Good morning. Welcome, greetings tonight. Thanks a lot for joining the Sensirion Analyst and Media Conference on the Financial Results 2023. My name is Lars Dünnhaupt. I'm the Director of Investor Relations, and I'm your host today. On the Sensirion side, the main presenters are Marc von Waldkirch, our CEO, and Matthias Gantner, our CFO. Please note that the event will be recorded, so you can go back to the session and see it again at your own convenience. Then we look at the agenda for today. We have three sessions. Marc von Waldkirch, our CEO, will start the session with the full year 2023 business highlights. Then he will hand over to Matthias Gantner, who will walk you through the 2023 financials. At the end, Marc will conclude with his view on the outlook 2024 and our Sensirion's strategic focus.
After the presentation, as you can see, you will have the opportunity to ask questions here in Zurich. Just raise your hands, and we will then take the questions. And for all the participants online, please use the Webex chat functionality. Post your questions there, and I will then read the questions aloud. With that, I would like to hand it over to Marc.
Thank you, Lars, and a warm welcome this morning here in Zurich, but also all our virtual attendees today. It's a pleasure for me to present the figures of last year, and also thank you for your interest in Sensirion. Please yes, thank you. So let's start first with a short executive summary. All points I will raise again afterwards in more details in the slides to come.
First of all, and I think this is already a pretty well-known, 2023 was a pretty challenging year for Sensirion. This after three years with exactly opposite wind conditions. That means we actually benefited from extremely strong tailwinds in the last three years, with a significant growth in all these three years. And now in 2023, we had a change of the winds, and we had strong tailwinds. In parallel, we intentionally decided to continue our paths to expand R&D and sales in order to work on all the innovation pipelines short term, mid, and long term we have in the pipeline, and secondly also we are convinced about. And this combination of lower pipeline combined with higher sales and R&D costs actually ended up in significantly lower profitability for 2023. The profitability was actually impacted by this decision.
On the other hand, we are strengthening our longer, but also even short-term prospects for the future. I think it's already important here to highlight that the strategy we are following since many, many years is fully on track. Also the execution of the strategy, we are fully on track. I will come back to this point later on. And we are also still benefiting from all these secular megatrends like climate protection, but also energy efficiency and health. I will also come back to a very concrete example later in my presentation. Coming shortly to the figures. So revenue recorded CHF 202.33 million. This is down 27% all in all. If we figure that out in more details, we have 15% down in the organic part.
We have additionally 8.8% coming from the one-off of 2022 of the CPAP business, which was already at that time clear that this will disappear again. And last but not least, there was also, unfortunately, due to the fact we are located in Switzerland, down of 3% due to FX changes. Gross margin declined to 52%. And I will also comment this topic later in my presentation. And EBITDA at the end of the day, CHF 4.3 million. A short look to the future. Also there, I will spend more time later on. So we are, on the one hand side, we are pretty confident that we can come back to growth this year thanks to new projects. We are still somehow cautious about the existing business, how fast the existing business will recover due to this stocking situation.
On the other hand, in terms of profitability, 2024 will be a kind of a transitional year, and we are not yet back on the path we actually expect to be in terms of profitability. Let's bring it to the next slide. Lars, please.
Yeah, thank you. So, to comment the pipeline, I think we should actually zoom out somehow and not to focus too much on 2022, 2023, because at the end of the day, it was a significant setback in our story of growth. And if you're looking back the three years before, and not just due to one-offs, but also due to the core business, we had significant growth, and now we have this significant setback afterwards. What was the reason for that? There are actually mainly three reasons for this setback in the pipeline. On the one-hand side, it was this determination of this one-off of slightly less than CHF 30 million in 2023. This was expected. This was also already reflected in all the guidances we gave at the beginning of the year.
The second part was a kind of an overconsumption, which was pandemically driven in the air quality, in air purifying, and all this stuff. And there I have openly to admit that we have underestimated this effect at the beginning of last year. Not just we underestimated it, but also our customers in the respective fields. And the problem there is actually there is no baseline because this is a new category of products, especially for our company because we started all these environmental sensors in 2019. So immediately before the pandemic, this was a lucky good timing. And, afterwards, we recorded significant reduction in the markets, which was, as it turned out now, was significantly leveraged by the pandemic.
We were already aware that there is a kind of a pandemic effect, which is leveraging these sales, but it was not estimated to be on the level we have now recorded. This is the very same as we have also discussed with our customers. Also they have admitted that they have actually underestimated the effect of this pandemic-driven overconsumption. This was combined, and I think this is. It's pretty hard to figure out which comes from overconsumption, which comes from the stocking, because at the end of the day, all our customers did the very same. So they were pretty confident about the future of air purifying and air quality devices, so they ordered a lot of additional components. In our company, we were pretty lucky and also pretty proud of delivering all these products even during the allocation.
So there was no backup at all at the beginning of 2023. And now they all face a lot of stock in their supply chain, not just stock of our modules and sensors in our customers' inventory, but also downstream, there was a lot of air purifiers and air quality devices anywhere in the retail shops in of our customers' supply chain, downstream. This is now ongoing to be solved. It's not that easy to figure out how much of these CHF 50 million down in the core business is coming from overconsumption, how much is coming from the stocking. What we see is that in some parts of the market, we see now a kind of a tipping point. It's not yet in a way that we have a significant recovery already recorded in our figures.
We see at least there is a tipping point, so at least the downturn trend actually came to an end. Additionally, there was a third effect. I have already mentioned it in my executive summary. This was CHF 10 million comes from FX changes compared to Switzerland. I think it's important also to highlight here again, and I did already the same statement last summer in the half-year results presentation, that all these setbacks come not from the fact that we have lost any customers or even product families or whatever. So all customers are still with us. There is also not even a project we will actually cancel, the major project. The fact is just that they all, especially in the appliance markets and in consumer markets, they just ordered less than before due to all these effects, as I have explained.
Some words about the gross margin. Also, the gross margin is indicated here with the blue line. There we have also to keep in mind that the gross margin of the last three years was inflated by the fact that we actually faced a significant and also pretty demanding overload of our operations. Now we are in a kind of an underload situation. There I'd like to, also to point out that in component manufacturing, you have a lot of fixed costs in a way that you have a lot of capacity installed, equipments, very expensive equipments, and you have very dedicated engineers to support the line. That means, for to give you an example, in humidity, if you produce less, there is pretty hard to reduce costs because at the end of the day, there are not a lot of operators you can actually reduce.
There are a lot of dedicated process engineers, and you need them even with 80% load or 70% load because you cannot stop the line. This is also influencing the gross profit in both ways. So in the last years, there was an inflated situation because you could actually do with the very same staff, you could do even more. And now, and going up to 100% or even more than 100% with 2024 operations, and now we are in a kind of underload situation, which is reflected also in the gross profit margin. Let's bring it to the next slide. So what how do we react on this situation we are facing? What we have decided to do, and this is not new information, is actually kind of a twofold approach. On the one-hand side, Sensirion is driven by innovation.
