ANNUAL REPORT 2004 - ELMOS Semiconductor AG

MANAGEMENT BOARD ELMOS – THE COMPANY THE ELMOS SHARE CORPORATE GOVERNANCE
38
204.4
2000
Semiconductor market in billion USD
138.9
2001
140.8
2002
166.4
2003
213.0
2004
Source: Semiconductor Industry Association (SIA)
ELMOS profits from the
growing share of
electronics per vehicle
ECONOMIC FRAMEWORK
As a manufacturer of semiconductors for the automobile industry, the semiconduc-
tor market is relevant to ELMOS from the producer’s viewpoint, for example regar-
ding the purchase of production machines. However, of far greater importance to
the business development are the customer markets which primarily depend on
automobile production, and particularly on the proportion of electrics/electronics
per vehicle.
Semiconductor market
In 2004 the semiconductor industry was able to achieve a two-digit growth in sales
for the first time in years. After 2001, the year of crisis for the semiconductor indus-
try with a decline in sales of 32 percent compared to the record year 2000, the total
sales volume rose from roughly 166 billion US-Dollar in 2003 to 213 billion US-Dollar in
2004 worldwide. With a growth in sales of almost 30 percent in comparison with the
previous year, the industry took up the high growth rates of former years. Memory
chips for computers and camera chips for mobile phones were the biggest growth
drivers in 2004. Global sales in 2004 even exceeded the high level of 2000.
The euphoria vanished in the second half-year after a satisfying first half-year, so that
an upward trend for the semiconductor market can only be reckoned with for 2006,
following a sideways motion in 2005.
The semiconductor market’s economic situation is important to ELMOS insofar as
the cost of raw materials, supplies and purchased goods as well as purchased ser-
vices and the acquisition costs of capital equipment fluctuate in response to business
conditions. The customers’ order behavior is also highly dependent on the general
state of the economy. There are always excessive “panic orders” in boom periods and
significant reserve in periods of slackness.
Automobile industry and automotive electronics
The development of the market for automotive electronics is crucial to ELMOS as it
influences roughly 90 percent of ELMOS sales. Changes in the automotive semicon-
ductor market are characterized by the state of the automobile industry’s economy
and the growing share of electronics in an automobile.
2004 was a successful year for the automobile industry: New vehicle registrations in
2004 showed a significant increase. This is a pleasant surprise keeping in mind the
predictions for a declining trend. One of the reasons for that was a strong year’s fi-
nish leading to an increase in new car registrations in Europe. This resulted in a plus of
2.1 percent for the whole year, corresponding with 14.5 million new registrations, the