Mega Trends and the Nondestructive Testing Industry

Macro to Micro Opportunities on Future Business, Cultures and

Personal Lives

1

By Nikhil Jain

Agenda

• Introduction and Definition of Mega Trends

• Presentation of Top Mega Trends

• Conclusion and Macro to Micro : How To Apply Mega Trends Within Your Organization to Develop Growth Strategies

2

Top Mega Trends

What is a Mega Trend?

Mega trends are transformative, global forces that define the

future world with their far reaching impact on business, societies,

economies, cultures and personal lives.

Urbanization – City as a Customer

Smart is the New Green

Social Trends

Connectivity and Convergence

Bricks and Clicks

Innovating to Zero

New Business Models: Value for Many

Beyond BRIC: The Next Game Changers

Future Infrastructure Development

Health, Wellness and Well Being

Future of Mobility

3

Mega Trend 1:

Urbanisation - “City as a Customer”

Mega Cities Mega

Regions

Mega Slums Mega

Corridor 5

6

Chongqin

g

Note: A Mega City has a population greater than 8.0

million and a GDP of $250.00 billion or more.

Source: United Nations, Department of Economic and Social Affairs, Population Division (2012);

World Urbanization Prospects: The 2011 Revision; and Frost & Sullivan analysis.

Population in 2025

More than 27 million

18–27 million

8–18 million

Beijing

Chongqing

Wuhan Tianjin

Chengdu

Harbin

Tokyo

Osaka-Kobe Delhi

Mumbai Mexico City

New York City

São Paulo

Kolkata

Los Angeles

Buenos Aires

Istanbul

Cairo

Rio de Janeiro

Jakarta

Moscow

Paris

London Chicago

Seoul

Tehran

Madrid

Shenzhen

Foshan Guangzhou

Hong Kong

Shanghai

Hangzhou

Shenzhen

Nanjing

Bogotá

Mega Cities in 2025 By 2025, 35 Mega Cities will exist globally, and about 77% of these will be from the developing world. Tokyo will be the largest Mega City in 2025, with a population of 38.7 million.

7

Greater Sao

Paulo

28.8 million

Greater

Buenos Aires

36.5 million

Central

Mexico

31.4 million Chennai, Kanchipuram,

Pondicherry

15.0 million

Greater Los

Angeles

20.9 million

Tri-state Area

36.9 million

Lagos and Eko

Atlantic City

25.0 million

Marmara Mega Region

Istanbul, Kocaeli

20.6 million

Mumbai,

Bhiwandi,

Kalyan, Thane,

Ulhasnagar

34.4 million

New Delhi, Greater

Noida, Ghaziabad,

Gurgaon,

Faridabad

28.5 million

Population

greater than 40

million

Population from 20

million to 40 million

Population from 15

million to 20 million

Beijing-Tianjin

51.0 million

Shanghai

67.9 million

Chongqing-

Chengdu

28.9 million Washington, D.C.-

Baltimore Area

15.6 million

Greater Rio

de Janeiro

17.2 million

Cairo-Giza

17.6 million

Source: United Nations, Department of Economic and Social Affairs, Population Division (2012);

World Urbanization Prospects: The 2011 Revision; and Frost & Sullivan analysis.

National Capital Region

in the Philippines

27.7 million

Guangdong Region

58.7 million

Greater Jakarta

29.8 million

Greater Bangkok

19.2 million

Kolkata,

Howrah

21.6 million

Johannesburg and

Pretoria

7.6 million

Emerging Mega

Region

Top Mega Regions of the World in 2025 By 2025, 21 Mega Regions will exist globally. Shanghai and Guangdong Mega Regions will contain 9% of the total population of China.

8

Mega Corridors in 2025 By 2025, there will be 21 Mega Corridors globally.