It used to be driven by innovation and by growth for more than 25 years since our very first day of foundation. This is exactly also what we are convinced about, is the fact that we have a good pipeline, short term, mid term, and long term, and we like actually to work on these projects. Therefore, we have actively invested into R&D in order to be ready now also to turn to ramp up new products. We have also to probably look back in 2019. 2019 was in the history of Sensirion not even a year. There we had also a kind of not a so dramatic setback, but also a short setback in the pipeline. But also then we decided to continue to invest into R&D.
This was the base, the foundation, in order to have to be ready for all these booming years of 2020 up to 2022. Without investing into all these environmental sensors in 2019, we had no chance to serve all these markets during the last three years. The exact same strategy is actually applied today, that we like to focus on the products we are convinced about that they will come to market in order to react on the situation by growth. This is what we are doing today as well. On the other hand, definitely, there is also homework to do in terms of efficiency, productivity, and capacity adjustments. I reflected before, I pointed out before, the component manufacturing. On the other hand, we have also module manufacturing, which is more based on operators, especially in Hungary and China.
In all the three operation sites, we have already started to reduce significantly our operator capacity, starting already in Q2 of last year. So this is an ongoing process. In parallel, we have also initiated a lot of initiatives in order to optimize and to increase the efficiency in administrations, in sales, but also in R&D. So there's an ongoing process also in order to review our projects. Innovation is always like linked to risks, but we like to increase the efficiency and effectiveness of our innovation pipeline even more. This is all what is ongoing, not started yesterday. It has already started last year, but it's ongoing also for this year. Let's bring it to the next slide. So shortly, looking into the four markets, we are reporting automotive. This was the only market which can record growth last year. So the revenue went up by 11%.
This was mainly driven by new projects in, as component manufacturer, but also in the module manufacturing side. So, just as kind of a reminder, we have two different automotive businesses. On the one-hand side, the Tier 1 business, where we are typically shipping modules to our OEMs directly. And secondly, we have the legacy Tier 2 business, which is based on components. And the sub-customers there are mainly module manufacturers based their modules are based on our components, humidity, or gas, or gas flow sensors. We have also recorded here a pretty resilient demand of the existing business. So there's the growth comes from new projects, but also the existing business was pretty resilient despite all the headwinds in the markets. Medical, this is significantly more turbulent. On the one-hand side, definitely the CPAP-based one-off of last year disappeared completely.
We recorded a pretty good first half of the year. I can remember that we had a lot of discussions with you as investors about the significant increase of medical revenue in the core business of Q1, H1 2023, compared to H1 2022. And also there I highlight that this can also be a kind of a special effect because there was an additional demand for medical products in China in the first half of the year. What happened now in the second half of the year, this was mainly driven by the stocking. So in the CPAP market, there was this race to grab a lot of opportunities due to the replacement situation, quality-driven replacement situation of Philips. And all the other competitors as well, they actually tried to do their very best in order to grab additional market potentials due to the weakness of Philips.
Now they turned out, for all of them, they have actually significant high inventories, and they have actually to work and to execute on respective now also in this market. This market is not impacted by an end-consumer weakness because medical is extremely robust in terms of end-consumer markets, but demand, the problem here is definitely driven by the stocking only. This will also last another six, even 12 months, before the stocking here, especially in the CPAP market, will come to an end. Industrial, industrial is a huge basket of different applications. So on the one hand side, the dominant role here plays appliances, white goods, but also HVAC applications. Secondly, we have also the classical industrial application, widely spread in applications, but at the end of the day, also gas metering is part of our industrial market.
Here we have a significant drop of 34% compared to 2022. It was mainly driven if you zoom in into this market, this highly diversified market, we see that this was mainly coming from appliances. These are air purifiers and all other kinds of white goods. And secondly, from HVAC in a significantly lower part. Which was running pretty good was gas metering, which is unlinked to the economic situation because these markets are mainly formed by governmental decisions in order to roll out these new kinds of smart meters or tenders, typically ordered and also placed in the markets by the utilities. They are very close to government. So this part ran pretty well and robust, but in appliances and in HVAC, we see that already before mentioned weaknesses due to the stocking, but also the overconsumption, due to the pandemic.
Last but not least, some words about consumer. There the situation is more or less the same. The only difference is there is no stabilizing contribution from other markets because consumer is fully focused on these kinds of air quality devices, table-based, and all this stuff. Also there we see a significant reduction by 44% compared to 2022. Also here, the main explanation is this combination of overconsumption, but also of the stocking in the respective markets. Also here, again, to highlight, there is no customers they have been lost. It's even the contrast situation. So all these customers, they are still confident also to bring up and to come up with new products in air quality. So air quality is definitely not bad.
It's just a setback from a, as it turned out now, from a too euphoric situation down to a more conservative view of the future of air quality devices. With these slides, lost a little bit. I'd like to hand over to Matthias, and I will come back to comment the outlook for 2023.
Yeah, thank you, Marc. Ladies and gentlemen, also a warm welcome from my side to the audience here and to all those who have dialed in this morning. In addition to Marc's comments on the course of business and the KPIs, of course, this year a little bit more extensive than in the previous periods, I look forward to putting a little bit more color on the set of financials over the last for the next few minutes.
So as in previous years, the figures presented are reported according to the Swiss GAAP FER, and all the figures or all the report has been audited by our auditors KPMG. After two years with this tailwind mentioned by Marc, even during the pandemic period, so 2023, of course, also in terms of setting up the financials, a very challenging one. The picture that we got reflected from the market, of course, is also then completely reflected in the figures just from top line to bottom line. But, first things first. So let's start with the development of the revenue and the bridging from the successful 2022 to the more weak year fiscal year 2023, coming down from the CHF 321 million turnover to the CHF 233 million turnover in fiscal year 2023. I think the bridge is built with three components.
Two of those, Marc already mentioned is this fading out of the one-off business of CHF 28 million that we definitely had in 2022. And then, of course, we have this CHF 50 million definitely decline in sales volumes, price, etc., that we read as the organic one. And, of course, also a strong impact and heavily hurts us is the FX portion if we have a like-for-like comparison with 2022, I think. Here it plays in the FX effect with around CHF 10 million. Of course, the strong weights in there is U.S. dollar and euro. And because this is coming along with a higher ratio of export that we have in our sales, and with that, of course, associated the invoicing in these main currencies. So we are definitely heavily exposed to the strong Swiss francs on the top line.
So in addition, but especially for this year, we see also for the Asian currencies a down of up to -10%. So also here we have a bigger impact than in previous years when we talk about Korean won, U.S. dollar, Japanese yen, and Chinese yuan. So all in all, this definitely sums up to CHF 10 million, which is then in percent the 3% impact from the FX effects in our top line. So here on this slide a summarized composition of the sales 2023 according to markets. Marc elaborated on that. We have the growth portion in automotive. And out of that, of course, in the automotive stands now in 2023 for close to one-third of our total sales.
