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MÄKIMATTILA SIMODR., LEADING EXPERT, RESEARCH, ELEVATORS AND ESCALATORS

OHUTLEVYPÄIVÄT 201812-13 APRIL 2018, JYVÄSKYLÄ

SUCCESS STORIES IN SHEET METAL INDUSTRY – Case Elevator Escalator

Presentation on Corporate R&D as a Success Factor

CONTENTSWho we areMegatrends impacting our industryOur mission, vision and strategyOur solutionsHelping cities growR&D as a Success FactorMaterials technologyConclusions

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More than 100 years in business

KONE today

KONE is a global leader in the elevator and

escalator industry. We are here to make cities

better places to live

We provide value for our customers at every step

of the way for the entire lifespan of a building

We offer innovative and sustainable new

equipment solutions, ensure the safety and

availability of equipment in operation and offer

modernization solutions for aging equipment

Founded in Finland in 1910

Over 55,000 employees

Over 450,000 customers

Net sales EUR 8.9 billion in 2017

Listed on the NASDAQ Helsinki since 1967

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OUR BUSINESSES

New Equipment

State of the art solutions for

all types of buildings.

Our versatile product

portfolio features a wide

range of innovative

products including

elevators, escalators,

autowalks, automatic doors,

monitoring, access and

destination control systems.

OUR BUSINESSES

Maintenance

Maintenance and monitoring

solutions that maximize safety and

reliability while minimizing

downtime and costs.

Including smart preventive

services, expert advice and rapid

response.

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OUR BUSINESSES

Modernization

We give customers full control over

the upgrade of their equipment.

Our modernization services help

customers determine when and

how to upgrade equipment to

ensure a lifetime of optimal

operation and to maximize

customers’ return on investment.

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KONE has a broad global coverage: we have our own operations in more than 60 countries

Coal Valley

Hyvinkää

Essen

Kunshan

Allen

Chennai

Torreón

Helsinki

Cadrezzate

Pero

Ùsti nad Labem

Nanxun (GiantKONE)

Global R&D site

Production site

Head office

KONE collaborates withdistributors in over 80 countries

KONE is present

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A typical working day for KONE

~ 450 unitsdeliveredevery day

Over 1.2 millionunits in service

400-500orders booked

~ 70,000maintenance

visits~ 450,000customers

served

Operationsin over

60 countries

~10,000packages through

our distributioncenters

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ELEVATORS AND ESCALATORS IN OPERATION, UNITS PER REGION

Global elevator and escalator markets (2016)

Elevators and escalators in operation(over 14 million units)

8%

9%

7%

4%

31%

42%

EMEA

China

Japan andSouth Korea

Rest ofAsia Pacific

South America

North America

Based on KONE’s estimate. Figures have been rounded.

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NEW ELEVATOR AND ESCALATOR INSTALLATIONS, UNITS PER REGION

Global elevator and escalator markets (2016)

New elevator and escalator market 825,000 units

3%

4%

8%

3%

62%

20%

EMEA

China

Japan andSouth Korea

Rest ofAsia Pacific

South America

North America

Based on KONE’s estimate. Figures have been rounded.

Sales by business, 2017, % (2016) Sales by market, 2017, % (2016)

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Sales distribution 2017

32%(31%)

14%(14%)

53%(55%)

Maintenance Modernization New equipment

(2015 figures in brackets) EMEA = Europe, Middle East, Africa

41%(40%)

20%(19%)

39%(41%)

EMEA Americas Asia-Pacific

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January 25, 2018 Internal results presentation 2017 | © KONE Corporation13

KONE key financials 2017

1–12/2017 1–12/2016 ChangeComparable

change

Orders received MEUR 7,554.0 7,621.0 -0.9% 1.7%

Order book MEUR 8,240.2 8,591.9 -4.1% 3.1%

Sales MEUR 8,942.4 8,784.3 1.8% 4.2%

Operating income (EBIT) MEUR 1,217.1 1,293.3 -5.9%

Operating income margin (EBIT %) % 13.6 14.7

Cash flow from operations(before financing items and taxes)

MEUR 1,263.3 1,509.5

Megatrends impacting our industry

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Two megatrends impact our business environment

URBANIZATION, AGING

Continuing urbanization drives long term

growth potential for new equipment,

maintenance and modernization.

