The Changing Dynamics of the Global High Tech Industry

High Tech Manufacturing the way we see it

An analysis of key segments and trends

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Body-Section-Title; Berkeley 25-30pt; 2 lines Contents Body-Section-Intro; Helvetica 75 bold; 13/19pt; Content can continue for 3 lines; arsimonia ncre lorem Introductionipsolum arisimonia contentdere. 5

Industry Overview 6

High Tech Industry Value Chain 8

Consumer Electronics 9

Tablet PCs will drive the global consumer electronics market 10

TVs will continue to evolve as ‘smarter’ 10

Evolution of user interfaces 11

Semiconductors and Solar 12

Semiconductors 12

Growth of media tablets and eReaders will continue to fuel demand for semiconductors 13

Automotive will be the next pillar of growth for semiconductor suppliers 14

Wireless Local Area Network (WLAN) chipset market set to outpace the average semiconductor industry growth 15

Global solar power market 16

Print and Imaging 17

Print and imaging market 17

Technology highlights in the print and imaging market 17

Vendor highlights 17

Imaging, digital cameras, high definition and single-lens reflex cameras (SLR ) 18 Introduction 5 Regional highlights in imaging, digital cameras, high definition and single-lens reflex cameras (SLR) 18 Industry Overview 6 Convergence of print and photocopy machines 19

High Tech Industry Value Chain 8 International compliance and managed print services 19

Digital single-lens reflex cameras (DSLR) Consumer Electronics 9 driving growth in emerging markets 19

Tablet PCs will drive the global consumer electronics market 10 Computers and Peripherals 20

TVs will continue to evolve as ‘smarter’ 10 Personal computers 20

Evolution of user interfaces 11 Regional highlights in personal computers 21

Semiconductors and Solar 12 Server market 21

Semiconductors 12 Consumer segment to lead the PC business in mature markets 23

Growth of media tablets and eReaders will continue to fuel demand for semiconductors 13 Green IT 23

Automotive will be the next pillar of growth Personal computers will not be personal for semiconductor suppliers 14 anymore; they will be shared computers 23

Wireless Local Area Network (WLAN) chipset market set to outpace the average semiconductor industry growth 15 Enterprise Software 24

Global solar power market 16 Enterprise Software 24

Cloud computing to evolve over the next few years 25 Print and Imaging 17

Hybrid software landscape to emerge 25 Print and imaging market 17

Collaborative analytics will transform the Technology highlights in the print business intelligence space 25 and imaging market 17

Vendor highlights 17 Conclusion 26

4 High Tech Manufacturing the way we see it

Introduction

In the quest for recovery, companies analysis of the high tech value chain. in the global high tech industry are Also contained in the report are key competing against each other to market observations, substantiated by increase their market presence while relevant market sizing and forecast continuing to face challenges like slim figures. And an overview of future operating margins, high capital trends and recommendations is expenditure, shortening product designed to inform and inspire lifecycle and managing a global manufacturers as they develop their supply chain. go-to-market strategies.

However, high tech manufacturers are trying to overcome these challenges through innovations, launching new products and services, forging new partnerships, and acquiring new capabilities through mergers and acquisitions. Despite rapid change, the industry is poised to grow in the future fueled by factors like price erosion, higher per capita income and consumer attachments to iPads, tablets, smart phones and other mobile devices.

The global high tech industry has a broad reach, so it can be defined in a number of ways. Capgemini’s definition of the industry comprises consumer electronics, semiconductors and solar, print and imaging, computer and peripherals, and software.

This Capgemini research study assesses the global high tech industry and identifies both the challenges and opportunities the market presents for manufacturers. The report examines the five key industry segments listed above. In addition, it provides an

5 Industry Overview

The global economic meltdown of The high tech industry was relatively 2009 had a massive impact on the insulated from the economic swings manufacturing industry. According to of recent years because of its global Economist Intelligence Unit data, nature of operations. The high tech global industrial production decreased industry as a whole, other than a few 9.2% in 2009 after increasing just key segments like consumer 0.1% in 2008. JP Morgan’s Global electronics, was not affected as badly Manufacturing Purchasing Managers as other manufacturing segments. Index (PMI) showed a sharp decrease Initiatives like the introduction of in output beginning in mid 2008 as low-cost netbooks, average price companies slashed inventory. The erosion of mobile phone sales and the decline reached its bottom in January emergence of alternate delivery 2009, followed by an improvement. models like Cloud and Software-as-a- By mid 2010, manufacturing output Service (SaaS) helped high tech showed some increase. manufacturers ride the 2009 downturn.

The world economy expanded at an From 1995 to 2007, high tech annual rate close to 5% in the first manufacturing output in terms of half of 2010. IMF estimated world gross value added (GVA) registered industrial production registered higher growth when compared to the growth rates of about 15%, and global total manufacturing output. The trade recovered at rates over 40% United States, the European Union during this period. The key reasons and few of the Asian economies were for the improvement were a sudden experiencing growth closer to the increase in inventory levels and fixed world average, whereas Japan’s output investment accounts. declined from 27% to 11% during the period.

Figure 1: Manufacturing GVA as % of Total GVA

US$43 trillion US$46 trillion US$52 trillion US$57 trillion US$54 trillion 100%

80%

60%

40% 82.2% 82.2% 82.1% 82.2% 82.4%

20%

17.8% 17.8% 17.9% 17.8% 17.6% 0% 2005 2006 2007 2008 2009

Manufacturing Value Added Others

Source – UNCTADStat http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=95

6 High Tech Manufacturing the way we see it

China’s growth in high tech back on track with the high tech manufacturing output outpaced the segment leading the recovery. world average from US$19 billion in According to Manufacturers Alliance 1995 to US$167 billion in 2007. The for Productivity & Innovation (MAPI)1 US share of the global value-added pie US high tech industrial production in terms of high tech manufacturing rose at a 2% annual rate from the first was stable over the decade until the quarter to the second quarter of 2011. economic downturn. MAPI is also anticipating this sector to increase by 9 percent in 2011 and With the economy reviving, the show 11% growth in 2012. manufacturing industry is once again

Figure 2: High Tech Manufacturing Production

5 13.3% 15% 11.9% 10.5% 9.9% 9.4% 9.1% 8.3% 10% 4

9.3% % 3.3% 5% te

3.0% Ra

tion in trillions of US$ 3 -1.4% -2.5% oduc 0% Pr ear Growth 2 Y On- turing -5% ear- Y

1 -9.4% -10% ech Manufac T High

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -15%

High Tech Manufacturing Production Value Growth Rate

Source – National Science Foundation website http://www.nsf.gov/statistics/

Figure 3: High Tech and Electronics Industry Worldwide Revenue and Net Proﬁt Margin Trends