If we look at the region, then the upturn of this additional Tier 1 module business that was mentioned, of course, we see a stronger quota of sales in the EMEA. This is, of course, also driven by this automotive Tier 1 business. Next slide, please. So again, here this view on the development of the gross margin. I think definitely the top line here is suffering from these enormous economies of scale and leverage we have with a given cost structure, low portion of variable costs, high portion of fixed costs. Marc explained, with the example of humidity sensors. So here with this underutilization of our capacities, definitely, we have this down to overall 52.2%.
But again, as already mentioned also, we have a little bit if we look on the long-term bandwidth where we see profitability for Sensirion, we definitely have to fade out these extraordinary good years, 2021 and 2022, also as one-offs as we do this on the top line. In addition to all these effects about underutilization of our capacities, of course, the second thing is this change in our product mix with more weight on the modules. A look at the overhead costs development on the lower part of this chart. It shows that we are burdened in the 2023 figures with a recruited staff that we build up in R&D and SG&A now for the full year. I think this burden effect and this full pay-in of these additional personnel costs definitely applies for SG&A and R&D.
And this underlines also that we are still confident that there is growth, that we are now at a kind of turning point. And we are very confident that with the new initiatives and the new projects to come, but Marc will elaborate on that in the outlook section later, that it's the right setup really to continuously look that we have the right resources in place. And given the nature of our business, of course, we have to do a lot of investment in advance with a high R&D value added that we have in our company and in our setup. If we look at a little bit more detail in R&D, we can state that also given the fact that we are working definitely or that we worked a lot in 2023 on the projects to come.
And then, of course, we also have the approach to capitalize a certain portion of these R&D expenses. We have to state that we did this with a little bit higher volumes in 2023, but clearly stated that it's not a change of our methodology. It's given to the fact that with the A2L projects that we drove, that we brought to maturity, that it allows us and that it's following they are close to materialized in sales in 2024. We'll see this in the outlook session also from Marc, that we here strictly follow our ruling. And it's not a progressive approach now. It's still following our quite conservative approach in capitalizing R&D activities. But anyway, it's more or less CHF 5.8 million higher if you refer to the reference year 2022. Not bearing any additional risk as we judge it.
So talking about the operating result then is definitely as a result of all these cost blocks we saw. Of course, with CHF 10.1 million an absolutely unsatisfactory level, we see this as a turning point in terms of how we want to get things moving in the right direction again in the coming periods. So, but for that, be with us for a few moments, and, Marc will give put some more color on that, how our initiatives are there and how the outlook will be.
So the top line, bottom down, down to profit or loss after tax, profit after tax results in minus CHF 6.6 million on the bottom line. So below EBIT, we see a quite big, financial result. That is the outcome of definitely, realized and unrealized losses on our, accounts in the balance sheet with, foreign currencies. So, this results in minus CHF 5.8 million, net financial result.
Some words on asset positions on net working capital. Here in 2023, we consequently followed the idea to build up buffer stocks as a safety buffer stock to be prepared for future deteriorations in the supply chain. Definitely, we build up our inventory up to CHF 78 million. We record CHF 26 million receivables as per the end of the year. This is not by random, but it's definitely the full strategic approach. We have made the decision to be prepared with the buffer buffer stocks for crisis that we all hope might not come. But we see this as an insurance and have definitely spent the money and taken the cash out to have these buffers ready in Stäfa. With these buffers, it's not linked any risk of obsolete stock. That is clearly under control by us.
Also in terms of risks, also for the CHF 26 million of receivables outstanding as per end of year, we can clearly state, and once more state, that we see no risk here in terms of bad debts. Talking about CapEx, I think we strictly followed here also our plan to increase and to invest mainly in infrastructure, mainly in Switzerland, a certain portion also in Hungary, to finish the preparation and the finalization of the fab there. But the really main portion is in Switzerland, is in Stäfa. Here we are working on this project, having a second clean room, which is asked by needed capacity, but also is a topic of risk mitigation to have two separate clean rooms in Stäfa ready in terms of mitigate the risk of production stops or fire events or whatever can happen.
That is clearly a cash out of close to CHF 28 million for PPE. And gives, of course, high burden also for our cash flow. A look at the balance sheet overall. Even with a reduced cash position coming down with CHF 50 million from CHF 120 million to CHF 73 million as per end of year, we still interpret this as a good balance sheet structure, which gives us sufficient freedom of action. So, we are still free for any decisions that are to be done. And it don't hinder us to follow our growth strategy and to follow our growth ideas. The equity ratio with 88.8% is still a very good one. So here, this comfort of the strong balance sheet, even after the weak period 2023, is still an asset for our company.
Finally, I will look at the cash flow as a consequence of the operating result, presented here. And the CapEx of 36 million, this all supplements the total cash outflow of around 50 million, which is not, of course, a strategy that we want to follow, that we definitely have this cash outflow over years. It definitely is also here a turning point that we want to generate and have this cash conversion rate back to a solid level in the future. With that, I conclude my remarks. And I would like now to hand over back to Marc for strategic focus, brands and outlook.
Thank you, Matthias. It's my pleasure now to focus more on future rather than on the past. So, let's go to the next slide. So first of all, in which environment are we at the moment?
I think we have one positive and one negative contextual impact. On the one hand side, the megatrends in sensor industry are still extremely robust and strong. That means, we are benefiting, and I come back to this point later, we are benefiting by these megatrends like energy efficiency, like climate protection, which is coming more and more also in the field of sensors as a good additional market field. On the other hand, we are expecting that the destocking is not yet over. So in the industrial or to be more precise in appliances but also consumers, we expect that destocking will last another six months. In medical, we expect that it lasts in 12 months. This is also reflected in our guidance. So that's also the reason why we are somehow consciously cautious about the existing business because of these destocking effects.
On the other hand, as we all know, there are a lot of geopolitical and there are some macroeconomic uncertainties all around the globe. What are the focus of the company for 2024? On the one hand side, I have explained it already at the very beginning, it's our full commitment to come back to growth this year. And we are also confident to be successful in doing so. The focus is on mainly two new projects. They are kicking in this year, especially the second half of the year. On the one hand side, we have a very interesting project with an OEM in Germany on automotive modules. To be precise, it's on particulate matter sensors. They are planning to ramp up in the middle of this year. And secondly, it's all about this called A2L refrigerant leakage business.
I will spend another slide to explain it in more detail. Secondly, I have also explained that in advance already, cost management will be a topic this year, and not just in operations where we have already adjusted the capacity to be aligned with the demand, but also in administration, in sales, and R&D. In R&D and sales, it's more the focus to have these reviews of projects, and definitely not to jeopardize our innovation pipeline, which is strong and should also be workable. Last but not least, we like to focus and to execute further our strategy. There is no change in our view that we have a good strategic radar, and we like actually to work on this. This brings me to the next slide to shed more light on our new innovation products to come up soon on the market.
