Opportunities Report

Opportunity Management System

WACKER’s opportunity management system remained unchanged from the previous year. It is a divisional and Group-level instrument. We identify operational opportunities and exploit them in our business divisions, which possess the detailed product and market expertise needed. We continuously use market observation and analysis tools to obtain a well-structured assessment of market, industry and competitor data, for instance. Plus, we hold customer interviews to evaluate future opportunities. The monitoring process – how WACKER seizes opportunities – is based on key indicators (such as rolling forecasts and current-status reporting).

Opportunity Management System

Strategic opportunities of overarching importance – such as strategy adjustments, potential acquisitions, collaborations and partnerships – are handled at the Executive Board level. Such opportunities are incorporated into WACKER’s annual strategy-development and planning process, with current issues being discussed at regularly scheduled Executive Board meetings. For these issues, we normally use various scenarios to develop risk-opportunity profiles before making decisions.

WACKER has identified a whole range of opportunities for advancing the Group’s success over the next few years.

Overall Economic-Growth Opportunities

Although the economic environment is becoming tougher, WACKER sees good opportunities for growth in new markets and sales regions. Our focus here is on Brazil, China, India and the Middle East. As previously, we expect the highest growth rates to be in China and Southeast Asia. To seize such opportunities, we are steadily expanding our presence in these markets. Our technical competence centers and the WACKER ACADEMY are pivotal in achieving WACKER’s high standard of service and customer proximity.

Sector-Specific Opportunities

Sector-specific opportunities arise mainly due to our extensive product portfolio, which enables us to satisfy global megatrends with great success. These trends remain as important as ever to our business.

Rising prosperity in Asia’s growth markets and in the emerging economies of other regions is fueling the need for high-quality products that incorporate silicones. By 2014, the market for silicone products should expand to €11.1 billion – growing at an average of 6 percent annually. In almost every sector, WACKER SILICONES offers products and solutions that support rising prosperity and promote urbanization, infrastructure expansion and environmental protection.

Energy remains a key megatrend, with the photovoltaic industry playing a major part here. The competitiveness of the solar industry compared to other energy sources continues to spur demand for solar installations. All around the globe, the use of renewable energy is increasing. Some countries and regions are supplanting Germany as the key market. The main examples here are the USA, China and Japan. As a polysilicon producer and cost and quality leader, WACKER POLYSILICON will benefit from this megatrend. Importantly, WACKER’s portfolio includes products that conserve energy. WACKER POLYMERS supplies innovative products for the thermal insulation of buildings, for example. The Chinese government has cited energy conservation as one of its key environmental goals for the next few years. Thanks to our products, we can play a significant role here.

The digital processing and storage of information is progressing fast. As a manufacturer of silicon wafers, WACKER benefits from this megatrend. The demand for silicon wafers is climbing, fueled by semiconductor products for consumer electronics and by volume growth in Asia. The market share of 300 mm wafers is rising. In 2013, WACKER will have sufficient capacity to participate in this growth due to the expansion measures at Siltronic Samsung Wafer, our Singapore-based joint venture.

Strategic Opportunities

Production-capacity expansion presents WACKER’s divisions with opportunities for further growth. All our divisions are investing specifically in technologies and production plants that underpin and promote growth. The three chemical divisions – WACKER SILICONES, WACKER POLYMERS and WACKER BIOSOLUTIONS – offer the best growth prospects. At WACKER POLYSILICON, we aim to benefit from the photovoltaic market’s continuing growth.

Further opportunities arise through developing high-quality WACKER products that we can use to substitute other commercial products.

WACKER POLYMERS sees scope for growth in the substitution of styrene-butadiene with VAE dispersions. The high price of crude oil and the lack of supply security following the switch from oil to ethane by American crackers have prompted many paper and carpet manufacturers to turn to cost-effective VAE dispersions. In our opinion, this trend will continue. We also see scope for substitution in the coatings area.

At WACKER SILICONES, we aim to sell more products for specialty applications. To that end, we are developing a host of new products and applications. For example, thermoplastic silicone elastomers. Their prime advantage is that crosslinking can be reversed under heat, via established technology, and that they retain their typical silicone characteristics. They are used in photovoltaics, in medical technology and in film and sheet manufacturing. Growth opportunities will also arise from setting up a new development center for consumer electronics in South Korea, the international hub of this industry. The new “Center of Excellence Electronics” will focus on developing new products and tailored high-tech solutions for the electronics industry, and on implementing customer requirements with greater speed and ease.

Performance-Related Opportunities

If our energy costs were appreciably lower, production costs would clearly benefit, especially in energy-intensive polysilicon manufacturing.

To optimize procurement costs, we aim to systematically reduce our dependence on individual suppliers and qualify new partners.

Through our “Wacker Operating System” (WOS), we strive to optimize processes and increase productivity, each year fine-tuning the main levers within our supply chain so that we become even better. The overriding objective is to defend WACKER’s superior cost and quality position against competitors. Crucially, we are supported by our own engineering teams, who have a wealth of plant expertise. During 2013, a key priority will be cutting costs in our polysilicon production processes.

We will continue expanding our sales organization, technical competence centers and WACKER ACADEMY. In 2013, the technical competence center in Brazil will be enlarged. Having an even stronger market presence will open opportunities to enhance our market share.