up reliable and costefficient electrical infrastructure

Optim izing the grids for powerquality and power-flow efficiency

Developing in a new competitiveenvironment

Sources: UBS Investm ent Research, T&D and Internal Market Research

Cap

ital E

xpen

ditu

res

T ime Frame: 15-30Years 10-15Years 10-15Years






Time Frame: 15-30Years 10-15Years 10-15Years






Aging infrastructure in developed countries & new infrastructure in developing countries driving massive global investmentTransmission & distribution spend expected to grow at 13% CAGR through 2010

Dynamics

Electrical Markets in the “Sweet Spot”…

Source: Siemens 2006, Boston Consulting Group

13


Infrastructure Markets

Telecom “Hangover” has Passed…Spending Normalized

Telecom Customer & Broadband Investments

$31B

$63B

$29B

$24B$13B

Worldwide broadband subscribers will double by 2012 to 500 million driving investmentsConsolidation continues…but cyclical spending is still a challenge

Dynamics

Telecom Markets Steady…

14


Segment Est. 2008 Size($ Billions)

Est. CAGR('06 - '11)

Business $37 6%Communication 439 11%Consumer 206 10%Auto 131 12%Computer 542 12%Gov't / Military 173 6%Industrial 170 8%Instrument 116 8%

TOTAL $1,814 10%

Electronics Markets…Perpetual Growth

Electronics is a $1.8 Trillion Market Growing at 1.5-2X GDP…No Longer Dominated by Computer

Business

Consumer

AutoComputer

Gov't / Military

Industrial

Instrument

Communication

Source: Electronic Outlook Corp., Electronics Industry Outlook Q4 2007

15


ECB Has Improved Business & Financial Footprint…

International human capital investmentsLeadership localizationTechnology driven growth…back to “3M DNA”

Supply chain shift…Closer to the customerProductivity: Lean Six Sigma, supplier management, indirect costs, cycle time reductionManiacal focus on service and channel partner intimacy

Market focused / Customer centric go-to-market structureSuccessful NPI program based on VOC and technical differentiationAggressive geographic expansionSelective acquisitions

Simple Approach has Yielded Good Results…Full Speed Ahead

…Driven by a Simple Strategy

Growth(Customers)

Competitiveness(Shareholders)

EngagedEmployees

(Energized)

16


Incorporating “Classic 3M Technology” into VOC Based Customized Technology Differentiated Solutions…

Running with the Winners

ECB Market-Focused / Customer-Centric ApproachEMMD Focused on Key Electronic Segments / Customers…

$367$452

$501$556

$625

2004 2005 2006 2007 2008E

Semi-conductor HDD MHH Display Printer

Mar

ket

Segm

ent

Cus

tom

erEx

ampl

es TSMCIntelIBMFreescale

SeagateWestern DigitalHitachi

NokiaMotorolaAppleSamsung

LGPhilipsSamsungSharp

HPLexmarkCanonBrother

+14%CAGR

Revenue…Yielding Growth at 2x Market Rates…

$ Milli

ons

17


$206$255

$336

$457 $491

$656

$800

2002 2003 2004 2005 2006 2007 2008E

3M Technical Expertise Providing Differentiated Products / Solutions to Customers

Accelerating ‘VOC’ Based New Product GrowthRe-Engineered the NPI Effort…

% of Sales 9% 12% 14% 18% 18% 24% 30+%

+$ M

illion

s

Prioritizing on high probability VOC projectsCapitalizing on international human capital investment (Tech)

+25%CAGR

5-Year New Product Sales*

*Sales of products released within past 5 years.

18


117 130

120181

216

191

2006 2007 2008E

$ M

illio

ns

2nd Year1st Year

$237

$311

Shifting Activities Closer to Customers:- Local ‘Centers of Excellence’

- Platform Specific Technology Roadmaps

5-Year 2-Year

’07 ’08 Chg. ‘08

U.S. 64 47 39

Asia 22 31 37

Europe 11 18 21

LA/C 3 4 3

NPI % Origin$407

Ensuring the Sustainability…Focusing on 2-Year New Product Sales*…

Lab Headcount:U.S. 44% 38% 32% Int’l 56% 62% 68%

Int’l Revenue 70% 71% 74%

*Sales of products released within past 2 years.

