Annual Report 2002 Komax – Success through ... - Komax Group

Annual Report 2002
Komax – Success through innovation

About the illustrations
We live in an age of innovation. Each achievement is
constantly replaced by newer versions that are even
faster, even more efficient, even better … and even
more high tech. This also applies to the markets that
are important for Komax. The ability to offer innovative
solutions for new market requirements at the
right time is a vital success factor. For this reason
we invest substantial resources in development and
engineering, and with success: Komax generates
about 70% of its sales with products that are not
more than two or three years old.
General note
For the sake of readability, the masculine pronoun is
used throughout this Report to include the feminine
gender.

Contents
Highlights __2
Report of the Board of Directors __5
China – the locomotive for growth in the future? __10
2002 – review of operations __14
2003 – creating the basis for the future __22
New connection technologies – the future has begun __26
Glossary __32
Corporate governance and
financial report __Appendix

Highlights
Net sales of the Komax Group
220
200
180
160
140
120
100
80
60
40
20
0
in CHFm 1998 1999 2000 2001 2002
Operating profit (EBIT) of the Komax Group
34
32
30
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
in CHFm
2__
142.0
22.4
183.7
27.6
211.6
32.9
196.9
18.7
191.5
17.7
1998 1999 2000 2001 2002
Key figures of the Komax Group
in CHFm 2002 2001 +/- in % 2)
Net sales 191.5 196.9 -2.7
EBITDA 25.8 26.4 -2.3
Operating profit (EBIT) 17.7 18.7 -5.4
Group profit after tax (EAT) 13.2 13.9 -5.1
Research & development 17.3 16.5 +4.8
Free cash flow 3.7 -6.9 +153.0
Investments in fixed assets 16.8 19.6 -14.7
Net investments in participations 0.3 11.1 -97.3
Net cash (+) / net indebtedness (-) -23.7 -26.9 -11.8
Shareholders’ equity 126.2 118.8 +6.3
Headcount (as of 31.12.) 680 698 -2.6
Net sales per employee 0.282 0.276 +2.2
Basic earnings per share CHF 4.23 4.47 -5.4
Equity per share CHF 40.00 38.10 +5.0
Dividend per share CHF – 1.00 –
Repayment of par value
per share CHF 1.00 1) – –
Price high CHF 95.00 163.00 -41.7
Price low CHF 39.50 59.00 -33.1
1) Proposal of the Board of Directors of Komax Holding AG.
2) Percentage change in the amount calculated in CHF 1,000.

Komax – Success through innovation
Despite the difficult economic environment, the opportunities for growth in
the markets that are important for Komax are better than ever. Driven by
the growing demand for comfort and safety, which has led for one thing to
an increasing number of electronic assemblies and for another to miniaturization
of the components used and higher quality standards, more and
more processes are being automated. At the same time, high productivity
requirements and the use of new technologies such as fiber-optic cables
or flat cables are putting pressure on manual processing.
Komax is responding to these trends with quality
and innovative solutions. In the past fiscal year the
Group further strengthened its market position
with a number of new products and by expanding
its sales structures. This is creating the conditions
needed to make greater use of existing market
opportunities and to successfully deal with future
challenges.
__3

Report of the Board of Directors
Dear Shareholders
In the past fiscal year Komax once again made considerable
progress in realizing its objectives. The Group has further
expanded its market position by strengthening its presence in
Asia and by launching new products. We also achieved
better-than-average growth in system business in the wireprocessing
sector.
Melk M. Lehner (left), Chairman of the Board, and Leo Steiner,
President & Group Chief Executive Officer.
We accomplished this despite the deterioration in the
economic climate in the markets that are important
for Komax; the economic upswing that was generally
hoped for in the third, and then in the fourth quarter
of 2002 failed to materialize. Given these conditions
we rate it as a success that sales and earnings –
after a weak second half in 2001 and first half of
2002 – showed a marked improvement in the second
half of 2002.
Sales – up on previous year after adjustment
for currency fluctuations
Sales declined by 2.7% to CHF 191.5 million compared
with the year-back period (previous year:
CHF 196.9 million). This is attributable in the main to
unfavorable exchange rates: in local currency terms
the increase would have been 2.1%. Wire-processing
system business grew at a disproportionately
high rate; sales in Europe and North America doubled
compared with the previous year, due in no small
measure to innovative new solutions. Wire-processing
machine business also developed satisfactorily
in the USA and in Asia. By contrast, sales in Europe
fell because of reluctance on the part of customers
to make investments. In the assembly automation
sector Komax generated slightly higher sales thanks
to attractive orders from the automotive industry, but
intake of new orders was unsatisfactory. All in all,
new orders received by the Group amounting to
about CHF 200 million exceeded sales (book-to-bill
ratio of 1.05).
__5

