Russian Microelectronics Market: Current State and Development Opportunities November 1, 2013 Ankit A. Shukla Practise Director, Technical Insights
Global Microelectronics Market Total market size USD 318 billion (2012), forecasted CAGR 5-8% By 2025 the market is expected to total USD 1 trillion 17.2 % North and South Americas Demand concentrated in US Growth in 2012 г 40.7% USD 54.2 billion 12.1 % Еurope France and Germany - leaders Growth in 2012 27% USD 38.6 billion APAC <1% 54.7 % Russia Oil price correlation Growth in 2012 7.6% USD 2.5 billion Booming demand in China Growth in 2012 г. 35% USD 175.3 billion 2
The Russian Microelectronics Market Historical Performance Over the past 10 years the Russian microelectronics market has been in close correlation to the oil prices Russian Microelectronics Market CAGR 2002-12: 15.0% USD billion 3000 2500 2000 1500 1000 624 816 988 1176 1431 1861 2163 1406 1898 2344 2522 140 120 100 80 60 40 USD/barrel 500 20 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Market revenue Oil price 0 3
The Russian Microelectronics Market - Segmentation Aerospace and defence accounts for over 40% of the Russia microelectronics market demand The market is consolidated with dominant position of imports Russian microelectronics market end-user segmentation Russian microelectronics market - competition 27% 40% 60% 73% Aerospace and defence Other industries Import Domestic manufacturers 4
The Russian Microelectronics Market - Forecast Russian microelectronics market growth will be driven by development in key end-user industries 8000 7000 6000 Russian microelectronics market Forecast CAGR 2012-17: 9.2% CAGR 2012-25: 8.4% 7154 Aerospace and defence 12.0%* Telecom equipment 7.5% USD million 5000 4000 3000 2522 3924 Security systems 7.4% 2000 Lighting systems 5.9% 1000 0 2012 2017 2025 Industrial automation 5.5% *CAGR 2012-25 5
The Russian Microelectronics Market Key Characteristics State support of the industry; availability of historically established industrial clusters and created Special Economic Zones Virtual inexistence of domestic electronics and instrumentation idusries key end-users of microelectronic components Outdated infrastructure and shortage of human resources;industrial and educational cooperation are underdeveloped Lagging behind the world in terms of key technological developments Gradual substitution of domestic components by imports even in the most sensitive industries (A&D) 6
The Choice of Business Model IDM Fab-less Foundry In-house R&D, manufacturing and sales In-house R&D and sales, outsourced production Mass contract manufacturing to order Full product life-cycle Lower CAPEX, faster route-tomarket Cost advantages due to economies of scale Flexibility High capital intensity Dependency on foundry Intellectual property protection High CAPEX Lower ROI Gradual switch from IDM to fabless or fab-light Facilitates innovative growth Need to preserve domestic manufacturing for sensitive end-user industries Need to ensure high output volumes to reach profitability 7
Creation of Attractive Eco-system for Industry Flourishing Attracting private investors Hedging investors risks by the government High cost/deficit of land Lack of proper infrastructure Land and infrastructure Technology Advanced tech development Global R&D University cooperation State-private partnership Technology knowledge Management Regulatory support measures Human resources Tax and other benefits 8
Focus on Key Technologies Development Availability of technological capacity/experience in a given field in Russia Availability of sizeable domestic demand (end-user industry) and export opportunities Technology relevance/novelty in the world and prospects of its development 9
Quo Vadis? Potential for microelectronics industry development in Russia can grow many fold, provided: 1. There is increased support for local electronics and instrumentation manufacturing: National industry champions Import substitution Improve competitiveness 2. Careful selection of technology directions for development: Availability of experience Product life-cycle outstripping and not catching up Domestic demand and export opportunities 3. State support: Eco-system customs, taxation, ease of doing business, etc. Selection of priority areas for development Infrastructure human resources (!), industrial and university cooperation 4. Partnerships with global companies and technology clusters: From joint R&D to manufacturing 10