India: the Vibrant Electronics Industry

1
India the Vibrant Electronics Industry
Vinnie Mehta Executive Director Manufacturers
Association for Information Technology Tel
Aviv November 05 ,2007
2
Presentation agenda

• India a land of opportunities
• Snapshot of Electronics IT industry in India
• Conclusion

3
India on the move

• One of the fastest growing nations
• GDP grew at 9.4 during 2007
• Top 10 of nations since 1980
• On the verge of sustained double-digit growth
• Strong investment momentum
• Market capitalization up from USD 140 Bn in FY
  2001 to gt USD 1 Trn recently
• FDI on the rise - USD 7.6 Bn (06) and USD 19.4 Bn
  (07)
• FII investment - USD 6.5 Bn in 2006-07
• 140 public traded companies with market cap gt
  USD 1 Bn

GDP
GDP composition FY 2007
Source CMIE
By 2050, India projected GDP is US 70 Trillion
4
India the 5 Ds

• Democracy
• Largest democracy in the world
• Largest digital elections
• 9 Prime ministers from 6 major parties, 50
  state parties, 3 MM elected representatives
• ONE POLICY

• Diversity
• Highly diverse
• 23 languages, 30 provinces
• 6 major religions
• Cultural,religious, Climatic

• Diaspora
• Over 2 Mn Indians outside India
• Indian companies outbound MA gt USD 15 Bn in 2006

• Demographics
• 1.12 Bn population, Remain a young nation
  beyond 2050
• lt 20 yrs population
• 442 Mn currently
• 479 Mn by 2050
• 10 Mn finishing school, 600,000 Engineers and 3
  Mn graduates p.a

• Demand
• 5th largest consumer market in the world by 2025.
• 300 Mn growing middle class
• Rising incomes to lift 291 Mn out of poverty to
  make middle class 583 Mn by 2025

Ingredients for sustained and consistent economic
performance
5
Electronics industry in India A snapshot

• The Market 2006-07
• Domestic demand USD 30 bn
• Production USD 16 bn
• Exports USD 2.2 bn
• Employment
• Direct 0.75 million
• Indirect 1.5 million

Components 2.15 Bn
Strategic Electronics 1.09 Bn
Consumer Electronics 4.87 Bn
Comm. Broadcasting Equip. 2.32 Bn
Industrial Other 2.55 Bn
Computers 3.12 Bn

• Growth over 2005-06 20

6
Key Electronics Associations in India

• CEAMA Consumer Electronics Appliances
  Manufacturers Association
• ELCINA ELCINA Electronic Industries Association
  of India
• ISA Indian Semiconductor Association
• MAIT Manufacturers Association for Information
  Technology
• TEMA Telecom Equipment Manufacturers Association

CEHA Council of Electronics Hardware Associations
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Electronics IT industry in India A snapshot

• The Market 2006-07
• IT Industry size USD 48 bn
• IT Hardware Domestic USD 7 bn USD 1.7 bn
• ITES Software Exports USD 31.3 bn Domestic
  USD 8.4 bn
• 6.3 million PCs sold Installed base 22 mn
• 13 million TVs consumed Installed base 100 mn
• 5 million DVDs sold growing at 40 annually
• Internet users 50 mnBroadband connections 2.5
  mn
• Mobile sales 75 mn Installed base 172 mn
• Significant RD and product development
• Sizeable presence of MNCs Intel, IBM, Cisco,
  Motorola, Nokia, Samsung, LG
• India is suddenly attractive for
  hardware/electronics manufacturing

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India Electronics Equipment Consumption Market- A
300 billion Opportunity

• Note The bubbles in the chart depicts the share
  of Indian electronic equipment consumption as a
  percentage of the global electronics equipment
  production
• Read Coordinates as (X, Y) (Year, Share in
  percentage)1

• Indias electronic equipment consumption was
  estimated at around 28.2 billion in 2005,
  expected to reach 126.7 billion by 2010 and 363
  billion by 2015 growing at a CAGR 29.8
• Indias electronic equipment consumption in 2003
  was approximately around 1.8 percent in 2005. It
  is expected to grow to 2.9 percent in 2007, 5.5
  percent in 2010 and 11 percent in 2015

Source ISA Frost Sullivan
9
The PC market (Desktop Notebooks) in India
Units

• CAGR 2001-07 30
• Growth over 2005-06 26

10
Desktop sales 2001-2007
Units

• CAGR 2001-07 27
• Growth over the 2005-06 19

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Desktop market Regional spread
4,614,724 Units
5,490,591 Units
2005-06
2006-07

• Desktop consumption in North grew by 59,
  followed by East at 53.
• Consumption in West grew by 5, while in South it
  declined by 12

Figures in bracket represent the growth in
2006-07 over 2005-06
12
Desktop Market Share of Indian, MNC Assembled
2006-07
2005-06

• Consumption of Indian brands decreased 2 in
  absolute terms
• Sales of MNC Brands grew by 33 and that of
  Assembled by 22 in absolute terms

13
Desktop sales City-spread

• Consumption in Top 4 metros grew by 15 while in
  Next 4 it dropped by 26
• Sales in Rest of India (Other smaller Towns) grew
  by 33

14
Desktop sales 2001-2007
74
75
Units
72
77
81
26
78
25
28
23
19
22

• Desktop market growth over 2005-06 19
• Annual Growth in Homes 23 in Businesses 18

15
Notebook sales 2001-2007

Units

• Annual sales grew by 97 CAGR 80
• Households accounted for 37 of the market
  growing five-folds, Businesses accounted for 63
  of the market growing 41