So all of them will kick in and will contribute significantly this year. To be very precise, it's more in order to give you more light about what's going on, what is in our pipeline. First of all, it's about our environmental sensor portfolio. They are already in the market since three years ago. We have the dream or the vision that we can actually bring down CO2, particulate matter, and formaldehyde, beyond humidity, which is already on chip, to bring these three parameters downwards to a chip or to at least a fully integrated solution. We are now very close to that thanks to all what we have invested in the last two, three years. So in carbon dioxide, as you know, we have already the second generation in the market. So the first generation is probably not fully at scale here on the slide.
The first generation had the size of a business card. The second generation had the size of a sugar cube. The second third generation, which will actually be launched during 2024, is on chip only. So we are talking then about 2 by 2 millimeters, more or less. Probably 4 by 4 millimeters. But it's definitely a chip only. To be very clear on that, this will not automatically, immediately, contribute to top line because it's an OEM business. That means, first of all, our customers, they need time in order to evaluate this new chip, but also in order to design it into their devices. But definitely, it will support the trend, the top line in the next years to come. Particulate matter, the very same.
So the existing first generation, which is this green box on the slide, has a size of probably 5-6 centimeters, 5, 5-6 centimeters. So it's a pretty bulky module. And now we like actually or we have integrated all these functionalities of chip only. The only which cannot be integrated is the fan. So at the end of the day, what is highlighted here is just the chip. Beside that, we need also a fan because you have actually actively bring the air to the sensor in order to have a precise measurement. And last but not least, also formaldehyde, which is a very good business in China, but also with air purifier manufacturers in Europe. And there also, we have ambitions to bring it downwards to the chip level. The first two candidates, they will be launched this year.
The third will be launched in early 2025. Secondly, we have these two, this new we cannot say actually more generally, we are working on kind of a leakage product family, which is not monitoring the air quality, but is monitoring any kinds of gas leakages. Just to highlight two candidates, one of them is about methane leakage, which is combined to be serviced or as a service business. I will come back later in the strategic view. And secondly, we have this gas leakage for HVAC applications. The next slide will bring more light into this topic, which is definitely contributing this year already. And last but not least, we see additional business, which is not for this year, but for the mid-term view, on in automotive.
On the one hand side, about battery management, also in battery management, one of the topics there is actually to detect kinds of leakage of cell off- gases. So gases, they shouldn't be there. And when they are there, there's an indication that the battery is either at risk or is at least decay going down in quality. It's easier. And secondly, it's about the autonomous driving. Definitely, we are not going to ship the full system to for autonomous driving, but we see a lot of additional functionalities to set on central level. We can support this autonomous driving functionality in future. So what about this A2L, which is, beyond these particulate matter sensors on automotive, the second contributor to this year's growth? As you might know, there is a very strong market drive in the markets in the U.S.
So the U.S. Environmental Protection Agency, they have decided also the Canada one, but the U.S. one is more the stronger. They have decided to stop any kinds of old-fashioned refrigerants in HVAC systems from January 2025. The alternative is the category so-called A2L refrigerants. This is a refrigerant class which is significantly less harmful for the climate. So the so-called global warming potential is significantly lower. On the other hand, it's significantly more flammable. And this combination brings in the need of a gas leakage sensor in order to warn or at least to change the functionality of the HVAC system in case of a leakage. The same change has also already taken place in Europe, but the European but also the Asian authorities, they have not decided to go with a leakage sensor, but to do it without a leakage sensor.
But the change, the transformation is the same. But in the U.S. and in Canada, there is an obligation for a gas leakage sensor, at least for those HVAC systems. They have a, a dedicated amount of refrigerants inside. And this brings in our technology. So we have a very well-proven technology of thermal conductivity. And based on this very, fully integrated, function technology on chip, we can serve this market perfectly. In the meantime, we have worked on customer-specific modules. So we are not going to ship the chip only. We are going to ship the full module to the HVAC manufacturers directly. In the meantime, we are working with four or five out of six of the largest HVAC manufacturers in the U.S. or even located in other countries, but serving the U.S. markets.
It's important also to highlight that not all of them are going with a single-source situation. So five of six are working together with us. Some of them, they have also some competitors on board, not just our solution. So we are not going to win 100% of five out of six, just to not have a kind of misunderstanding here. There is still some uncertainties about the volumes. The problem there is actually that it's fully clear that the regulation comes in place next year, beginning of next year, 2025. It's not yet clear how many systems will be equipped beyond those they have to be equipped because it's easier for the manufacturers to equip all of them. So therefore, the full run rate volume in the global market is not yet fully clear because we are in this transition phase.
What is already clear is that in the second half of this year, there will be the ramp-up with all these HVAC manufacturers because they have to be ready by end of the year. This will also contribute for the 2025 revenue, because the ramp-up will not be over by end of 2024. It's just the beginning. It's expected at the moment that the ramp-up will come to an end and the volumes will stabilize by end of 2025. This will be a journey of more or less 18 months from, starting in summer 2024. That brings me to the next slide. And, as always, I'd like to have a short review on the strategic achievements. As you know, we have divided our strategy since many years on two or three focus based on the fundamentals.
So in the fundamentals, our probably most valuable assets are the people, but also our culture. There, I think we could renew again our award of being one of the top employers of Switzerland. We were awarded by a European-wide prize last year to be in the top 10 employers on the European scale. Secondly, we also celebrated our 25th anniversary with a lot of stakeholders, not just employees, but also a lot of neighbors and local authorities in Stäfa. Secondly, the focus one, this is all about humidity and gas flow, our legacy products. They are still extremely important for the company where we have dominated the market position today. Also there, we can report that we could even increase our market position even further.
And thanks also to the fact that one of our competitors, unfortunately not the strongest one, but at least a very important one, STMicroelectronics, they decided last year to give up the humidity sensors and to switch to our solution. That means from summer last year, all the boards of STMicroelectronics, they have a humidity sensor on board. That this sensor is coming from us. So they are a very good sales channel for us in order to be more present, at least in those markets where we have probably not the direct contacts to our customers because the customers are too small or they are just buying the humidity sensor as a kind of commoditized product like microprocessors and all this stuff. Therefore, this sales channel is of high importance for us.
We have launched two years ago the fourth generation of humidity to shrink down the form factor again and secondly also to reduce costs. And this changed the transition from the third to the fourth generation is at full swing. First of all, in consumer and appliance markets, secondly, but also in automotive, typically, it's a longer adoption time for automotive products. And as Matthias has already mentioned, I think that's important to highlight again, we have intentionally decided to increase our wafer inventories significantly because of all the geopolitical problems in Taiwan. The semiconductor industry is highly reliant on Taiwan. And we like definitely to be a responsible supplier for all our customers, especially in those situations as most of them, we are single-source suppliers in automotive and medical.
