India: the Vibrant Electronics Industry

1. India: the Vibrant Electronics Industry Vinnie Mehta Executive Director Manufacturers’ Association for Information Technology Tel Aviv November 05 ,2007

2. Presentation agenda India – a land of opportunities Snapshot of Electronics & IT industry in India Conclusion

3. India on the move… One of the fastest growing nations GDP grew at 9.4% during 2007 Top 10% of nations since 1980 On the verge of sustained double-digit growth Strong investment momentum Market capitalization up from USD 140 Bn in FY 2001 to > USD 1 Trn recently FDI on the rise - USD 7.6 Bn (06) and USD 19.4 Bn (07) FII investment - USD 6.5 Bn in 2006-07 140 + public traded companies with market cap > USD 1 Bn GDP GDP composition – FY 2007 Source: CMIE By 2050, India projected GDP is US$ 70 Trillion

4. India – the 5 Ds • Democracy • Largest democracy in the world • Largest digital elections • 9 Prime ministers from 6 major parties, 50 + state parties, 3 MM elected representatives • ONE POLICY • Diversity • Highly diverse • 23 languages, 30 provinces • 6 major religions • Cultural,religious, & Climatic • Diaspora • Over 2 Mn Indians outside India • Indian companies outbound M&A > USD 15 Bn in 2006 • Demographics • 1.12 Bn population, Remain a ‘young’ nation beyond 2050 • < 20 yrs population • 442 Mn currently • 479 Mn by 2050 • ~10 Mn finishing school, 600,000 Engineers and 3 Mn graduates p.a • Demand • 5th largest consumer market in the world by 2025. • 300 Mn growing middle class • Rising incomes to lift 291 Mn out of poverty to make middle class 583 Mn by 2025 Ingredients for sustained and consistent economic performance

5. The Market: 2006-07 Domestic demand: USD 30 bn Production: USD 16 bn Exports: USD 2.2 bn Employment Direct: 0.75 million Indirect: 1.5 million Electronics industry in India: A snapshot Components $ 2.15 Bn Strategic Electronics $ 1.09 Bn Consumer Electronics $ 4.87 Bn Comm. & Broadcasting Equip. $ 2.32 Bn Computers $ 3.12 Bn Industrial + Other $ 2.55 Bn • Growth over 2005-06: 20%

6. CEAMA: Consumer Electronics & Appliances Manufacturers’ Association ELCINA: ELCINA Electronic Industries Association of India ISA: Indian Semiconductor Association MAIT: Manufacturers’ Association for Information Technology TEMA: Telecom Equipment Manufacturers Association Key Electronics Associations in India CEHA: Council of Electronics Hardware Associations

7. The Market: 2006-07 IT Industry size: USD 48 bn + IT Hardware Domestic: USD 7 bn: USD 1.7 bn ITES & Software Exports: USD 31.3 bn ; Domestic: USD 8.4 bn 6.3 million PCs sold; Installed base: 22 mn 13 million TVs consumed; Installed base 100 mn + 5 million + DVDs sold: growing at 40% annually Internet users: 50 mn+;Broadband connections: 2.5 mn Mobile sales: 75 mn ; Installed base: 172 mn Significant R&D and product development Sizeable presence of MNCs: Intel, IBM, Cisco, Motorola, Nokia, Samsung, LG India is suddenly attractive for hardware/electronics manufacturing Electronics & IT industry in India: A snapshot

8. The PC market (Desktop + Notebooks) in India Units • CAGR 2001-07: 30% • Growth over 2005-06: 26%

9. Desktop Market: Share of Indian, MNC & Assembled 2005-06 2006-07 • Consumption of Indian brands decreased 2% in absolute terms • Sales of MNC Brands grew by 33% and that of Assembled by 22% in absolute terms

10. Desktop sales: City-spread • Consumption in Top 4 metros grew by 15% while in Next 4 it dropped by 26% • Sales in Rest of India (Other smaller Towns) grew by 33%