150 8 6 100 4 2002=100 2 enue Index, 50 ro t Margin %

Rev 0 base year Net P

0 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 -2

Revenue Index Net Pro t Margin

Source – IDC: “Optimizing Channel Coordination in High-Tech and Electronics Manufacturing: Flawless Sales Execution from Initial Lead Generation Through After sales Service,” Simon Ellis, October 2009 1 Manufacturers Alliance for Productivity & Innovation (MAPI): ‘MAPI Quarterly U.S. Industrial Outlook’ http://www.mapi.net/MediaCenter/news/Lists/Posts/Post.aspx?ID=314 7

High Tech Industry Value Chain

Overall the high tech industry becoming partners in the design and value chain can be classified production phase to large OEMs. between semiconductors and contract manufacturers and Original Generally, the high tech industry Equipment Manufacturers (OEMs). is affected by shorter technology Traditionally semiconductor lifecycles. The value chain faces the companies supply manufacturers challenge of being too asset heavy with thousands of other components (semiconductors), brand heavy to manufacture a device. Then the (consumer electronics) and complex software companies or embedded in terms of technology (computer and software providers develop the telecom equipment). This often adds platform or software that is later to the already increasing complexity, installed in systems to provide life to particularly for companies that span the device. multiple sub-segments.

In addition, there are thousands At the bottom end high tech of other suppliers responsible companies effectively manage complex for providing basic components sales channels through distributors, required by OEMs, which exist resellers and partners. higher in the value chain. However, with the changing dynamics in the industry these suppliers are gradually

Figure 4: High Tech Industry Value Chain

Consumer Fabless Electronics Semiconductor Retailer

Semiconductor Manufacturing (Dedicated Foundries) Distributor Electronic Consumer

Chemicals Packaging and Equipment

(Spec and Basic) Interconnection

Printed Circuit Boards Corporate Disposal Buyer

Passive Components Printed Circuit Distributors Board Assemblies EMS and ODMS

erous Display

Metals Components Nonf on and Steel Ir

Active Components

Base Materials Contract Manufacturer Electronic Equipment Sales & Service & Telecom

8 High Tech Manufacturing the way we see it

Consumer Electronics

With the global economic recovery, to the biggest conglomerates to keep the global consumer electronics investing for continued growth. market is expected to grow 10.4% in 2011 to US$964 billion, according In 2010 the revival of the consumer to the Consumer Electronics electronics industry was apparent Association’s retail forecast2. In around the world, with nearly every 2010, worldwide sales of consumer region registering sales growth. The electronics products grew 13% to only region facing growth challenges US$873 billion from 2009. In 2009 was Japan, but in China consumer the total retail sales of consumer electronics sales grew by 25% and electronics goods fell 9% amounting in Africa the growth was 70%, albeit to US$771 billion in the midst of from a lower base. By comparison, the recession. all the regions of the world witnessed much lower sales in 2009 when The segment forecast for 2011 is more compared to 2010. In 2011, North than twice as strong as the world’s American sales are predicted to grow gross domestic product (GDP), by 15%, Western Europe to grow by a measure of the size of the total 23%, China by 15% while Japan is economy. The world GDP is expected predicted to garner 8% growth. to register growth of 4.5% in 2011. With these positive numbers a sense Overall, according to the Consumer of optimism is back among enterprises Electronics Association, the US in spanning from the smallest start-ups particular will continue to drive the

Figure 5: Consumer Electronics Global Retail Sales Revenue, 2008 – 2011

13.2% 1,200 10.4% 15%

1,000 10% 6.9%

800 5% %

600 849.0 771.0 873.0 964.0 0% ear Growth Y

400 -5% ear On Y

Retail Sales Revenue in millions of US$ 200 -9.2% -10%

0 -15% 2008 2009 2010 2011

Revenue Growth

Source – GfK: “World Market of Consumer Technics”, Juergen Boyny, May 12, 2011 2 Consumer Electronics Association retail forecast http://www.chinapost.com.tw/business/global-markets/2011/01/15/287688/Consumer-electronics.htm

9 global consumer electronics industry Growth in terms of products comes with Apple’s launch of the iPad in with the EU close behind. However, primarily from smart phones, mid 2010. This market is at a nascent this growth pattern is expected to shift netbooks, laptops, ethernet-connected stage with many players launching as demand from developing nations TVs, high-definition camcorders, LED products. These devices are typically rises and the Asia Pacific region TV players, eBook readers and Blu-ray of similar hardware specifications, emerges as a major influencer. players. In the near future, consumers following the latest trend for netbooks will continue to move beyond high- and other small devices. The Indian consumer electronics definition video on TVs to web- industry is expected to grow at a connected TVs. Players like Apple have experienced Compound Annual Growth Rate tremendous success in the consumer (CAGR) of about 19% in 2010-2013. In the recent past, there was a gap in market and are likely to post even Among all products the highest the market for devices with screens stronger growth in the recent future. growth in 2010 was booked by smart ranging between 5 inches and 15 Moving forward, the tablet PC market phones, which registered a 51% inches. With an eye to bridge the gap, is predicted to be highly competitive year-on-year growth. In the near manufacturers launched a number with many new entrants in 2011 and future, smart phones are expected to of smart books, eBook readers and the coming years. According to IDC3 continue dominating the growth curve netbooks. However, netbooks are worldwide media tablet shipments followed by mobile and personal more “consumerized” now with expected to grow from 7.6 million computers (PC). At the same time, vendors finally able to break into units in 2010 to more than 46 million video game sales dropped in 2010 mass markets. units in 2014, representing a CAGR for the second consecutive year due of 57.4%. to the relative demand saturation. Tablet PCs will drive the global Moving forward, digital technologies consumer electronics market TVs will continue to evolve as related to connectivity and mobility ‘smarter’ will be crucial in further accelerating Despite the fact that tablet PCs are not the consumer electronics industry’s new and have existed for quite some Television is getting smarter with growth. time the market was transformed the addition of features like web

Figure 6: Consumer Electronics Global Retail Sales Revenue Split by Regions, 2008, 2010 & 2011

100% Africa & Middle East, 5% Africa & Middle East, 5% Africa & Middle East, 6% 90% Rest of APAC, 12% Rest of APAC, 12% Rest of APAC, 12%

80% Japan, 8% Japan, 10% Japan, 8%

China, 10% 70% China, 12% China, 13% 60% South America, 9% South America, 10% South America, 12% 50%

% Split North America, 21% 40% North America, 21% North America, 21% 30%

20% Europe, 35% Europe, 29% Europe, 28% 10% 0% 2008 2010 2011

Bars may not equal 100% due to rounding

Source – GfK: “World Market of Consumer Technics”, Juergen Boyny, May 12, 2011 3 IDC: “Worldwide and U.S. Media Tablet 2010-2014 Forecast”, By: Susan Kevorkian, Bob O’Donnell, 20 May 2010

