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Global and China Micro Electric-Voice Device Industry Report, 2010-2011

2

1. Profile of Mobile Phone Electric-voice Devices

1.4 MEMS Microphone Market and Industry

The shipment of MEMS microphones was ** million units in 2009, and is expected to be ** million units in

2010, and to soar by four times over 2009 to ** billion units in 2014.

Source: iSuppli

The application of MEMS microphone in iPhone4 makes Apple become the second largest buyer of MEMS

microphones in 2010. The largest buyer of MEMS microphone is Samsung. Apple was the sixth largest buyer

of MEMS microphone in 2009.

Although MEMS microphone is more expensive than ECM, but it has clear advantages over ECM in size,

scalability, temperature stability and sound quality.

In order to suppress noise, iPhone 4 adopts two independent MEMS microphones to reduce background noise

and improve the clarity of voice calls. Although the noise suppression technology was mature as early as 2006,

its wide application only began after the mass application of MEMS microphones by Motorola Droid and Apple

iPhone 4.


3

The top three end products adopting MEMS microphones are mobile devices, notebooks and headsets in 2010.

It’s estimated that by 2014 most of the smart phones will have adopted two or more MEMS microphones.

Handheld devices and notebooks will still be the largest users of MEMS microphones, followed by flat panel

devices.

Among the large MEMS microphone manufacturers, Knowles Electronics has remained as the leader since

2003. Its market share reached around **% in 2010. Its main advantage lies in the ownership of MEMS

microphone IP patent. However, the MEMS microphone market competition is increasingly fierce. Among the

top five MEMS microphone manufacturers, three come from Asia, including Chinese AAC Acoustic

Technologies, ** and Japanese Hosiden. All the three enterprises manufactured ECM products previously, and

now have launched or planned MEMS microphone product lines. They buy MEMS bare dies from Infineon, and

then package and sell them through existing channels. Among the top five enterprises, only ADI is a pure

MEMS microphone manufacturer.

ADI’s success in the tort lawsuit against Knowles Electronics will change the entire MEMS microphone industry.

The ownership of packaging patent has enabled Knowles Electronics to dominate the MEMS microphone

market in the past, but ADI’s success in the lawsuit may end the long-term exclusive advantages of Knowles

Electronics in the future.


4

4. Micro Electric-Voice Industry

4.1 Ranking

Revenue and Operating Margin of Micro Electric Voice Manufacturers, 2010

Operating

Margin

Revenue

(US$ mln)

Major Products

Merry ** ** hands-free receivers

Goertek 13.3% ** Bluetooth headsets, microphone, speaker

AAC ** Bluetooth headsets, hands-free receivers, receiver,

speaker

Hosiden ** ** Bluetooth headsets, hands-free receivers, receiver,

speaker

Foster ** ** Earphone, speaker, hands-free receivers

BSE ** ** ECM microphone

Plantronics ** ** earphone

Knowles ** ** MEMS microphone

NXP Sound Solutions

(acquired by Dover)

** Speaker, receiver

Forgrand ** speaker

Panasonic Electronic Devices Co., Ltd. ** Speaker, receiver, hands-free receivers

Sonion ** Speaker, receiver, hands-free receivers

Zhejiang New Jialian Electronics ** Speaker, receiver

STAR MICRONICS ** Speaker, receiver, hands-free receivers

Bujeon ** Speaker, receiver

Crysn ** earphone


5

Output Value of Mobile Phone Electric Voice by Product, 2010

Speaker Receiver Microphone Hands-free Receiver

** ** ** **

Unit: US$ mln

4.2 Market Share of Mobile Phone Electri-voice Products

Market Share of Global Mobile Phone Speaker Manufacturers, 2010

NXP AAC Hosiden GoerTek Foster Panasonic Electronic

Devices Co., Ltd.

Bujeon Bluecom Other

** ** ** ** ** ** ** ** 13%


6

Market Share of Global Mobile Phone Receiver Manufacturers, 2010

NXP AAC Hosiden Panasonic Electronic

Devices Co., Ltd.

