Forces of Change

Mega Trends That Will Reshape the World of

Manufacturing by 2020

David Frigstad: Chairman

Richard Sear: Global VP – Visionary Innovation

Frost & Sullivan

May 2013

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"When it comes to the future, there are

three kinds of people: those who let it

happen, those who make it happen, an

those who wonder what happened."- John M. Richardson

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Our Definition of Mega Trends

“Mega Trends are global, sustained forces

of development that are transformational

to business, economy, society, cultures and

personal lives”

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The Indicator

High Immaturity

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The top right corner on each page will show the following indicator

The RED arrow shows the Maturity of the OVERALL area being discussed

The GREEN arrow shows the degree of impact to manufacturing as it relates to

addressing the area being discussed

GAP between Green and Red = Relative complexity to overcome the challenge

High Maturity

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URBANIZATION

“CITY AS A CUSTOMER”

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“CITY AS A CUSTOMER”

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Four Main Trends in Urbanization: Development of Mega Cities,

Mega Regions, Mega Corridors, and Mega Slums

MEGA REGIONS

Cities combining with

suburbs to form regions

(Population over 15

million)

EXAMPLE: National capital

region of Delhi (includes

New Delhi, Noida, Greater

Noida, Ghaziabad,

Gurgaon, Faridabad)

MEGA

CORRIDORS

The corridors connecting

two major cities or Mega

Regions (60 km or more

apart, and with a

combined population of 25

million or more)

EXAMPLE: Hong Kong-

Shenzhen Western

Corridor

MEGA CITY

City with a minimum

population of 8 million and

a GDP of $250 billion in

2025 (13 Mega Cities in

2011 and 34 Mega Cities in

2025)

EXAMPLE: Greater Tokyo

MEGA SLUMS

837Mn in Slums in 2012

Source: Frost & Sullivan Analysis.

Photo Credits: Dreamstime

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There Will be 34 Mega Cities Globally By 2025 - 76% of Mega

Cities to be From Developing World

Source: : United Nations, Department of Economic and Social Affairs, Population Division (2012). World Urbanization Prospects: The 2011

Revision , Frost & Sullivan, 2012

Population in 2025

> 27 Million

18-27 Million

8-18 Million

Beijing

Chongqing

WuhanTianjin

Chengdu

Harbin

Tokyo

Osaka-KobeDelhi

MumbaiMexico City

New York City

São Paulo

Kolkata

Los Angeles

Buenos Aires

Istanbul

Cairo

Rio de Janeiro

Jakarta

Moscow

ParisLondon

Chicago

SeoulTehranMadrid

Hong Kong

Shenzhen

Guangzhou

Foshan

Shanghai

Nanjing

Hangzhou

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The Future of Urban Logistics– The Hub and Spoke

Logistics Model In Urban Environments

The Spokes:Drop of delivery points for

double trailer trucks

Heavy Commercial

Vehicles (double

trailer trucks) will carry

goods to big warehouses

at outskirts

Macro to Micro Implications

The Hub: Central Distribution Centres

• All trucks to operate at 80-100%

capacity (load factor)

• New Technologies in tracking

deliveries such as Track and

Trace, RFID in warehouses to

evolve

• New Business Models like in-

night services, special delivery,

self-collection points to grow in

popularity

• ~50% reduction in trucks going

in and out of cities

• Ensures ‘On-time delivery’ for

retailers

Medium and

Light CVs will

deliver goods to

warehouses within

city

Outer Ring Road

25 miles from City

Centre

Source: Frost & Sullivan Analysis.