Latin America (2)

• Rio de Janeiro-Sao Paulo-

Campinas Corridor

• Toluca-Mexico City-Puebla

Corridor

Africa (3)

• Abidjan-

Ouagadougou

Corridor

• North-South

Corridor

• Kampala-Nairobi-

Mombasa Urban

Corridor

India (8)

• Delhi Mumbai

Industrial Corridor

• Mehsana-Valsa

• Mumbai-Ahmedabad

• Mumbai-Nagpur

• Bangalore-Belgaum

• Hyderabad-Hindupur

• Srikakulum-Nellore

• Chennai-Hosur

Cross-country (1)

Beijing-Tokyo-Pyongyang-

Seoul Corridor

Japan (1)

Tokyo-Osaka Corridor

Australia (2)

• Brisbane Urban Corridor

• Perth Urban Corridor

Jakarta (2)

• Sumatra-Java

• Jakarta-East Java

Turkey (1)

Istanbul-Izmir

Mega Corridor

Note: Mega Corridors are corridors that connect two major cities or Mega Regions (60 km

or more apart, and with a combined population of 25 million or more). The corridors can be

planned transportation or economic corridors (with planned investment going into transport

infrastructure, industrial zones, energy, or real estate) or naturally evolving urban corridors.

Mega Corridors (21)

Transportation Corridors (16)

Source: UN-Habitat and Frost & Sullivan analysis.

Regions with Mega Corridors

Europe (2)

• Trans-European

Network Transport

(TEN-T)

• Blue-Banana

Corridor

China (7)

• Beijing-Harbin and Dalian

• Beijing-Shanghai

• Shanghai-Chengdu

• Ningbo-Shenzhen

• Beijing-Guangzhou

• Shanghai-Kunming

• Guangzhou-Shenzhen-Hong

Kong

Malaysia (5)

• Sarawak Corridor of

Renewable Energy

(SCORE)

• Sabah Development

Corridor (SDC)

• East Coast Economic

Region (ECER) Corridor

• Northern Corridor

Economic Region (NCER)

• Iskandar Development

Region (IDR) Corridor

United States (3)

• Southern

California

• Great Lakes

Corridor

• Bos-Wash (D.C.)

Corridor

9

Asia 56.9%

Rest of the World43.1%

Slum Population, Global, 2025

1.1

Oceania

25.1

Northern Africa

41.8

88.7

Europe

Southeastern

Asia

89.4

Western

Asia

Latin America

and the

Caribbean

362.0

Eastern Asia

475.7

476.0

South-

Central

Asia

Sub-Saharan

Africa

Source: UN-Habitat and Frost & Sullivan analysis.

Forecast of Asian Slum

Population as a Percent

of Total Slum Population,

Global, 2025

Note: The numbers in the circle are in millions

196.8

Mega Slums Globally, 22% of the total population will live in slums by 2025.

Cities, and Not Countries, Will Drive Wealth Creation In the Future

Cities like Seoul account for 50% of the country’s GDP; Budapest (Hungary) and Brussels (Belgium) each for roughly 45%.

What are the Micro Implications? High Economic Power Hub and Spoke Business Model Transit oriented development New Mobility Solutions City as a Customer

10

Mega Trend 2:

Smart is the New Green

Smart Factory Case Study: Toyota Practices “Kakushin” in its New Takaoka Plant

Able to Build 8 High-Volume Models as Against 3 on the Original Assembly Line

Welding Parts Shops Press Shop

Body Shop

Paint Shop # 1

Assembly Shop # 1/2

Paint Shop # 2

• 2010– Capacity 500,000

Ditch huge expensive machinery

A welding system that

slashes the cost of jigs and other tooling.

Welding Parts Shops

Press Shop

Body Shop

Paint Shop # 1

Assembly Shop # 1

Paint Shop # 2

Body Shop

Assembly Shop # 2/3

Paint Shop # 3

• 2006 – 660,000 Capacity

- Cost-cutting to generate more than $2.5 billion

- Lead time to add new model halved

- Sensors that monitor quality during each process

A paint process that eliminates the need to let

the base coat dry.

A "set parts system" that delivers a basket of parts to

each vehicle.

Stamping presses that use servo-motors rather than hydraulics, combined with high-speed

delivery robots.