10 High Tech Manufacturing the way we see it

surfing, downloading videos, live is expected to grow at double- see the consumer’s response to these streaming of games from websites, digit rates over the next four years, new control schemes, and how soon and downloading news and traffic reaching 122 million units by 2014. software is developed that can take updates. Although smart TVs made advantage of it. up a small portion of overall sales Evolution of user interfaces last year, the number is growing, as With such user interfaces, interactive consumers recognize the vast amount The evolving user interface represents 3D gaming, keyboard entry and of web-based content available a key challenge for designers of map manipulation are some of the to them. consumer electronics. It requires applications that will gain increasing mapping the complex user actions to traction. This multi-touch all-point From Google to Samsung, electronics create a spontaneous yet productive technology will provide OEMs with and technology players are betting on experience. With all of their senses, opportunities to better understand web content delivered directly to users are on one side of this paradigm their users and ultimately help them TV sets. Samsung has also upgraded while the device is on the other. to create the next generation of user its Internet@TV feature to include Touchscreens are now integrated into interfaces and devices. Samsung Apps from leading service a wide range of products spanning providers like Associated Press, from Microsoft’s Surface tablets to Blockbuster, Fashion TV, Twitter, everyday cell phones. As technology Netflix and YouTube. LG has also continues to evolve, multi-touch Key Takeaways launched “Smart TV” in the market all-point technology is expected to with features like network-enabled bring touchscreens to the next level • The global consumer electronics HDTV features, wi-fi-like DLNA with rich applications and increasing market is expected to grow close support, 150 TV Apps (free and reliability. to 10% in 2011. premium – i.e.Netflix, Hulu Plus, VUDU, etc.) and a web browser. Microsoft is planning to launch • Consumer electronics demand Project Natal, which has camera- from US and Europe and According to DisplaySearch estimates, based sensors and the ability to developing economies like 21% of all TVs shipped in 2010 have detect full body movements, for the India and China is expected to fuel internet connectivity, and the segment Xbox 360. It will be interesting to the growth.

Figure 7: Consumer Electronics Global Retail Sales Revenue Split • Increasing digitization of consumer by Top-Tier Products, 2008, 2010 & 2011 electronics goods along with falling prices of these goods 100% in several regions are some of the 90% key reasons consumers are spending more on consumer 80% 37% 32% 30% electronics. 70% 3% 3% • Other key growth drivers include 60% 9% 8% 7% the advent of mobile broadband 50% 14% 15% 16% along with portable media players, % Split 40% 1% 1% 1% high-definition recording and display products, and 30% 13% 16% 15% continuous automation. 12% 20% 20% 15% 10% • Key players in the market include 16% 0% 6% 10% Sony, Apple, Sharp, LG, Samsung, 2008 2010 2011(F) Matsushita, Koninklijke Philips Smart Phone Mobile Phone LCD TV Plasma TV and SANYO. Mobile PC Desk PC Tablet PC Other

Source – GfK: “World Market of Consumer Technics”, Juergen Boyny, May 12, 2011

11 Semiconductors and Solar

Semiconductors The largest category of the semiconductor market is all Affected by the global economic “general-purpose” standard recession, sales in the global semiconductor products, which was semiconductor market declined by estimated at US$196.8 billion in 10.4% from US$255 billion in 2008 2010. This figure is expected to reach to US$228 billion in 2009. However, US$259.5 billion in 2015, reflecting in 2010 worldwide semiconductor CAGR of 5.7% during the period revenues increased 30.9% to reach 2010 to 2015. US$299 billion, according to the latest Gartner semiconductor spending All application-specific devices forecast. emerges as the second fastest growing category with a CAGR of 6.1%, The industry’s recovery was strong higher than the overall semiconductor and sustainable across all the key growth figure of 5.9% for the period market verticals, regions and device 2010 to 2015. categories. Applications, increasing traction of smart phones, media Finally, non-optical sensors remains tablets and eReaders, automotive an important space and emerges as infotainment, notebook PCs, data the fastest growing category. Gartner4 center servers, and wireless and wired estimates this segment will grow from communication infrastructure are US$4.0B in 2010 to US$7.2B in 2015, driving the robust consumption of representing CAGR of 12.5%. semiconductors worldwide.

Figure 8: Revenue from the Consumption of Semiconductors Forecast, 2009 – 2015

450,000 40% 399,110 400,000 368,454 30.9% 345,173 30% 350,000 341,903 % 314,721 te 299,364 Ra 300,000 20%

onsumption of 250,000 228,673

10% ear Growth 8.6% 8.3% Y 200,000 6.7% tors in millions of US$ On- 5.1%

150,000 1.0% 0% ear- Y enue from the C 100,000 Semiconduc Rev -10% 50,000 -10.4% 0 -20% 2009 2010 2011 2012 2013 2014 2015 Revenue Growth

Source – Gartner, Inc.: “Gartner Market Databook, 2Q11 Update,” Richard Gordon, Peter Kjeldsen (Telecom), Kathryn Hale (IT Services), Jonathon Hardcastle (Computing Hardware) and Colleen Graham (Software), 29 March 2011 4 Gartner, Inc.: “Gartner Market Databook, 2Q11 Update,” Richard Gordon, Peter Kjeldsen (Telecom), Kathryn Hale (IT Services), Jonathon Hardcastle (Computing Hardware) and Colleen Graham (Software), 29 March 2011 12 High Tech Manufacturing the way we see it

Semiconductor consumption in China reach US$3.3 billion in 2010. The continues to outpace the rest of semiconductor suppliers continue to world. In 2009, China’s share of the enable OEMs to bring new products semiconductor market was 41% while to the market. The starting point was the Americas and Japan were at 17% the launch of the iPad after which the and 16.9%, respectively. market has shown a high degree of optimism. Further, sales of the Figure 9: Worldwide Semiconductor In terms of market share, Intel Android Honeycomb Media Tablet Market by Region, 2009 continues to lead the market with and eReader semiconductor are close to 14% market share, followed expected to grow by over 100% in by Samsung at 9.4%. Other leading 2011. Europe, 13.2% ROW, 11.9% chip suppliers are Texas Instruments, Toshiba and STMicroelectronics. Semiconductor firms often enable Together, the top 10 vendors tablets with features like touchscreen represent 49% of overall market controllers and sensors, baseband revenues. modems, wi-fi chipsets and related integrated circuits (ICs). In the recent Growth of media tablets and past growing interest among eReaders will continue to fuel consumers has created unlimited demand for semiconductors opportunities for semiconductor

Japan, 16.9% Americas, 17.0% China, 41.0% suppliers in developing new chips and According to Electronics.ca, media software platforms that will enable tablet and eReader semiconductors these products and will provide a Source – Semiconductors Industry Association and CCID Consulting registered growth of over 2,000% to better user experience. Beyond

Figure 10: Semiconductor Worldwide Forecast, 2Q 2011 Update

450,000

400,000 7,245

350,000 132,287 300,000 4,012

onsumption of 250,000 98,460 200,000

150,000 tor by Categories in millions of US$

enue from the C 100,000 196,862 259,578 Rev 50,000

Semiconduc 0% 2008 2010 All General-Purpose Standard Products All Application-Speci c Devices Non-Optical Sensors