Komax Group
Sales by region (1998–2002)
6__
220
200
180
160
140
120
100
80
60
40
20
0
in CHFm 1998 1999 2000 2001 2002
Africa
Asia
North and South America
Europe
Profit – strong growth in the second half
The gross profit margin of 64.6% was considerably higher than in the previous
year (61.6%) after an adjustment of -3.3 percentage points for the
currency effect. This was attributable to successful sales of fully automatic
crimping machines and productivity gains in assembly automation. Earnings
before interest, tax, depreciation and amortization (EBITDA) and
operating profit (EBIT) improved substantially in the second half – compared
with both the second half of 2001 and the first half of 2002. On an
annualized basis, EBITDA amounted to 13.5% of sales or CHF 25.8 million
(previous year: 13.4% / CHF 26.4 million). EBIT came to CHF 17.7 million,
or 9.2% of sales (previous year: CHF 18.7 million / 9.5%). Adjusted for
currency fluctuations, both results were higher than last year. Expenditures
on research & development were increased to CHF 17.3 million in the
past year (previous year: CHF 16.5 million).
Owing to the low average interest rate on financial loans and the valued
and realized market profits, the financial result improved to CHF -0.8 million
(previous year: CHF -2.5 million). Although profit before tax (EBT) was
higher compared with the year-back period, group profit after tax (EAT)
fell to CHF 13.2 million (previous year: CHF 13.9 million). This decline is
attributable to significantly higher taxes on earnings.
Repayment of par value in lieu of a dividend
The Board of Directors proposes to the Annual General Meeting that, instead
of a dividend, the share capital of the company be reduced by lowering
the par value of the registered shares by CHF 1 each from CHF 10
to CHF 9 (total reduction CHF 3,152,783) and paying shareholders CHF 1
in cash for each share held. On approval of the proposal by the Annual
General Meeting, the legally prescribed procedure for repayment of par
value will be initiated. Barring any delays or unforeseen circumstances, the
repayment of the par value in the amount of CHF 1 per registered share
can be made to shareholders, in accordance with existing instructions, by
the end of July 2003 without deduction of withholding tax.
Market presence – expansion in Asia
A strategically important step in strengthening our competitiveness is the
expansion of our presence in Asia. With effect from December 31, 2002,
our activities in China have been merged in the newly founded Komax
Shanghai Co. Ltd. This wholly owned subsidiary provides sales and other
relevant services and manufactures for the local market. We have also
established a joint venture in Japan with Murata Kogyo KK, a company

active in the assembly automation and wire-processing segments. The
new sales company Komax Murata KK, which is headquartered in Shizuoka,
provides sales, marketing and engineering services. Thanks to its
customer relations and the local presence of the partner company, Komax
will greatly strengthen its position in the Japanese wire-processing and
assembly automation market.
Product portfolio – successful new products
An important measure for consolidating our technology leadership and
consequently our market position was the launching of a number of new
products. Apart from the selective expansion of the machine range,
Komax also unveiled a number of new special applications. In the system
business we have also succeeded in making the fully automatic processing
of complex cables and wire harnesses increasingly competitive compared
with manual working thanks to the new generation of robots. At the
same time the increased use of standard components makes it possible
to cut lead times and thus bring down production costs.
Komax has also rolled out highly standardized solutions for processing
new connection technologies (fiber-optic cables, flat cables) and special
applications (airbag and sensor cables), and has made a real technology
leap with the newly developed system for IDC connectors in the household
appliance sector.
Assembly automation – new building commissioned
In 2001 we began with the planning of a new building in Rotkreuz, Zug /
Switzerland. The aim was to enable us to exploit the opportunities in the
assembly automation sector more effectively and to achieve our ambitious
growth targets. The new location, in which we invested about CHF 25 million,
was commissioned in the year under review. The four production halls
and six office floors covering 12,000 sq. meters will enable us to optimize
production processes and provide sufficient room for targeted expansion.
Outlook
Prospects for growth for the Komax Group remain very good; the trend
towards more electronics, with more cable connections, connectors, sensors
and actuators, continues without letup. The level of automation in the
processing industry is constantly increasing, driven by ever higher quality
and productivity standards, increasing miniaturization and the use of new
technologies. Our sales successes in system business confirm that we are
on the right track with our products and technologies.
Sales system and machine business in 2002
Machines
Systems (wire-harness production and
assembly automation)
__7

8__
As the business environment remains unstable and visibility poor, it is not
possible to make a reliable forecast for 2003. However, Komax is optimistic
about the future in view of the many interesting projects from our
customers and the pent-up demand that still prevails. Moreover, several
long-term major orders especially in Eastern Europe are now in the final
phase. The Group further strengthened its strategic positioning by capturing
market share and successfully launching new products at the end of
2002. This, together with the solid balance sheet, puts Komax in a betterthan-average
position to benefit from an upswing in the economy.
Thanks – to our partners
On behalf of the Board of Directors, we would like to thank everyone who
has contributed to the success of Komax in this challenging environment.
Our thanks are due to all employees, who can take full credit for the
results we have achieved. Their great dedication and flexibility have created
the basis for meeting the challenges of the future successfully. Our
deep gratitude also goes to our customers for their collaboration as partners.
Our thanks are also due to our suppliers for the good cooperation
over many years.
And we thank you, our esteemed shareholders, for the solidarity and loyalty
that you have shown to our company.
Melk M. Lehner Leo Steiner
Chairman of the Board Chief Executive Officer
Komax Holding AG Komax Holding AG