Current Plant

Future Plant

13

Mega Trend 3:

Social Trends

15

Gen Y Geo Socialization

“She-conomy”

Ageing Population

Reverse Brain Drain

Middle Bulge

Generational Political Shift

Surge in Asian Work

Pool

16

Gen Y Geo Socialization

“She-conomy”

Ageing Population

Reverse Brain Drain

Middle Bulge

Generational Political Shift

Surge in Asian Work

Pool

Global Population in 2025: Out of 2.4 Billion Gen Y Population , Around 52% from Asia Alone

Around 37% of Gen Y Population Will Live in India and China Alone

World Population: Breakdown by Region (Global), 2025 2025

2011

6.99 Billion

8.01 Billion

0-14 years 15-34 years 35-64 years 65 years and above

Source: Department of Economic and Social Affairs of the United Nations 2011; Frost & Sullivan, 2012

17

Mega Trend 4:

Connectivity & Convergence

10 Connected Devices for Every Household by 2020

5 billion internet users by 2020

5 connected devices for every user by 2020

500 devices with unique digital IDs (Internet of things) per square kilometre by 2020

80 Billion Connected Devices By 2020

Source: Frost & Sullivan, 2012

19

Technology Convergence Industry Convergence Product Convergence

Connectivity will Lead to Convergence of Products, Technologies and Industries

UAV Unmanned Aerial Vehicle

V2V Vehicle to vehicle

Vehicle to Infrastructure

Vehicle to Home V2H

V2I

20

Convergence in the NDT Industry

Industry Convergence

Metrology

NDT

Product Convergence

Tablet Computers

Phased Array Ultrasonic

Instruments

Competition Convergence

“Expert” Alliance

NDT Training and Equipment

Vendors

21

Mega Trend 5: Bricks and Clicks

Macro To Micro Implications of Bricks and Clicks

23

Store Sizes to Decrease by

15%-20% by 2020 (from 2011

levels)

In-store, online and mobile to integrate creating a

‘Omnichannel’ shopping experience

M-Payment Users to

increase by 16% exceeding the

1 billion mark by 2025

Before Clicks After Clicks Macro to Micro Implications

Small-box Format (Virtual Stores)

Single-Channel Omnichannel

Money Wallets Mobile Wallets

New Marketing Solutions

through new ‘social’ platforms

TV Campaigns Social Media Campaigns

Big-box Format (Hypermarket)

Mega Trend 7:

New Business Models: Value for Many

New Business Models

Personalization and Customization

Personalization & Customization

Nike

Quirky .com

Co-Creation

One-off Experience

Service as a Business Model

Location Based

Services

(red letter Days)

Source: Frost & Sullivan, 2012

25

Will Replace

“Value for Many”

“Value for Money”

Free Premium

Freemium

+

=

Source: Frost & Sullivan, 2012 26

Mega Trend 8:

Economic Trends

The Next Game Changers in 2025

$2,827 Billion

$5,437 Billion

$1,098 Billion

$811 Billion

$1,167 Billion $2,441

Billion

$653 Billion $6,235

Billion

$38,526 Billion

$6,189 Billion

$772 Billion $323

Billion

$483 Billion

Mexico Brazil

Argentina

Egypt

South Africa

Turkey

Poland

India

China

Russia

Indonesia

Thailand

Vietnam

Philippines

BRIC Nations

Next Game Changers

Note : The figure denotes GDP at market prices. Forecasts to 2025 have been extrapolated based on Nominal GDP growth rate projections .

Source: International Monetary Fund. Oxford Economics, Frost & Sullivan, 2012

$4,816 Billion

The Next Game Changers in 2025—Increasing Oil and Gas Activity in Africa Driving Economic Growth

Source: Frost & Sullivan Analysis

- Emerging oil and gas Producers

- Current Major Oil and Gas Producers

- Potential oil and gas Producers

Ethiopia and Somalia

Exploration activity has found

reserves of oil and gas, however,

production is still a few years apart.

Kenya

Recent oil and natural gas discoveries

have increased investment. 46 oil

blocks auctioned off in the past year.

Tanzania

Large natural gas reserves discovered

recently. The country looking to develop the

reserves and start exporting power by 2015.

