Electronics Industry An Opportunity for Egypt

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Electronics Industry An Opportunity for Egypt

• March 2006

2
Presentation Outline

• Part I Overview
• World Status of the Electronics Industry
• Electronics Market Segmentation.
• Hard Core
• Soft Core
• World Market Share.
• Emerging Technologies.
• Status of the Egyptian Electronics Industry.

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Presentation Outline (Cont.)

• Part II A Pragmatic Approach Towards a New
  Electronics Industry in Egypt
• Pragmatic vs. Ideal approaches
• Outline of the proposed approach
• Opportunity
• Business Plan
• Project Description
• Financial Model
• Summary and Conclusions

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Part I
Industry Overview
5
World Status of the Electronics Industry

• Electronics Industries accounts for more than
  13.4 of the worlds GDP Close to 1.4 Trillion
  US
• 1,360,000,000,000
• The biggest among all industrial sectors.
• US electronics industry is bigger than its steel
  and automotive industries combined.
• Highest CAGR among all industries
• Electronics industry accounts for 1/4 - 1/3 of
  the GDPs of Asian tigers.

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Electronics Industry

• Hard Core
• Equipment Manufacturing.
• Component Manufacturing.
• Soft Core
• Design and RD.
• S\W and Embedded Systems.
• System Integration.
• Service and Maintenance.

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Electronics Industry Segmentation
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Sector Classification

• Computer Office Equipment
• Mainframes.
• Servers, Workstations, Datacoms,.
• PCs Desktop Laptops etc.
• Displays.
• Peripherals (printers, copiers, scanners,.)

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Sector Classification (Cont.)

• Telecom
• Mobile terminals.
• Mobile infrastructure.
• Public switching (subscribers bay).
• Public switching (access and transportation).
• Private switching, PABXs.
• Terminals and others.

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Sector Classification (Cont.)

• Industrial / Control
• Railways.
• Power supplies, converters.
• Power distribution.
• Control equipment.
• Medical other instrumentation.

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Sector Classification (Cont.)

• Consumer Electronics
• TV sets.
• Set-top boxes.
• VCR, DVD,
• Digital cameras
• Watches, etc

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Sector Classification (Cont.)

• Automotive
• Engine control.
• Security (air bags, brakes, etc..)
• Sensors
• Instrument panel.
• Comfort.
• Other.

BACK
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Components Manufacturing

• Passive Components.
• Semiconductors.
• Electromechanical

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Passive Components

• PCBs - printed circuit boards
• 1. Single Sided2. Double Sided3. Multi-layer
  from 4 to 6 layers4. Multi-layer over 6
  layers5. Flexible, semi-rigid, etc.
• Connectors
• 1. I/O
• 1.1 Coaxial1.2 Circular1.3 Rectangular
• 2. Optical
• 3. PCB
• 4. Automotive, others (sockets, terminals,...)
• Hybrid circuits / MCM (Multi Chip Module)
• 1. MCM-C2. MCM-L, MCM-D, others MCM3. Hybrid
  circuits (power hybrid, opto-hybrid, microwave
  circuit and SAW, resistive networks, others)

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Passive Components (Cont.)

• Switches, keyboards
• 1. keyboards, panels2. 3. Switches
• Magnetic components
• 1. Deflection and transformers for CRT2. Other
  transformers3. SMD inductors4. Toroidal
   others inductors5. Soft ferrites
• Capacitors
• 1. Film2. Aluminum3. Tantalum4. Ceramic and
  other
• Resistors
• 1. Linear2. Networks3. Non linear resistors
  (NTC, PTC, Varistors)4. Variable
• Piezo, crystal and filters
• 1. Resonators2. Oscillators3. Filters, others

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Semiconductors
Source IC Insights, 2003
BACK
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Semi conductor Market Evolution (WSTS)
BACK
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Total Semiconductor Sales By End Market
Source UBS, 2003
BACK
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Major World Players
Pac Rim expanding mainly on the expense of the US
Source IC Insights, 2003
BACK
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World Market Share (B US)
BACK
Forward
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Major Growth Areas

• Handheld Communicators (smart phones).
• Wireless Technologies GPRS/Edge, WiFi,
  Bluetooth, UWB.
• Home Networking WiFi, 10B1000, other.
• Consumer Laptops other PC products.
• High Definition TV.
• Home Theatre Media Centers
• Flat Panel Display Technologies (LCD, Plasma,
  DLP).
• Satellite TV (DirecTV, EchoStar, Voom).
• Biosensors

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Major Growth Areas (Cont.)

