Engineering R&D: Advantage India
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Transcript of Engineering R&D: Advantage India
Engineering R&D : Advantage India
Zinnov
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Agenda
Global R&D Outlook
India Product Engineering Landscape
India Captive Centers: Story of Resurgence
India Service Provider: Consolidating Growth
1
2
3
4
Product Engineering in India: The Way Forward 5
The markets across various verticals are increasingly shifting towards emerging economies
Automotive While the sales in North America and Asia grew significantly, Europe continued to witness a decrease in automotive sales owing to European debt crisis
Aerospace Europe are the leading markets currently, By 2030, regions outside Europe and North America are expected to own about half the commercial aircraft in service
Computer Hardware and Storage US and China amongst the fastest growing nations in this segment. The market expected to hit USD 220+ Billion by 2016
Medical Devices One of the fastest growing vertical segment globally owing to increased governmental spend in healthcare and also increased instances of lifestyle diseases
Consumer Electronics The market is expected to reach over USD 1.3 trillion dominated by US and China
Industrial Automation The United States and Chinese markets are expected to be the powerhouses driving 9.5 percent growth in the global industrial automation market Emerging geographies are expected to grow at an average of 10-15 percent Year-on-Year
Semiconductor South east Asian countries will dominate the semiconductor industry in future as Asia accounts for more than 50% of the market. Growing technological advancements has spurred demand
ISV Post the recession in 2009, software segment is poised to witness a higher growth. The markets for both enterprise and software have witnessed significant growth
Telecom The industry is witnessing de-regulation in some of the world’s largest telecom markets like India and China fueling further growth prospects for the industry
Key Market Trends
This has created an increased focus on R&D in these high growth markets with US and Europe still dominating the R&D spend
North America
Japan Europe
20%
32% 35%
RoW*
13%
Verticals % Contribution
of North America to R&D
ISV 35%
Semiconductor 23%
Automotive 17%
Telecom 13%
Aerospace 9%
Others 3%
Verticals % Contribution
of Europe to R&D
Automotive 54%
Telecom 20%
Aerospace 10%
Semiconductor 7%
ISV 5%
Others 4%
Verticals
% Contribution of Japan to
R&D
Automotive 49%
Consumer Electronics
43%
Semiconductor
8%
R&D Spend Across Geographies
Top five R&D Spenders from North America Microsoft Intel General Motors IBM Cisco Systems
Verticals
% Contribution
of RoW to R&D
Consumer Electronics
35%
Semiconductor 31%
Telecom 28%
Others 5%
Note: * Rest of world Source: Zinnov Research & Analysis, Annual reports
Top five R&D Spenders from Europe Volkswagen Daimler Nokia Robert Bosch Ericsson
Top five R&D Spenders from Japan Honda Motor Panasonic Nissan Motor Sony Canon
Top five R&D Spenders from rest of world Samsung Huawei Technologies Hyundai Motors ZTE LG
11%
16% 3%
Indicates Increase in R&D Spend in FY 2011 over FY 2010
X% Indicates % contribution of a region to overall R&D spend
5%
Automotive and Industrial Automation giants lead the global R&D investment
Automotive Aerospace Consumer Electronics
Semiconductor Medical Devices
Telecom ISV
Company %
Toyota Motor 6%
Volkswagen 16%
General Motors 17%
Daimler 17%
Honda Motor 7%
Company %
Boeing -5%
EADS 7%
Finmeccanica -3%
United Technologies 18%
Rockwell Collins 24%
Company %
Panasonic -2%
Samsung Electronics 11%
Sony 1%
Canon 1%
FUJIFILM 4%
Company %
Abbott 11%
Medtronic 1%
Boston Scientific -5%
St. Jude Medical 12%
Stryker 17%
Company %
Nokia 0%
Cisco Systems -6%
Ericsson 4%
Huawei Technologies
42%
Alcatel-Lucent -8%
Company %
Microsoft 8%
IBM 4%
Google 37%
Oracle 0%
SAP 9%
Company %
Intel 27%
Samsung 7%
STMicroelectronics 0%
Toshiba 1%
Broadcom 13%
R&D Spend Increase of Key Companies Across Verticals, FY 2012
Note: % Indicates growth in R&D investments YoY. Source: Zinnov Research & Analysis, Annual reports
Industrial Automation
Company %
Siemens 8%
Mitsubishi Electric 11%
ABB 27%
Danaher 32%
Schneider Electric 20%
11% 3% -3%
8% 12% 5% 11%
15%
Energy efficiency and convergence are the major areas of focus for most R&D organizations across various verticals
Automotive
Aerospace
Consumer Electronics
Computer Peripherals
