Report by the Board of Directors

Automotive Business Segment

In the Automotive Business Segment EB offers software products and R&D services for carmakers, car electronics suppliers and other suppliers to the automotive industry. The offering includes in-car infotainment solutions, such as navigation and human machine interfaces (HMI), as well as software for electronic control units (ECU) and driver assistance (DA). By combining its software products and R&D services, EB is creating unique, customized solutions for the automotive industry. EB´s software products are: EB street director navigation software, EB GUIDE HMI development and speech dialogue platform, EB tresos product line of software components used in ECUs and tools for their configuration, and EB Assist, an extensive product line with tooling and a software development kit for driver assistance solutions. These software products generate license fees, often combined with supply of R&D services for customized solutions.

EB and AUDI´s subsidiary, Audi Electronics Venture GmbH (AEV), have a jointly owned company GmbH that is currently developing infotainment software and provides systems engineering and systems integration services for Volkswagen Group car models. EB also delivers products and R&D services to the joint venture. EB owns 51% of GmbH and AEV 49%.

Development of the Automotive Business Segment in 2013

Net sales of the Automotive Business Segment in January-December 2013 grew to EUR 138.3 million (restated net sales of EUR 110.6 million, 1–12 2012), representing 25.0 per cent growth year-on-year. A significant proportion of the growth in the net sales came from the rapid growth of GmbH, a jointly owned company with AUDI. Operating profit was EUR 8.5 million (restated operating profit of EUR 3.3 million, 1–12 2012). Operating profit improved due to the growth of the service and software sales, slight decrease in R&D costs, and improved management of projects and measures to improve the cost structure. At the beginning of 2013 EB was selected as the supplier for several long-term product development and product customization projects for leading car makers. A pricing model, where a part of the product development fee is moved to license fee based on the actual delivery volumes of new cars, was increasingly often taken into use in the largest projects. When using this pricing model, which is common in the automotive industry, the project specific positive operating result and cash flow will be typically reached first during the car production years.

During the first quarter EB announced the integration of EB street director navigation software into the QNX CAR™ application platform 2.0, a product of QNX Software Systems Limited used to develop advanced infotainment systems for connected car. EB also announced that the runtime solution of its development platform for human machine interfaces (HMIs), EB GUIDE Graphic Target Framework (GTF), has been ported to the Renesas´ R-Car H1. The collaboration will enable car manufacturers to use the high-end Renesas chip in combination with the EB GUIDE GTF to utilize the advanced graphical capabilities of the SoC (systems-on-chip).

EB told that it is among the first suppliers to deliver an ASIL D certified AUTOSAR operating system and the only one certified for two safety standards. ASIL D and SIL 3 rank among the highest security levels for functional safety according to the ISO 26262 / IEC 61508 specifications for electric and electronic components. Functional Safety is getting more and more important for today´s automotive ECUs and these received certificates strengthen EB´s position in these markets.

In April, EB announced to have opened a new office in Brasov, Romania for automotive software development. The new location will allow the company to expand its existing automotive software development teams in Romania. The Brasov office will focus on automotive software product development and testing.

In June, EB and Daimler announced to have strengthened their long-term successful partnership for developing Daimler´s embedded driver assistance software. Through this partnership, a new collaboration model is being introduced, where EB is taking the role of direct software supplier for Driver Assistance to Daimler. By separating hardware and software development, EB and Daimler are able to manage the growing complexity of software in the Driver Assistance domain. It also enables both parties to focus on their core competencies.

EB continued its R&D investments into the automotive software products and tools. In October, EB announced a new version of its HMI development platform, EB GUIDE 5.5, which includes a wide-range of consumer-inspired features including 3D content import, compelling graphical animations and effects, speech recognition for dynamic data, as well as multi-touch and touch gesture recognition for smartphonelike user interaction. EB GUIDE 5.5 also enables carmakers and suppliers to create multi-modal HMIs enriched with HTML5 application-like content.

Automotive Business Segment Market Outlook

As the global economy is showing signs of recovery, the global car market is expected to grow by 3% in 2014 according to the forecast made by VDA (Verband der Automobilindustrie). For several years carmakers have continued to invest in automotive software for new car models and the market for software products and services is estimated to continue growing during 2014. The demand for EB´s products and services is estimated to develop positively year-on-year during 2014 in the Automotive Business Segment.

The market for electronics and software for cars is estimated to continue growing in the long term. The study “Future Industry Structure of Automotive (FAST) Electronics 2025´ from Berylls assumes a growth of automotive electronics from EUR 215 billion in 2012 to EUR 456 billion in 2025 (CAGR 6%).

Growth in automotive software market is mainly driven by:

  • The majority of in-vehicle innovations come from electronics and software. Carmakers can develop more vehicle features and create product differentiation as software innovation allows for great product innovation jumps in the areas of comfort, information and entertainment, powertrain and communication.
  • The software and hardware in electronics solutions will be gradually separated from each other in order to speed up the innovation and to improve the quality and cost efficiency. Consumers expect in the car the same richness of features and user experience they know from the internet and mobile devices, and therefore infotainment systems become increasingly common in all car price categories.
  • Mobile connectivity will become one of the fastest-growing Internet-connected device platforms among other connected consumer electronics devices, such as media tablets and smartphones. Gartner estimates that by 2016, the majority of car buyers in automotive markets like the USA and the Western Europe will view the availability of in-vehicle, web-enabled dynamic content as a key buying criterion when considering a standard brand car. This tipping point will be reached even sooner — during 2014 — for premium-brand cars.
  • Connected Car solutions and cloud connections enable bringing of new applications and enhancements to car functions, for example real-time traffic information for navigation. The Wearable devices, such as smart watches, are becoming a trend in mass markets and they are also expected to wirelessly connect with the internal technology of the car. The increasing demand for better integration of mobile devices with the car has been reflected in consumer electronics companies such as Apple´s “iOS in the Car´ or Google´s announcement of Open Automotive Alliance.
  • The need for mobile connectivity is increasing also due to development steps made in car to car communication, communication from vehicle to other systems as well as in driver assistance systems (including autonomous driving features of vehicles).
  • New Active Safety Systems and Driver Assistance applications are being brought to markets as automated driving is becoming one of the key trends in the markets.