• Video Recording (TiVo, DVRs, DVD, Set Top
  Boxes).
• Digital Photography and Printing (Cameras,
  Camcorder)
• Flash Memory Storage Devices (SD, MiniSD, XD,
  Mem. Stick).
• Satellite Radio (XM, Sirius).
• Digital Audio MP3 Players (iPod, Digital
  Stereo, Digital Radio).
• Satellite Navigation (GPS).
• Video Games (Xbox, Playstation, PSP1, GameBoy,
  etc).
• Digital Radio.

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Emerging Technologies

• Intelligent Devices.
• Nano Technologies.
• Telemetics.
• Embedded Systems Design.
• RFID.
• All-in-one devices TV, Cell phone, Remote Control
  ..etc.
• IP Addressable Devices.
• Home and Building automation.
• Robotics.

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Vision To The Future

• By The Year 2009
• Approaching 2 Trillion USD
• Data processing 23
• Telecom 24
• Industrial medical 16
• Aerospace defense 6,5
• Audio-video 14.5
• Home appliance 6,9
• Automotive 9

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Egypts Electronics Industry

• Number of Companies 185
• Total production 16,181 MLE?
• Share to GDP 0.5
• Investments 9,453 MLE
• Market need 5.35 B
• Labor 35,000
• Productivity/Labor 469 KLE ?
• Mainly TV sets and Consumer electronics.

Source Public Authority for Industrialization
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Egypts Electronics Industry

• Do we have a chance.
• ?????
• Yes ..
• If we study the success models

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Asian Tigers

• Clear Strategy
• All Parties Commitment
• Different Incentive Packages
• SUCCESS

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Asian Tigers

• Taiwan
• Intl. Mkt. Research.
• Strategy for high added value industry
• Full RD support specially high risk.
• Envolvment of Taiwanese Expats.
• Heavy Investment in training (7900 graduate in
  1983- 180,000 in 1988) .
• Training of graduates in USA.
• Incentive for mega intl. companies

• South Korea
• Mega Companies (Gov. Support)
• Alliance with USA (Defete Japan)
• Mass production (Modern Production Lines).
• J.V. in Intl Markets to sell Components.
• RD support.
• Soft Loans.
• IP protection.

• Singapore
• First Class Infra Structure
• Cheap labor
• Venture Capital (Gov. Support)
• Capital Investment Sharing.
• Intl. Marketing Offices.

• Hong Kong
• Passive Role/Market Mechanisms.
• No governmental interference.
• Driven by small companies.
• Low technologies / Low investments.
• Volume production.
• Low added value.

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Egyptian Electronics Industry Assessment

• Strengths
• Existing production capabilities.
• Large base of University Graduates.
• Large Mass of Technicians.
• Increasing local needs.
• Local interest from most Intl. Players.

• Weaknesses
• Based on low-level technology licensing (imported
  know-how, kits)
• Very limited design efforts.
• Weak feeding industries.
• Poor technical marketing and non-export oriented
• Lack of linkage between the industry and the
  Research.
• Lack of a national strategy for the electronics
  industry.
• Lack of funding mechanisms.