China – the locomotive for growth in the future?
Present-day China, long more than just the
world’s third largest country and custodian
of an important cultural heritage, is marked
by consistent economic growth and modernization.
Today the Middle Kingdom is
the engine driving the economy of Asia and
to an increasing extent the entire global
economy.
10__
World-famous monuments such as the Great Wall of China or the Imperial
Palace bear testimony to an ancient culture going back thousands of
years. When traveling through rural regions it is easy to imagine that time
has stood still, but the densely populated coastal regions give the very
opposite impression. In cities such as Shanghai, ultramodern infrastructures
have grown up within a very short time, creating an excellent springboard
for growth. Nevertheless, the economic potential of China is still
often not fully appreciated.
China: an exporting nation ...
In 2002 China’s exports amounted to US$ 326 billion, about 22% higher
than in the previous year. Whereas in the past China tended to export lowtech
goods such as garments and toys, today electronic equipment such
as computers or DVD systems top the list of exports. China currently
produces 50% of all computer mouses sold worldwide and a third of all
mobile phones. In 2002 China for the first time ousted Japan as the number
one supplier to the USA. The main exports to the United States included
components for the automotive industry, PCs and electrical equipment,
as well as garments, agricultural products and furniture.
… and production location
Parallel to the steady growth in local production, more and more foreign
manufacturers are relocating production to China, driven by increasing
cost pressure. This development is also reflected in the fact that in 2002
China was the largest recipient of direct foreign investment in the world.
Two thirds of the products sold by Philips China, for example, are for
export. Most of the big car manufacturers such as Ford, General Motors,
VW, Honda, Citroën, Audi, Toyota or DaimlerChrysler also operate local
joint ventures. About 120 manufacturers produce two million vehicles
annually in China, principally to meet demand from the burgeoning domestic
market.

Growing middle class
With 1.3 billion inhabitants, China is home to about one quarter of the
world’s population. The population is more than four times as large as the
USA’s. Thanks to low-cost and increasingly efficient production, the consumer
price index has fallen by about 15% (in local currency terms) over
the past five years. While most industrial countries have been hit by recession
or stagnation in the last few years, China has developed into the
economic powerhouse of Asia with annual growth rates of 7 to 8%. This
has also impacted on the purchasing power of the population.
China’s urban middle class currently numbers about 100 million, and is
growing steadily. Consumer spending is rising, and at the same time higher
standards of quality and service are demanded. The country already
counts nearly 200 million mobile phone users, and in 2002 car sales rose
by 55% to over one million, making China the fastest growing car market
in the world.
Total imports rose by 21% to US$ 295 billion last year. Asia is the second
largest customer for goods from Switzerland (before America); China,
including Hong Kong, has overtaken Japan as the most important importer
of Swiss products. China’s accession to the WTO (World Trade Organization)
is expected to result in a further opening of the country’s formerly
heavily protected markets especially in the telecommunications and automotive
industry.
Modernization and continuous growth – an impressive contrast
with the culture of China that goes back thousands of years.
__11

There are no limits to shopping opportunities ...
12__
Komax – expanding our local presence
These developments also affect the markets that are important to Komax.
The wire-processing industry is increasingly shifting its production facilities
out of the traditional countries Japan, Korea and Taiwan to China, driven
by the attractive manufacturing conditions, the huge local consumer market
and the growing number of foreign producers and the resulting opportunities
for component suppliers. At the same time there are more and
more local wire-harness manufacturers, and China is already the fastest
growing wire-processing market in Asia.
At the end of 2002 Komax merged its activities in China into a newly established,
wholly owned subsidiary with the aim of making more effective use
of existing opportunities. With a staff of 12 at present, Komax Shanghai
Co. Ltd. provides sales and other services and has started up production
for the local market. Apart from the headquarters in Shanghai there are
also sales centers in Beijing, Changchun and Guangzhou. This year these
will be supplemented by the establishment of a nationwide network of
agencies for small machines. These measures will enable Komax to guarantee
the short delivery times required and to offer a fast, professional
service locally. After the expansion of our subsidiary in Singapore to a
regional distribution center and the founding of a joint venture in Japan,
this represents a further step in consolidating our market position in Asia.
Our aim is to increase the share of group sales accounted for by Asia
from the present figure of 9% to about 15%.

