Zinnovzones E R&D Services Ratings
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Zinnov Zones 2018 ER&D Services December 2018 Zinnov Proprietary Confiidentiial 1 01 ER&D Services Market Overview ➢ Global Corporate ER&D Spend v Z1000 R&D Spend by vertical ➢ Overall Digital Engineering Spend v Digital engineering spend by vertical 02 Zinnov Zones ER&D Service provider Ratings 2018 Zinnov Proprietary Confiidentiial 12 The Global Corporate ER&D Spend is pegged at USD 1.2 trillion Global Corporate Engineering and R&D Spend is in excess of USD 1.2 Trillion in 2018 Z1000 organizations Total Corporate ER&D Spend Aerospace & Defence Media & Entertainment Automotive Medical devices Total Corporate R&D Spend BFSI Mining & Metals USD1228B Biotechnology Pharmaceutical Z1000 R&D Spend Consumer Electronics Retail USD B Includes Traditional 975 R&D spend andTotal Chemicals & Materials Semiconductor Engineering Spend Organization wide Peripherals & Storage Software & Internet USD812B Spend of Global Top R&D Spend by Global Energy &Utilities Telecommunication 1000 R&D Spenders Corporates (includes Manufacturing engineering spend companies beyond Project Engineering Spend FMCG Transportation & CHM Z1000) MRO Spend in aerospace Healthcare payers & providers Travel & Hospitality Regulatory Services spend Telecom NW Service & Layout Industrial Others Zinnov has increased its coverage through new verticals such as BFSI, Retail, and Travel & Hospitality, etc. which reflects as increased Corporate ER&D spend Zinnov Proprietary Confidential Source: Zinnov Z1000 database, Zinnov Research &Analysis 3 3 While automotive firms lead R&D spending, Software & Internet firms have witnessed highest growth (1/2) X% % Increase in R&D spend over 2017 Z1000 organizations YX%% decrease in R&D spend over2017 USD 812Billion 2018 Z1000 R&D $ 130 BN $ 125 BN $ 117 BN $ 67 BN $ 61 BN $ 54 BN $ 30 BN $ 28 BN Software& Consumer Telecom & Peripherals& Medical Automotive Pharmaceutical Semiconductor Internet Electronics Networking Storage Devices 6-7% 5-6% 18-19% 9-10% 7-8% 4-5% 1-2% 9-10% Top R&D Spenders Dell Volkswagen 10.2 B 22.6 B Apple 14.2 B Intel 13.1 B Huawei 13.5 B 4.3B Medtronic 2.2 B 14.5 B Merck &Co. Amazon Technologies Samsung Daimler 9.6 B Qualcomm 5.6 B Cisco Systems 6.3 B Canon Bard Novartis 8.9 B Alphabet 16.6 B Electronics 14.1 B 2.7B 1 B Western Becton Toyota Motor 9.5 B Pfizer. 7.7 B Microsoft 13 B Sony 4.1 B Broadcom 3.3 B Nokia 5.4 B 2.4B 1 B Digital Dickinson 4.1 B Boston 1 B Robert Bosch 8 B Bristol-Myers 6.4 B Facebook 7.7 B Panasonic TSMC 2.5 B Ericsson 4.4 B Lenovo 1.2 B Squibb Scientific Thermo Fisher Ford Motor FujiFilm 1.5 B 2.1 B NTT 1.9 B Seagate 1 B 0.9 B 8 B GlaxoSmithKline 6.1B Oracle 6.2 B MicronTechnology Scientific Zinnov Proprietary Confidential Source: Zinnov Z1000 database, Zinnov Research &Analysis 4 While automotive firms lead R&D spending, software & Internet firms have witnessed highest growth (2/2) X% % Increase in R&D spend over 2017 Z1000 organizations YX%% decrease in R&D spend over2017 USD 812Billion 2018 Z1000 R&D $ 27 BN $ 27 BN $ 26 BN $ 24 BN $ 19 BN $ 15 BN $ 14 BN $ 46 BN Aerospace& Chemicals& Energy& Transportation, Industrial Biotechnology FMCG Others Defense Materials Utilities Construction & HM 5-6% 0-1% 7-8% 7-8% -2% -1% 3-4% Top R&D Spenders Procter & ABB 1.3 B Boeing 3.2 B Celgene 5.9 B Dupont 2.1 B Petrochina 1.8 B 1.8 B Caterpillar 1.9 B Gamble Sumitomo Gilead China Railway Airbus BASF 2.1B SNAM 1.1B Nestle Electric 1.1 B 3.1 B Sciences 3.7B 1.7 B Construction 1.5 B TDK BAE CRRC 2.1 B Amgen 3.5B 3M 1.8B ExxonMobil 1.1B Unilever 1 B 1.5 B 0.9 B Systems Deere & Murata Leonardo- Dow 0.8 B 1.7 B Biogen 2.2 B 1.6 B Sinopec 0.9 B L'oreal 1 B Company 1.4 B ManuFacturing Finmeccanica Chemical Toyota Sumitomo CNH Industries 0.7 B Safran 1.5 B Monsanto 1.6 B Chemical 1.5 B Royal Dutch 0.9 B Pepsico 0.7 B 1 B ZinnoV Proprietary ConFidential Source: Zinnov Z1000 database, Zinnov Research &Analysis 5 Digital natives have been disrupting large R&D spenders across verticals… Traditional Products Industries Digital Products Early adopters to drive digitization Shared Mobility CarSales Automotive • Ride sharing company UBER has a higher valuation than GMand Ford Autonomous and EVs • Tesla focuses on building autonomous EVs Industrial Analytics • Honeywell built its Sentience platform and provides analytics Equipment Industrial services to its clients • PTC acquired Thoughtworks to provide platform services to its Platform clients Predictive maintenance • Taleris uses sensors to monitor aircraft components & systems and Oil Production Energy provide predictive maintenance services for customers Operational efficiency • KUKA produces one unpainted vehicle body every 77 seconds On-Demand MedicalDevices • Practo Became world’s largest health appointment