ANNUAL REPORT 2004 - ELMOS Semiconductor AG

GROUP STATUS REPORT FINANCIAL STATEMENTS GROUP STRUCTURE GLOSSARY
Business and economic framework
Future of automotive electronics
Profit, financial and assets situation
Supplementary report
ÿ Risk report
Outlook report
Not covered development
costs are amortized
through serial production
DEVELOPMENT OF NEW PRODUCTS AND TECHNOLOGIES
It must be considered with regard to the customer specific development of products
that today’s manufacturer, winning a new contract, is usually no longer able to co-
llect reimbursements for the total one-off development costs from the customers
in advance anymore. The development costs not covered in advance are amortized
through the later units in serial production. The risk remains that not amortized ex-
penses from product developments not resulting in a supplier relationship will re-
main with the company. However, the number of products not resulting in a supplier
relationship has been very small in the past.
The market for ELMOS products is characterized by constant further development
and improvement of the products. Accordingly, the success of ELMOS is closely rela-
ted to the company’s ability to economically develop new sophisticated products, to
introduce them to the market on time, and to ensure that these products are chosen
by leading suppliers to the automobile industry.
The future success of ELMOS is also dependent on the ability to come up with new de-
velopment and production technology. ELMOS develops analog and digital semicon-
ductor structures and functions for its self-developed modular high-voltage CMOS
process technology. Like its competition ELMOS is forced to continuously improve its
technology and to develop new process technologies for the advancing minimization
of structures in the submicron area. If ELMOS ceased to be able to develop, produce,
and sell new products and product upgrades in the future, significant effects on the
assets, financial and profit situation would be likely to result.
Owing to the ability of ELMOS to develop and manufacture ASICs for all kinds of
electronic automotive applications, ELMOS products are represented in almost any
electronic car component so that the risks of order cancellation for an individual
electronic component are widely spread and practically do not exist. A slump in the
car industry for several years in a row, causing car manufacturers not to develop any
new electronic products, could have a lasting effect on the company’s development,
though. However, such a slump is not to be expected under the current circum-
stances, particularly because the automobile industry tends to upgrade technical
features in bad times, as has already been mentioned. A second reason, customer
specific ASICs by ELMOS have been replacing electronic standard components at an
increasing rate, enabling ELMOS to grow faster than the total market, thus increasing
its market share. This way even risks connected to the possible loss of development
orders for ASICs for automotive use can be reduced.
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