June 2011

White Paper – Global In-Car Audio and DSP Market

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Agenda

1. In-Car Audio Systems Market

2. Arkamys Value Proposition

3. Opportunities offered to OEMs by Digital Sound Processing

Solutions

3

Branded Premium Sound Systems Penetration Increasing– Key USP to sell vehicles

Increasing Focus on HDD for Storage – through different medias like USB, SD Card, physical HDD

Weight Reduction Key Factor – Reducing weight from speakers, wiring using sound absorbing elements

DSP is More for Compact/Small Car Segment – Speaker Number not key in this segment so DSP important

Mixed Scenario with Number of Speakers – NA OEMs tending to go for more speakers while leaders in EU like Volvo are

focusing on improving efficiency with existing speakers

Auxiliary Input for Nomad Devices Critical – Nomad device connectivity with vehicle HMI control is a critical feature

Top Level Market Overview

“ Branded premium sound: OEMs consciously put well known brands such as Bose,Bang&Olufsen, etc. in their vehicles as this is the key selling point for premium audiosystems.” – Mercedes Benz

Sound Quality is Definitely a Key USP for OEMs, Premium Branded and DSP are Two Approaches Used by High-End and Mass Manufacturers

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Premium car buyers in China require a branded sound system as a must to have

product

Premium brands boast of high end Bluetooth hands free telephony

Growing demand in China for integratedInfotainment systems

Premium OEMs like BMW in China offerhigh end branded Audio

MP3 system with 4 speakers and frontaux connection for nomadic devices

is required in India

Only a few OEMs like Fiat offer BluetoothTelephony in India with low uptake rates and

awareness levels due to high cost

Low awareness and demand for Infotainment solutions purely because of the

high cost

Low consumer awareness and requirements for sound quality

offering very little potential

Type of System

Bluetooth Connectivity

Sound Quality

Integration

Key Requirements

Emerging Market In-Car Audio Requirements – Branded Audio Systems are a Must to Offer Feature for Premium Cars in China

“Multimedia is big in China, even in smaller cars. High expectation when it comes to

brands – selling a unbranded sound system is almost impossible (esp. in China).

Expectation regarding sound quality is still low. Will increase in the mid- to long-

term.” – Volvo

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Imp

act

Ma

rke

t D

rive

rsM

ark

et

Re

str

ain

ts

Imp

act

Demand for Aux Input for Nomad

Devices

Initial cost of investment for the premium sound

system

Increasing Sound Quality Demands from Aware

Consumers

Low

High

Low

High

Advances in the Consumer

Electronics Field

Continuous Technology

Improvements like dynamic volume etc

Improvements in Areas like Hands Free

Calling

Lag between Consumer Electronics and

Automotive Development Cycles

New Developments like Emotions through Sound still limited to High End

Consumers

Source: Frost & Sullivan

Customer Demand for Improved Sound Quality is a Big Driver. Conversely High Initial Investment is a Big Restraint owing to Current Crisis

Consumers turning from Car Performance

to Comfort

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Weight constraints with large speakers

complicating manufacturing process

Available processing capacity on head units

and power in vehicles

Cost of the premium audio product for mass

market customers with rising audio requirements

Packaging Constraints with speakers

impacting sound quality

Technical

Challenges

Commercial

Challenges

“Weight and packaging constraints are the biggest challenges when it comes to audiodevelopment in a specific car – Visteon

Cost Remains to be the Biggest Challenge but Weight Reduction, Power Management and Packaging Constraints are Also Critical Challenges

Need to reduce development costs

High

Low

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Audio

Processing

Market

• Enabling CD/DVD media to play in 5.1 or 7.1 surround modes

• Encoding/decoding technologies

Encoding and

Decoding

• Algorithms to create sound effects � 2 channel sounding like 5

• Effects that can be switched off by customer

Algorithms for

Effects and

Sound

Processing

High Quality

Audio Tuning

• Digital Tuning of sound to offer audio quality in line with cabin acoustics

• Superior audio experience comparable to systems with 10+ speakers but with only 4

