Annual Report 2007 - AudioDev - #9

Factors that will affect the outcome are the price of players for the respective formats, the availability of combo players (that will play both formats) and how well each camp positions itself towards the global film industry.

he DVD market in Europe and the US is flat, and growth is minimal. However, there are still markets where DVD and DVD-R are growing, though volumes can't be compared with the format's heyday. Growth areas include South America, Eastern Europe, Middle East and India. China is not growing much at the mo­ment, but the market is both upgrading from CD to DVD and beginning to look at investments in the new high-definition for­mats. Because of its sheer size, China is a very important market for AudioDev, and we have a strong and active presence there.

Primary customers

AudioDev holds a total market share of over 50 % amongst manu­facturers of pre-mastered and recordable optical discs in today's established media formats and, so far, AudioDev clearly domi­nates the sale of QA equipment for the BD and HD DVD markets. his position is thanks in part to our ongoing success in estab­lishing our test methodologies for the CD and DVD formats, a strategy which rests in turn on our high level of retained technical expertise and strategic dialogue with major players throughout the electronics industry and disc manufacturing companies.

Manufacturers of optical media can be divided into two dis­tinct groups: pre-mastered discs and recordable discs, he first is located primarily in the US and Europe, close to the filmmaking and games industries. he second is concentrated in Asia.

AudioDev's customers include all of the world's major media manufacturers, such as Cinram, CMC, Microsoft, Sony, Moser Baer India, Panasonic, Pioneer, Ritek Corp. and Technicolor. he wide geographical spread and market share division reduces AudioDev's sensitivity to the financial fortunes of any specific customer.

Competitors

In optical media testing, AudioDev's primary competitors are Datarius Technologies and Expert Magnetics in the signal testing of pre-mastered and recordable discs respectively, and Dr. Shenk, Dr. Schwab and Basler in physical defect detection.

dustrial applications, and the technology usually provides a cost-effective alternative to more traditional techniques. In some in­stances, thin film technology enables applications that just weren't possible in the past

he market for thin film, while already significant, should con­tinue to grow steadily because of the cost, quality- and techno­logical benefits the technology offers, here is no indication that this growth will slow, or that thin film will be replaced by other technologies in the long term.

he market for quality- and process-control equipment is still underdeveloped. However, most applications have a strong de­mand for solutions that ensure consistency and reduce waste, as the materials employed are often expensive. Competition is very fragmented and most companies focus on selling components rather than providing complete solutions.

Utilizing its expertise in spectrometric measurement, ETA-Optik, acquired by AudioDev in February 2007, has offered quality assur­ance and production control solutions for thin film manufacturers for a number of years. To date, this business has primarily focused on a limited range of applications and geographical markets.

It is AudioDev's defined strategy to now develop and expand the business both in terms of technical solutions, applications and geographical markets.

The road ahead

AudioDev is very well positioned to meet BD and HD DVD in­vestments in the coming years. We have invested heavily in our technology and are well prepared to meet the expected volume demand. his means that, in the next year, we shall be able to devote more resources to establishing a strong AudioDev presence in hin Film Metrology. his strategy is essential to our future growth. We expect growth from this new source to start slowly, as we continue to adapt products and solutions and build up our positions in the new markets.

The market for thin film metrology

hin film is a rapidly growing manufacturing technology used in a broad range of high-tech industries. Sophisticated thin layers and coatings are used for protection, passivation, insulation, and as diffusion barriers. Components utilizing thin films are found in many common household products as well as in high-end in-

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