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High Maturity

Gujarat International Finance Tec –City (GIFT ) $15.6 Billion

PPP Project to be India‟s Zero Discharge City and Zero

Fatal Accidental City by 2017-2018

TRANSIT ORIENTED

DEVELOPMENT

• 10:90 modal split Private :

Public Transport

• 2 Multimodal Transit Nodes

• 4 External Parking Hubs

and Logistics Centers

• PRT Systems – no journey

to extend 10 mins

• Well connected to 6

external gateways from NH-

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PROJECT FEATURES

• NEXT VERTICAL CITY – 61

buildings to be High Rise

• 60% of Built up Area for

Commercial Purposes and 23%

of Residential Purposes

• 60% of Land to be green

• 99.9% Uninterrupted Power

Supply

• WiFi/WiMAX Services For High

Speed And All-pervasive Network

• 8000 Km of High Speed Fibre

Cables

ZERO FATAL ACCIDENTAL

CITY BY 2017

No fatal accident

due to use of intelligent

transport system

ZERO DISCHARGE

CITY BY 2017

No release of any

harmful or toxic

material to the

environment

BUSINESS SEGMENTS

Core Financial Services

Capital Markets and Trading

IT ServicesITeS/BPO services

GIFT Project in 2020

• No. of Jobs 10,000-11,000 (Thousands)• Value add to GDP: $375-425 Billion• Market Capitalisation-$1,600-$1,800 Billion

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Case Study: The BOS-WASH Corridor to have

58.2 Million population and to account for 20% of

United States GDP in 2025

$2.6 Trillion

Gross Metropolitan

Product (2025)

$300 Billion

Five Year Plan To

Upgrade Transport,

Energy, Water, Telecom

Infrastructure Announced

(Feb 2011)

18 Million

new inhabitants in the

next decade

400 Million

Total volume on the

corridor, including

commuter service

Boston

Washington, D.C

White Plains Airport

Philadelphia

Airport

Wilmington

Baltimore

BWI Airport

Waterbury

Trenton

Philadelphia

New Rochelle

New York CityNewark AirportNewark

Boston

Route 128

Danbury

Woonsocket

Hartford

Hub City Station

Major City Station

Other City Station

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SOCIAL TRENDS

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SOCIAL TRENDS

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Gen YGeo Socialization

“She-conomy”

Ageing Population

Reverse Brain Drain

Middle Bulge

Generational Political Shift

Surge in Asian Work

Pool

0.53 0.45

0.15 0.07 0.12

0.370.22

0.49 0.60

0.21

0.100.16

0.48

0.36

0.34

0.70

0.24

0.14

0.31

0.50

0.62

0.06

0.18

0.07

0.07

0.15

0.110.20

0.00

0.50

1.00

1.50

2.00

2.50

Africa Rest of AsiaLatin America, Caribbean and OceaniaNorth America Europe India China

Po

pu

lati

on

(B

illio

n)

65 Years and Above 35-64 15-34 0-14

1.91

2.40

2.85

0.84

Global Population in 2025Of 2.4 Billion Gen Y Population, about 60% will be from Asia

Source: U.S. Census Bureau 2010 and Department of Economic and Social Affairs of the United Nations 2011; Frost & Sullivan analysis.

Note: Gen Y = Population between 15 and 34 years 2011 2025

Population Forecast by Region and Age, Global, 2011 and 2025

1.85

2.29

2.29

0.54

6.97 Billion 8.00 BillionApproximately 35 percent of

Gen Y Population will live in

India and China.

Global

Population Global

Population

Region

Personalization

and

Individualization

Techno Savvy

and Connected

24 X 7

Civic and

Environmentally

Friendly

Demanding and

Impatient – “Fast

and the Furious”

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245.0

354.4

611.5

223.3

Rise of Young Dragons China to Have 354.4 Million Gen Y (15–34 years) Population and 966

Million Working Age Population by 2025

2011

2025

Total Population: 1,404.1 million

Gen Y Population by Province, (China), 2025

65 above35–64 15–34 0–14

Source: Population Division, United Nations, National Bureau of Statistics of China; Frost & Sullivan, 2012

Total Population: 1,355.2 million

Note: All values in the charts are in millions. Some numbers do not add up because of rounding

