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India: the Vibrant Electronics India: the Vibrant Electronics IndustryIndustry

Vinnie MehtaVinnie MehtaExecutive DirectorExecutive Director

Manufacturers’ Association for Information TechnologyManufacturers’ Association for Information Technology

Tel AvivTel Aviv November 05 ,2007November 05 ,2007

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Presentation agenda

India – a land of opportunitiesIndia – a land of opportunities

Snapshot of Electronics & IT industry in IndiaSnapshot of Electronics & IT industry in India

Conclusion Conclusion

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India on the move… One of the fastest growing nations One of the fastest growing nations

GDP grew at 9.4% during 2007GDP grew at 9.4% during 2007

Top 10% of nations since 1980Top 10% of nations since 1980

On the verge of sustained double-digit growthOn the verge of sustained double-digit growth

Strong investment momentumStrong investment momentum Market capitalization up from USD 140 Bn in FY Market capitalization up from USD 140 Bn in FY

2001 to > USD 1 Trn recently2001 to > USD 1 Trn recently

FDI on the rise - USD 7.6 Bn (06) and USD FDI on the rise - USD 7.6 Bn (06) and USD

19.4 Bn (07)19.4 Bn (07)

FII investment - USD 6.5 Bn in 2006-07FII investment - USD 6.5 Bn in 2006-07

140 + public traded companies with market cap 140 + public traded companies with market cap

> USD 1 Bn> USD 1 Bn

635 722 8911229

3228

0

500

1000

1500

2000

2500

3000

3500

FY2005 FY2006 FY2007 FY2010 FY2020

US$

BB

Services54%

Industry27%

Agriculture19%

GDP

GDP composition – FY 2007

By 2050, India projected GDP is US$ 70 Trillion

Source: CMIE

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India – the 5 Ds• Diversity

– Highly diverseHighly diverse– 23 languages, 30 23 languages, 30

provincesprovinces– 6 major religions6 major religions– Cultural,religious, Cultural,religious,

& Climatic& Climatic

• Diaspora– Over 2 Mn Indians Over 2 Mn Indians

outside Indiaoutside India

– Indian companies Indian companies outbound M&A > outbound M&A > USD 15 Bn in 2006USD 15 Bn in 2006

• Demographics– 1.12 Bn population, 1.12 Bn population, Remain a Remain a

‘young’ nation beyond 2050‘young’ nation beyond 2050– < 20 yrs population< 20 yrs population

– 442 Mn currently 442 Mn currently – 479 Mn by 2050479 Mn by 2050

– ~10 Mn finishing school, 600,000 ~10 Mn finishing school, 600,000 Engineers and 3 Mn graduates Engineers and 3 Mn graduates p.ap.a

• Demand– 5th largest consumer market in 5th largest consumer market in

the world by 2025.the world by 2025.– 300 Mn growing middle class300 Mn growing middle class– Rising incomes to lift 291 Mn Rising incomes to lift 291 Mn

out of poverty to make middle out of poverty to make middle class 583 Mn by 2025class 583 Mn by 2025

Ingredients for sustained and consistent economic performance

• Democracy– Largest democracy in Largest democracy in

the worldthe world– Largest digital electionsLargest digital elections– 9 Prime ministers from 6 9 Prime ministers from 6

major parties, 50 + state major parties, 50 + state parties, 3 MM elected parties, 3 MM elected representatives representatives

– ONE POLICYONE POLICY

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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

Consumer Electronics$ 4.87 Bn

Industrial + Other$ 2.55 Bn

Computers$ 3.12 Bn

Comm. & Broadcasting Equip.$ 2.32 Bn

StrategicElectronics$ 1.09 Bn

Components$ 2.15 Bn

• Growth over 2005-06: 20%

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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 mn+;Broadband connections: 2.5 mn

Mobile sales: 75 mn ; Installed base: 172 mn

Significant R&D 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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The PC market (Desktop + Notebooks) in India U

nits

1,715,620

2,344,6173,124,422

3,809,724

5,046,558

6,341,451

0

1,500,000

3,000,000

4,500,000

6,000,000

7,500,000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

• CAGR 2001-07: 30%

• Growth over 2005-06: 26%

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Desktop Market: Share of Indian, MNC & Assembled

2006-07

• 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

23%

38%

39%

Indian Brands MNC brands Assembled

2005-06

28%37%

35%

Indian Brands MNC brands Assembled

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Desktop sales: City-spread

30 3545 51 54 60

14 1212

11 13 856 53

43 38 33 32

0%

20%

40%

60%

80%

100%

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Rest of India Next 4 Top 4

• 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%

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The Set top box market: 2004-07

Million Units

0.75

1.5

2.75

0

0.5

1

1.5

2

2.5

3

2004-05 2005-06 2006-07Set-top box

• Annual growth 84%;

• 2007-08: sales expected to cross 2.5 million

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Telecom Market in India : 2002-07

66.5

41.9

15.413

33.6

52.2

98.78

171.21

0

20

40

60

80

100

120

140

160

180

2002-03 2003-04 2004-05 2005-06 2006-07Annual Mobile Sales Mobile Subsciber Base

Mobile Phones

• 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%

Mill

ion

Uni

ts

Council of Electronics Hardware Associations

The Software & Services market

7,6809,870

12,500

17,700

23,600

31,300

10,10012,450

15,900

22,600

30,300

39,700

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Year

Indu

stry

Siz

e DomesticExportsTotal

USD Million

Source: NASSCOM

Annual growth: 31%; Exports growth at over 32% and domestic at 25%

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The Software & Services Exports Markets

Source: NASSCOM

~ 80% of Fortune 500 outsource their IT from India

2003-04 2004-05 2005-06

Americas 69.4% 68.3% 67.18%

Europe 22.6% 23.10% 25.13%

ROW 8.0% 8.60% 7.69%

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India Semiconductor Market

• India’s 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)

2.82

12.67

36.3

1.14

5.8

15.52

0

5

10

15

20

25

30

35

40

2005 2010 2015

Rev

enue

s $

Bill

ion

TM TAMTM CAGR – 29.8%, TAM CAGR- 29.4% TM in 2015 is expected to grow

by 13 times the TM in 2005

TAM in 2015 is expected to grow by 14 times the TAM in 2005

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,

IL&FS Venture Corporation, Infinity Technology Ventures, SIDBI,

Walden International etc.

Source: IVCA

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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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India advantage

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

Local Market

Profit from Local Sales

Manufacture

Harness low cost manufacturing base to service local, European

and MEA markets

Back-end Services

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

AdvantageIndia

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 Come..explore..be a part of the great Indian opportunity!opportunity!

We look forward to welcoming you to WEF 2008We look forward to welcoming you to WEF 2008

Thank you!Thank you!

- vinnie@mait.com