ESS Technology Acquires Divio, Inc.

Safe Harbor Statement
The matters discussed in this presentation include certain
forward-looking statements that involve risks and uncertainties,
including, but not limited to, the impact of competitive products
and pricing, the possible reduction of consumer spending
occasioned by general economic conditions, the timely
availability and acceptance of ESS‘s new products, the
dependence on continued growth in demand for consumer
multimedia products, the uncertainty of the outcome of any
litigation proceedings, and the other risks detailed from time to
time in the SEC reports of ESS, including the reports on Form
10-K, Form 10-Q and Form 8-K. Actual results could differ
materially from those projected in the forward-looking
statements. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new
information, future events, or otherwise.
May 2002
The Leader in Consumer
Digital Entertainment Electronics
August 2003
May 2002
ESS Overview
• ESS is a fabless consumer digital entertainment
chip supplier
• ESS has a long history of being a market leader
• 1989 - #1 Supplier - Sound chips for toy industry
• 1995 - #1 Supplier - Audio accelerator chips for PCs
• 1998 - #1 Supplier - VCD video chips
• 2001 - #1 Supplier - DVD video chips
• 2002 - #1 Supplier - Digital video chips
- #1 Supplier – Videophone chips
• Currently #1 supplier of Digital Video chips
worldwide (InStat, June 2003)
May 2002
The Digital World
• The World is going digital
-
Audio (music and voice)
Video (TV, playback and recording)
Imaging (camera and camcorder)
Communications (phone and internet)
• Digital Technology enables new applications
• New applications are changing our lifestyle
May 2002
ESS Opportunities
• ESS is the leader in Digital Video Playback
- VCD & DVD (MPEG 1 & 2)
- MPEG4, DivX (new)
• Expanding into Digital Video Recording
-
Recordable DVD (MPEG2)
Digital Video Recorder (DVR)
Acquired Divio
- MPEG4 encoding
- DV Codec
• Expanding into Digital photography
- Acquired Pictos
- Sensor and image processor for Digital Still Camera (DSC)
- Sensor and image processor for camera phone
- Image processor for Camcorder
May 2002
VCD has a New Life
• VCD Playback
• VCD is growing worldwide
• Low cost content
• $30 street price
• BOM cost lower than DVD
• Royalty free
• > 65 million players in 2003 and growing
• Popular in most populous countries:
• China, India and Indonesia
• Popular in emerging countries:
• Russia, South America, Africa
• ESS has 65% market share and growing
May 2002
VCD has a New Life
• VCD-MPEG4 is the new upcoming standard
•
•
•
•
•
Same video and audio quality as DVD
Only one CD disk per movie
Street price between VCD and DVD player
Lower BOM cost than DVD (uses CD loader)
Large amount of low cost content available from Internet
• VCD market is migrating to VCD-MPEG4
• ESS’s VCD-MPEG4 revenue and margins are
much greater than DVD and VCD
May 2002
DVD
• DVD Playback
• Basic DVD Player
• Emerging Applications
• MPEG4 and DivX
• Combo
• Automotive
• Portable
• 90 million players in 2003 and growing
May 2002
Digital Audio and Video Applications
• Home Theatre In-a-Box
- Audio Decoder
- Digital Amplifier
• Digital Media Player
May 2002
Recordable Applications
• Video Disk Recorder
- Recordable DVD
• Digital Video Recorder (DVR)
- Hard-disk based
- Record TV programs (Tivo-like)
- Archive
•
•
•
TV Programs
Home Videos
Digital photos
• Video Disk Recorder and Hard Disk
Recorder combo
May 2002
Digital Photography Applications
• Digital Still Camera
• CameraPhone
• Digital Camcorder
• Digital Photo Viewer and
Printer
• Digital Photo Pictureframe
May 2002
Videophone Applications
• Analog Phone
• IP Phone – high speed
• Cellular videophone
• Cameraphone to videophone
May 2002
Digital Home System (DHS)
• Digital Home System (DHS)
A central digital entertainment home-media system
- Playback and Record
• Audio and Video
- Recordable DVD