254.8

413.2555.6

131.6

Less than 10 million

10-20 million

20-30 million

Shandong 25 millionSichuan

22 million

Guangdong28 million

Henan 28 million

Gen Y

Top 4 Provinces Account for 29% of Gen

Y population

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Developing World Seeing a Thirst For InnovationFive Key Trends for Employers of Youth in Emerging Markets (tracking similar to

developed nations)

Trend 1: School to Work Transition

Trend 2: Entrepreneurship Society / Positive Identity

Trend 3: Thirst for Access to Technology

Trend 4: Desire for Education / Certificates

Trend 5: Longevity and Security

TECHNOLOGY

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TECHNOLOGY

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Connected World: Over 80 billion devices will be Connected in Future

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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

10 Connected Devices

for Every Household

by 2020

5 connected devices for

every user by 2020

5 billion internet

users by 202080 billion Devices

by 2020

China = 5.1

Billion Devices

IPv6

China 877Mn

Internet Users800Mn Internet

Users in Africa

India = 1.5

Billion Devices

190Mn Pay TV

In India

Connected

World

340,282,366,920,938,463,463,374,607,431,768,211,456

Virtual World 2020: 3D Simulated Environment

for Interaction: Progress made by interesting players

Virtual Shopping Allowing Customers to Try Products without leaving their homes

Virtual Classes and Laboratories and Daily 3D Field Trips

to Different Countries and Planets

Virtual World Used forProduct Builds

Virtual Business Conferences

Social Networking: 3D Avatars Enabling People to Lead Multiple

Lives

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Total Augmented Reality Market to Hit $75.2 Billion in

2020, with Mobile Augmented Reality Market Accounting

for The Majority 60%

Augmented Reality (AR) is defined as a real-time augmented view of the environment through digital data through use of

text, sound, graphics, video, and navigation systems that increases user‟s interactivity with the local environment . This extends business and

mobility options, social interactions and experiences which has implications on personal lives, businesses and even day-to-day activities.

Mobile AR Others

Heads Up Displays & Head

Mounted DisplaysAugmented reality embedded

mobile apps

60% 40%

$45 Billion $30.2 Billion

Total AR Market: $75.2 Billion

Augmented Reality, Global Revenue, 2020

Source: : Frost & Sullivan, 2012

RealityAugmented Reality

Augmented Virtuality Virtual World

Photocredits: : Dreamstime

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Future Robotics: Pervasive Robotic Technology in

2020 - 2025

Robots To Help

With Strategic

Planning and

Business

Robots for

Companionship

Robots as Pets Robots for

Household

Chores

Robots to Wait

on Hand and

Foot

Robots as

Waiters

Robots as

Nannies

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“Smart” as the New Green

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MOBILITY

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MOBILITY

Top 20 Megacities – Regional Transportation PoliciesCongestion , low emission zones and road user charging initiatives in the emerging

economies will have a major impact on car mobility

Delhi Mumbai Beijing Shanghai Moscow Seoul New York London Tokyo

Bus Rapid

Transit Lanes2011 2011

Metro/Subway 2011

Congestion

ChargingPlanned Planned 2012 2012 Future Planned Future

Parking Cuts

Road use

Charging/BanYes

1 Week

Day Ban

1 week

Day Ban

1 Week

Day Ban*Future

EV/Hybrid

Incentives

Bicycle Lanes

Emission

StandardEuro 4 Euro 4 Euro 4 Euro 4

Euro 3

Euro 4 by

2012

Euro 4

CAFÉ

27.5mpg.