Mozambique

Large recent natural gas discoveries add to the

existing reserves. Production to ramp up with

potential export of natural gas to South Africa

being planned.

Ivory Coast

Recent oil discoveries are expected to

enhance oil production by 200,000 bpd

in 5 years from approximately 32,500

bpd being produced currently

Ghana

The country planning $20 billion

investment in the oil and gas sector over

the next 5 years. Oil production

expected to double by 2021.

Gabon

The country has been producing oil for decades but

production has been dwindling over the past 15 years

due to depletion of reserves. However, offshore oil

discovery is expected to usher in the next oil boom in the

country.

Cameroon

Oil production has been declining steadily since

1985 but large natural gas reserves remain

largely untapped. The country expected to

invest in developing the natural gas reserves

over the next 5-7 years.

Equatorial Guinea

Oil production rebounded in 2012 after declining year on year

since reaching a peak in 2005. Natural gas production rising

and expected to witness considerable investment.

Namibia

Oil discovered recently in partnership with a

Brazilian firm after years of exploration.

Production expected to start in the next 5

years.

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

20.5

21.0

0.0

50.0

100.0

150.0

200.0

250.0

2012 2013 2014 2015 2016 2017

Reve

nu

e G

row

th R

ate

(%

)

Reve

nu

e (

$ M

illi

on

)

Year

Revenue Revenue Growth Rate

South Africa—NDT Inspection Services Market

Source: Frost & Sullivan, 2012

Key Takeaway: The market is expected to witness high revenue growth rates with significant

investment being made in developing new infrastructure.

Mega Trend 9:

Future Infrastructure Development

32

Worldwide Infrastructure Investment, US$ Trillion, 2010-2025 (Cumulative)

10.5

6.6

8.3

1.5

1.0

Americas

Europe

Middle East

Asia Pacific

Africa

Sector Total (US$

trillion)

Road 9.7

Railway 1.5

Air/Seaport 1.0

Power 9.7

Water 5.9

Investments in Infrastructure Development is expected to cross $27 trillion by 2025

Source: Frost & Sullivan analysis.

CAPEX in Developing Canadian Upstream Infrastructure Increasing Steadily

33

23.0 25.4

20.9 19.4

11.0

18.5 19.8 19.6

44.7

9.9

12.2

16.8

20.7

10.6

17.2

21.6 24.8

0.00

20.00

40.00

60.00

80.00

100.00

120.00

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2005 2006 2007 2008 2009 2010 2011 2012 2013

Conventional Oil and Gas Oil Sands Oil Prices

Fore

cast

E&

P C

AP

EX

($

B)

WT

I S

po

t C

rud

e P

ric

e (

$/b

bl)

E&P Capital Expenditure in Oil and Gas, Canada, 2005-2013

Source: Statistics Canada, Public and Private Investment in Canada, BP Statistical Review of World Energy 2013, Frost & Sullivan Analysis

CAPEX in Developing Pipeline Infrastructure Increasing at a High Pace

34

Source: Oil and Gas Journal, Frost & Sullivan Analysis

1.3

2.6

5.7

0

1

2

3

4

5

6

2011 2012 2013

Pla

nn

ed

Pip

eli

ne

s C

AP

EX

($

B)

Macro Micro

From Macro to Micro: Taking Mega Trends from Information to Strategy Implementation

Mega Trend Selected trends that impact your

business and markets

Sub Trend A sub-layer of trends that has a

wide ranging impact

Impact to Your Industry Visualising the roadmap of these critical forces through scenario-

building and macro economic forecasts

Impact on Future Product/ Technology

Analysis of Opportunities and Unmet Needs

To

35

Thank You

Questions?

36

Contact Information

37

Nikhil Jain Senior Research Analyst, Measurement and Instrumentation

nikhilj@frost.com

Jeannette Garcia Corporate Communications, Measurement and Instrumentation

(+1) 210.477.8427

jeannette.garcia@frost.com

Vijay Mathew Program Manager, Measurement and Instrumentation

vijay.mathew@frost.com