Sound Processing Market – Multiple Layers of Companies Cater to this Sector offering Different Expertise

Typical Features

of Audio

Processing

� Sound rendering enhancement

� Sound scene lifting

� Simulated surround sound

� Volume levelling for different compressed format

� Active noise reduction

� Audio compressed decoding like MP3, AAC…

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Agenda

1. In-Car Audio Systems Market

2. Arkamys Value Proposition

3. Opportunities offered to OEMs by Digital Sound Processing

Solutions

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Specialized in audio processing and services for Consumer Electronic market

Two mains offers :- “Sound Staging” for Automotive

- “Immerse U” for mobile and connected devices

Sound Staging, User options, Audio features, HMI & Controls

Upper Mid RangeMid RangeEntry Level

Performance

Standardization of audio solution across many suppliers for a single VM

Cost innovative

sound technology dedicated to car

audio enhancement

Software solution, no impact on

audio hardware (head unit,

speakers set-up)

Customizable audio solution

tailored for all types of head units

and speakers set-up

Customer specific sound signature

based on vehicle type and acoustics

Arkamys Value Proposition – One Sound Staging Solution across the Whole Product Range and Platforms Constraints

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Processing poweroptimized

Phantom Tweeter Option

Phantom Center Speaker Option

Platform Independent

Sound Staging

Audio Enhancement Cost Reduction

Arkamys Value Proposition – 3D Positioning is the key Offer with Renault on many Models

Benefits Cost Reduction Areas

• Creation of a wide sound scene lifted in front ofeach listener

• Correction of lateralization due to door speakers

localization

• Optimization of audio rendering

• Respect of timber and dynamics

• Standardization of audio signature

• Sound engineer mastering for a natural listeningpleasure

Phantom Tweeter Option• Allows to remove the physical tweeters and to save the

cost of their installation • Recreates smooth and detailed highs without tweeters to

reach at least the same level of quality Phantom Center Speaker Option• Allows to remove the physical center speaker • Creates a virtual center whose position can be precisely

managed • Allows to accurately display 5.1 contents in standard

configurations

3D Positioning

Acoustic compensation

In-vehicle adaptation

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Arkamys Value Proposition – Sound Staging and Multiple Level Advanced Audio Features are Available

ComplianceWith many speaker set ups – 2 to 12

speakersWith every audio material (mono,

stereo, 5.1, 7.1)With every source

Ad

van

ced

Au

dio

Featu

res

Sound Staging Solution

Expert Audio TuningSound Adjustment Tool (SAT)Skilled sound engineers in charge of sound rendering definition, audio validation, final qualitySAT with real time tuning, audio professional GUI and automatic tuning feature

Surround Sound• Enhances the

feeling of sound immersion

• Is dedicated to a front listening (1

or 2 passengers)

ANC & ECNRActive Noise Control, Echo Cancelling Noise Reduction to reduce noise and ease hands-free communications

Phantom Subwoofer

Rendering similar to a

physical subwoofer

HMI ControlsSimplified access

to controls and controls for

spacilziation and touch panel

ergonomics

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Arkamys Cost Benefit Analysis – Sound staging by Arkamys on a middle range vehicle case save 3.5 gCO2/km and as high as 60 M€ / year