34.1 mpg

by 2016

Euro 4

Euro 5 by

2011

25%

reduction

by 2015

Not planned Existing currently * Voluntary no road usage incentiveSource: Frost & Sullivan

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Impact of Urbanization on Vehicle Technology PlanningOpportunity for OEMs to Develop Technologies for Customers’ Unmet Needs

Evolution of Megacities: Impact on Vehicle Technology Planning (Global), 1950 - 2025

Ergonomically designed comfortable seats for long commuting hours

Turning radius <4.3m to drive in congested streets

Start Stop System for frequent stop in traffic

Facebook on wheels, Internet in cars

3G/Wi-Fi Connectivity - V2V and V2X communication

Limited boot space and more head and

leg room

CO2 less than 80 gm/km vehicles

Lightweight construction

Panoramic roofs

Navigation systems with route guidance and traffic

information

Customised and personalised comfort

functions

Smart vehicle access

Low speed collision avoidance for enhanced safety and pedestrian

protection

Simple and easy to use HMI

Vehicle length of less than 3500mm

Source: Frost & Sullivan

Autonomous parking assist

Voice recognition technology

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CHARGING

STATIONDISTANCE: 1 KM

TIME: 3 MINS

INTERMODAL

COMMUNICATIONDISTANCE: 1.5 KM

TIME: 3.5 MINS

SATELLITE

COMMUNICATION

REAL TIME

INFORMATION

PARKING SERVICEDISTANCE: 3 KM

TIME: 10 MINS

AIRPORTDISTANCE: 10 KM

TIME: 40 MINS

VEHICLE TO VEHICLE

COMMUNICATION

CONGESTION

CHARGING

ZONEDISTANCE: 1.5 KM

TIME; 53.5MINS

TOLL COLLECTION

POINTDISTANCE: 4 KM

TIME: 20 MINSCAR SHARINGDISTANCE: 3.5 KM

TIME: 15 MINS

The Future of Mobility will Rely on „Intelligent‟, „Integrated‟ and

„Interoperable‟ Transport InfrastructureExample of Implication of Augmented Reality and Location Based Services

YOUR

FRIENDSDISTANCE: 1.7 KM

TIME: 4 MINS

RETAILDISTANCE: 5 KM

TIME: 25 MINS

SERVICE STATIONDISTANCE: 3.5 KM

TIME: 17 MINS

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NEW BUSINESS MODELS

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NEW BUSINESS MODELS

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Business Model Focus Creates Higher Rate of Return

Strategy Process Product Delivery

Business model

Partnering Enabling process

Core process

Product performance

Product system

Service Channel Brand Customer experience

Cumulative Value Creation

Last 10 Years

Volume of Innovation Efforts

Last 10 Years

Hi

Source: Doblin analysis, Doblin Inc.

Lo

Hi

Lo

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N=1Integration of Technology changes manufacturing Business Model’s

Source: MLC, Frost & Sullivan

N=1Integration of Technology changes manufacturing Business Model’s

INFRASTRUCTURE DEVELOPMENT

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INFRASTRUCTURE DEVELOPMENT

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Asia

Europe

Latin America

North America

Africa

Oceania

90%

41%

200%

140%

91%

200%

56%

150%

82%

112%

27%

4%

90%

56%

65%

7%

65%

11%

57%

83%

Broadband

Penetration

Mobile

Penetration

Source: 2009 telecommunications statistics from ITU 2020 projections from Frost & Sullivan

90%

200%

100%

68%

Telecom Infrastructure: Investments are expected to drive mobile penetration (M2M

included) in Latin America from 91% in 2009 to more than 200% in 2020, and fixed broadband

from 7% to 65%

Broadband

Penetration

Mobile

Penetration

Broadband

Penetration

Mobile

Penetration

Broadband

Penetration

Mobile

Penetration

Broadband

Penetration

Mobile

Penetration

Broadband

Penetration

Mobile

Penetration

2010

2020

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Infrastructure in Latin America: Latin America’s infrastructure is significantly behind