We definitely don't like to run in any kinds of risks, not to be able to ship due to any crises in the South Asian region. Focus two, I have already explained about miniaturization, which is ongoing, which is very short to be launched. And also about the increasing and the standing we have with all the OEM manufacturers in terms of automotive environmental monitoring of cars. And now I'm going to list about the third focus. There, we are working on this new kind of leakage program family, which is based on a technology we have already in-house. I have already explained this most prominent candidate of A2L, but there will also be other things to come, not this year, but next years.
So, there will be a new class of refrigerants in the next years to kick in, which is even lower in GWP. We are also working on H2 leakage sensors. So, this is also to support the energy transition from more fossil energies to more harmless technologies where H2 will be one of the most important candidates to store energy from summer to winter, for example. Then thirdly, we are still ongoing with our additional complementary business model of not shipping just hardware, but also serving with data, this SaaS model, software as a sensor as a service, which is actually divided in two parts. On the one hand side, it's methane leakage, which is progressing very well. There, we also expected that there will contribute first time on the top line this or next year. And it's coming more and more, methane leakage.
On the other hand, we have this two years ago acquired business in Berlin, which is focusing on condition monitoring. There, we are still somehow not critical, but it's a tough business. So at least it takes longer than expected at the beginning to come into the market. The adoption rate is slower than we had anticipated at the beginning. That's also one of the reasons why we had in the theoretical goodwill a kind of an impairment to be on the safe side, on the conservative side, due to the acquisition costs, which is in the theoretical goodwill according to Swiss GAAP FER. That brings me to the last slide, I assume. Yes. About figures of 2024. Again, I think the market condition will be challenging again this year due to the geopolitical situation, but also because of the disruption, which is not yet at the end.
In terms of profitability, we expect to be in a transitional year, 2024, coming off to expect, hopefully also to, normal levels of profitability back in 2025. Medium-term outlook remains still positive. I hoped actually also to give you more light, more confidence about what we are working on. In sales, we expect for 2024, in the existing business, somehow a kind of recovery. On the other hand, we are still suffering from the destock, especially in medical. That means we are somehow reluctant and cautious about the recovery strength of the existing business. In the growth, which is indicated by the guidance, is actually coming 90% from the new projects, mainly in automotive, but also in kinds of these leakage sensors.
That brings also the challenge we are in for 2024, that this kind of product mix between the existing business, which is mainly based on components, which is still somehow suffering from de-stocking, but also from the weak demand in the market, combined with the new projects, they are mainly based on modules, which are coming typically with lower gross margin, leads to a kind of a lower gross margin in 2024, which is also reflected in the guidance of 2024. So this brings me to the figures. CHF 202.5 million-CHF 280 million is our guidance for the top line. This is a growth of 7%-20%, compared to 2023.
We are still suffering, in terms of the profitability, gross margin, but also EBITDA margin-wise, due to the, also higher costs to ramp up all these products and the product mix, which is not very favorable this year, due to the still weak demand in medical and also in, in the legacy products. That brings me to the end. And I'm very happy to answer, your questions.
So let's see some hands here. Go ahead.
Yes, Tobias Fahrenholz from Stifel. Could you comment a little bit on, at least transaction risks? So, what has been the negative EBIT margin impact last year? How does it look like with, sales and costs in Swiss franc?
Yeah.
What can you do there in future?
Yeah, we definitely, bring it to the facts, or the EBITDA effect, for 2023, we, calculated around, CHF 4 million impact on the on the bottom line there. Definitely, how is the scenario? I think, if you look at our cost structure, with our big R&D portion given and most of, or almost all of, our R&D resources definitely situated in Switzerland, this is definitely in terms of personnel cost, the biggest portion of cost is in Swiss francs.
So now, what is our policy? Our policy is, on the first hand, not doing any hedging business or not working with derivatives. That's a clear philosophy, that is in our manuals. So we are reduced to natural hedge. And here, of course, we are doing all what we can. Of course, we have procurement market with portions of wafers coming in US dollar. And then, there is a second important currency here in terms of procurement: euro.
At the end, if you balance this and set off with the sales, I think we have around 50% sales in U.S. dollar. We have 20% sales in euro. And the rest is the diverse currencies on the sales. So, all in all, I think we are quite limited in playing this natural hedge. Of course, we are improving that with having more volumes in the Fed in Hungary where we have the more or less linkage to the European currencies outside Switzerland. Of course, also with A2L, there will be some more added value in the U.S. region. So, then also having more cost in U.S. dollar. So this mitigates to a certain extent. But at the end, we will be definitely ongoing having a quite huge exposure with a strong Swiss franc.
Yes, thank you, Marc, for the phone call. First question on the cost side, on the operating expenses, I'm not sure if I'm correct, but if I understand correctly, that you do not expect to increase OpEx in 2024. In 2025, do you expect to already be back in the mid-term target range for the EBITDA margin in the high teens?
Well, so to your first question, Michael, yes, this is true that we are planning not to increase further our OpEx because this also reflects the project pipeline. H12 is very close to be ramped up. There is now actually the job of operations to take over and not R&D and sales. And typically in our company, it's always sales and R&D together.
So R&D only doesn't make sense because at the end of the day, we have to acquire the customer first in order to work on the specific solutions and the applications. These people, they are now getting free. They can actually work on the next candidates, in our pipeline. So OpEx would actually be stable this year. This is our plans for 2025. Your second question, we are not going to have a guidance for 2025. Honestly, it's already in this predetermined times we are in. It's already challenging to give a full year guidance, but we don't like actually to look to 2025. What I can say to you again, and I haven't mentioned it already before, is that it's our intention, definitely, to come back to normal levels. We anticipate, but this is not an official guidance. It's just our ambitions. This is also depending on growth. We are also confident about growth in 2025, but it's too early to already name it by figures
Okay, thank you. A second question on the A2L market. Could you maybe elaborate a little bit on the potential that you see maybe in 2025 when the market will be kicking in and what the competitive situation looks like if your solution is sort of the prime solution, or are there any other approaches to solving that leakage model?
Well, first of all, the competitor landscape, there are actually three different technologies. They can measure A2L in a leakage situation. One is an optical solution, which is supported by some of the competitors. Honestly, this solution is very robust, but on the other hand, pretty expensive.
Secondly, it's a metal oxide technology, which is, we have also this kind of technology in our house. We are fully confident that this is actually not the right technology to work on. This is more kind of a legacy technology for leakage in the Japanese market. The problem with metal oxide is always the stability of the sensor longer term. Therefore, also the customers, they are not that happy about this technology. The third, which is not just supported by us, but also another competitor, they, is this thermal conductivity, which is technology which is pretty robust because it's kind of a physical measurement. It's just based on physics, combined with the fact that it's, easily shrinkable downwards to a chip, which brings actually good scalability, but also a good cost, portion.
What we have to keep in mind is that it's the technology or the way how to measure H12 is actually on the chip. This is the heart of the solution. But at the end of the day, you have also to work on the module. To see that their efficiencies are significantly lower compared to the technology to be applied to measure the H12. So I think we are very well positioned, but we're not the only one. About volumes, in 2025, again, it's not yet clear. It's changing every day. What are the longer term?