TECHNOLOGICAL DISRUPTION

MOBILITY

New technology gives us a great opportunity

to learn new ways of working and serve our

customers and users in smarter and more

exciting ways.

Maybe other pic?

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Needs for sustainable and smart urban living

Affordable,

accessible

vertical

housing

Safe,

reliable,

efficient

infrastructure

Improving

living

standards and

convenience

Eco-

efficiency and

sustainability

Growing

building

intelligence

Well being

and

happiness

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WE ADDRESS THESE NEEDS TO CREATE MORE VALUE

Technological disruptionNew technology gives us a great opportunity

to learn new ways of working and serve our

customers and users in smarter and more

exciting ways.

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Technological disruption has permanently upgraded customers’ and users’ expectations

Customers and users are more aware and have more power than ever before

Increasingly, the experienceis the product

The best driver for growth is a happy customer advocating on our behalf

Anywhere,anytime

Open andtransparent

Responsive,Proactive and

predictive

Everythingand everyoneis connected

An industryleader

Our equipment moves over

1 billion users each day, with over

1.2 million elevators and

escalators in our service base.

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Leisure, education, special buildings

Public transportation and airports

Marine

Smooth people flow for all buildings

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OfficeResidential Retail

Hotel Medical

Residential Office Retail Hotel Special buildings

Medical Public transportation and airports

KONE solutions for different buildings

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Autowalks

Escalators

Bed elevators

Helipad elev.

Scenic elevators

Car park elevators

Glass shaft elev.

Passenger elevators

Goods and freight elevators

Fire elevators

Construction time elevators

Access, monitoring and destination control solutions

Building doors

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KONE solutions

R&D as a success factor

An innovationleader

Cooperation with customers,key partners, leading universities and research facilities

New technologies offer great opportunities to innovate more personalized and connected services, with real-time transparency

We prove customers and users with ease, effectiveness and new experiences

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KONE solutions

R&D has been one of the main success factors

1970 – Acquisitions1990 - Harmonization of Codes , EU1990 -Globalization1996 – Technology: MonoSpace , MiniSpace2000 - Localization, China2000 - Eco-efficiency2000 - Megacities2010 - Mobility2010 – Smart Cities2015 - Urban flow

30- year retrospective

KONE modernization solutions

Ranging from small upgrades to the full replacement of

elevators, escalators and doors

Improving equipment’s safety, accessibility, performance,

aesthetic appeal and eco-efficiency

Increasing the eco-efficiency of an elevator by up to 70%

KONE Care for Life™ is a unique service that analyses the

condition of equipment in order to plan modernization

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KONE maintenance solutions

KONE has over 1,200,000 elevators and escalators in its

maintenance base

Flexible maintenance services for elevators,

escalators and doors

Modular Based Maintenance for uninterrupted People Flow

in buildings

KONE Care™ service contracts, KONE remote monitoring

services and 24/7 Customer Care Centers

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KONE People Flow Intelligence solutions

Access solutions for improved People Flow and security with

integrated access, elevator and door solutions.

Optimized elevator performance with KONE Destination control

system.

Information displays and screens so facility managers and

service providers offer services to tenants and visitors.

Easy monitoring of elevator and escalator operations from

a single location through KONE E-Link™.

Remote configuration and management of equipment.

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Making our citiesmore sustainable

Cities occupy 2% of world’s land

mass, but account for 75% of

energy consumption and 80% of

manmade greenhouse gas

emission.

We must improve the quality of life

while reducing consumption and

use of energy, transport and

resources.

KONE one of the world’sgreenest companies

KONE is recognized as a a top climate change

performer with an A- score in CDP 2017.

KONE was confirmed as a constituent of the

FTSE4Good Index in July and December 2016.

KONE ranked 28th in the 2015 list of Global

100 Most Sustainable Corporations in the World,

released by a Toronto-based media and investment

advisory company Corporate Knights.