Semiconductor
Medical Devices
Telecom
ISV
1
2
3
4
5
6
7
8
Industrial Automation 8 9
Key Technology Focus Areas
Energy Efficiency, Automotive Electronics
Green Energy, Integrated Avionics, Higher Electronics Content
Connectivity, Device convergence, Digitization
Application Optimized Storage, Miniaturization, Energy Efficiency
Optoelectronics, Sensors/MEMs
Homecare Solutions, Medical robotics, Wearable Technologies
Redesign for cloud, Mobile Use, Complex Data Analytics, Context Aware, Vertical Market Specialization
Sustainability, Industrial Automation 2.0, Safety
Note: Source: Zinnov Research & Analysis
Mobile-Cloud Convergence, Device & Network Convergence
Agenda
Global R&D Outlook 1
India Product Engineering Landscape
India Captive Centers: Story of Resurgence
India Service Provider: Consolidating Growth
2
3
4
Product Engineering in India: The Way Forward 5
India is the leading offshore destination in delivering engineering and R&D services with a 22% market share
13 14.7
42
FY2011 FY2012 FY2020 E
Overall Product Engineering Growth Rate( In USD Billions)
Service Provider Growth Rate( In USD Billions) Captive Center Growth Rate( In USD Billions)
4.689
5.439
FY2011 FY2012
8.343
9.261
FY2011 FY2012
Note: Source: Zinnov Research & Analysis
MNC Captive centers continue to drive the India product engineering growth story
Sem
ico
nd
uct
or
Tele
com
Au
tom
oti
ve
Aer
osp
ace
Co
mp
uti
ng
Syst
ems
Co
nsu
mer
Ele
ctro
nic
s
Med
ical
Dev
ices
ISV
(OSP
D)
79%
50%
69%
24%
74% 68% 65%
70%
21%
50%
31%
76%
26% 32% 35%
30%
Captive Split Service Provider Split
Captive Vs. Service Provider Split Across Verticals
Note: Source: Zinnov Research & Analysis
Talent, Business and Technology imperatives will drive future growth across most verticals
Semiconductor
11%
Telecom 19%
Automotive 8%
Aerospace 4%
Computing Systems
7%
Consumer Electronics
6%
Others* 10%
Medical Devices/Hea
lthcare 3%
ISV(OSPD) 32%
Vertical wise Revenue Distribution FY 2012 Product Engineering
Note: Source: Zinnov Research & Analysis
Globalization Drivers
2011 2020 E
Talent
Business
Technology
Drivers for Globalization of Product Engineering to India
Talent- Availability, Quality, Scalability Business- Costs, Risk Mgmt., Market/Customer Technology-Innovation, Technology Trends
Agenda
Global R&D Outlook 1
India Product Engineering Landscape
India Captive Centers: Story of Resurgence
India Service Provider: Consolidating Growth
2
3
4
Product Engineering in India: The Way Forward 5
Over the last two years there has been a resurgence in the number of engineering R&D captives centers setup in India
Semiconductor 9%
Telecom 17%
Automotive 6%
Aerospace 2%
Computing Systems
5%
Consumer Electronics
4%
Others* 10%
Medical Devices/Heal
thcare 6%
ISV(OSPD) 41%
836
874
FY2011 FY2012
Growth in the Number of Captives, FY 2011 Split of Captives in India Based on Vertical 2012
Note: Source: Zinnov Research & Analysis
ISV segment posted a smart growth owing to the entry of new players and also headcount ramp up in existing captive centers
0.656
0.146
0.595 0.718
0.997
0.315
1.347
2.692
0.765
0.165
0.666 0.81
1.1
0.397
1.38
3.168
Automotive Aerospace ConsumerElectronics
ComputerPeripherals &
Storage
Semiconductor Medical Devices Telecom ISV
Captive Revenue Growth Rates-Vertical Wise( In USD Billion)
17%
13%
12% 13%
10%
26%
2%
18%
Note: Source: Zinnov Research & Analysis
Large Medical device manufacturers are looking at India to establish their regional R&D center for emerging markets
3
0
2
0
2
2
5
5
12
8
Automotive
Aerospace
Consumer Electronics
Computer Peripherals &Storage
Industrial Automation
Semiconductor
Medical Devices
Telecom
ISV
Others
No. of New Captives Added in 2011 New Captives Large Captives
Walmart, Open solutions Paypal, Fidelity, GE Energy
Faurecia, Peugeot, CASKA
STEC, Silicon Image
Panasonic, Hitachi
Ricoh, Medline
Ruckus Wireless, Fluk networks, Posedge
Linkedin, Zynga, Facebook, ORCC
Momentive, Hysitron
Bosch, Volkswagen, GM
Honeywell, GE, EADS,Boeing
Samsung, LG, Toshiba, Philips, Sony
IBM, NetApp, Symantec, EMC
Schneider Electric, GE, Siemens
Intel, ST Microelectronics, TI, AMD
Microsoft, Oracle, SAP Labs
Huawei, Nokia Siemens, Ericsson
Huawei, Nokia Siemens, Ericsson
Note: Source: Zinnov Research & Analysis
Medical Device
While ISV is the most mature vertical in the India captive landscape, medical devices space is rapidly gaining traction
Mature
ISV
Telecom
Industrial Automation
Rapidly Growing Emerging Vertical Nascent Vertical