11. The Set top box market: 2004-07 Million Units • Annual growth 84%; • 2007-08: sales expected to cross 2.5 million

12. Telecom Market in India : 2002-07 Mobile Phones Million Units • Annual subscriber base growth 44%; 2007-08: subscriber expected to cross 250 mn • 2006-07: Base Stations installed: 100,000; Annual growth: 55% • 2006-07: Towers installed: 100,000; Annual growth: 60%

13. The Software & Services market USD Million • Annual growth: 31%; Exports growth at over 32% and domestic at 25% Source: NASSCOM

14. The Software & Services Exports Markets Source: NASSCOM ~ 80% of Fortune 500 outsource their IT from India

15. 40 36.3 TM TAM TM CAGR – 29.8%, TAM CAGR- 29.4% 35 TM in 2015 is expected to grow by 13 times the TM in 2005 TAM in 2015 is expected to grow by 14 times the TAM in 2005 30 25 Revenues $ Billion 20 15.52 12.67 15 10 5.8 2.82 5 1.14 0 2005 2010 2015 India Semiconductor Market • India’s share in the global semiconductor market is expected to increase from 1.2 % in 2005 and is forecast to be 5 % by 2015 • Telecommunication, Consumer and IT Hardware are the segments driving the market during the forecast period • Wireless handsets, Base Station Transceivers (BTS) are the major sub product categories driving the TAM for telecommunications segment • Set Top Box, DVD players and writers are the emerging product categories in consumer segment • Few other emerging product categories are electronic clusters, Capacitive Discharge Units (CDI) and Engine Management Systems (EMS) Source: ISA – Frost & Sullivan

16. Venture Capital Industry • An estimated USD 7.5 bn in VC/PE in 2006 across 299 deals • Over 250 deals in first half of 2007 with USD 5.6 bn • Expected to cross USD 10 bn in 2007 • Key Investment Verticals – IT/ITES (23.5%), BFSI (12.1%), Manufacturing (12%), Real Estate (7.1%); Engg & Construction (7.9%) • India Specific VCs: ChrysCapital, HSBC Pvt Equity, ICICI Ventures, IL&FS Venture Corporation, Infinity Technology Ventures, SIDBI, Walden International etc. Source: IVCA

17. India emerging as a manufacturing destination • Surge in manufacturing confidence led by mobile players • Branded players: Nokia, Motorola, LG, Samsung, Ericsson… • EMS companies: Elcoteq, Flextronics, Solectron, Jabil Circuits, Sanmina, Celestica and Foxconn/Honhai … • With new Fab policy several Semiconductor firms are keen to manufacture in India • Taiwanese Companies just about coming in • Foxconn/Honhai; Compal (Reliance), Delta Electronics, Liteon

18. Advantage India India advantage Local Market • A very rapidly growing domestic market: CAGR 30%+ • Global recognition for back-end services: • A proven case for IP, embedded systems and IC design • Attractive for Manufacturing Investments • Skilled employee base • Fast and upcoming modern infrastructure (SEZs) • Proximity to EU and MEA market • Freight Cost; 20% cheaper than China - Faster delivery and lesser pipeline inventory Profit from Local Sales Harness low cost manufacturing base to service local, European and MEA markets • Use India for IP and ITes Services • New Product development • Engineering services • BPO Manufacture Back-end Services India is a great Opportunity –Triple Advantage

19. 2010… Mobile installed base: 500 mn PC sales: 25 mn; installed base 65 mn ITES & Software exports: USD 60 bn 40 mn new internet connection; at least 50% broadband Nationwide TV broadcast to be digital by 2015 beginning 2010: significant opportunity for STB consumption & manufacturing Over USD10 bn investment in e-governance and national id card The Future… 2015: Total expected Market USD 320 bn; Domestic production USD 155 bn

20. Come..explore..be a part of the great Indian opportunity!We look forward to welcoming you to WEF 2008Thank you! - vinnie@mait.com