That means no, not longer term, but mid-term view on the volumes, what we expect that there will be a phase one, which is in 2024 and 2025, where all the manufacturers are fully focused on making this transition successful because they don't have actually just to design in a leakage sensor. They have also to change the refrigerants in their systems. So there's a huge challenge for a type of manufacturers. They are not that used to change every year their way of how to manufacture HVAC systems. They are a pretty conservative industry. And therefore, this is a huge challenge for them. There will be another phase, probably starting in 2026, where we have also to work on adding more value to the sensors because there will also be a kind of consolidation phase. But 2024, 2025, more focused on making it possible.
Afterwards, there will be also a kind of which technology is the more convincing one in order to consolidate the portfolio. For 2025, to give you some kinds of indications, we expect to be in a mid-range of the two two-digit million revenue contribution. So it's not about CHF 100 million. It's not about CHF 10 million. Thank you. Michael?
Yes, that's all. And secondly, I have just two questions. First of all, you mentioned that you are checking a little bit more on your R&D projects. Could you maybe give us a couple of examples what kind of products or projects you are actually questioning going forward?
The second question is, you mentioned that you, if I understood you correctly, that you took an impairment in your goodwill in the equity, probably, which is an indication, as you said, it's not the AiSight, probably it's not doing so well. My question here would be, what are the milestones going forward?
There must be a point in time where you have to take a decision if you are being a bit provocative, if you stop it completely, or if there's a real chance to get to a certain revenue, and then you would need to tell the investors probably what that is. So I'm just trying to understand where are we in this situation on the AiSight?
Well, first, the first question about general about projects. We can probably differentiate between projects. They're very close to the ramp-up. They are just to be done. There are full commitments to customers. There is no question about what I more addressed with my statement about the review of projects is more the longer-term projects where we have also a lot of innovation projects.
Honestly, all typically, we're pretty low-resource allocation. So probably three, four, five -year people are working, sales and R&D combined, are working on these innovation projects. And these projects are not coming to contribute to the top line in the next two, three years. This is exactly the one of the assets of the company, also to have this long-term view. Most of what we have talked about today and also the booming years of 2020 to 2022 is actually based on initiatives we started already five, six, seven years ago. But all these longer-term innovations have also kinds of intrinsic risks.
This is exactly where we are looking into again and to say, "Okay, which of them are of high value?" We are still, and this is an ongoing process, honestly, also in good years. We are doing this. This has to be done in a company where you are dealing with a lot of higher-risk innovation projects in early stages. What you are doing now is actually just to be more picky in terms of what is the ratio between chances, either short-, mid-, or long-term, and the risks, intrinsic and inexplicable. Therefore, I cannot give you a kind of a list, first of all, because this is an ongoing process. Secondly, most of these projects are not yet well-known because we don't like actually to wake up our competitors, especially if not for those projects. We like definitely to work on further.
We have also to be sure about that. We are not talking about projects as 50, 60, 80 people on board. It's more this kind of a lot of smaller projects. They are also laying the foundation for longer-term growth we are looking into. About AiSight, as I have explained, and that's already in summer, we discussed about that, is that there was kind of a readjustment of the adoption rate in the market. What we see is the market is here. This is a good point. Secondly, we see also there is a demand for this kind of condition monitoring systems. What we have underestimated is the way that it's not the way that the customers are evaluating the solution first. They are hopefully getting convinced about the solution, and then they decide to roll it out into all their fabs or factories.
This is not the way how it works. This is actually new, what we have learned in the last two years. This is not a disruptive learning from December or January this year. It's actually more learning we have learned over the time that it takes significantly longer in order after the evaluation to come into one fab, second, and third one. This also led to a kind of a readjustment of our business plans and of the cash flow situations of the respective business. This triggered these kind of theoretical goodwill adjustments. About the milestones, definitely, what we have there in place is a kind of a regular, and this is what we are doing with all these new adventures all the time, also with the Methane Leakage Sensors.
By the way, also with the H12 at very early stages that we have on a regular basis, we have a kind of a review, internal review of, "Can we reach the milestone we have actually anticipated?" And also what is to change in the longer-term view about milestones and about the business plans. And then we take decision. The last review was in November last year, which also triggered this way of saying, "Okay, we have actually to adjust the business plans, but we are still believing in this kind of market to be evolved."
Can I maybe just add an add-on question, and I know there may be no answer to that, but I still have to ask you. I mean, how much does it really cost per year? How much does it cost on the EBITDA line to found this AiSight business? I know there's really no answer, but I think it's a.
So thank you for answering your own question. No, I think we are not going to go into specific projects because at the end of the day, it's actually the acquisition. Therefore, it's also reflected in the kind of the Schattenrechnung or the theoretical goodwill. But at the end of the day, it's one of the projects we are running. And honestly, there are more expensive projects than the one linked to AiSight in Berlin, but it's just one of more than one. And therefore, I don't like actually to deeply dive into this topic, but it's at least affordable for the company.
Within more than Eric Fedal. I'm impressed into the mention that you don't have a responsible supply chain. You mentioned you are covering by multisourcing the risk, which is fantastic. Now, last year, you mentioned that on your Scope Three emission, you had hired a consulting company to basically set your baseline. Do you mind touching upon what has happened to that project and given the performance, how much of a priority it has become?
Sorry, can you repeat the question that way? I missed which Scope Three project. Scope Three is the focus three. Yeah. Yeah. And which project Scope Three?
And you mentioned last year that you had hired a consultancy to help you with the baseline of that Scope Three of the emission. The Methane? Yeah. No, no, no. Scope Three. Yes, sir. Oh, okay. I was completely on the wrong table. Sorry.
I translated your scope three to focus for your strategy, but you are talking about scope three. Yes, sorry about that. Yes, what we have done is kind of an internal or together with an engineering office. So this was, how it was called? South Pole Consulting Company. We did a kind of an investigation about our scope three emission rate. Honestly, I'm not already pretty happy about the outcome, not about the level, but I don't believe all what they have calculated. So we have actually to go through this, the study again because also South Pole, which is a very well-known firm indeed on their part, is not that familiar with kinds of semiconductor businesses. And the main contribution for scope three is actually the manufacturing of wafers in Taiwan.
Therefore, we have now initiated also to be very close to our suppliers in Taiwan, but also the other ones, fabs. We are working together in order to learn more from them because I think we are more precise in that. At the end, Scope Three will turn out that if you like actually to bring down Scope Three emissions, then you have actually to work not we, but also our supplier have actually to work on the emissions of all these or the filter rates of all these gases they need for not CO2. It's other ones like SF6 or something like that, to work on those, in order they need to etch the wafers.