19


Austin, TX

Germany

China

Taiwan

FranceTilton, NH

Singapore

St. Paul, MN Korea

Brazil

St. PaulComposite ConductorElectronic Adhesives

FC FluidsBattery Mtls.

AustinMV Cable AccessoriesElec. Tapes/Supplies

Copper & Fiber ConnectorsTest & Measure Instrumentation

ClosuresSpecialty Circuits

Static Control BrazilRubber Tapes

PVC Tapes

NeussHigh Speed Interconnect

Regional Applications Dev.Indoor Copper Connectors

Security SystemsResins

MV Splices

ClusesCross-connect blocks

Gels & GreasesClosures

ChinaElectronic PSA TapesComponent TransportLow-Cost I/O Intercon

High Voltage Acc.Passive Cabinets

KoreaEMI/EMC Tapes

Battery Matls.OCAs

JapanSemicon FinishingMHH InterconnectConsumer CircuitsFiber Connectors

Textool

TaiwanSemicon pkgOEM TapesE-CabinetsSingapore

Consumer CircuitsSC Liquid AdhesivesElectronic Adhesives

CMP Abrasives

India

PolandRussia

RussiaTech Service

PolandTech Service

IndiaHeat Shrink

MV Acc.FTTH

TiltonPaper

Insulation

Investmentsin 2008

Global Centers of Excellence

Technology & Development Expertise Close-to-the-Customer…SPEED to Drive Growth

20


Market (Customer) PrioritiesMarket (Customer) PrioritiesRegulations broadening from 0-1GHz to 0-3GHz. Miniaturization causing greater EMI issues Driving need for multi functional component

2007 2008 2009 2010 2011Core

Pads

and

Foa

ms

Sing

le C

oat a

nd

Adh

esiv

e Tr

ansf

er

EMD Foil & Fabric Tapes

EMD Sheets & Films

EMD Mesh & Sleeving

EMD Gaskets & Cushions

NTF EMC New Foam

EMI New Foam Gasket

EMI Metal Particle

EMI Metal Oxide Particle

EMC Hybrid

EMD Anti-Static Tape

EMD High Temp Tape

Transparent EMI TapeEMC Absorbing Tape

Conductive Foam Tape

EMI Label

300PL Foil Shield

Z-Axis Acrylic, Epoxy

XYZ-Axis Acrylic, SiParticle based XYZ-Axis

Tape

EMC Adhesive

EMI Absorbers

EMC Conformal & In-Mold Solutions

EMI/EMC Engineered Flex Circuits

Acid Free AdhesiveHigh Pitch

Structural EMC Adhesive

Cap Shield

AB5000RFID Absorber

Conductive Cushion

Compressible Adhesive

Thin Adhesive

Film Impedance Material Low Frequency

Absorber

High Frequency Absorber

Hybrid Absorber

Liquid EMC Material

Advanced EMC

Hybrid Adhesive Multi-layer Adhesive

Basic Material Property Testing

Advanced Modeling & Computation

Engineered Design Capability

2 mil XYZ-Axis Tape

Test

&

Mea

sure

Tech

nolo

gy

Gap

s

Metallurgy Expertise Galvanic Series Materials

ExpertiseCorrosion Electrochemistry

Expertise

Transparent EC Polymers

Advanced Product & PerformanceTest Capability

Precision Pattern Coating

Precision Particle Alignment

Complex Converting Capability

Multilayer Manufacturing

EMI Functional Nano Layers

ExistingExistingInIn--DevelopmentDevelopmentNeed/GapNeed/Gap

LegendLegend

Post Launch/Core NPI/Development

Idea HopperConcepts

LegendLegend

Technology Roadmaps – EMC…

Focused roadmaps for each product family…

Clearly maps out technologies in-house, being developed, and what we need to go get

21


0

20

40

60

80

100

120

'02 '03 '04 '05 '06 '07 '08E

$ M

illio

ns

International growth plus competitiveness

Establishing regional sources of supply

Rationalized / sold 7 facilities

‘Lean’ mentality everywhere

International Expansion…Our Biggest Opportunity

Building global technical expertise

Strong local leadership development

75% of electronics business moved to Asia

NPI no longer dependent on US

0

100

200

300

400

500

600

700

800

'06 '07 '08E

90% of Additions Int’l

(Cumulative)