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Technological enablers: Connectivity, IoT cloud and cognitive analytics

CONNECTED EMPLOYEESSupporting the collaboration and

efficiency of our people

CONNECTED EQUIPMENTConnecting >1 millionequipment to the cloud

CONNECTED USERSPersonalized experience for users

CONNECTED CUSTOMERSIncreased business value through better

communication and productivity

We are investing heavily in new technology

New innovations and personalized services by using data

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More than 450,000 customers

Lifetime business with long-lasting customer

relationships

New and personalized

services

Data on a wide scale for mass customization

When we connect more equipment, the amount of data grows exponentially

Over one billion people using our equipment every

day

Long relationships create a long digital footprint

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We embrace collaborative innovationWe embrace collaborative innovation

Making use of innovation

that happens outside KONE

Bringing new solutions to

the market faster

Fast learning and optimal

focus of resources

Technology companies

Smart building partners

Start-ups

Customers

WHY? WITH WHO?

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Intelligent services for elevators and escalators are here

KONE is revolutionizing

elevator and escalator

maintenance with new

KONE 24/7 Connected

Services that are based on

real-time data and

analytics. For customers it

means improved safety, full

transparency and more

value.

Machine-room-less technology

KONE MonoSpace® elevator

– Machine-room-less (MRL) elevator concept

– Eliminates the need for space-consuming machine rooms

by putting the hoisting mechanism in the lift shaft itself

KONE EcoDisc® hoisting machine

– The green heart of the MonoSpace platform

– Fits in the shaft

– Consumes only 60% of the energy of a comparable geared

traction machine and 30% of a comparable hydro

– The most eco-efficient solution on the market today

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#1 INNOVATION IN THE INDUSTRY

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KONE UltraRope®

Ultra-light and durable rope that offers huge advantages over

the steel ropes traditionally used to hoist elevators

Lightweight carbon fiber core and special, high-friction coating

– Longer future elevator travel distances (1,000 meters,

twice the distance currently feasible)

– Significant energy savings – benefits grow as travel distance

increases

– Less elevator downtime on windy days

– Unprecedented durability with a lifetime twice that of conventional

steel rope

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KONE JumpLift

The KONE JumpLift is a unique solution for improving

the people and goods flow during construction

The temporary machine room of the KONE JumpLift elevator

is moved upward in the shaft as new floors are added

KONE JumpLift advantages

– enabling a faster, safer construction process

– earlier closing of the facade

– reduced down-time

– all weather operation

– safer transportation

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KONE NanoSpace™

Revolutionary new HybridHoisting™ system

incorporates a unique combination of belt and rope

technologies

Two thin balancing weights enable adaptive

balancing and energy consumption optimization,

and also allow more space for a larger car

Proven energy-efficient KONE EcoReel™ motor

technology with an all-new compact design

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KONE EcoMod™

Full escalator modernization without removing

the existing truss

Complete renewal of old escalators without

demolishing floors and roofs is an excellent

solution in narrow, difficult to access locations

The escalator is delivered in modules and

assembled on site

Maintain the appearance of the building while

gaining the advantages of:

– improved performance

– increase safety

– reduced maintenance costs

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KONE InnoTrack™

World’s flattest technology for autowalks

‘Machine-room-less’ autowalk

– flat and light construction

– easy installation

– reusability

– green-drive technology

– lower life-time costs

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Double-deck elevator

Two elevator cars on top of each other

Increases transportation capacity and shortens

traveling time

Saves space

Saves construction costs

Increases the freedom of architectural design

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Award winning design

KONE designs and innovations have been

recognized with many prestigious awards.

Our materials, designs and accessories

have won numerous GOOD DESIGN, IF

Product Design and Red dot design awards.

- China export (Finland, Germany)- 1997 Hong Kong annexed to Mainland- Own manufacturing- 100 % local sourcing- 2004 R&D Center in Kunshan

History of KONE in China

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13 April 2018 KONE Profile 2016 | Confidential | © KONE Corporation45

China R&D perspective> 50% of market2016, 85000 units

Deliveries:Elevators to Asia-Pacific, China, Russia, India, Australia,

Escalators to 80 countries

All platforms and markets

Started 2004, Kunshan, near Shanghai, elevators and escalators

Located in the economic and technical hub of China, the Yangze Delta,

in a Special Economic Area, SAR

Kunshan R&D Unit is in the center of Chinese manufacturing indstries

and main market. World’s fastest developing industrial area,

Close to main markets.