16
Server sales 2001-2007
Units

• Annual sales increased 1
• Top 4 cities accounted for 35 of sales
  registering a decline of 5 Next 4 cities for 7
  with sales declining 53 smaller towns
  accounted for 58 of the consumption with 23
  growth.
• Large establishments accounted for 55 medium
  for 23 and small for 22 of total Server sales

17
Routers and Switches Market 2006-07
Routers
Switches

• Market 2006-07 USD 320 mn
• Annual growth 36

• Market 2006-07 USD 440 mn
• Annual growth 25

18
Networking products sales 2004-2007
Units

• Annual Growth NICs 15 Modems 43 Hubs 33

19
Printers Market DMP, Inkjet Laser 2001-2007

• Overall Printers market declined by 1 Laser
  sales grew by 36 while consumption of Inkjet
  and Dot-matrix declined by 15 and 7
  respectively
• CAGR DMP 9 Inkjet 6 Laser 47

20
UPS sales 2001-2007
Units

• Annual growth 80 CAGR 47
• Consumption in households grew by 48, accounting
  for 42 of the market while consumption in
  businesses grew by 112, accounting for the rest
  58
• Top 4 cities accounted for 41 of consumption,
  next 4 cities for 5 while smaller towns
  accounted for the maximum 54

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The Set top box market 2004-07
Million Units

• Annual growth 84
• 2007-08 sales expected to cross 2.5 million

22
Telecom Market in India 2002-07
Mobile Phones
Million Units

• Annual subscriber base growth 44 2007-08
  subscriber expected to cross 250 mn
• 2006-07 Base Stations installed 100,000 Annual
  growth 55
• 2006-07 Towers installed 100,000 Annual
  growth 60

23
The Software Services market
USD Million

• Annual growth 31 Exports growth at over 32
  and domestic at 25

Source NASSCOM
24
The Software Services Exports Markets
Source NASSCOM
80 of Fortune 500 outsource their IT from India
25
India Semiconductor Market

• Indias share in the global semiconductor market
  is expected to increase from 1.2 in 2005 and is
  forecast to be 5 by 2015
• Telecommunication, Consumer and IT Hardware are
  the segments driving the market during the
  forecast period
• Wireless handsets, Base Station Transceivers
  (BTS) are the major sub product categories
  driving the TAM for telecommunications segment
• Set Top Box, DVD players and writers are the
  emerging product categories in consumer segment
• Few other emerging product categories are
  electronic clusters, Capacitive Discharge Units
  (CDI) and Engine Management Systems (EMS)

Source ISA Frost Sullivan
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Venture Capital Industry

• An estimated USD 7.5 bn in VC/PE in 2006 across
  299 deals
• Over 250 deals in first half of 2007 with USD 5.6
  bn
• Expected to cross USD 10 bn in 2007
• Key Investment Verticals IT/ITES (23.5), BFSI
  (12.1), Manufacturing (12), Real Estate (7.1)
  Engg Construction (7.9)
• India Specific VCs ChrysCapital, HSBC Pvt
  Equity, ICICI Ventures, ILFS Venture
  Corporation, Infinity Technology Ventures, SIDBI,
  Walden International etc.

Source IVCA
27
India emerging as a manufacturing destination

• Surge in manufacturing confidence led by mobile
  players
• Branded players Nokia, Motorola, LG, Samsung,
  Ericsson
• EMS companies Elcoteq, Flextronics, Solectron,
  Jabil Circuits, Sanmina, Celestica and
  Foxconn/Honhai
• With new Fab policy several Semiconductor firms
  are keen to manufacture in India
• Taiwanese Companies just about coming in
• Foxconn/Honhai Compal (Reliance), Delta
  Electronics, Liteon

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Electronics Production- 150 bn Opportunity

• Note The bubbles in the chart depict the share
  of Indian electronic equipment production as a
  percentage of the global electronics equipment
  production.
• Read Coordinates as (X, Y) (Year, Share in
  percentage)

• Indian electronics equipment production was
  estimated at 10.99 billion in 2005 and is
  expected to reach 58 billion in 2010 and 155
  billion in 2015 growing at a CAGR of 26.9
• Indian electronics production output had a share
  of less than one percent in 2005. The share is
  expected to increase to 2.5 percent in 2010 and 5
  percent in 2015

Source ISA Frost Sullivan
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India advantage
Local Market

• A very rapidly growing domestic market CAGR 30
  
• Global recognition for back-end services
• A proven case for IP, embedded systems and IC
  design
• Attractive for Manufacturing Investments
• Skilled employee base
• Fast and upcoming modern infrastructure (SEZs)
• Proximity to EU and MEA market
• Freight Cost 20 cheaper than China - Faster
  delivery and lesser pipeline inventory

Profit from Local Sales
Harness low cost manufacturing base to service
local, European and MEA markets

• Use India for IP and ITes Services
• New Product development
• Engineering services
• BPO

Manufacture
Back-end Services
India is a great Opportunity Triple Advantage
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The Future

• 2010
• Mobile installed base 500 mn
• PC sales 25 mn installed base 65 mn
• ITES Software exports USD 60 bn
• 40 mn new internet connection at least 50
  broadband
• Nationwide TV broadcast to be digital by 2015
  beginning 2010 significant opportunity for STB
  consumption manufacturing
• Over USD10 bn investment in e-governance and
  national id card

2015 Total expected Market USD 320 bn Domestic
production USD 155 bn
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Come..explore..be a part of the great Indian
opportunity!We look forward to welcoming you to
WEF 2008Thank you!
- vinnie_at_mait.com