booking platform Medicines Healthcare in 2015 Connected Devices • CareFusion is shifting to patient centric model Software defined networks • Over 1 Bn active users with 42 Bn+ texts sentdaily TelecomEquipment Telecom • The industry expects to lose combined $386 Bn between 2012 and Network Infra 2018 to OTT players such as Skype Over the topservices Software as aservice • Salesforce.com transformed the CRM business by providing cloud On-premise applications Enterprise based services Software Mobility • Salesforce.com has captured 20% of the market share • Slack is valued at $5 billion and transformed enterprise collaboration Product personalization • Spotify quadrupled its paying user base (40 Mn+) in just 2years Embedded • Facebook uses consumer data to define product roadmaps Design Consumer Data driven productengineering • 1.2B+ people use Facebook Zinnov Proprietary Confidential Source: Zinnov Research &Analysis 6 …As a consequence, R&D spenders are investing towards digital engineering to stave off competition Top R&D spenders are investing in digital engineering themes to drive velocity in manufacturing processes and new product development while also enabling alternate revenue streams Spend on digital Spend on enabling infrastructure new products Engineering and R&D spend to build digital Engineering and R&D Spend to build: infrastructure: • New and connected products such as • Includes spend on digitally modernizing connected cars, wearables, smart ✓ Faster product Digital the product launch and development lighting, etc. development engineering ✓ Enhanced new ✓ Enhanced quality process ( ex. Factory 4.0) • New services such as predictive asset product portfolio spend Recurring revenue checks • Includes spend on new digital maintenance, remote diagnostics, etc. ✓ ✓ Automated production technologies on modern infrastructure streams through lines such as AR/VR andAI subscription models Enhanced product dev. velocity s Enhanced product ownership e experience m o c t u Alternate revenue streams O Efficient processes & quality control Zinnov Proprietary Confidential Source: Zinnov Research &Analysis 7 Digital engineering spend is expected to account for 37% of ER&D Spending by 2023 DIGITAL ENGINEERING SPEND 2013 2018 2023E Spendin USDBillion 1058 1228 1722 37% OF ER&D SPEND BY 2023 159 293 642 Driven by convergence of: • Technology innovations • Business model innovations 15% 24% 37% • Growth of Tech giants and start- ups DIGITAL ENGINEERING SPEND • Vibrant global digital ecosystem GLOBAL ER&D SPEND DIGITAL ENGG % OFER&D Zinnov Proprietary Confidential Source: Zinnov Z1000 database, Zinnov Research &Analysis 8 8 Across industries, digital engineering will drive future ER&D growth Digital Engineering Spend Across Industries 2018 2023 USD Billion USD Billion 293 642 Digital engineering spend in USD billion Digital Engineering Spend (2018) Digital Engineering Spend (2023) Consumer Medical Media & Software & Telecom Automotive Industrial BFSI Retail Healthcare Aerospace Inter2n9et Electronics Devices Technology 18% 6 16% 14% 59 129 29% 41 12% 12% 18% 29% 31 24% 21% 28 8% 22 21 19 21 22 12 11 9 9 11 9 6 4 4 2 3 Digital Engineering Spend by Vertical (in USD Billion) Zinnov Proprietary ConFidential Source: Zinnov Z1000 database, Zinnov Research &Analysis 9 9 North America dominates digital engineering spend, however, China is catching up Digital Engineering Spend Across Geographies China accounts for 1/3rd of APAC digital engineering spend Digital Spend NorthAmerica Western Europe 20% APAC North American enterprises accountfor 58% 58% of the digital engineering spend 58% driven by increased R&D spending by 22% Software & Internet firms (Tech Mafia). USD 58 B USD 169 B Top Spenders • AstraZeneca Top Spenders Top Spenders • BMW USD B • Alibaba • Alphabet • Daimler AG 65 Chinese Enterprises • Baidu • Apple • Ericsson • Ctrip • Amazon • Nokia • Honda There are 6 Chinese enterprises • Cisco • Novartis • Huawei 6/10 amongst the top digital engineering • Facebook • RobertBosch • Samsung 10 spenders in the APACregion • IBM • Roche • Tencent • Intel • SAP • Toyota • Volkswagen More than one-thirds of the digital • Microsoft • Zte • Oracle engineering spend in APAC is • NTT accounted for by Chinese • VMware enterprises X% % of global digital engineering spending Zinnov Proprietary Confidential Source: Zinnov Z1000 database, Zinnov Research &Analysis 1010 Digital engineering is seen as a means to “Renew the Old” and “Build the New” by R&D spenders Digital Engineering spend Modernization of product development process New/Connected Products and Services “RENEW THE OLD” “BUILD THE NEW” • Robotic automation in plants • Autonomous vehicles • 3D printing for components • Connected vehicles Automotive • Digital PLM • ADAS Consumer • Digital modernization of product • Connected