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GLOBAL R&D BENCHMARKING STUDY - FY2011 June , 2012
Overall Global R&D spending
Geographical split of R&D spending
Vertical split of R&D spending
1
2
3
India presence of top 1000 R&D spenders
4
Vertical wise Intensity of top R&D spenders in
India
5
• After witnessing a decline in the FY 2010, Global R&D spending has increased significantly in FY 2011. Both Net Sales and R&D Spending has increased significantly with a growth of 13.55 percent and 8.2 percent respectively
• The R&D spend for NA and EU is 36% and 34% respectively • As compared to last year the R&D spending for companies headquartered in
APAC has increased by 28% followed by NA 11%
• Telecom & Networking, Electrical & Electronic equipment witnessed a marginal increase in their Global R&D spending while Industrial sector witnessed a decline
• About one-third of the Global 1000 R&D spenders have centers in India • About 30 percent companies with HQs’ in EU are in India and about 15%
which have their HQs’ either in Japan or APAC, are in India
• Software and Semiconductor are mature verticals in terms of R&D headcount intensity in India.
• Automotive and Aerospace are fast growing verticals
Executive Summary
Source: Zinnov analysis of global top 1000 R&D spenders and India R&D landscape, The analysis has been done for FY2011
Vertical and Geo Definitions
Source: Zinnov analysis of global top 1000 R&D spenders and India R&D landscape. **Electrical and Electronic equipment
Verticals Definition Sample Companies
Software/ Internet Includes companies from software domain and Internet based companies Oracle, Microsoft, Amazon, SAP Labs, Google
Semiconductors Include companies from semiconductors (Chip design, ASIC design) and power semiconductor companies
Intel, TI, AMD, Broadcom
Telecom & Networking Includes companies operating in areas of mobile communications, Telecommunication equipment, wireless services and Networking etc.
Erickson, Nokia, Cisco ,NTT
E&E** & Computer Hardware
Includes companies manufacturing consumer electronic equipment, motors, heavy electrical equipment Computer Hardware, etc.
LG, Sony, Whirlpool, Apple, IBM, HP
Aerospace & Defense Includes companies working on designing and manufacturing of aerospace equipment
EADS, Rockwell Collins, Boeing, Bombardier
Chemicals Includes Chemical companies BASF, Dupont, AKZO Noble
Automotive Includes companies which are into automotive , Transportation and commercial vehicles
Toyota, Volkswagen, GM, Honda
Biotechnology & Pharmaceuticals
Includes companies working in areas of healthcare, pharmaceutical manufacturing, biotechnology
GE Healthcare, Novartis, United Healthcare
Medical Equipment Includes healthcare equipment, device and services companies Medtronic, Baxter, Stryker
Others Includes BFSI, Energy, FMCG, Media & Entertainment, Retail etc Nestle, Unilever, Shell, HSBC, Shell, Exxon Mobil
Geographies EU NA APAC JAPAN ROW
European union North America Asia Pacific Japan Rest of the world
Global R&D Investment Analysis
Agenda
4
R&D Globalization Analysis
Global R&D Investment Analysis
Agenda
5
R&D Globalization Analysis
Global R&D spend has Increased; however, R&D Spending as percentage of Net Sales has remained constant from 2007-08 to 2010-11
Source: Zinnov analysis of global top 1000 R&D spenders
*Conversion Ratio from EURO to USD- 1.324. 6
511
549
538
582*
460
480
500
520
540
560
580
600
2007-08 2008-09 2009-10 2010-11
Global R&D Investments Growth Trends, 2007-11 (USD Billion)
15,336
16,684
14,953
16,980*
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
17,500
2007-08 2008-09 2009-10 2010-11
Global Net Sales Trends, 2006-11 (USD Billion)
R&D spending in FY 2011 witnessed an increase due to increase in spending of semiconductor, industrial & consumer hardware and Electrical and Electronic equipment companies
Intel, Samsung, General Motors, Pfizer, Volkswagen are the few companies which played a key role in increasing R&D spend in FY 2011
Source: Zinnov analysis of global top 1000 R&D spenders
0
50000
100000
150000
200000
250000
300000
350000
400000
2010
Contribution of Top R&D Investors in the Total Global 1,000 R&D Spend
Company
Name
2010-11
Rank
2009-10
Rank
Change
2008-09
Rank
Change
Roche 1 +1 +3
Pfizer 2 +3 +4
Microsoft 3 0 -1
Toyota Motor 4 -3 -3
Merck US 5 +11 +20
Volkswagen 6 -2 -3
Samsung Electronics
7 +3 +17
Novartis 8 -2 +2
General Motors 9 +3 -4
Johnson & Johnson
10 -2 -3
Nokia 11 -4 -3
Intel 12 +5 +5
Daimler 13 +1 0
Sanofi- Aventis 14 -5 -2
Panasonic 15 +3 -1
The Top 500 R&D spenders account for nearly 90% of the total corporate R&D spending in the world
Companies marked in Red have shown continuous decrease in rank in last four years. The Scenario is opposite for companies marked in Green.
