Contribution of the IT Industry to Economic Development

1. The Israel Perspective Contribution of the IT Industry to Economic Development Hanan Achsaf President, Motorola Israel Ltd. Former President Israel Electronics Association Advisor to the Prime Minister Infrastructure Communications and Information July 16, 1999

2. “Today we are witnessing the early turbulent days of a revolution that may prove to surpass all previous revolutions” The Emerging Digital Economy

3. IT Developments More use of consumer electronics like TV sets, video recorders, video games, CD players, PCs, etc. Computer-based communications, information, commerce and entertainment services Internet, Intranet, Extranet usage spreading fast Globalisation trends and trade increase productivity and flexibility People spend more time on the move and want to communicate and be informed when travelling

4. Classifications For New Media Industry • CommunicationsCommunications facilitiesHousehold A/V equipmentTelephone and telegraph equipmentBroadcasting and communications equipmentRadio and TV broadcasting • ComputingComputer equipmentSemiconductorsElectrical equipment and suppliesSearch and navigation equipment • ContentNewspapers, Periodicals, Books, Greeting cardsAdvertisingBusiness servicesMotion picturesLibraries, vocational and schools Source: The Digital Economy, Don Tapscott

5. Mobility • personal • terminal • service • Integration • fixed/mobile • cordless/cellular/satellite Towards the third generation systems Convergence trends • Convergence • telephony • data • information/Internet • broadcasting • Information Society • services

6. Technologies For The New Economy

7. Voice/Audio • High-quality voice • Music Multimedia Applications Remote LAN &Intranet Internet applications • File transfer • Groupware • E-mail • Corporate info • WWW Browsing • Video Telephone • E-mail • News push • Networked games • Electronic commerce The Future Network ISDN/PSTN Video conference Video terminal • High-quality tailor-made appl. • Standard ISDN package CorporateLAN Internet ApplicationServers Wireless Post Card and Electronic Business Card InternetServiceProviders • Multimedia electronic mail

8. Video Conference HandwritingRecognition Camera Fax,E-Mail, WWW Voice Inputand Output foldable Personal Communicator Global Mobile Communications A View of the Future The “Portable Tool Set”

9. Enabling Technologies - “Portable Tool Set” PC Workstation Video/Still Camera TV/Web TV Fax Copier Scanner DVD/CD-ROM GPS Navigation Organizer Cellular/Satellite Link Answering Machine Electronic Dictionary Electronic Translator Single Portable Unit ~ $500

10. 40 Years: Transistor Radio 10 Years: 1kg Cellular Phone 10-15 Years ??“The ToolSet”: Credit Card Size 80g StarTac 20kg 100-200 g Technological solution for the “Tool Set”

11. Knowledge Digitization Virtualization Molecularization Internetworking Innovation Immediacy Globalization Discordance Convergence 10 Themes Of The New Economy

12. IT - A Major Engine of Economic Growth in Industrial Nations GDP Growth In The US 1995-1998 (Percent) IT contribute 35% of US economic growth and accounting for only 8% of GDP

13. Comparison Of Multimedia Output 1996 and 2005 Source: The Digital Economy, Don Tapscott

14. IT Changing Productivity standards US Computer Output Per Worker ($US terms) $K Source: US Industry and Trade Outlook, 1998.

15. Foreign Employment By Global Companies (Percent of Total) Source: World Investment Report 1997

16. New Media Industry Job Growth1995-2005 Million of Jobs Source: The Digital Economy, Don Tapscott

17. IT Investment - Top 15 IndustriesIT investment per worker Source: The emerging digital economy II, June 1999

18. Shifts To The Internetworked Government Source: The Digital Economy, Don Tapscott

19. Internet is showing the wayinto the new world!

20. World Wide Web Users Traffic on the internet doubles every 100 days !!!! Source: US Industry and Trade Outlook, 1998

21. New Era of Digital Economy • The Internet - is evolving to an open network infrastructure and a unique venue for commercial opportunities@ Expanded customer base@ Cost effective delivery channel@ Efficient customer service

22. Huge Increases In Sales Volume • Amazon.com - Went from $16m to $300m in sales between 1996 and 1998 • Cisco systems - Went from $100m to $4Bn in internet sales over the same period • Dell computers - Went from $1m per day over the net sales to $6m between Jan 1997- Jan 1998. • Auto-by-tel - Went from $2Bn to over $10Bn in sale over the net between 1996-1998.

23. How well Are We Measuring The Digital Economy ? • E-Commerce - Retail sales transactions are not broken out by method of selling • Firm/Industry - Not yet developed the micro data sufficiently outside of manufacturing • Prices - New products, services and ways of selling are yet to be modeled.

24. Israel Electronics Industry Profile $M 1998 Total Revenue - $8.0Bn Exports - $6.2Bn 47,000 workers are employed in the industry Sales per employee amount to $172,000 The Israeli electronics industry has 65% added value rate 12% of employees in the electronics industry are engaged in R&D

25. Israel Electronics Industry Outlook $Bn Accelerated Growth Path 2005 ~ $25 Bn (17% CAGR) Current Growth Path 2005 ~ $17 Bn (11% CAGR) Total electronics industry revenue is expected to reach $10 billion by 2000 Strong government support for accelerated growth of the industry Increased emphasis on technological education to close the human resources gap The Israeli economy will be increasingly technology-based

26. Israel Start-Up Phenomena Largest number of start-ups outside of US Highest concentration of start-ups outside Silicon Valley Expanding volume of venture capital - nearly $1.8 billion has been invested in 300-400 start-ups since 1992 In 1998, $150M of US venture capital was invested in Israel - more than in any other country outside the US Over 100 Israeli companies traded on U.S. & European exchanges. More than $1.5 billion raised from placements in 1998

27. Total Capital Raised by Year ($Million) Total Capital raised is estimated at $2.87 Billion An estimated 60% have been invested already A total of $1.1 Billion is yet to be invested

28. Capital Distribution by Industry1998

29. Acquisition of Israeli Technology 1998 • Elcint by GE valued @ $100M • WaveAccess by Lucent valued @ $56M • Teledata by ADC valued @ $200M • Memco by Platinum valued @ $412M • Lannet by Lucent valued @ $117M • Class Data by Cisco valued @ $50M • Mirabilis by AOL valued @ $407M • Picture Vision by Kodak

30. More acquisition of Israeli Technology 1996 & 1997 • Armon Networking by Bay Networks @ $36M • Instent by Medtronics @ $200M • Scorpio Com by US Robotics @$72M • Orbot by Applied Materials @ $100M • Opal by Applied Materials @ $175M • Biosense by J&J @ $400M • RadNet by Siemens @$75M

31. Leading Start-Up Technologies Data Compression ADSL,HDSL - wide band com. Artificial intelligence Cryptography, security, encryption Firewall, Compression Data bases, data mining, Development tools, Semiconductor Design, Asic, DSP Digital imaging, printing Image processing, Audio, video E-commerce, E-mail, E-publishing Distance learning, training Internet connectivity, multimedia, navigation, protection, service, telephony Internet Video Streaming Smart cards Voice and Handwriting Recognition Wireless LANs Automatic PCB quality control Bio imaging, bio informatics Bio sensors, Cardiac imaging Dental diagnostic and imaging

32. Thank You H.Achsaf@Motorola.com