13 semiconductors, these suppliers are in improved overall performance also targeting opportunities to provide and efficiency. The advent of OEMs with system software as well as semiconductors in the automotive access into app stores thereby industry has enabled many vehicle reducing the product lifecycles. manufacturers to implement According to the IDC report5, applications on a single chip and “Worldwide Media Tablet and avoid unnecessary complexities. Semiconductor Forecast: The According to a report published Explosion of an Opportunity,” the by Frost & Sullivan, arrival of the appeal of media tablets will drive the concept of integrated electronics semiconductor revenue opportunity to solutions was one of the primary a five year CAGR of 31%. drivers of growth. However, after experiencing stiff decline in vehicle Automotive will be the next pillar demand from 2008 automotive of growth for semiconductor semiconductor sales are back on suppliers track with the revival of the global economic outlook in 2011. The automotive industry has transformed over the last couple According to Semicast, the of years with rapid integration of market volume for automotive semiconductors into vehicles resulting semiconductors is forecasted to grow

Figure 11: Worldwide Semiconductor Market Share, 2010

Intel 14.0% Samsung Electronics 9.4% Toshiba 4.1%

Texas Instruments 4.0%

STMicroelectronics 3.5%

Renesas Electronics 3.4% Hynix Semiconductor 3.3% Micron Technology 2.7%

Qualcomm 2.4% Broadcom 2.2%

0% 5% 10% 15%

Source – Gartner, Inc.: “Market Share Analysis: Preliminary Total Semiconductor Revenue, Worldwide, 2010,” Peter Middleton, Steve Ohr, Gerald Van Hoy, Nolan Reilly, Andrew Norwood, John Barber, Adriana Blanco, Jon Erensen, Christian Heidarson, Masao Kuniba, Ben Lee, Adib Carl Ghubril, Bryan Lewis, Mark Hung, Sergis Mushell, Ganesh Ramamoorthy, Paul O’Donovan, Marielena Oppenheimer, Hiroyuki Shimizu, Amy Teng, Joseph Unsworth, Andrew Philips, Alfonso Velosa, Brady Wang, Jamie Wang, Masatsune Yamaji, 13 April 2011 5 IDC: ‘Worldwide Media Tablet and eReader Semiconductor 2011–2015 Forecast’: The Explosion of an Opportunity by Michael J.Palma http://www.idc.com/getdoc.jsp?containerId=prUS22777311

14 High Tech Manufacturing the way we see it

at double the rate — from US$20 Wireless Local Area Network Another connectivity technology, billion in 2010 to US$39 billion in (WLAN) chipset market set ZigBee, is trying to gain momentum 2014, on a global basis registering an to outpace the average in the home automation and smart average annual growth rate of almost semiconductor industry growth utility monitoring applications 20%. The recent surge in automotive segment. ZigBee is an IEEE 802.15.4 semiconductor demand is primarily According to iSuppli, WLAN standard for data communications due to the growth in light vehicle chipset shipments are projected to with business and consumer devices. production in the emerging markets, reach 738.9 million units in 2011, It is designed around low-power particularly in China, Brazil, Russia representing a sharp growth of consumption allowing batteries to and India. 101.5% from 366.8 million units in essentially last forever. 2010. By 2014, chipset shipments are The rise of environmentally friendly expected to increase to more than 2 The ZigBee standard provides vehicles like hybrid electric and billion units. network, security and application battery electric cars is expected to support services operating on top of create new revenue opportunities for In addition to WLAN chipsets the IEEE 802.15.4 Medium Access semiconductor suppliers. Production 802.11n wi-fi standard, other Control (MAC) and Physical Layer of hybrid vehicles is expected to emerging connectivity technologies (PHY) wireless standard. ZigBee increase from 3 million in 2010 to are also gaining traction in the daily is penetrating the next-generation 47 million in 2017. This will also lives of consumers such as Wireless automated manufacturing industry drive the power train industry, which Personal Area Networking (WPAN), with small transmitters in every is forecasted to grow at a higher which encompasses disparate device on the floor, allowing for rate when compared to the overall technologies like Bluetooth and near- communication between devices segment. Entertainment systems are field communications. In both WLAN to a central computer. This new also expected to impact growth in and WPAN technologies, radio waves level of communication is creating automotive semiconductors. In-vehicle transmit and exchange data over short opportunities for remote monitoring entertainment systems are growing distances between devices. Demand and manipulation. in complexity and functionality as for these technologies is growing due consumers demand a “digital home” to ease of use and increased interest experience in their cars. in mobility.

Figure 12: Global Silicon Solar Cell Market Sizing, 2010 – 2013

25,000 1.5 US$1.36 20,000 US$1.22 tion US$1.02 US$0.92 1 oduc ice in US$

15,000 Pr ell Pr

10,000

MW - C 13,368 14,569 17,877 20,285 0.5

5,000 erage Selling Av

0 0 2010 2011 2012 2013

Revenue Average Selling Price

Source – GTM Research, 2011

15 Global solar power market upturn in the developing countries a strong market contender by 2008. of Asia, including China and India, China’s solar cell output totaled After registering substantial growth, as well as industrial subsidy policies 2,278.6 MW in 2008, making it the the photovoltaic (PV) industry slowed across most of the countries and number one producer in the world. for a brief period in 2009 due to the the expansionary monetary policy global economic downturn. Sluggish adopted by the central banks. The However, Chinese solar manufacturing demand resulted in increasing increasing prominence of Asia in the companies have yet to move their inventory levels, ranging from raw sector is primarily attributed to solar surplus inventory created during the material silicon and PV cells to cell production in China and Taiwan, recession. These companies over- complete PV systems. which together accounted for 49% produced solar panels in 2007 and of the global solar cell production 2008 with the expectation that the Massive capacity and limited in 2008. Going forward, the global solar markets would thrive during utilization pulled down the prices of photovoltaic market is poised for 2009. As a result, low-cost panels crystalline silicon solar cells, panels robust growth, owing to the rapid are available, which in turn lowers and modules in most of the markets. adoption of solar energy across the up-front costs of solar power According to Global Industry Analysts various regions. generation for customers. Panel prices Inc. (GIA), this drop in prices was have fallen from the high range of also attributable to a sharp decline In terms of production, China $3.50 to $5.00 a watt during 2008 to in silicon prices to as low as US$50 has emerged as the world’s largest an expected $1.36 per watt in 2011. per kg. The falling prices, however, producer of solar cells replacing According to GTM Research, average ushered in a period of cost-effective Japan, which had massive solar solar cell prices per watt are expected solar systems, bringing down the cost cell capacity worldwide until 2007. to decrease from US$1.36/watt in of entire PV systems. Chinese solar companies established 2010 to US$0.92/watt in 2013. In new manufacturing facilities and 2013, the global solar cell market However, the PV market rebounded invested huge sums in production value is expected to reach quickly, backed by the economic facilities since 2005, and emerged as US$18.7 billion.