Provides Local Customer Intimacy, Source of Supply, and Speed to Market

2/3 of $ CapEx Int’l OUSUS

$34

$102$93

$76

$46

$63

$43

Capex Human Capital

+300

+415

+725

Shifting Assets Closer to the Customer…

Hea

dcou

nt

22


LA/CANEurope / MEAAPAC

International Growth

Key Subs CAGRChina 15%India 59%Taiwan 8%Korea 7%Singapore * 5%Japan * 6%

Key Subs CAGRCEE 17%Middle East 36%Germany 3%France 4%Spain 12%UK / Ireland * 5%

Key Subs CAGRCanada 14%Brazil 22%Columbia 17% Venezuela 30%Chile 13%Mexico 2%

Investing in Higher Growth Regions…Close to the Customer

’05 ’06 ’07 ’08E

APAC Sales+9% CAGR*

Europe Sales+8% CAGR*

L.A. / Canada Sales +28% CAGR*

Recent Investments Gaining Traction…Growth Continues as Organizational Competencies Develop

*Excludes Flex Sales

’05 ’06 ’07 ’08E ’05 ’06 ’07 ’08E

23


…Geographic ExpansionMahindra & Mahindra $ 8Giglio $25

Expanding Electronics Footprint… ’08E Rev.

Static Control (Sanford / Santa Cruz) $35Medical Flex (Siemens) $20

…Adjacent Markets…Innovative Paper Technology $30

Watching Environment Closely…in Parallel with ECB Growth Strategy

Opportunistic M&A

24


60%

57%56%

55%

'04 '05 '06 '07

Productivity Critical to Maintain ECB Competitiveness

$144$147 $147

$155

'04 '05 '06 '07

$44 $42

$36$39

'04 '05 '06 '07

13%

18% 18%

21%

'04 '05 '06 '07

Lean Six Sigma Benefits… …Supplier Management Savings…

…And High ROIC%…Drives Lower Factory Costs…

ECB Performance Improvement – 2004 to 2007

% to Rev. 6% 6% 6% 6% % of Buy 6% 6% 5% 5%

1 Point is Worth ~ $26 Million

25


ECB Service Initiative Correlates to Growth

Service Benefits Growth, Cost, and Cash

81 80 8182 83

80

97

95

90

85

1% 0%

-8%

1%

4%

12%

10%

11%

1%1%

75

80

85

90

95

100

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08E-10%

-5%

0%

5%

10%

15%

OTIF LC Rev. Growth %

LC R

ev. Grow

th %O

TIF

%

Analysis indicates 1/3rd of growth attributable to OTIF improvementService now a 3M differentiator

Share Gains Continue in 2008…Customers Cust. Growth 3M Growth DifferenceCommercial 5% 19% +14 Pts.Utility 2 21 19OEM 8 50 42Acq. (IPT) 0 28 28Core OEM (2) 2 4

Electrical Markets Example…

’99 – ’04 ’05 – ‘08Rev. CAGR 0% 12%OTIF 81% 95%

26


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

A Healthier Platform Provides Opportunities

Key Components in a Robust Product Line

27


Unique technology enabling 2x transmission with 50% sag vs. traditional cableValue add applications

Constrained transmission corridorsAging infrastructureLower installation costsLong river / gorge crossing

$1B addressable market today with 6% CAGR

Emerging Market Demand for Power Transmission…

…3M Uniquely Positioned as Scale-up Increases

2004 2005 2006 2007 2008E2004 2005 2006 2007 2008E

Production Scale-up & Cost Productivity will Drive Market Leadership in Transmission Cable

Revenues$ Mfg Cost / Foot

High Capacity Conductors

$ Milli

ons(38%)

(36%)(22%) (21%)

+167%

+50%+17%

+43%

28


ECB accelerated organic development for core fiber and connectivity platforms in 2004