R&D Investments rank
60% of R&D spend in 2010-11 was from top 100 companies, a similar trend from the previous year
From a geography perspective, the North American and EU region continues to dominate both in terms of numbers as well as the overall R&D spend
Source: Zinnov analysis of global top 1000 R&D spenders 8
Split of Top 1000 Companies by Geography
Split of R&D Investment of Top 1000 Companies by Geography
APAC 11%
EU 32% Japan
20%
NA 35%
ROW 2% APAC, 7%
EU, 34%
Japan, 22%
NA, 36%
ROW, 1% Total R&D Investment USD 582 Billion
Company Geography
Exxon Mobile North America
Royal Dutch Shell Europe
Toyota Motor Japan
China Petroleum & Chemicals APAC
Petro China APAC
Top companies by Net Sales Top companies by R&D investment
Company Geography
Merck US North America
Pfizer North America
Microsoft North America
Roche Europe
Toyota Motor Japan
R&D investments in year 2008-2011 and split by Geography
A positive sign is that despite widely varying macro economic variables, companies across regions increased their R&D Investments in FY 2011
Source: Zinnov analysis of global top 1000 R&D spenders
0
50000
100000
150000
200000
250000
APAC EU Japan NA Others
R&D in 2008-09 R&D in 2009-10 R&D in 2010-11
28%
6%
3%
6%
11%
• Though the number of companies in APAC region has marginally increased from 9.8% in FY 2010 to 10.6% in FY 2011, the R&D spend has significantly increased. Companies with high R&D spending are Samsung, LG, Huawei, Teva Pharma, etc.
• The R&D spending for EU companies did not increase much but the net sales in this region went up by 17%.
• More than 75% of the North American companies increased their R&D spend. Companies headquartered in North America with increased R&D spending are Google, Abott Laboratries, HP, EMC, Apple, Caterpillar, Dupont, etc.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
0 20 40 60 80 100 120
Comparative R&D Spend vs Net Sales for Telecom, EEE, Automotive and Aerospace have remained constant since last year
Source: Zinnov analysis of global top 1000 R&D spenders. **Electrical and Electronic equipment 10
Total Vertical R&D Investments (USD Billion)
1. Size of the Bubble Represents the relative Total Net Sales of the Industry Vertical
2. Arrow indicates whether R&D as a % of sales increased or decreased compared o last year
R&
D I
nve
stm
ents
as
Per
cen
tage
of
Ne
t Sa
les
E&E** / Computer Hardware
Automotive
Total R&D Investments as Percentage of Net Sales (Top 1,000 R&D Spenders) , 2010 -2011
Semiconductors
Software
Telecom & Networking
Industrial
Aerospace & Defense
Distribution of R&D Investments Top 1000 Companies in Industrial Vertical by Geography
Companies in the Industrial vertical are Small/Medium sized that contribute aggressively towards R&D investments; companies from APAC are on the rise in this vertical
Source: Zinnov analysis of global top 1000 R&D spenders 11
Distribution of Top 1000 Companies in Industrial Vertical by Geography and Revenue Ranges (USD)
APAC, 10%
EU, 44% Japan, 24%
NA, 20%
ROW, 2%
17 20
32
69
3
Company Geography
Siemens Europe
General Electric North America
Honeywell North America
ABB Europe
Mitsubishi Heavy Japan
17
63
20
29
2
4
1
1
2
2
NA EU APAC Japan ROW
1 - 500 Mn 500 Mn - 1 Bn 1 - 10 Bn 10 Bn+
Distribution of R&D Investments Top 1000 Companies in Semiconductor Vertical by Geography
North America accounts for around 67% of total R&D Spend in Semiconductor vertical
Source: Zinnov analysis of global top 1000 R&D spenders 12
43
4
12 8
5
3
2
2
5
1
1
NA EU APAC Japan
1 - 500 Mn 500 Mn - 1 Bn 1 - 10 Bn 10 Bn+
53
8 10
Distribution of Top 1000 Companies in Semiconductor Vertical by Geography and Revenue Ranges (USD)
APAC, 12%
EU, 13%
Japan, 8%
NA, 67%
15
Company Geography
Intel North America
STMicroelectronics Europe
Advanced Micro Devices North America
Broadcom North America
Texas Instruments North America
Distribution of R&D Investments Top 1000 Companies in Telecom & Networking Vertical by Geography
Companies from North America and Europe have a significant R&D spend in the Telecom & Networking vertical
Source: Zinnov analysis of global top 1000 R&D spenders 13
20
13
4 2
2
1
1
1
3
3
2
1
NA EU APAC Japan ROW
1 - 500 Mn 500 Mn - 1 Bn 1 - 10 Bn 10 Bn+
25
17
6
1
Distribution of Top 1000 Companies in Telecom & Networking Vertical by Geography and Revenue Ranges (USD)
APAC, 10%
EU, 43%
Japan, 9%
NA, 37%
ROW, 1%
4 Company Geography
Nokia Europe
Cisco Systems North America
Alcatel-Lucent Europe
Ericsson Europe
NTT Japan
Distribution of R&D Investments Top 1000 Companies in Automotive Vertical by Geography