Competency
Cap
tive
Pre
sen
ce
Semiconductor
Vertical Maturity Levels- Captives
Size of Bubble Indicates Headcount
Automotive
Consumer Electronics
Computer Peripherals and Storage
Aerospace
Note: Source: Zinnov Research & Analysis
Many companies have started their core research teams operating from India
Note: Source: Zinnov Research & Analysis
Focus Areas: • Composite material design • Electromagnetic analytics • Nondestructive evaluation technology
Focus Areas: • Abrasives / adhesives • Coatings • NVH materials
Focus Areas: • High performance computing • Avionics • Structures
Focus Areas: • Smart system modeling • Vehicle structure and safety • Chemical reaction modeling
Focus Areas: • Next generation magnetic sensors • Image analysis and computer vision • Intelligent vehicle technologies
Focus Areas: • Manufacturing technologies • Communication technologies • Robotics
Focus Areas: • Decentralized energy systems • Embedded systems • S.M.A.R.T.* technologies
Focus Areas: • Healthcare systems and technologies • Energy and lighting • Consumer lifestyle technologies
Snapshot of core research by MNC R&D centers in India
GE
Honeywell
General Motors
Philips
EADS
Siemens
3M
ABB
Key Captive Trends
Increased ownership of global products
Transitioning to play the role of multi function centers
Co-creating innovations with service providers
Creating COEs to build products for local and global markets
Increased decision making in global sourcing initiatives
Shift in talent model from designation based to role based
Note: Source: Zinnov Research & Analysis
Agenda
Global R&D Outlook 1
India Product Engineering Landscape
India Captive Centers: Story of Resurgence
India Service Provider: Consolidating Growth
2
3
4
Product Engineering in India: The Way Forward 5
Product Engineering in telecom and ISV segment continues to be the mainstay for Indian service providers
0.297
0.454
0.234 0.23 0.243 0.167
1.312
1.128
0.347
0.512
0.32 0.286 0.293
0.211
1.399 1.328
Automotive Aerospace ConsumerElectronics
ComputerPeripherals &
Storage
Semiconductor Medical Devices Telecom ISV
FY 2011 FY 2012
Service Provider Growth Rates-Vertical Wise
17%
13%
37%
24% 21%
7%
18%
26%
Note: Source: Zinnov Research & Analysis
India service providers have deep competencies in software product development and embedded development which have variety of applications across verticals
Mature
Telecom
Transport
Aerospace
Industrial Automation
Rapidly Growing Emerging Vertical Nascent Vertical
Competency
Serv
ice
Pro
vid
er
Pre
sen
ce
Automotive
Vertical Maturity Levels-Service Providers
Size of Bubble Indicates Headcount
ISV Consumer Peripherals
and Storage
Semiconductor
Medical Devices
Note: Source: Zinnov Research & Analysis
Service providers have moved beyond certifications and are focused on building competencies which will differentiate them in the market place
Automotive
Aerospace
Consumer Electronics
Computer Peripherals and Storage
Industrial Automation
Semiconductor
Medical Devices
Telecom
ISV
University GDFs* MNC Partners Certifications
Note: GDF( Global Development Forums) Source: Zinnov Research & Analysis
Key Service Provider Trends
Note: Source: Zinnov Research & Analysis
Shifting focus from traditional PES to Products and Platforms
Working closely with startups as innovation partners
Increasingly engaging with MNC Captive Centers in India
Building strong ecosystem partnerships with universities, global development forums and MNCs
Working not just as product development partners but also as Go-To – Market partners with MNCs
Increasing investment in domain/vertical specific infrastructure and COEs
Key Service Provider Trends
Note: Source: Zinnov Research & Analysis
Global R&D Outlook 1
India Product Engineering Landscape
India Captive Centers: Story of Resurgence
India Service Provider: Consolidating Growth
2
3
4
Product Engineering in India: The Way Forward
5
The Road Ahead
Note: Source: Zinnov Research & Analysis
• Product Engineering Services expected to outpace the IT growth rate
• Service providers will grow faster in volume and capability as compared to captive centers
• As relationships mature, service providers and their customers will enter into pricing models that are based on market outcomes
• As the thin line of difference between CIO and CTO is beginning to fade, service providers are increasingly pitching fully loaded service offerings to the end clients
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