- Hard Disk
- Jukebox and Archive
• Movies
• Music
• Digital photos
- Entertainment Distribution
• Home Network
- Wireless
- Ethernet
- Internet Connectivity
May 2002
• Download Entertainment Content
Product Line and Revenue growth
• New products for emerging markets
- MPEG4, R-DVD, DVR, Digital Amplifier
• New products for large complementary
markets
- DSC Image Processor
- CMOS Image Sensor
• ESS will leverage
-
Existing technologies and products
Existing customer base
Existing infrastructure in Asia
Mass production efficiency and costs
May 2002
Margin and Profit Growth
• Expand technologies and product lines
• Introduce new products with higher margins
• Increase mature product margin:
- Integration
- Feature enhancement
- Cost reduction
• Maximize the benefits of high volume production
• Keep expenses low
May 2002
ESS’s Total Available Market (Units)
Market TAM in Units
400
350
CameraPhone
Units (Millions)
300
Digital Still
Camera
250
DVD
Recordable
200
DVD
150
VCD
100
50
0
2002
May 2002
2003
2004
2005
2002-2005: ESS’s Units TAM: 2.6 X
ESS Estimate
ESS’s Total Available Market ($)
Market TAM in $
3,000
CameraPhone
$ (Millions)
2,500
2,000
Digital Still
Camera
1,500
DVD
Recorder
DVD
1,000
VCD
500
0
2002
May 2002
2003
2004
2005
2002-2005: ESS’s Revenue ($) TAM: 2.6 X
ESS Estimate
Key Customers
• USA
– Apex Digital, Audiovox, Creative Lab, GE, Motorola, Polaroid
• China
-
BBK, Chang Hong, Malata, Shinco, Skyworth, TCL, Tonic
• Japan
-
Alpine, Clarion, Denon, Fujitsu-Ten, JVC, Panasonic, Sanyo,
Sharp, Sony
• Korea
-
Anam, BlueTek, Daewoo, DMT, LG, RMC, Samsung,
Taeyoung
•
Taiwan
May 2002
- Carry, GBM, Mustek, Premier, Quanta, Sampo, Ya-Shin
DVD/VCD Roadmap
Vibratto™II
Servo + Decoder
DVD
Vibratto™
DVD decoder
Vibratto™ IV
Vibratto™ III
HD-DVD decoder
Single Chip
Advanced Decoder
+ Servo + RF Amp
Vibratto™S
Advanced
DVD decoder
Visa 2 ™
Visa ™
MPEG4-CD
MPEG4-CD
Recording
Visa 3 ™
MPEG4-CD
Advanced
Features
VCD
Visba 3™
VCD decoder
Visba 4™
Servo Controller
May 2002
H2/03
H1/04
H2/04
H1/05
Recordable
Vantage IV
Performance / Integration
Servo integration
Vantage III
Servo integration
VibrattoS
Vantage II
Encoder + Decoder
Decoder
Falcon
DV/1394
Video Decoder
Encoder
Vantage I
Time
H2/02
May 2002
H1/03
H2/03
H1/04
H2/04
Sensors
Image Processors
CameraPhone Roadmap
Dorado
Processor
Dorado II
Dorado LC
Processor
Processor
1.1M Pixel
CMOS Sensor
VGA CMOS
Sensor
1.3M Pixel
CMOS Sensor
2.2 M Pixel
CMOS Sensor
4T CMOS
Sensor
Time
H1/03
May 2002
H2/03
H1/04
H2/04
H1/05
DSC Roadmap
Image Processors
Sensor
3.3 M Pixel
4T CMOS
Sensor
Low Cost
Low Light Performance
Raptor III
Raptor II
Processor
Processor
2M – 3M Pixel
Low Power
2M – 3M Pixel
Raptor IIILC
Processor
Low Cost
2M – 4M Pixel
Time
H1/03
May 2002
H2/03
H1/04
H2/04
H1/05
DHS Roadmap
DHS with
MPEG2/MPEG4
Encoding
Networked Home
Entertainment Center
DHS II with
Falcon
Integration
DHS III
DHS II
Vantage I
ES8008
DHS Processor
Falcon
DV/1394
Video Decoder
Companion
chip
H2/03
May 2002
H1/04
Time
H2/04
H1/05
H2/05
Financial Overview
May 2002
Revenue and Gross Margin
Revenue
Gross Margin
40%
$300
$250
30%
$200
20%
$150
$100
10%
$50
0%
$0
2001
DVD
May 2002
2002
VCD
PC
2001
2002
Proforma EPS and Cash
Cash
Proforma EPS
$1.00
$0.87
$0.90
$0.80
$0.70
($ Millions)
$240
$199
$200
$0.64
$160
$0.60
$129
$0.50
$120
$0.40
$80
$0.30
$0.20
$40
$0.10
$0.00
$0
2001
May 2002
2002
2001
2002
Summary
• New Products and additional markets
–
–
–
–
–
New life for VCD
DVD/DivX/MPEG4
Recordables: R-DVD, DVR
Digital Photography: DSC, Camera Phone, Digital Camcorder
Digital Home System
• Revenue Growth
-
Target markets more than double by 2005
• Margin Growth
-
New Products for higher margin
Integration and added features to increase margin
Target margin above 40%
• Customer Base Expansion
Success in China, Japan, Korea and Europe
May -2002
• Strong Balance Sheet
May 2002
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