$2.3B market with 20% CAGRExpanding geographic and product footprint

Full functioning Euro & APAC labsTransitioning from supplier to consultant

Fiber Solutions…An Emerging Platform

$200

$300

$400

$500

$600

2004 2005 2006 2007 2012E

Rev

($ M

illio

ns)

0%

5%

10%

15%

20%

Copper Sales Copper OI%

CMD Solid in Copper…Cash Cow… …With Growing Fiber Presence…

$0

$50

$100

$150

$200

2004 2005 2006 2007 2012E

Rev

($ M

illio

ns)

0%

5%

10%

15%

20%

25%

Fiber Sales Fiber OI%

Sales CAGR’04–’07 = 1%’08–’12 = 5%

Sales CAGR’04–’07 = 19%’08–’12 = 20%

Organic Position Capitalizing on 3M NPI Expertise…Classic 3M DNA

29


Novec Fluids…Unique Technology in High Tech Apps

Fluorinated fluids for semiconductor manufacturing, electronics processing, and fire suppression

Safe, sustainable, responsible chemistryHalon replacement technologyBest EHS position vs. competitors

Growing 20+% in $1B, 3% CAGR market

New Applications in Wafer Cleaning & High Boilers…Plus Geographic Share Gains (APAC) Drives Growth

2006 2007 2008E

Revenue

+14%

+13%

30


Optically Clear Adhesive (OCA)Provides optical bonding for consumer electronic products in touch and key pad applicationsEnables OEMs / ODMs design flexibility for thinner, more attractive devices with improved contrast / brightnessProvides cost savings in processing due to fewer layers in display stack$350M market with 20% CAGR

2006 2007 2008E

Revenue

New Applications with Opportunity for Larger Format Applications

+21%+850%

31


Electrolyte

Lithium Ion Battery MaterialsGrowing rapidly with expansion of multiple 3M products and technology platforms

Fluorinated electrolytesNMC Cathode powdersSilicon alloy anodesMicro porous films

Strong IP positions provides licensing on manufacturing options

2006 2007 2008E

Revenue

Continued Development of Specialty Formulations & Additives in $3.8B Market

+44%

+50%

32


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

2006 2007 2008E

Revenue

Growing Opportunity Across Multiple Divisions

Electromagnetic Compatible (EMC) Materials

+13%+89%

33


Packaging media for surface mount technologies

High quality / High performance market position

Enhancing portfolio to capture mid-tier performance market

2006 2007 2008E

Revenue

$300M Market Growing at 6% CAGR

Transport Tape / Universal Cover Tape

+6%(3%)

34


Splicing Terminating Grounding

Securing & Labeling Marking & LocatingTaping

713 4

2

85 9

Just the Beginning…$12M 2008E Revenue in a Market Growing at 20%

Wind FarmsTailor 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

Technical training expertise

Value-add custom kits

35


Objective is to become the preferred global solar solutions provider

Integrated with “Big 3M” solar effort

‘Bench-to-Bench’ technical support for improved module efficiency through integrated materials technology

On-grid utility and installation support

Offering customized solutions in a dynamic environment

Ingot, Wafer & Cell

ManufactureModule / Panel Manufacture

System Installation &

Operation

• Wafer Process Aides

• Wafer / Cell Transport

• Anti-static Solutions

• Conductive & Insulation Tapes

• Environmentally Protective Resins

• Electrical Connectors

• Light Concentration

• Optically Clear Adhesives

• Thermal Management

• Interconnect solutions

• Splices

• Terminations

• Wire Management Solutions

Solar

$600M Market Growing at 30%...Massive Opportunity for 3M

36


MiningOpportunity 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

37


Stronger business footprint yields stronger financial results…Core revenues forecast at 5-8% CAGRSince 2004…Factory cost down 5%, OI up 7%, and ROIC +12%

Growth initiatives materializing nicelyNew products at 30+% of revenues…strong pipelineGeographic asset shift yielding top line and productivity (RSS)Legacy assets pruned…replacing with selective acquisitions

Operational excellence embedded in ECB cultureContinued 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

Electro and Communications BusinessPositioned for Accelerating Growth…



2008 3M Investor Conference

For Accelerating GrowthPositioned

joe harlan presentation

Economy & Finance