But at the end of the day, we are also there at the kind of edge of technology, how much filter rate can be achieved today with the existing filter technologies. This is exactly what we are also the scope we are coping with our Scope 1 and Scope 2. Also in our Scope 1, which is indicated in the annual report this year, I think it's even more than 50% of our emissions is actually coming from our own fab and the limited filtering rate capability of existing filters today. This is actually where we have to work on. There are other parts of Scope 3, for example, travel, where we are already compensating all our business travels. We are also working together with Swiss and Lufthansa Group in order to, to some extent, also to support their initiatives for sustainable fuel.
That means sustainable aviation fuel, which is significantly more costly, but also to compensate emissions. But from a technical and scientific point of view, it's significantly more convincing than just to compensate with any kinds of offset businesses anywhere in the world. With aviation fuel, which is sustainable, you can actually reduce the CO2 emissions sustainably and not just by offset business. This is also what we are investing, and we have also kind of a partnership with Swiss and Lufthansa in those terms. But our main goal at the moment in ESG is actually to do our own homework with scope one and scope two. This is definitely the main focus because there we have also no excuse. So there we can actually work on reducing emissions, and we don't have just to influence our suppliers to do so.
Thank you.
Andreas Guillaume, Turner Academy. I'm interested in the CO2 sensor business. What's the situation here? How far are you? Who are you working with? And are there, I could imagine, there are certain hurdles that not everybody's really interested in introducing these sensors because that could reduce business volume volume in the HVAC industry. Is that idea observable, or what's the situation here?
I think we can probably categorize CO2 business into three different types. First of all is those applications we are all familiar with during since the pandemic. That means these kind of table-based indicators, "Oh, the CO2 level is too high. You should actually open the window or go out of the room." This is a business which is still valid, but this came down from this hype during the pandemic.
The second part is about HVAC, where you have to measure or you can measure CO2 in order to optimize the ventilation system in industrial buildings, less in residential buildings. The main focus there is to guarantee a good air quality combined with lower energy efficiency. So the driver there is not in first priority the air quality, but more the energy efficiency because more and more commercial buildings, industrial buildings, are also qualified according to RESET and all these certificates in order to guarantee a good air quality. But this is a given baseline. Now we can actually work by keeping this baseline to reduce energy consumption. And this can be done by measuring CO2. This is ongoing, but the HVAC industry is not the fastest one. That means it takes some time.
They have also not a new product line every year in order to design that in. What is done there is actually to measure CO2 in order to change the mixture between fresh air, which is costly in terms of energy, and the recirculated air in the room, which is cheap in terms of energy, in a way in order to have the good balance between low energy and good air quality. And this can only be done if you have a kind of an indicator. And this is typically based on CO2. And the third category is about automotive. Automotive, we see this is a project. It's not all the existing business. Two ways. On the one hand side, it's all about CO2 levels in a car because at the end of the day, high CO2 level can also make you tired, tiring.
This is a danger for the driver. On the other hand, it's all about the heat pumps. More and more how, especially e-cars are equipped with heat pumps in order to reduce the energy efficiency or to increase the energy efficiency or reduce energy consumption. These heat pumps in cars are in Europe based on CO2. And CO2 is not harmful, or toxic, but it's definitely harmful if the concentration is too high. Therefore, if in case of leakage, you have to warn the driver. And if you build in a CO2-based heat pump, you have also to work, to design in the CO2 leakage sensor. Then it's CO2 leakage and not CO2 monitoring, but at the end of the day, it's the same technology, underlying technology. But this is future work, or future projects we are working on, the last category.
The HVAC sensor business, is that taking off? So this is implemented. You have to find it's built in the equipment.
It's taking off, but it's not a kind of a of a fighter, army fighter. It's more an Airbus 380. That means HVAC industry is all the only change is now with A2L because this is driven by a regulation. They have to do it. But all in other applications, it's step by step from year to year, contributing more and more, but it's not that prominent that we can highlight it in a way of, "This is to contribute to number one to growth next year." And this will also not happen in the next couple of years because it's an ongoing increase.
From Marcos of the BVAG, I would have a question concerning the capitalization of R&D. You said it's only a CHF 5.9 million increase, but from a base, I think, of below CHF 2 million. So what exactly has changed in order for you to do that now, and what will be the future? I mean, do you have that much leeway? I thought there would be very specific kind of, yeah, ways to measure it and to allow you to do it or not to do it.
Well, we have actually the policy to be very conservative in R&D capitalization. Our guideline is the way to have said, "Okay, on the one hand side, whenever we have production equipment which is designed internally, we have to activate, to capitalize the R&D efforts in order to be on a like-for-like comparison with those equipments we are buying over the counter." And in our case, we have a lot of equipment which is either done from scratch internally or is at least significantly modified, based on a over-the-counter equipment. And all these are capitalized.
Secondly, it's also this is a policy which is in place already for many, many years. Whenever it comes very close to the production, then we have some R&D efforts. They are capitalized. What has changed now in 2023 is not the policy, but we have now these big programs of PM2.5, but also especially A2L, which is very close to production.
This is actually triggered that on the one hand side, in this business, you have also to work on kinds of equipment which is not just over-the-counter business. It's not a kind of a standard MEMS equipment which can be bought. We have actually to do a lot of these equipments internally. And secondly, it's about the fact that we are very close to the ramp-up now of these new pro projects. So, as I have indicated before, the ramp-up is actually scheduled for summer this year. So already now, a lot of equipment is already installed because you have actually to run pilot runs and all this stuff to go through all the qualifications. And this is exactly the phase we are in now. And therefore, a lot of efforts had to be capitalized last year. So you mentioned that will go down.
These CHF 8.5 million will go down a bit in the future, and there is less of those to do. This is very likely to happen. Probably this year will still be some kinds of additional work to be capitalized, but then definitely if the ramp-up has been placed, at least for H12, this comes down again.
Can I just add another question concerning the semi kind of safety stocks that you build in order to compensate or mitigate the risk of Taiwan? I mean, is there no other way to do that since those Taiwan purchases are kind of single source?
Well, so, to keep in mind, the semiconductor industry is actually relying with, I think, 70% of all semiconductor products coming from these very tiny islands, Taiwan. So it's not that easy to go out of Taiwan.
Definitely, we're also working on this kind of second sourcing, but we have also to keep in mind that second sourcing wafers is always a huge challenge. You cannot actually take your wafer, go to another fab, and say, "Okay, please start." So there is a kind of a project in order to make this kind of fab transfer because all fabs are slightly different. So it's not that easy to switch. And afterwards, whenever you are going with another one, you have a kind of a second sourcing situation, which is fine in terms of resilience and robust supply chain. On the other hand, it's also a split of volumes, which is also not probably just favorable in terms of efficiency. You can do that, and we're also working on this kind of mitigation, which takes longer than just a kind of an inventory increase.
But it can only be done with the high-volume products where we have a lot of wafers. Because for all the smaller products and this is a number of wafers, not number of products. Today, we have humidity, which is definitely a million unit business. But also there, we have on one wafer in the latest generation, we have 70,000 humidity sensors on one wafer. So the number of wafers is decreasing at the moment compared to the previous year, not due to the fact because humidity is decreasing, but the number of chips on the chip, on the wafer is significantly increased. It's more than a factor of two compared to the third generation. And therefore, it's not that easy just to mitigate the full risks by double sourcing situations because of the effort, but also because of the number of wafers.