2002 – review of operations
Expanding our strategic market position
One of our priority goals in the past fiscal
year has been to expand our strategic market
position. Despite the difficult situation
Komax succeeded in capturing market
share and consolidating its technology leadership.
Komax Group
2002 sales by region
14__
Europe 63%
North and South America 25%
Asia 9%
Africa 3%
The success of the products rolled out at the end of 2001 was a crucially
important factor. At the same time selective additions were made to the
existing product range also in the past year. Thanks in no small measure
to the positive acceptance of these new products, the Group was able to
further increase its global market share.
This is all the more gratifying given that the global wire-processing market
actually shrank as a result of the economic situation. Mergers at major
customers also dampened the inclination to invest.
Europe – relocation to the East
The European wire-processing industry was hardest hit by this trend.
Greater reluctance to invest on the part of customers compared with the
previous year – especially in the automotive sector – resulted in a decline
in sales in machine business. Parallel to this the relocation of mass production
to low-wage countries continued. Consequently Komax recorded
strong growth in Slovakia as well as in Romania, Poland and Lithuania.
Developing business in these countries, while involving increased administration
and logistics costs, also offers the opportunity of selling more
services such as product support and training courses. The Group has
further strengthened its sales and service network in the Baltic states
accordingly. Tunisia and Morocco proved to be desirable locations, with
sales in Africa doubling compared with the year-back period.
In the traditional markets of Germany, France, the UK and Italy, wire-harness
manufacturers concentrated on complex special applications and
new connection technologies. System business and sales of the Alpha
488 fully automatic twisting machine developed satisfactorily in line with
this trend; after completion of the test and certification procedure, a number
of new big customers are using twisted pairs produced on fully automatic
machines to reduce electromagnetic interference.
In the assembly automation sector sales were significantly higher than
in the previous year. The creation of new platforms particularly in the

automotive sector resulted in interesting assignments. Sibos achieved some
notable successes with assembly systems for ABS with integrated stability
control, for electrical steering assistance and for space-saving electrical
connections. The technically sophisticated solutions guarantee efficient and
reliable processes for the production of assemblies.
Europe as a whole contributed CHF 123 million to Group sales (2001:
CHF 127 million).
America – strong second half
After two weak halves, the North American wire-processing business experienced
an upturn in the second half of 2002. A number of long-standing
projects were realized in the automotive sector, and sales in 2002
clearly outstripped the previous year. Today, the bulk of the wire harnesses
manufactured for the US market are processed in Mexico. Various European
producers have also set up production locations there. Komax profited
fully from this development thanks to its increased presence in Central
America. The Group also undertook its first major order in Nicaragua.
While the Brazilian wire-processing market stabilized at a low level, Argentina
recorded a massive decline in sales.
The Sibos Group, which specializes in assembly automation, was confronted
by difficult conditions with the slowdown on the connector market
coinciding with a decline in business in the telecommunications sector. By
contrast, sales of systems for medical technology and solar energy rose.
Thanks to close cooperation within the Komax Group, Sibos Ascor Inc.
was able to deliver systems worth several millions to the EU in the past
fiscal year.
Sales in North and South America contributed about CHF 49 million to
Group sales (2001: CHF 57 million).
Our people are the key to our success.
·Roberto Menegazzi / Josef Zumstein (Sales)
· Chris Schnellmann / Hans Lang / Marcel Wolfisberg (Marketing)
__15

Asia – concentration in China
The development in Asia was very encouraging, which was attributable
chiefly to continued growth in China. As pressure on costs increases,
more and more wire-harness manufacturers are shifting production away
from Japan, Taiwan or Korea to China. Komax has won a number of big
projects in the face of strong regional competition, and since the key to
this success was professional support at local level and a full range of services,
it has set up its own company in China and a joint venture in Japan.
In the traditional markets Malaysia, Thailand and Korea, the Group was
confronted with declining sales.
Total sales in Asia rose nearly 50% to CHF 15 million.
Wire processing – innovative new products
The products unveiled at the end of November are designed to meet the
requirements of modern wire processing. The increasing degree of automation
in Europe and North America calls for higher standards of reliability,
more complexity and greater versatility of the machines. Consequently the
various devices for quality assurance and the new Komax Zeta 633/655
product family have attracted considerable interest. The fully automatic
crimping machine with assembly module is highly efficient and flexible
thanks to line cameras and highly dynamic robotics axes and will be used
primarily for the manufacture of wire harnesses in the future.
At the same time the use of new connection technologies and special
applications in these countries is on the increase. The Komax Lambda
9100 is a versatile system developed jointly with Sibos for manufacturing
wire harnesses for complex applications (fiber-optic cables, flat cables, airbag
cables, sensor cables and coaxial cables). Its modular construction
and high degree of standardization make it possible to reduce system
costs and cut implementation times. For the household appliance industry
the Komax IDC 9600 MS represents a technology leap in the processing
of IDC connectors. System business more than doubled sales in 2002 on
the strength of these new products.
Komax is meeting the growing demand for so-called “low-cost models”
with two new semi-automatic machines. Both the BT 86 for processing
coaxial cables and the Komax BT 188 for manufacturing twisted pairs
have met with a very positive response from the market.
Thanks to their creativity and initiative, Komax enjoys a strong
market position with innovative products.
·Claudio Meisser / Karin Thoms (Development)
· Hanspeter Amstutz (Assembly) / Susanne Knöpfel (Development)
__17