Bujeon Sonion Other

** ** ** ** ** ** 10%

Market Share of Global Hands-free Receiver Manufacturers, 2010

Hosiden FOSTER Merry AAC Panasonic Electronic

Devices Co., Ltd.

Other

** ** ** ** ** **


7

Market Share of Global Bluetooth Headset Manufacturers, 2010

GN CRESYN Foxlink GoerTek Merry Cal-Comp Other

** ** ** ** ** ** **

Market Share of Major ECM Microphone Manufacturers, 2010

BSE Hosiden GoerTek Panasonic Electronic

Devices Co., Ltd.

Other

** ** ** ** **


8

Market Share of Major Mobile Phone Microphone Manufacturers, 2010

BSE Hosiden GoerTek Panasonic Electronic

Devices Co., Ltd.

AAC KNOWLES Sonion Other

** ** ** ** ** ** ** **

4.4 Notebook Speaker

Market Share of Major Notebook Computer Speaker Manufacturers, 2010

Fortune Grand Netronix Altec Lansing Foster Panasonic Electronic

Devices

Others

** ** ** ** ** 9%


9

Client

Fortune Grand Compal (**% supplied by Fortune Grand), Quanta (**%)

Netronix Wistron, ECS, Hon Hai, CLEVO

Altec Lansing Dell, HP

Foster Toshiba, Fujitsu, Sony

Panasonic Electronic Devices Toshiba, Fujitsu, Sony


10

5. Manufacturers of Micro Electric-Voice Devices

5.2 GoerTek

GoerTek is located in Weifang, Shandong. GoerTek has a mold R & D team of 400 people, an automatic

production line R & D team of 150 people. 250 people work in R & D teams of Qingdao GoerTek and Beijing

GoerTek.

GoerTek’s growth is attributed to its strategic adjustment. First, it adopted Key Account Strategy in 2005, and

gained the recognition from Samsung and LG; second, it acquired 75% stake of Weifang GoerTek and turned

it to be an acoustic solution provider in 2007; third, it went public in Share A to raise RMB530 million in 2008.

In 2009, GoerTek obtained all Bluetooth production lines of Plantronics and entered the microphone supply

system of Nokia.

The major clients of GoerTek include Samsung, HP, Cisco, LG, Panasonic, Siemens, NEC, Foxconn, Flextronics,

Acer, Asus, Lenovo, Kyocera, ZTE Corporation, Plantronics, Harman and Logitech.

In 2009, GoerTek achieved the revenue of RMB1.13 billion (up 11.3% year on year); the total profit of

RMB124 million (down 19.3%year on year); the net profit of RMB99.88 million (down 18.6% year on year).

The earnings per share reached RMB0.42, and the distribution program was RMB1 (in cash) for 10 shares.

In Q3 2010, GoerTek achieved the revenue of RMB18.45 million (up 159% year on year); the net profit of

RMB1.93 million (up 248 % year on year).

Micro-electro-acoustic field is still the basis for the development of GoerTek. GoerTek supplied more and more

digital microphones for NOKIA in 2010. In the future, the shipment will continue to increase, especially it will

supply a great number of speakers for Nokia.


11

GoerTek is the largest provider of Samsung's micro-electro-acoustic products, but is the second largest

supplier of a single product. GoerTek tries to raise its shares in Samsung from 20% to 40%.

The corporation with Asus and other notebook computer manufacturers in microphone array means

broadening of GoerTek’s product application. In the future, GoerTek will cooperate with more computer

companies.

The global financial crisis inspires OEMs of Bluetooth headsets, and Plantronics’s capacity transfer has been

completed. As the mobile phone industry recovers and the penetration of Bluetooth devices is enhanced,

GoerTek's Bluetooth headset business will generate profit in 2010. In addition, many mobile phone

manufacturers have launched the Bluetooth headsets with their own brands, GoerTek considers to provide

supporting products for NOKIA, Samsung, Apple and other vendors directly.

TV-use 3D glasses developed by GoerTek with its major customers and game-use acoustic systems will

become potential growth points.