Bose vs. Arkamys configuration

Weight

Power

consumption

- 0.136 L/100km - 204€

- 60 W/h - 0.12 L/100 kmAmplifier, central speaker,

2 tweeter, subwoofer-190€

- 4,7 kg - 0.016 L/100 km - 4,7 kg +0.014 L/100km

Total => Total =>

Configuration Hifi Mid BOSE – 10HP Sound staging by Arkamys – 6 HP

# Cost Weight # Cost Weight

Amplifier 8 channels DSP � 90€ 2,5 kg � - -

Arkamys Sound Staging � - - � 5€ -

Tweeters 4 4*10€ = 40€ 4*60g = 240g 2 2*10€ = 20€ 2*60€ = 120g

Woofer 4 4*20€ = 80€ 4*500g=2 kg 4 4*20€ = 80€ 4*350g=1.4kg

Central speaker 1 60€ 0.5kg - - -

Subwoofer 1 25€ 1 kg - - -

Total 10 295€ 6.24 kg 6 105€ 1.52 kg

10 kg = 0.9 gCO2/km 100 W/h = 0.2 L/100 km 120 gCO2/km = 4.5 L/100 km Diesel 1kg = 3€

- 3.6 gCO2/km - 61 M€Total => Total (300,000 car)=>

- Fuel consumption -

- 14€

- Costs -

Bose vs. Arkamys configuration

Weight

Bill of material

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Arkamys Value Proposition – Summary of Key Benefits Makes Arkamys a Killer Solution

Summary of Key Benefits

Cost Reduction

Processing power optimized

Cost and weight reduction by

eliminating needs for tweeters and woofers

using Arkamys DSP solution

Development time reduction

Efficient tuning process

� only few days compared to speaker

tuning which can take several weeks

Compliance

• Tier 1 Supplier

independent implementation

• Can be standardized across

vehicle platforms and styles

Sound Enhancement

Audio enhancement

features like front scene lifting,

surround sound and volume levelling are

key audio USP.

Arkamys’ software creates a full and pleasant surround sound that delivers an unrivalled listeningpleasure at this level of the product range. With Arkamys, even those who choose an entry-level

vehicle are able to enjoy a sound of “auditorium quality”. This listening pleasure is not reserved toupscale models anymore.

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Agenda

1. In-Car Audio Systems Market

2. Arkamys Value Proposition

3. Opportunities offered to OEMs by Digital Sound Processing

Solutions

15

Optimal Pricing and Purchasing ProcessSound staging software offered by companies like

Arkamys dramatically reduce tuning time and cost spent on audio enhancement making the

entire process very simple

Importance of Weight ReductionLot of OEMs are focusing on reducing weight

added by sound systems (speakers, woofers)and DSP is ideal for such a scenario

Adaption of Sound based on Local MarketsGrowing demand for sound adjustments based on

listening habits and local preferences (greater presence of bass in certain content, enhancement of highs, etc…)

Growing Demand for Small CarsGrowing demand for small cars in EU, NA and APAC

will shift more focus on DSP type enhancementsowing to low affordability of branded audio

Key Opportunity Areas for Sound Processing – Growing Demand for Small Cars even in Markets like NA will Increase Demand for DSP Type Solutions

• Sound staging is meant for all

types of cars – suits compact

car needs very well

• Automatic tuning tools are

critical, as current OEM

processes take days

• Affordable and clear

purchasing process is a big

advantage of DSP

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Summary of Key Benefits for OEMs – Arkamys Solution is Designed to be Platform and Supplier Independent thereby Increasing Efficiency and Reducing Costs for the OEM

Efficient tuning process

� only few days compared

to speaker tuning which can

take several weeks

Cost and weight reduction by

eliminating needs for tweeters

and woofers using DSP

�Arkamys solution fits the bill

and is more eco-friendly

Audio enhancement features

like front scene lifting, surround

sound and volume leveling are

key audio USP

Ability to adapt the sound

rendering to listening habits

and music types in local

markets Key

Benefits of

Arkamys

Solution

�Tier 1 Supplier independent

implementation

�Can be standardized

across vehicle platforms

and styles

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For Additional Information

For Additional InformationKatja FeickCorporate Communications

Automotive & Transportation

+49 (0) 69 7703343katja.feick@frost.com

Nicolas Meilhan

Senior Consultant

Automotive & Transportation Europe

+33 1 42 81 23 24

Nicolas.meilhan@frost.com