Komax Group
2002 sales by application
18__
Automotive industry approx. 55%
Household appliances approx. 20%
MedTec/Solar Energy/Others approx. 20%
Telecommunication/Electronics approx. 5%
Assembly automation – successful special applications
The Sibos Group achieved considerable success with special applications
for the automotive industry in the year under review. Next-generation
machines have been developed for the production of ABS systems, fuse
and relay boxes and electronic steering assistance. Applications with the
coating of terminal systems and the use of “molded interconnect devices”
(MID) also increased. MID is a process whereby electronic and mechanical
functions can be integrated onto any shape of thermoplastic circuit substrate.
This allows a high function density of the modules and enhances
miniaturization and rationalization. Sibos has designed solutions for all
three applications.
Sales of assembly systems with integrated cable processing have also
developed positively. Thanks to the cooperation between Sibos and
Komax, follow-up orders were acquired for the production of airbag connectors
and data communications cables with high transmission speed.
The further development of standard components was of central importance.
After the Domino and Trimino programs (Pick&Place and reel to
reel) and the LTS transfer system, an important phase in standardization
has been completed with the new standard cell Modulo. Thanks to the
new range of components customers can be offered the desired flexibility,
short lead times can be guaranteed and production costs reduced significantly.
The modules are used throughout the entire Group.
Development & engineering – maintaining our technology lead
Komax invested about CHF 17.3 million or 9% of sales to maintain its
technology leadership (2001: CHF 16.5 million). The focus was on the
development of platforms, the further development of existing products,
the launching of the Zeta 655 assembly robot and solutions for new connection
technologies.
Komax now has four established hardware and software platforms which
are used in all products. In this way the machines can be made more
user-friendly and production costs cut despite additional functions. In the
last fiscal year the Group applied for nine patent families to protect its
know-how.

Another trend is the networking of wire-processing machines. Using the
Windows-based software Komax TopNet, wire-harness manufacturers can
control their production from a central host and thus make more efficient
use of their machines.
The long-standing technology lead that Komax has enjoyed in the area of
fully automatic manufacture of wire harnesses with polymer optical fibers
(POF) resulted in follow-up orders during the year under review. These
days a sizeable percentage of all bus connections are realized with fiberoptic
cables that can provide the increasingly sophisticated functions
required in cars. The bundling of communications channels enables the
weight of the wire harness to be kept constant.
The proportion of flat cables in cars has also increased. One of the key
factors in the successful introduction of this technology is the contacting
system used. Komax closely examined the various techniques and jointly
with Sibos developed standardized processes for the high-quality processing
of this new technology. A first system for processing “flexible
printed circuit boards” was delivered during the year under review.
IT – global network
The growth of the Komax Group and the integration of new companies
call for international cooperation on an intensive scale. This requires the
coordinated use of corresponding infrastructures and the global availability
of information and data.
The development of specific hardware and software structures was also
one of the key tasks in 2002 in response to the need to link new members
of the Komax Group to the corporate network quickly and simply. This ran
concurrently with the updating of a number of application programs. Both
tasks have been successfully completed.
During the past fiscal year we have had very good experience with the
“EShop” system introduced at the end of 2001. The tool met with a very
positive response from customers and sales representatives alike who can
use it for ordering spare parts and small machines as well as for retrieving
all relevant information on the Web.
Modern infrastructures ...
·Christian Schmid (IT) / Andreas Wolfisberg (CFO)
·Christian Schärer / Viktor Tobler (Production)
__19

Komax Group
Employees by function in 2002
20__
Production 40%
Marketing and sales 25%
Development 14%
Engineering 12%
Management and administration 9%
Production – flexibility required
Fluctuations in incoming orders posed a big challenge for production.
Extreme flexibility was required from employees and external partners
alike. Procurement and production processes were further streamlined in
order to optimize capacity while still guaranteeing short delivery times.
New working time models were also introduced. Parallel to this, the Group
intensified its cooperation with suppliers. Only by making processes transparent
and involving the strategic partners at an early stage can we successfully
provide the required quality and flexibility at the right cost. Quality
and delivery punctuality have been improved by over 20% with the “Supplier
of the year” program.
Komax has relocated production of the Gamma 333 fully automatic
crimping machine in line with its production strategy. Since mid-2002 the
entire Gamma family has been manufactured and shipped by Komax Portugal.
The cooperation with Sibos has also been further improved, thereby
enabling additional synergies to be generated, especially in the areas of
machining and strategic procurement.
Quality management – towards “Business Excellence”
Apart from safeguarding the status quo, the further development of the
existing QM structure in the direction of “Business Excellence” was one of
the key tasks in 2002. As a first step the company’s processes were defined
on the basis of the new, process-oriented QM model ISO 9001/2000.
Then main processes and sub-processes were defined, which must now
be described in detail and implemented by the end of this year. The object
is recertification according to the new model in December 2003.
Ecology – creating the basis
Komax is well on the way to achieving its own ambitious targets with
respect to its environmental impact. Detailed analyses have been made of
the actual situation in order to provide the necessary basis for decisionmaking,
a number of improvement projects have been defined and the
required budgets earmarked. Against this background it should be possible
to improve the environmental impact within the targeted scope during
the current year.