Key Takeaways

• 2010 was a rebound year for the overall Toshiba, Texas Instruments, STMicroelectronics, semiconductor market. After enduring considerable Renesas Electronics, Hynix Semiconductor, Micron challenges during the global recession of Technology, Qualcomm and Broadcom. 2008 – 2009, the semiconductor market segment experienced double-digit growth rates during 2010. • Decreased demand from solar power-generation firms in European countries will reduce industry • Semiconductor companies are exploring emerging revenue for solar panel manufacturers. In turn, technologies that will help them drive economies these manufacturers will lower prices to meet of scale; some of the key focus areas for slowing demand and seek out other markets in semiconductor vendors are: which to sell their products. Solar markets outside • Investments in system-on-chip (SoC) of Europe (such as the US) lack generous subsidies. design capability As a result, relatively slow growth in these other • Focus on customer-driven solutions solar markets will also serve to lower panel prices. • Reduce system cost by offering highly integrated devices • The top 10 global solar cell manufacturers in 2010 • Development of Intellectual Property were First Solar, Suntech Power, Sharp, Q-Cells, Yingli Green Energy, JA Solar, Kyocera, Trina Solar, • The top 10 players are Intel, Samsung Electronics, SunPower and Gintech.

16 High Tech Manufacturing the way we see it

Print and Imaging

Print and imaging market year growth, with close to 8.5 million units shipped producing Emerging markets continued a 22% gain. Monochrome laser to outperform in the hardcopy printers remain the dominant peripherals space, growing at an type of laser in the office, average of 13% year-over-year accounting for 62% share of all compared to worldwide shipment monochrome devices. growth of 7.2% in the first quarter of 2011 (1Q11). According to the Vendor highlights International Data Corporation (IDC)6 Worldwide Quarterly Hardcopy • HP remains the undisputed leader Peripherals Tracker, the worldwide in the global HCP market with hardcopy peripherals (HCP) market 42.4% market share in 1Q11. recorded more than 30 million unit The vendor grew 10.5% shipments in the first quarter of “year-over-year”, the second 2011. Similar to the last two quarters, highest among the top 5 print monochrome laser led the pack in and imaging players. With the terms of growth with close to 8.5 exception of Japan, the vendor million units shipped and 22% year- posted positive year-over-year over-year growth. growth across all regions.

IDC expects the earthquake and • Canon continues to be a distant tsunami in Japan will have little to no second-ranked vendor with impact on the global imaging market 17.4% market share and over and that the negative impact will be 5.3 million units shipped. Canon felt more strongly for laser devices enjoyed an 11.3% year-over-year than for inkjet. gain, the highest among the top 5, due to double-digit Technology highlights in the print growth in emerging markets, and imaging market including Asia/Pacific (excluding Japan), Central • Losing share to laser technology, Europe, Middle East, Africa inkjet registered at 63% of (EMEA) and Latin America. overall shipments in 1Q11, down 4 points from a year ago, while • Epson continues to hold laser devices grew 3 points to the third place ranking with 33% share over the same period 14.1% share and close to 4.4 in 1Q10. All regions except million units shipped. With the Japan saw year-over-year growth exception of Latin America and in laser shipments with Asia/ Asia/Pacific (excluding Japan), Pacific (excluding Japan) Epson saw year-over-year and Latin America (LA) seeing declines in unit shipments across the highest growth at 29% each. all regions. Latin America was Epson’s best performing • 1Q11 marked the fourth region with 27% year-over-year consecutive quarter where growth, followed by Asia/Pacific monochrome laser surpassed (excluding Japan) with 2% growth. color laser in terms of year-over-

6 IDC: Worldwide Quarterly PC Tracker, 6th June - 2011 http://www.idc.com/getdoc.jsp?containerId=prUS22861211

17 • Samsung and Brother ended growth in emerging markets. The 1Q11 in a statistical tie for the increased demand for touchscreen fourth position with shipments and high-definition (HD) cameras has of roughly 1.8 million units and also contributed to the rise in sales of year-over-year growth of 1.1% compact digital cameras. But experts and 4.2%, respectively. warn that the impact on revenues will come slowly, as customers aren’t Imaging, digital cameras, high yet prepared to invest in high-end definition and single-lens reflex or expensive models, which are the cameras (SLR) major revenue drivers.

The global economic downturn Regional highlights in imaging, impacted the digital imaging market digital cameras, high definition and negatively, with volume shipments single-lens reflex cameras (SLR) declining significantly. The fallout was also attributed to the fact that According to new research conducted customers are settling for low-margin by Global Industry Analysts Inc., the models while manufacturers sought to US, Asia Pacific and Europe together stimulate sales by reducing prices. accounted for the biggest share of the market. Although the US, Europe, However, sales have been picking up Middle East and Africa were hit the since late 2009 and early 2010, driven hardest by the economic downturn, by a strong demand for single lens the Asian market has displayed reflex (SLR) cameras and robust

Figure 13: Worldwide Hardcopy Peripherals Market Share and Growth Rates, 1Q 2011

1Q 2011 1Q 2011 1Q 2010 1Q 2010 1Q 2011/1Q 2010 Vendor Unit Shipments Market Share Unit Shipments Market Share Growth