OECD countries, demanding significant investments

Broadband density per 100 people

Electric power

consumption (kWh per

capita)1907 8376

6.6 23.8

Improved water as % urban population 97.1% 99.6%

Improved sanitation as % population

87.0% 94.0%

Roads, paved (% of total roads) 33.3% 86.5%

Latin American countries

OECD countries*

Latin America has a large

infrastructure deficit…

Country / Region % of GDP

Argentina 4.0%

Brazil 8.0%

Chile 5.0%

Colombia 9.0%

Costa Rica 3.0%

Mexico 2.0%

Peru 11.0%

Venezuela 4.0%

Total LatAm 6.0%

Annual investment in infrastructure over 20 years to equal the same level of South Korea (as % of GDP)

And significant amounts need

to be spent

Rail lines (total route-km)

Air transport, registered

carrier departures (million)

562,410 km93,454 km

1,838,212 18,639,951

* Includes Chile and Mexico

Source: The Worldbank WDI database, 2010; WHO World Health Statistics 2011

Oil & Gas Pipelines (length in km)

26,500 All continent

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O&G will remain the Major Source for Primary Energy for the Next

Two Decades

• O&G will continue to remain the major source of energy

• O&G contribution to the global mix is expected be 55 percent in 2030, only 2 percent lower than 2010

• Oil consumption is expected be 18 percent higher in 2030 and gas consumption is expected to rise by 52 percent

0.0

5000.0

10000.0

15000.0

20000.0

2010 2015 2020 2025 2030

Forecasted Growth of Global Primary Energy Consumption (million tons of oil equivalent )

Total Liquids Consumption^ Total Natural Gas Consumption Others ^Liquids include Biofuel, Others include Nuclear, Coal, Renewable and Hydroelectric energy , Data Source (BP Statistical

Review, 2011)

• Global energy consumption to grow by 40 percent in the next two decades

• Non O&G energy source would see a rise of 50 percent from 2010 levels

• Renewable energy to grow at a CAGR of nearly 8.5 percent during this period

BUT

O&G will

provide for

55 percent of

energy

demand in

2030

Lithium ion batteries are the energy

storage option for electric vehicles and

hybrids – as demand increases cost will

decrease with volume efficiency bringing

economies of scale.

Lithium-manganese chemistry is likely

to be the future of lithium-ion batteries for

automotive applications.

The automotive application‟s share in the

lithium-Ion battery demand is likely to near

50% of the total demand by 2016

83%

40%

16%

12%

1%

48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2016

Automotive

Industrial

Consumer

Source: Frost & Sullivan

Energy StorageViable Solutions for Intermittent Challenges?

Ambri‟s Liquid Metal Battery

Magnesium (Mg)

Antimony (Sb)

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ECONOMY

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ECONOMY

Beyond BRIC: The Next Game Changers in 2025

$2,212

Billion

$6,467

Billion

$709

Billion

$1,167

Billion $2,601

Billion

$687

Billion $6,235

Billion

$38,526

Billion

$6,189

Billion

$803

Billion $323

Billion

$483

Billion$4,816

Billion

Mexico

BrazilEgypt

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 have been

made based on Real GDP growth

rates

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Trends Implications to Manufacturing

Adaptable and flexible to

opportunities caused by

technology is speeding

Manufacturing to arrive earlier in

R&D process as it becomes a value center to drive differentiation

Companies must drive and foster innovation – a

source of competitive advantage

Manufacturing pushes closer to end consumer in an era of hyper personalization

Constantly adapting to

technology will be crucial to stay

competitive, sustainable and

profitable over long term

China is a source of concern

Smart products will create complexity

to the manufacturing

process

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We will be witnessing

robots in homes

Digital assistants will guide our

lives

Cars to have autonomous

functions

Your health will be driven

China will be going through social reform

Cities will be Smart

USA remains the #1 wealth generator

Virtual world will Disrupt Industries

Innovating to 2025: A Few Predictions

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Contact Details

David FrigstadChairman

(210) 348-1000

df@frost.com

Join Our Mega Trend Group On

Mega Trends: Strategic Planning and Innovation Based

on Frost & Sullivan Research

@searrichard

Richard SearGlobal Vice President – Visionary Innovation

(210) 247-3840

rsear@frost.com