GoerTek Revenue and Operating Margin, 2006-2011

2006 2007 2008 2009 2010 2011

Revenue (RMB mln) ** ** ** ** ** **

Operating Margin 21.0% ** ** ** ** **


12

Products Microphones Speakers Handsfree / Bluetooth

Headsets

Quality

Requirements

Clear and accurate signals Sound effects Combination of

microphones and

receivers

Common Technology

Core

Technology

Direction structural design

Microphone array and phase

coherence technology

Digital and EMI technology

MEMS design and packaging

technology

Diaphragm design

technology

Tune design and module

design technology

Heat dissipation and

resistance technology

Micro-electromagnetic

speaker technology

Echo cancellation and

voice enhancement

technology

Short-range wireless

communication

technology

Active noise reduction

technology

Stamping injection mold

development and

manufacturing

technology

Automated production

and equipment

manufacturing

GoerTek has powerful integrated manufacturing capabilities and is good at diaphragm manufacturing, mold

technology and equipment manufacturing.

GoerTek is the first one to master the composite diaphragm technology. 85% of its microphone diaphragms

are made by itself, saving the cost by **%. All of its plastic casings are made by itself, shortening the

procurement period by 50% and saving the cost by 20%. GoerTek produces some devices which are used

frequently, the price declines from millions of yuan to RMB200,000. And such devices can be updated flexibly.

GoerTek developed a number of automatic and semi-automatic miniature microphone, mini speaker /

receiver production lines, supplying a gap in this field in China. GoerTek has 15 SMT production lines and 51

sets of injection molding machine. It can process 50 sets of precision molds and produce 6,000,000 pieces of

spraying parts per month.

Vertical integration brings lower cost and higher efficiency to GoerTek. For example, GoerTek usually spends

15 days on the development of the Bluetooth headset molds, while Merry 25 days and Plantronics Suzhou 30

days. As for automation equipment, GoerTek should pay RMB2 million for a set, but it only pays RMB500, 000

for a set if it produces by itself. AAC and Merry do not have such advantage like GoerTek, so they have not

conducted Bluetooth headset business. Besides, Plantronics closed its Suzhou Plant just after the

establishment of the plant, and transferred its Bluetooth orders to GoerTek.


13

GoerTek Output

Before Production (2007) After Production (2009)

Sales Volume Market Shares (%) Expected Sales Volume Market Shares (%)

Miniature Electret Microphones 23693 ** ** **

Miniature Speakers / Receivers 4114 ** ** **

Bluetooth Products 306 ** ** **

MEMS Microphones ** ** **

Portable Audio Products 8.22 ** ** **

GoerTek Revenue by Product, 2005-2010

2005 2006 2007 2008 2009 2010

Microphone 92 69 ** ** ** **

Speaker 7 24 ** ** ** **

Bluetooth 1 7 ** ** ** **

Portable Audio ** ** ** **

Others (including LED and 3D glasses) ** ** ** **

In H2 2010, GoerTek vigorously developed LED and 3D glasses business.3 D glasses business is developing

well, Sony and other customers will bring sustained growth.

GoerTek has production capacities in LED backlighting products, and will gain the orders from Samsung by

the end of this year. LED lamps and displays are promoted in Weifang and other regions. GoerTek will raise

RMB506 million in October, and will invest the fund in technological transformation of miniature digital

microphones, cell phone-use micro speakers / receivers, digital audio products and LED packaging.


14

GoerTek’s abilities in product development has been enhanced, the relations with Samsung, Plantronics,

Nokia and other front-line customers has been further strengthened, and it has obtained the orders incurred

by the international production transfer. Top five customers bring the increasing operating revenue, up to

RMB740 million. Top five customers are mainly well-known foreign manufacturers, and the export to them

sees a significant growth, with the year-on-year sales growth rate of 320%.

The future demand for GoerTek's electro-acoustic devices will keep rising.

GoerTek is the exclusive OEM of Plantronics which is a leading Bluetooth headset giant, and gains the output

value of RMB800 million thereby. Plantronics produces high-end headphones valued RMB2 billion by itself, but

it may grant OEMs to produce such products in the future. GoerTek also supplies some products to Samsung.

In addition, GoerTek will enter OEM supply chains of Sony, Nokia and so on.

Contact: Ms Liu / Ms Guo

Phone: +86-536-8525155

Postal Code: 261031


15

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16

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