HP 13.1 42.4% 11.8 41.2% 10.5%

Canon 5.3 17.4% 4.8 16.7% 11.3%

Epson 4.4 14.1% 4.3 15.1% 0.3%

Samsung 1.8 6.0% 1.8 6.3% 1.1%

All shipments are in millions of units Brother 1.8 5.8% 1.7 5.9% 4.2%

Others 4.4 14.3% 4.2 14.7% 4.2%

Total 30.7 100% 28.7 100% 7.2%

Source – http://www.idc.com/getdoc.jsp?containerId=prUS22888111

18 High Tech Manufacturing the way we see it

resilience, due to the relatively lower accompanying activism have affected 35% of revenues in the global levels of saturation in the SLR market. the procurement of parts and led MFP industry. OEMs to develop products that are Going forward, Russia, China and energy efficient and that help reduce Digital single-lens reflex cameras India are expected to be the growth the industry’s carbon footprint. The (DSLR) led growth in emerging markets for manufacturers of digital European Union’s Restriction of markets cameras. Purchase considerations Hazardous Substances (RoHS) and will hinge on consumers’ interest in Registration, Evaluation, Authorisation The digital camera market has grown new and novel technologies such as and Restriction of Chemicals tremendously in recent years and touchscreen user interface, HD video, (REACH) have been particularly the Digital SLR cameras have been wireless connectivity and advanced influential. instrumental in driving this growth. image detection capabilities. Digital SLRs hold immense potential In recent years there has been a trend in the future with their ease of usage, SLR cameras are the fastest-growing among Multi-function printers (MFP) digitization, major innovations in category of HD digital cameras, due to Original Equipment manufactures technology and growth in emerging the better quality of pictures. China, (OEMs) to promote their Managed markets. India and the Eastern European Print Services (MPS) instead of selling countries are the fastest-growing MFP hardware. This trend is more This will also have a positive effect on emerging markets, whereas growth pronounced in mature markets such accessories such as interchangeable has been adversely affected in Japan as the United States and Europe. lenses that are dedicated for SLRs. and US markets. According to However, the OEMs have been trying The market for interchangeable lenses the market research firm GfK, the to expand MPS operations in the is expected to grow as a result of the Middle East and Asia Pacific regions developing markets in Asia. By 2013, rapid market penetration of digital experienced growth of around 20%, MPS is expected to contribute up to SLR cameras. while Eastern Europe grew by about 19%. Key Takeaways Convergence of print and photocopy machines • Multi-function printers (MFPs) will imaging market, but sales lead worldwide growth of printing have been picking up slowly since The global multi-function printers devices at the expense of single- late 2009 and early 2010. (MFP) business developed from the function devices. This is convergence of the printing and attributable to the strong growth • Emerging markets are posting photocopying machines industries in emerging markets and to a strong growth led by SLRs, and experienced robust growth over certain extent Latin America. touchscreen and HD cameras. the last decade. The adoption of technologies enabled OEMs in both • Inkjet printers remain the largest- • However, this spurt in sales industries to streamline production selling printing technology as is unlikely to alter profitability and consolidate the functions of compared to laser printers. significantly as customers aren’t printers and photocopy machines willing to invest in top-of-the-line, into a single unit. As a result in 2010, • HP, Canon and Epson are the top expensive models. unit shipments of MFPs were 125.2 three vendors with 42.4%, 17.4% million globally. and 14.1% market shares, • The printing and photocopier respectively, in 1Q 2011. industries have converged through International compliance and adoption of technologies by managed print services • The economic downturn had a OEMs in both industries. negative effect on the digital Environmental concerns and

19 Computers and Peripherals

Personal computers (2Q11). The results are just short of IDC’s May 2011 projections7 for According to IDC Worldwide 2.9% growth, a letdown from the Quarterly PC Tracker, 2Q2011, over 20% growth seen in H1 2010. Worldwide PC shipments increased This was primarily due to competition 2.6% in the second quarter of 2011 from smartphones, other consumer products and pressure from lackluster Figure 14: Market Share Worldwide economic conditions. PC Shipments (by Region/Q2 2011) The U.S. PC market continued to contract in 2Q11, largely as a Others, 40.7% HP, 18.1% result of three factors. The first is an ongoing contraction in the mini Dell, 12.9% notebook (Netbook) market and related inventories. The second is the impact of 2Q10’s difficult-to-sustain 12% growth. And third, demand has softened as corporate buyers continue to focus on increasing share of their IT budget in new IT solutions such Acer Group, 10.9% as cloud and virtualization, and Lenovo, 12.2% Toshiba, 5.3% consumer interest shifts to media tablets. Source: http://www.idc.com/getdoc.jsp?containerId=prUS22937811

Figure 15: Hardcopy Peripherals Market Share and Growth Rates, 2Q 2010

2Q 2011 2Q 2011 2Q 2010 2Q 2010 2Q 2011/2Q 2010 Vendor Shipments Market Share Shipments Market Share Growth

HP 15,263 18.1% 14,823 18.0% 3.0%

Dell 10,927 12.9% 10,626 12.9% 2.8%

Lenovo 10,276 12.2% 8,363 10.2% 22.9%

Acer Group 9,160 10.9% 10,190 12.4% -10.1%

All shipments are in millions of units ASUS 4,468 5.3% 4,216 5.1% 6.0%

Others 34,320 40.7% 34,070 41.4% 0.7%

Total 84,413 100% 82,289 100% 2.6%

Source – http://www.idc.com/getdoc.jsp?containerId=prUS22888111 7 IDC: Worldwide Quarterly PC Tracker, 6th June - 2011 http://www.idc.com/getdoc.jsp?containerId=prUS22861211

20 High Tech Manufacturing the way we see it

Regional highlights in personal East and Africa (MEA) continued to help offset this, despite the ongoing computers expand and enjoyed positive inflation challenges there. growth overall. United States: With a decline of Server market 4.2% year over year, the market was Japan: The impact of the earthquake still downcast from a combination of on PC buying proved to be limited, According to IDC’s Worldwide exuberant consumption a year ago thus the market produced stronger Quarterly Server Tracker, factory and a tenuous economic recovery, but results than expected, with 3% revenue in the worldwide server the quarter also marked substantial growth. Many commercial projects market increased 12.1% year over growth from 1Q11, and total commenced as earlier fears of year to $11.9 billion in the first shipments topped over 17.8 million. inventory shortage did not materialize. quarter of 2011 (1Q11). This is the Coupled with continued average fifth consecutive quarter of year-over- Europe, Middle East, Africa selling price (ASP) declines since year revenue growth, as server market (EMEA): The EMEA PC market the beginning of 2011, consumer demand continued to improve around continued to contract in 2Q11, in line shipments also fared better than the world. Server unit shipments with IDC’s forecast, as sustained high expected. increased 2.5% year over year in levels of inventory prevented stronger 1Q11 to 1.9 million units, which is sell-in, particularly in Western Asia/Pacific (excluding Japan): the second highest quarterly total ever Europe, where budget cannibalization The region returned to double-digit reported in the first calendar quarter from media tablets and smartphones growth of just over 12% as the market of any year. continued to contribute to weak came in slightly above forecasts. A consumer demand and slow stock weak consumer market weighed down Improved market conditions were depletion. However, Central and India, but other key markets like seen across all three server classes Eastern Europe (CEE) and the Middle China continued their momentum to — volume, midrange enterprise,

Figure 16: Worldwide Server Systems Factory Revenue, 1Q 2011

1Q 2011/1Q 2010 Vendor 1Q 2011 1Q 2011 1Q 2010 1Q 2010 Revenue Market Share Revenue Market Share Revenue Growth