Japanese and European corporations account for around 76% of the R&D spend in the Automotive vertical
Source: Zinnov analysis of global top 1000 R&D spenders 14
18 15
18
12
1 4
3 4
10 8
1
NA EU Japan APAC
1 - 500 Mn 500 Mn - 1 Bn 1 - 10 Bn 10 Bn+
13
23
29
Distribution of Top 1000 Companies in Automotive Vertical by Geography and Revenue Ranges (USD)
APAC, 4%
EU, 42%
Japan, 34%
NA, 20% 29
Company Geography
Toyota Motor Japan
Volkswagen Europe
General Motors North America
Honda Motors Japan
Daimler Europe
Global R&D Investment Analysis
Agenda
15
R&D Globalization Analysis
30% of the Top 1,000 R&D spenders have a center in India. Less than 24% of the companies headquartered in APAC, EU and Japan have an India R&D set-up for specific verticals
Note: The companies in the Others vertical (which include companies in Pharmaceuticals, Biotechnology, FMCG etc.) have not been included in the above table
Source: Zinnov analysis of R&D landscape in India. **Electrical and Electronic equipment 16
Globalization Landscape of Top 1000 R&D Spenders
Top 1000 India
687 396
313 Total MNC Subsidiaries = 709
Industrial Semiconductor Software E&E**/ Comp.
HW Telecom &
Networking Automotive
Aerospace/ Defense
APAC 2/ 22 2/ 15 6/ 7 3/ 22 2/ 6 4/ 14 -/ 2
EU 14/ 70 4/ 8 14/ 24 6/ 19 5/ 20 12/ 28 7/ 15
Japan 2/ 32 -/ 10 -/ 3 8/ 38 2/ 4 8/ 29 -/ 1
NA 9/ 21 34/ 53 44/ 58 15/ 31 16/ 27 13/ 23 8/ 14
ROW -/ 3 -/ - 1/ 2 -/ - -/ 1 -/ - -/ 1
India MNC Subsidiaries Across Verticals & Geographies
Note: Fields highlighted in green color shows opportunity areas for new centers in India opportunities with 50% have been considered however for aerospace we have considered 40% as opportunity area
India accounts for a small proportion of the total R&D investments by global companies despite having a strong talent pool across verticals
17
MNC Subsidiary R&D Investment in India (USD millions)
Total India Market Size = USD 6.9 Bn
MNC Subsidiary Talent Pool in India
Software/ Internet 34.0%
Telecom & Networking
17.0%
Semiconductors
10.0%
Industrial 7.0%
Others 8.0%
Automotive 9%
Computer Hardware and E&E**
12%
Aerospace & Defense
2%
MNC Subsidiary Installed Talent Pool in India = ~220,000
Source: Zinnov analysis of R&D landscape in India. **Electrical and Electronic equipment
MNC R&D spend on headcount in India = 7.0 – 7.5 billion USD
Automotive 773
Others 660
Industrial 595
E&E** and Computer Hardware 971
Aerospace & Defense 149
Semiconductors 799
Software/Internet 2841
Telecom & Networking 1322
18
Note: The data set analyzed in the chart on the right is a sample list from the top 1000 r&d spenders which have an R&d center in India
Source: Zinnov analysis of R&D landscape in India. **Electrical and Electronic equipment
0%
20%
40%
60%
0 5 10 15 20 25
R&
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Years Since Inception in India
Denotes companies with global R&D spend > 1bn USD Denotes companies with global R&D spend between 500 m-1bn USD Denotes companies with global R&D spend < 500m USD
Recent Relevant India News
Recently Panasonic opened its India R&D center in NCR region LG, Samsung, Toshiba has huge plans to increase the R&D spending in India
E&E** and computer hardware R&D Intensity
Large companies from Japan and APAC dominate R&D spending in Electrical and Electronic Equipment; most India centers are currently operating at low intensity
19
Note: The data set analyzed in the chart on the right is a sample list from the top 1000 r&d spenders which have an R&d center in India
Source: Zinnov analysis of R&D landscape in India
0%
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40%
60%
0 5 10 15 20 25
R&
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Tota
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R&
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Years Since Inception in India
Denotes companies with global R&D spend > 1bn USD Denotes companies with global R&D spend between 500 m-1bn USD Denotes companies with global R&D spend < 500m USD
Recent Relevant India News
Honeywell recently invested USD 34 million to build a new technology center in NCR, India Boeing had submitted a USD 300 million plan for investment in the Indian defence industry last year
Aerospace & Defense R&D Intensity
North America and Europe dominate the Aerospace and Defense vertical. Many India centers were started in the last few years and many more are expected to enter this space
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