2003 – creating the basis for the future
Prospects for growth for Komax are better
than ever; the trend towards more automation
continues without letup. It is now up
to us to create the necessary basis so that
we can benefit from an upswing in the
economy.
Research & development expenditure 1999–2004
20
15
10
5
0
in CHFm 1999 2000 2001 2002 2003* 2004* *Estimates
22__
14.3
15.8
16.5
17.3
Investment in information technology 1999–2004
4,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0
in CHFm 1999 2000 2001 2002 2003* 2004* *Estimates
Applications (ERP, PDM, Office)
Communication (EShop, Internet, Intranet)
Infrastructure (hardware, networks, operation systems)
17
18
First and foremost this means anticipating the demand for flexible, costoptimized
solutions geared to actual applications. At the same time short
delivery times and professional customer support at local level are crucial
success factors. Two focal points in the current year are therefore developing
our product range in line with market requirements and adapting
internal structures to enable us to react quickly and flexibly to changes in
market fundamentals.
Markets – pent-up demand
As the business environment remains unstable and visibility poor, it is not
possible to make reliable predictions. However, the fact that demand for
processing systems for new connection technologies is increasing, especially
in the automotive sector, is a positive sign. There is also pent-up demand
for replacement investments in the area of fully automatic crimping
machines, where new applications can be covered with the Zeta family.
Increasing bidding activity on the North American assembly automation
market over the past few months is another encouraging sign. Owing to
its market leadership, Komax should be very well placed to benefit from
these developments.
The effective development and expansion of the companies in China and
Japan is crucially important for further strengthening the competitiveness
and market position of the Group in Asia. At the same time key account
management and services in the local markets will be intensified. A key
objective in the current year is the provision of new financing solutions, for
example rental or leasing.
Wire processing – from the wire-harness manufacturer to the
system supplier
As the level of outsourcing in the automotive industry increases, driven by
growing cost pressure, wire-harness manufacturers are more and more
becoming system suppliers. This increasingly involves the integration of
processes far beyond the scope of actual wire processing. The effect of
this is that large wire-harness manufacturers are outsourcing simple, laborintensive
work. This development has a number of implications for Komax.

Firstly, fully automatic crimping machines require greater flexibility and functionality.
The machines have to be able to perform more operations, which
results in a noticeable blurring of the dividing line with the system business.
Secondly the demand for “low-cost models” and semi-automatic
machines is rising. These are employed predominantly for simple tasks in
low-wage countries. For Komax this means extending its range of standard
products selectively at “both ends”. At the same time new opportunities
arise for the system business since frequently the complex and technically
demanding processing operations can no longer be performed
manually for quality reasons. Highly disparate processes can be integrated
with the new Zeta and Lambda product families and complex cables and
wire harnesses can be manufactured flexibly – and at competitive prices
even in comparison with manual labor.
Assembly automation – further expansion
It is uncertain whether the recovery in the connector market widely forecast
for the current year will actually materialize. However, the trend
towards technically more sophisticated systems and shorter lead times
continues undiminished. The further development of standard components
is therefore of crucial significance. During the current year new modules,
“control units” and “palletizing systems” will be added to the range and
introduced throughout the entire Group.
Cooperation and “cross-selling” within the Sibos Group will be intensified
so that we can tap into the identifiable market volume of several billion
Swiss francs more effectively. There are also good opportunities in North
America for automatic assembly machines with integrated wire processing;
following several concrete inquiries we plan to have more personnel
working in this area. In Europe the focus is on coverage of the markets in
France and Italy.
There is still potential for growth in the assembly automation area. Komax
will therefore be further expanding its activities both geographically and on
the technology side through internal and external growth.
… and cross-divisional thinking and team work are of crucial
importance.
·Christian Beer / Beat Wicki (System business)
·Margrith Kohler / Jeannine Hediger (Reception)
__23

The essentials are solid know-how acquired through a targeted
program of training.
·Sandra Buholzer / Peter Bünter (polymechanics technician
apprenticeship)
·René Lehn / Christoph Fischer (CAD training)
24__
Development – anticipating trends
In line with the situation described the emphasis in the current year will be
on the further development of the standard machine range and also standard
components. A number of new products are planned both in the
hardware and the software area. Another core task is to complete the Zeta
family for market roll-out on a broad front.
Current tasks include the development of standardized process modules
for processing new connection technologies (fiber-optic cables, flat
cables).
Production – increasing flexibility
Flexible production is a key factor for success in today’s environment. The
fluctuating intake of orders and required delivery times can only be handled
with adaptable capacities and short lead times. For this reason Komax
will be further optimizing its production in the current year and consolidating
strategic procurement. Parallel to this, cooperation with Sibos will be
intensified and widened.