HP 3,754 31.5% 3,387 31.8% 10.8%

IBM 3,489 29.2% 2,857 26.9% 22.1%

Dell 1,862 15.6% 1,697 16.0% 9.7%

Oracle 773 6.5% 681 6.4% 13.6%

All shipments are in millions of units Fujitsu 578 4.8% 685 6.4% -15.6%

Others 1,473 12.3% 1,332 12.5% 10.6%

Total 11,929 100% 10,639 100% 12.1%

Source – http://www.idc.com/getdoc.jsp?containerId=prUS2284141

21 and high-end enterprise. Volume • Unix servers experienced the x86 industry standard server systems experienced an 8.7% year- first quarter showing market dynamics over-year revenue increase, the sixth year-on-year factory revenue consecutive quarter of positive growth improvement in 11 quarters, Demand for x86 servers continued for the segment. Midrange enterprise growing 12.5% when compared to improve in 1Q11, with revenues demand improved for the third time to 1Q10. IBM, HP, and Oracle growing 12.0% in the quarter to $7.9 in the past four quarters, with a all experienced improvement billion worldwide as unit shipments sharp 28.3% year-over-year revenue in Unix server revenue in the increased 2.6% to 1.9 million servers. increase. Finally, the improving quarter, as worldwide Unix market conditions extended to the revenues were $2.6 billion, HP led the market with 37.7% high-end enterprise segment, as representing 21.8% of quarterly revenue share based on 11.6% growth quarterly revenue increased 14.2% server revenue. over 1Q10. Dell retained second when compared to 1Q10. This is the place, securing 23.5% revenue share, first time in eight quarters that all • IBM’s System z servers running while IBM now holds 16.4% revenue three segments of the server market z/OS experienced the third share. have experienced a year-over-year consecutive quarter of positive revenue increase in the same quarter. revenue growth, with 41.1% Overall, 1Q11 was the eighth year-over-year growth in 1Q11 consecutive quarter with year-over- HP held the number 1 position in the to $1.0 billion, representing year increases in average selling worldwide server market with 31.5% 8.8% of quarterly server revenue prices for x86 servers as both the factory revenue share for 1Q11. HP’s worldwide. This was the third mix of systems and average system 10.8% revenue growth was led by consecutive quarter that z/OS configurations continue to move improved demand for both x86- system revenue exceeded up-market, driving generally higher based ProLiant servers and Itanium- $1 billion. product margin for x86 ecosystem based Integrity servers. IBM held the players. Additionally, this was the number 2 spot with 29.2% share • Linux server demand increased sixth consecutive quarter of year-over- for the quarter as factory revenue for the sixth consecutive quarter year factory revenue growth for x86 increased 22.1% compared to 1Q10 in 1Q11, with revenue growing servers with particular strength in and gained 2.4 points of share from a 16.6% to $2.0 billion when Asia/Pacific and Central and Eastern year ago. compared with the first quarter Europe, the Middle East and Africa. of 2010. Linux servers now Top technology findings represent 16.9% of all server Bladed server market dynamics revenue, up 0.7 points over • The market for non-x86 servers, 1Q10. The blade market continued its strong including servers based on RISC, growth in the quarter with factory EPIC (Itanium-based), and CISC • Microsoft Windows server revenue increasing 23.8% year over processors, increased 12.3% demand also continued to show year, with shipment growth increasing year over year to $4.0 billion strong demand as Windows by 5.4% compared to 1Q10. Overall, in 1Q11. This is the second based hardware revenue bladed servers, including x86, EPIC, consecutive quarter in which increased 10.1% year-over- and RISC blades, accounted for $1.8 non-x86 servers have exhibited year. Quarterly revenue of $5.8 billion in revenues, representing positive growth and the first billionfor Windows servers 15.2% of quarterly server market time in two years that non-x86 represented 48.5% of overall revenue. Nearly 90% of all blade based system revenue has grown quarterly factory revenue and revenue is driven by x86-based faster than the market overall. 75.2% of all quarterly server blades, which now represent 20.5% of Growth in non-x86 server shipments. all x86 server revenue. HP maintained revenue was driven by improved the number1 spot in the server demand for Unix servers and blade market in 1Q11 with 50.0% IBM System z platforms. 22 High Tech Manufacturing the way we see it

revenue share, while IBM finished Green IT Personal computers will not be with 20.2% revenue share. Cisco personal anymore; they will be and Dell rounded out the top 4 with Globally green IT is gaining immense shared computers 9.4% and 8.4% factory revenue share, traction in the market. According to respectively. Forrester10, 45% of IT organizations With an increasing number of users are implementing or creating a green opting for mobile PCs, the desk- Consumer segment to lead the IT strategy, with an additional 34% based PC market is set to undergo a PC business in mature markets considering it. paradigm shift. In the years to come, the market will evolve to a profitable According to a Gartner Report8, As green IT continues to evolve niche segment with a unique form “the consumer segment has led from the concept of “Green for IT” factor. The all-in-one desktop PC (desktop and mobile) and will to “IT for green”, the industry’s concept, a PC that will be integrated continue to lead the growth in mature initial ongoing green IT efforts are with a monitor, is expected to grow in markets during the next five years set to shift from data center to other the next five years, particularly in the as a growing number of households infrastructure like servers and PCs. mature consumer market. acquire multiple PCs.” Adoption of desktop or server Users will select mobile PCs as a According to the same report, “In virtualization will help enterprises primary device, and desk-based PCs the past five years, an ongoing price reduce energy footprints significantly will remain as a hub system shared decline has led to increased consumer thus saving operational costs per by multiple users at home. For this demand for PCs in North America annum. reason, the desk-based PC is not so and Western Europe. In these regions, much a “personal” computer anymore families have moved from having one but a “shared” computer for a family. PC in the household to multiple PCs per household. This is a significant change. In 2006, consumers Key Takeaways accounted for only 40% of PCs purchased; in 2010, the consumer • According to IDC Worldwide • Demand for x86 servers continued share will reach 54%. Consumers Quarterly PC Tracker - 2Q2011, to improve in 1Q11, with models are scaled down or low- global PC shipments increased revenues growing 12.0% in the specification PC models.” 2.6% in second quarter 2011. quarter to $7.9 billion worldwide as unit shipments increased 2.6% The Gartner report9 also highlighted • HP continues to be the market to 1.9 million servers. “As consumers purchase their leader with market share of second, third or fourth PC and buy 18.1%. • Demand for Microsoft Windows multiple PCs for the household, the server was high while UNIX desire for ‘latest and greatest’ and • The emerging markets are server revenue was relatively flat ‘fastest’ specifications will decrease. facing the challenge of in 2010. Opportunities for “good enough” and increasing inventory level commoditized products will increase, resulting in lower shipments. with “good enough” determined by the usage model.”