Secondly, always in the newspaper, we can read that the US is heavily working on bringing fabs to the US. I'd like to comment that shortly. This is not beneficial for us because we are on 8-inch wafers. All what can be read in the newspapers is 12-inch, and these are the latest nodes of CMOS. So there we are talking about 13 nanometers, 20 nanometers on these very large wafers. Our sensor technology is based on 8-inch, the smaller ones. They are typically 90 nanometers or even higher than 100 nanometers. Definitely, we can adapt the technology also to the latest CMOS nodes, but this is not, makes it doesn't make sense for the company because at the end of the day, we have a sensor on it. So we pay more for the wafer.
At the end of the day, most of it, we cannot benefit from the shrinking effect because at the end of the day, we have a sensor on the chip. So it's to go to these latest nodes is not of benefit for the company. There we stick more on the legacy wafer technologies, which is from a point of cost significantly more interesting for our business, but cannot be migrated to the US in terms of this governmentally driven onshoring of fab technologies to the U.S.
But then these CHF 78 million after CHF 60 million the year before of inventory buildup. I mean, how should we kind of think of it for the future? Yeah. When we go we will see a similar increase, or is it all CHF 78 million now is new run rate, kind of, depending on sales level?
To give you an indication, more or less CHF 20 million comes from a wafer, from a wafer inventory. These CHF 20 millions is our intention to keep it stable. Definitely, if the business with wafers is significantly increasing, we have also to adapt this level. But this is not today or tomorrow because the company can't keep not the contributors to growth this year. Therefore, we expect to keep that stable. Then secondly, we have the non-wafer inventory where we are still working on reducing the inventory. That's our ambitions. On the third, we have to keep in mind the ramp-ups of the new businesses, that means the PM2.5, but also the A2L business, which also has a kind of a front-loading situation. So, our ambition is actually to keep the inventory more or less stable, all in all.
Are there any additional questions from the room? No? Then, let's also have a look if there are any online questions. Can you support, Catalina? I can't see you. I know.
Okay. Question came through. A2L sensors for air conditioning systems in the USA. How much annual revenue do you expect in 2025? Is there a chance that Europeans and Asians will also use the A2L sensors one day, perhaps after an accident?
And yeah, maybe that's the first part. Perhaps after an accident. So the first question was already answered. The second part, about Europe, we do not expect that Europe, or Asia will implement a kind of a guideline for leakage sensor for A2L because they have already done the transition more or less. By the way, in Europe, it's typically called R32, the refrigerant, and somehow you see so these labels on air conditioner systems today here also in Switzerland.
Looking forward, longer term down the road, there will be the transition from the so-called A2L category to A3 category. This will not happen in the next two or three years, but it will happen probably in the next four to five years. And A3 is a category which is even worse in terms of flammability or even explosive situations, but on the other hand, completely harmless for the, for the environment. This transition will happen, not today, not tomorrow, but in 5 years from now on. And there, it's very, very likely also Europe and Asia. They have actually to, in to design in, leakage sensors because the A3 category is even more flammable or more explosive compared to A2L. So A3, for example, is propane, which is pretty well known, but. And this brings us also to the next question.
Heat pumps in Europe, the new generations also use a gas that is good for the environment but scares people. Are you also developing propane sensors for these? We are working on this. This is one of the projects in pipeline to be ready for this kind of transition whenever it happens.
Marc, maybe a question to you. How have your competitive environment and your market shares for carbon dioxide and particulate matter and formaldehyde sensors developed worldwide?
It is. Just business is still in the transition phase. First of all, it's emerging CO2 and formaldehyde. Secondly, it was affected by all these ups and downs with the COVID. So at the moment, I think not even for the experts, it's clear how large is actually the market in a stable situation, ignoring all these adjusted by all these, positive and negative effects of the stocking of, COVID-driven, overconsumption.
I think what I can say is at the moment, my perception is the way that there are actually two big players in the market for CO2, but also formaldehyde, especially CO2. One is Sensirion, and the other one is, still the very same. That means Cubic in, China. They have good products. They are fully focused on modules only, so they have no support by components. And, we are these two companies, Sensirion, but also Cubic, they are, in a competing situation more or less on the same level in terms of market shares for CO2, but also particulate matter.
Our strategy is actually to shrink it downwards to chip because this is actually a way they cannot do. What their advantage is, is the fact that module business is the core technology in China. So they are really good in doing a fast design, also a cheap design, and also to produce this cheap. So they are in price and in time to market, they are really good. We have to respect them fully. In terms of integration into chips, they are definitely not the experts.
Marc, the next question is on the guidance. Can you please break down full year 2024 guidance between declining existing business and growth in a new business? And what is the contribution expected from the new business in 2024?
Well, what I have indicated before is not a declining of the existing business, but just to be a cautious situation in existing business that indicates that at the moment, we expect to be more or less flat in the existing business. We are not anticipating a further decline. If we zoom into the markets, still in medical, it's taking longer, and it started later. That is stocking situation. That means there, it's likely to be in a declining situation. In other markets, I also have indicated that we see already kind of tipping points. And there, we have also some growth in existing, but all in all, I think it's a flat situation in the existing business. The indicated growth on the top line is mainly coming from growth projects.
It's another online question, on, on automotive.
Given the automotive inventories are rising currently, do you see any risk in the automotive segment for 2024? Also there, we have to divide the growth project compared to the existing business. In automotive, we are somehow also there, we are reluctant. I think last year, we recorded 11%+ in the automotive sector. I think also there, there will be some kinds of inventory corrections ongoing. Therefore, we are somehow cautious about that, not in a tremendous way, but at least not in a kind of a we are not, reflecting or we are not seeing a kind of a increasing existing business in automotive this year. The growth also in automotive comes from these additional projects I have highlighted before. And then a question on, Sensirion shares. Since 2019, Swiss shares cannot be traded at stock exchanges in the EU.
Do you have any plans to bring Sensirion shares to a European stock exchange? This would increase the number of potential shareholders and support the internationalization of Sensirion. No, there are no plans at all. I think we are fully fine with the Swiss stock exchange. I think also Zurich is a very good place to be. There are even an Austrian chip manufacturer, which is actually listed here in Swiss, in Switzerland. I think there is also a good ways in order to trade stock equities on the Swiss stock exchange despite of all these regulations from the EU. I think there are a lot of other way around, workarounds in order to do so. Therefore, we have no plans neither to go to a European stock exchange nor to the Wall Street because we are just too small for that.
It doesn't make sense for Sensirion. Good. So there are no more online questions. So with that, I think we should conclude the session here in the room. Thanks a lot. And we meet outside for refreshments. So then please leave the room, and let's go outside. Thanks a lot. Thank you for coming. Thank you. And also thank you for dialing in.