New connection technologies – the future has begun
The number of electrical and electronic
applications in appliances and machines
is growing at a rapid pace with a parallel
increase in the complexity of the cabling
systems. New connection technologies such
as fiber-optic or flat cables are being used
to an increasing extent to keep pace with
requirements.
Dipl. Physik-Ing. Jörg Blaschke, Head of the
FPC Division, Coroplast Fritz Müller GmbH &
Co. KG, Wuppertal / Germany.
26__
This development applies particularly to the automotive industry. Every
vehicle contains an average of 2.5 kilometers of cable. The various wires
are assembled into wire harnesses with all sorts of different branches,
connector systems, adhesive tapes, tubes, etc. and supplied to the automakers
by the wire-harness manufacturers as a complete cable set.
In addition to ordinary copper wires, high-quality, special-purpose materials
are used in challenging application areas such as ignition systems,
ABS and airbag controls or engine management. These materials must be
able to withstand corrosive substances, temperature variations and vibration
while remaining flexible and resistant to kinking. Meanwhile the parallel
trend towards complex navigation and multimedia applications and electrical
controls for valve drives, brakes and steering calls for the development
of new connection technologies.
An interview with Jörg Blaschke of Coroplast Fritz Müller GmbH & Co. KG,
one of the leading manufacturers of flexible printed circuit boards (FPC).
Mr. Blaschke, what do you understand by “new connection technologies”?
We are talking about three distinct technologies: fiber-optic cables, flat
cables and MID technology (Molded Interconnect Devices). MID technology
is the combination of electronic and mechanical functions on a thermoplastic
substrate. Fiber-optic cables are familiar to us all from data
communications – although in car-making plastic rather than glass optical
fibers are used. Flat cables is a generic term comprising “flexible flat
cables” (FFC) and “flexible printed circuit boards” (FPC). FFC is a product
sold by the meter, consisting of copper conductors laminated or extruded
between coated plastic films, whereas FPCs are flexible, freely configurable
printed circuit boards. Unlike the conventional rigid printed circuit
boards (PCB) they are made of thin, flexible copper substrate materials
such as polyester or polyimide films.
What are the advantages of these technologies?
Every technology has its specific advantages. Fiber-optic cables can
transmit large volumes of data very quickly and reliably. MID for its part
allows high functional density of modules thus enhancing miniaturization
and rationalization. The advantages of flat cables among others are in
space and weight saving – the saving in weight can easily be over 50%!
Above all, the regular structure of FPC circuit boards offers the advantage

of simpler logistics and assembly with a resulting reduction in transport
and storage volume of up to 70%. FPCs can also incorporate electronic
components such as light-emitting diodes, switches and the like. Further,
because flat cables have a regular structure, they possess consistent and
predictable properties with regard to electromagnetic compatibility. At the
same time all flat cables, FPCs in particular, are of very high quality since
they are produced in largely automated processes.
Are there any disadvantages?
The biggest disadvantage compared with conventional copper cables are
the higher processing costs and component prices at present, due primarily
to the fact that volumes are still relatively small. However, when flat
cables are compared with round cable sets today only the product costs
are considered; the advantages I have just mentioned are not taken into
the equation.
Fiber-optic cables are highly sensitive to mechanical influences such as
bending or kinking and have to be laid in curves of defined radius. Flat
cables have limited current carrying capacity. Also the possibilities of
repairing FFCs and FPCs – once installed – are limited.
Which technology will in your view become established and why?
Each of these technologies has considerable potential in selected applications.
FPCs are ideal for complex wiring systems with many current
branch-offs up to 3 meters long. The application-specific design of flexible
circuit boards is subject to virtually no limitations, and the savings in space
and weight compared with conventional wire harnesses are enormous.
For this reason FPCs are frequently candidates for use in inside roof linings,
doors, seats and the cockpit of vehicles.
FFCs can carry higher currents because of their larger copper cross sections
and are ideal in cut lengths for so-called 1:1 connections. These
are “predestined” for covering long distances, on the other hand the wireharness
manufacture is considerably more difficult, especially in complex
applications with many different current branch-offs. Logistics and assembly
are also more demanding on account of the branched structures,
similar to round wire cable sets in this respect. This again entails disadvantages
with the transport volume and when laying. Typical areas of
application for FFCs in our view are in parts of the cockpit, under the roof
and in the pedal area of cars.
Completely prepared panel with eight FPCs – ready for
assembly.
__27