8, 9 Gartner, Inc.: “Predicts 2011: Opportunities for Growth Still Exist in PC Market,” Mikako Kitagawa, Annette Jump, Charles Smulders, Tracy Tsai & Angela McIntyre, 23 November 2010 10 “Green IT Plans And Activities Persist In 2010 Despite Lack Of Formal Budgets And Priorities,” Forrester Research Inc., July 27, 2010

23 Enterprise Software

Enterprise Software figure is expected to reach $326.6 billion in 2015, reflecting a 51% According to Forrester11, “The total market share, and a CAGR of 10.7% market volume for software will during this period. increase from $432.4 billion in 2011 to $481.9 billion in 2012, Middleware emerges as the second representing 11.5% growth over fastest growing segment with a CAGR 12 months. A number of trends of 10.2%, higher than the overall will drive this rapid growth, software growth figure of 9.6% for including cloud computing, smart the period 2010 - 2015. In 2010, the computing, advanced analytics, and segment accounted for 32.7% share collaboration.” of the market, or $132.4 billion, and is expected to rise to $214.8 billion The largest segment of the global in 2014, representing nearly 33.5% of software market is applications, which the marketplace. was estimated at $135.3 billion, or 48.7%, of the market in 2010. This

Figure 17: Global Business and Government Purchases of Software

$700 Applications built by consultants and contractors Applications $600 Middleware Operating systems $500

$400

$300

re Purchases in billions of US$ of billions in Purchases re $200 Softwa $100

$0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Applications built by consultants and contractors $67.2 $68.1 $67.1 $64.0 $52.9 $49.3 $43.5 $50.9 $59.0 $62.7 $64.8 Applications $135.3 $148.2 $171.5 $189.2 $178.1 $196.7 $213.4 $237.5 $265.6 $296.6 $326.6 Middleware $79.7 $88.7 $99.6 $117.8 $118.8 $132.4 $147.9 $163.9 $163.9 $198.9 $214.8 Operating systems $20.4 $20.4 $23.4 $23.9 $22.6 $25.9 $27.6 $29.6 $31.3 $32.9 $34.2

Total $302.6 $325.5 $361.5 $395.0 $372.5 $404.3 $432.4 $481.9 $536.2 $591.1 $640.5

Source – January 10, 2011, “2010 to 2012 Global Tech Industry Outlook” Forrester report

11 “Foresights: The Software Market In Transformation, 2011 And Beyond,” Forrester Research Inc., May 27, 2011

24 High Tech Manufacturing the way we see it

Finally, operating system remains to Hybrid software landscape to Key Takeaways be an important space for vendors to emerge have a strong presence. This segment • The total market volume for will remain at an approximate In the near future, both on-premise software will increase from between 5% and 6% of the total and on-demand models will continue $432.4 billion in 2011 to market until 2015, although growing to co-exist in the market, effectively $640.5 billion in 2012, from $25.9 billion in 2010 to $34.2 leading to an environment of ‘hybrid’ representing 9.6% growth billion in 2015, representing a CAGR software landscapes that need to be over next 5 years. of 5.7%. integrated by vendors. The hybrid approach will also create additional • Cloud computing, smart The Forrester12 report also highlighted services and options for enterprises computing, advanced “With ongoing operational costs willing to maintain their existing analytics and collaboration eating up a major part of corporate infrastructure but want to use services are expected to gain traction IT budgets, there is usually very little in the cloud to help them boost in the market. left for organizations to spend on new security and maximize their existing initiatives or true innovation. set-up.

Cloud computing to evolve over Collaborative analytics will the next few years transform the business intelligence space Cloud computing is a result of the evolution of how software and A combination of market forces is services are delivered to enterprises, creating a new set of challenges for over the past 15 years, and a enterprises all sizes. These challenges continuing trend toward the are making it imperative to provide industrialization of IT. This is, in part, greater access to real-time data due to the popularity of outsourcing and insights. Legacy BI tools are and hosting of increasingly not becoming able to support and industrialized service definitions, cost meet expectations of an increasingly structures, and pricing. The cloud dispersed sales team. Even with computing model is enabled by the the data traditional BI tools made ongoing standardization of underlying available, distribution via file technologies like virtualization, servers and email impeded effective service-oriented architecture (SOA), conversations and collaboration and Web 2.0. around what the data showed.

Over the next few years, the delivery Collaborative analytics describes models of software will transform the process of users engaged in from the fundamental concepts of a collaborative and iterative goal on-premise to just-in-time, pay-per- seeking approach to problem solving. use, abstracted and simplified It is a mesh of reporting, analytics, resources, and composite applications. workflow and collaboration services Customers will be interested in less that aids knowledge workers’ decision cost, more availability and agility, as productivity. Collaborative analytics well as managed risk. will continue to evolve and gradually get embedded as part of the business intelligence solution portfolio.

12 “Foresights: The Software Market In Transformation, 2011 And Beyond,” Forrester Research Inc., May 27, 2011

25 Conclusion

The fast-paced global high tech to a services-based model. The industry is not without its own distinct companies that provide excellent and complex challenges. Every player service to their customers will be the in the industry is striving to gain and ones that will stand tall in the future. maintain competitive differentiation by adopting new approaches or by Rapid product innovation: Rapid realizing latent sources of success in innovation and faster time-to-market existing operations. However, while are key business success factors each of the sub-segments faces specific for manufacturing organizations. challenges, smart high tech companies Solutions in this area can help should embrace four key strategies in companies implement product and order to thrive: plan changes faster and more cost efficiently. Contain costs; it’s essential: Lacking short-term ways to stimulate demand Operational excellence: Optimize and sales growth, many companies and harmonize global supply chain, remain focused on preserving their rationalize the supplier base and bottom lines by holding down costs. undertake integrated business and inventory planning. Global Deliver top-notch customer service: harmonization programs address these High tech companies have done challenges and help manufacturers what they can during the downturn achieve a reduced operational to satisfy the customer – even when cost basis. service and cost are competing priorities. Reduce cost without compromising on the quality: Cost reduction Respond quickly to changes in techniques can help manufacturing supply or demand: For years, many companies improve their bottom high tech firms focused on forecasting line. This can be done by offshoring but lacked adaptability or flexibility if of the manufacturing processes to their assumptions turned out to low-cost countries. Business Process be wrong. Outsourcing and/or co-sourcing approaches also help drive Focus on product development; it significant cost reduction and enable matters more than ever: High tech manufacturers to focus on their companies are intent on getting their core activities. internal houses in order, focusing on core capabilities and core markets. This report gives an overview of key trends in the high tech sub-segments. In this increasingly competitive There are many techniques and environment high tech companies tools that can be applied to your more than ever must excel in key organization to make you stand strategic areas by taking the tall in the market. For additional following actions: information about how Capgemini can help you address the trends and Shift from products to services: challenges, please visit our high tech Most high tech companies are making practice website at: a shift from a product-based model www.capgemini.com/high-tech

26 High Tech Manufacturing the way we see it

About Capgemini

With 115,000 people in A deeply multicultural organization, 40 countries, Capgemini is Capgemini has developed its own way of one of the world’s foremost working, the Collaborative Business providers of consulting, technology and ExperienceTM, and draws on Rightshore®, its outsourcing services. The Group reported worldwide delivery model. 2010 global revenues of EUR 8.7 billion More information is available at Together with its clients, Capgemini creates www.capgemini.com and delivers business and technology solutions that fit their needs and drive the results they want.

27 www.capgemini.com/high-tech

For more information please contact:

Guido Kamann + 49 (0)151 4025 2115 [email protected]

Nick Gill + 44 (0)870 904 5699 [email protected]

Avishek Sen +91 9619631525 [email protected]