280 employees close to assembly units, own factories, 2:nd largest R&D

unit after Hyvinkää

Started with local product management, component categories,

platforms, maintenance

Since 2012 also for concept creation, industrial design, new services

and IoT

Near supply chain, universities, industrial services, education,

commercial associations.

Excellent transport and communication networks

Success factors of an overseas R&D

CHINA R&D, Multi-national companies establish over-seas R&D units

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Speed of construction much higher than in Europe• Booming market, 50% growth, bubble economy• 70% government target of urban population• Price and cost competition• Large, phased contracts up to 400 units even in

residential projects• City planning aspects• National hot spots of construction• Standardization of buildings• All big competitors, OTIS, SCHINDLER,

THYSSEN, MITSUBISHI, HITACHI, FUJITEC,• Local brands also fast growing, (CANNY, SJEC)• Small foreign brands, special markets (Marine)

HOW to COMPETE vs. MARKET SITUATION• Product releases => R&D response time• Cost => Competitivity• Safety, Reliability, => Customer, publicity• Eco-Efficiency => Value• New Services => ?

ASIA, CHINA vs EUROPE market characters

Biggest migration in the history of mankind

R&D Competences for local staff• Young organization• Project management skills• Often competitor background, job-hopping• High-motivation for technical learning• Retention rate• Communication skills, (local / international)• Networking to Universities• Open attitude, virtual teams, cultural borders• R&D is not the first option for graduates• Elevator industry is not the best option

Testing for localizationLocal SourcingLocal product managementSupport for delivery quality, reliability and safetyNew local product releases

LOCAL R&D UNIT Growth

Capabilities

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Portfolion hallinta

Kilpailijaseuranta

Tekniikan tason kartoitus

Keksintöilmoitukset

Diaarin ylläpito

Vuosimaksut

IPR-toiminnot yrityksessä

UutuustutkimuksetToimintavapausselvitykset

Patenttivirasto

Paikallinen asiamies

Hallinnoiva asiamies

Yrityksen IPR-organisaatio

Local R&D, requirements of public support, High-Tech Industry

High-Tech Status• Value-added products• High-Tech transformation of Chinese economy• Employment of Talents• Talent Programs• Start-ups• Export

R&D competence audit, (Criteria change every year)• Investments to R&D• R&D personnel investments• Reporting of R&D staff • Patents• Innovations

• Company tax cut• Other benefits (city level)• R&D personnel salary

support (local)

What the company can get…

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Partnering with start-ups at hackathons around the world

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Role of materials technology

Critical materials, electro-mechanical

parts

1. Permanent magnet materials, NbFeB

2. Carbon steel wire, ropes

3. Die-cast aluminum, AlSi12

4. Stainless steels, austenitic/ferritic

5. Cold rolled sheet, galvanized, organic

coated,

6. High-strength cast iron

7. Electrical steel and copper

8. Low friction polymers, UHMWPE

9. Elastomers

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New materials

1. Carbon fiber composites

2. Polymer nanocomposites

3. High-strength steels

4. High-strength Al-Mg alloy

5. TPU- coatings

6. High-temperature friction

materials

New materials and light-weight structures are

seen as a strategic area2017

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Sheet metal

Part variation is very large, size, finish, steel type,

Applications: Doors, cars, guides, frames, housings, cabinets,

containers, panels, profiles ,faceplates, skirtings, railings, etc,

95% mechanically joined parts,

Degree of integration is low, maintainability, disassembly

Flexible production, specialized suppliers for elevator and

escalator industry, (capital cost)

Large mass of products but proportion of added value is low,

Construction industry uses sheet metal, appliances, electro-

mechanics, decoration. Visual quality critical.

Elevators and escalators need to follow the architectural design

trends. So, quality of visual parts is of prime importance.

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Thank you !