Fiber-optic cables are used mainly to network information and communication
systems and safety modules. Navigation devices, radio or the
switching center of the steering column, for example, communicate by
means of digital light signals over optical fibers. Thanks to their resistance
to electromagnetic interference fiber-optic cables are highly reliable; on
the other hand they are difficult to process because of their sensitivity to
impact and bending.
Does that mean that soon there will no longer be any conventional copper
cables in cars?
No, it won’t go that far. I estimate that the proportion of flat cables in
automotive cabling will increase to about 30%. There are studies that predict
a market volume of a billion euros. At the same time the number of
electronic connections and corresponding cabling is growing rapidly.
Depending on the car model, a wire harness costs anything between 200
and 800 euros. Electrical and electronic components account for 20% of
the production costs of cars on average. As expectations of safety and
comfort rise, this proportion is expected to increase to an estimated 30%.
This development is certainly very positive for you as a manufacturer of
flexible printed circuit boards …
Given a market for automotive wire harnesses of five billion euros in Europe
alone, you’re quite right, prospects for growth are good. But to be
successful you need to have invested first, especially in automation which
in turn is an investment in quality and process reliability! With the new FPC
processing system from Sibos we can reduce the proportion of manual
production by about 75%. With their fully automatic assembly systems,
Sibos and Komax therefore offer solutions that meet a growing demand.
Parallel to this we have to invest in the development of new materials and
terminal parts. The cooperation between ourselves, the carmakers and
our suppliers is intensifying. There are only a few suppliers of FPCs and
there is a clear technical need for new, space-saving and integration-compatible
technologies. The resulting opportunities justify the relatively high
entry costs.
Sibos system for fully automatic processing of FPCs.
__29

Space and weight can be saved thanks to the use of FPCs.
30__
What will the next few years bring in the way of connection technologies?
Certainly an increase in automation – for quality and cost reasons. This
in turn will impact on the design of the components. To give you an example:
since cable insertion today is still predominantly done by hand, housings
have a dual locking mechanism. If this process is automated only one
locking mechanism is needed, and that requires a new design.
At the same time suppliers to the automotive industry are increasingly becoming
system suppliers. This means that more and more complete parts,
e.g. entire doors, are supplied. Simple, low-cost laying of cabling therefore
becomes an increasingly important issue and this in turn influences the
design of the flat cables.
How about “Bluetooth”?
We don’t regard cable-free transmission alternatives as a threat. They can
certainly be used for information modules but their susceptibility to interference
rules them out for security-relevant components.
The bigger challenge will be to get the full technical and economic potential
out of FPC connections. This will require rethinking the design of
cars and their wiring. With FPC a large number of functions can be integrated
in the wire harness. This, however, means intensive cooperation
between very different specialist areas both on the customer and supplier
side.
Mr. Blaschke, thank you very much for talking to us.

Glossary
Bus system Transmission of multiple data via a single channel (e.g. via an optical fiber)
by means of a standardized protocol.
Crimping (terminal attachment) Creating an electrical connection (cold welding) between a wire (normally
a stranded wire) and terminal by mechanical deformation.
Cutting Cutting a wire to the required length.
Flat cable Generic term covering “flexible flat cables” (FFC) and “flexible printed
circuit boards” (FPC).
FFC – laminated or extruded Copper strips (conductors) laminated or extruded between two plastic
flat cable (FLC or ExFC) films coated with adhesive.
FPC – flexible printed circuit board Unlike conventional printed circuit boards, flexible printed circuit boards
are made out of a thin and flexible substrate material.
Fully automatic crimping machine Type of machine able to crimp terminals at both ends of a wire.
Fully automatic twisting machine Type of machine that produces fully processed (measured, cut, stripped,
crimped) twisted pairs from two single endless wires.
IDC – Insulation Displacement Connection Insulation Displacement Connection is a contacting technique in which
the usual individual crimping processes stripping, terminal attachment and
insertion are combined in one operation.
Insertion Inserting crimped terminals into connectors.
Integrated systems suppliers In wire processing this means that instead of supplying individual cables
and wire harnesses, integrated system suppliers provide a complete unit
(e.g. an entire instrument panel) already wired and assembled.
Machine business “Standardized” machines for cutting wires to size and stripping them and
for attaching terminals.
MID – Molded Interconnect Devices With this technique electronic and mechanical functions are combined on
a thermoplastic substrate. This allows a high functional density of modules
thus enhancing miniaturization and rationalization.
Miniaturization The growing number of wires, connectors, housings, etc. combined with
the limited space for them have meant that individual elements have to be
made increasingly smaller.
32__

Optical fibers Fibers or fiber bunches made of glass (GOF – glass optical fiber) or plastic
(POF – plastic optical fiber), which can be used for transmitting data or
images or for lighting.
Stripping Removing the insulation from wire.
System business Komax Systems made to the customer’s specification for the fully automatic
block loading and production of complete wire harnesses.
System business Sibos Manufacturing and assembly automation; customized systems for
machine manufacturing, assembly and testing of single components and
entire assemblies.
Terminal (crimp) Plug component (male/female) formed by punching, turning and/or cold
forming.
Twisting / twisted pairs When two wires are twisted together to reduce electromagnetic interference
and to increase mechanical stability.
Wire harness Assembly combining a number of individual wires and held together by
plugs and wrapping elements.
Wire-harness manufacturers Companies which process wires and produce complete wire harnesses.
Forward-looking statements
Certain events may occur which may lead to a material difference
between actual results and the forward-looking statements
made in this Report. Investors are cautioned that all forwardlooking
statements are subject to risks and uncertainties beyond
Komax’s control. These risks and uncertainties include general
economic factors such as exchange-rate fluctuations and
macroeconomic trends as well as the market behavior of our
competitors.
__33

Your best connections
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