BACK
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Egyptian Electronics Industry Assessment

• Opportunities
• Replacement of Imports
• Computers, Copiers, Printers.
• Communication Equipment.
• Cell phones.
• Control Equipment.
• Modernization Programs
• Automation Systems.
• POS for Ration Control.
• Electronic Wallet\Money.
• Access Control.
• ID recognition.
• Telecom wireless (Wi-Fi,Wi-Max)
• CDMA equipment.
• VOIP

• Community Needs
• Traffic control\ Display.
• Energy Saving.
• Utilities Measurement and Control.
• Taxi Metering, Tracking.
• Parking systems.
• Hospitality Systems.
• Export Oriented Activities
• Design and Development.
• Locally developed Systems.
• African markets (low tech, respect for Egyptian
  products - less demanding).

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Egyptian Electronics Industry Assessment

• Threats
• Technology
• High evolution rate of the industry.
• Competition
• China is a major competitor for mass-market
  products.
• India has potential in the Consumer Products and
  Design.
• Turkey is a close competitor for foreign
  Investors.
• Israel has significant interest in Africa.
• Dubai Silicon Oasis for design outsourcing.
• Resources
• Brain drainage to the West.

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Egyptian Electronics Industry Requirements

• Transparency of Governmental Plans and Tenders.
• Adaptation of Educational Programs.
• Incentive packages for SMEs.
• Venture Capital, and financial packages.
• Incentive for co-operation projects Academia
  Industry.
• Motivation for Innovation.
• Compensation for RD.
• Alliance with Intl. Companies.
• Regional and Intl. Market Studies.
• Intl. Marketing Companies.
• Incentive for Intl. MKTG and Exhibitions.

BACK
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Part II
A Pragmatic Approach Towards a New Electronics
Industry in Egypt
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Ideal Approach
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Pragmatic Approach Look for Windows of
Opportunity
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Industrial Phases in Electronics

• Silicon Wafers
• IC design
• Embedded SW development
• IC manufacturing
• IC packaging/testing
• PCB design
• PCB manufacturing
• System design and assembly

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Business Patterns in the IC Industry

• Systems Companies
• Nokia, Sony, Cisco
• Integrated Device Manufacturers (IDMs)
• TI, ST microelectronics, Infenion, NEC
• Pure-Play Silicon Foundries
• TSMC, UMC, Chartered
• Fabless Integrated Circuits Companies
• Cirrus Logic, Level One, Qualcomm, etc
• IP Providers
• Artisan, Aspec, Cascade, Pivotal, Rambus
• EDA Companies
• Synopsys, CADENCE, Mentor Graphics

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Top 10 Fabless IC Companies

• In 2003, more than 25 Billion US (Fabless
  IP) !!!
• Growth rate 10 times that of the industry.

Source IC Insights
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Explosion of Applications Opportunities
Convergence of Consumer, Computer Communications
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The Modern VLSI Chip
? Very Complex Design Process
Source Intl Technology Roadmap http//notes.sema
tech.org/ntrs/pub1NTRS.nsf
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The Productivity Gap An Opportunity !
Need for more design efforts to bridge the gap ?
IP providers and Fabless Companies
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IP and Design OutsourcingAn Opportunity ?!

• Shortage of IP in many areas of design
• Scarcity high cost of design resources in US
  Europe
• Two Global Mega Trends
• IP and design re-use
• More than 90 of any new design is based on IP
  and re-use
• Outsourcing is already underway
• 2M man-year outsourced to China and India in 2005

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Hot Areas For Investment
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Opportunity Assessment

• Strengths
• Highly skilled / low cost design engineers
• Egyptian expatriates

• Weaknesses
• International perception barrier
• No local market
• Low market exposure

• Opportunities
• Increasing demand in niche areas not strongly
  addressed by India China (A/MS, RF, Embedded
  SW)
• Low investment levels

• Threats
• Dubai Silicon Oasis
• India and China
• Brain drain towards US

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Project Concept
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Outline

• Project Description
• Mission Goals
• Project Concept
• Incubator Services and Mechanisms
• Keys to Success
• Products and Services
• Deal Flow
• Financial Model
• Summary

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Mission

• Contribute to the creation and development of a
  strong electronics industry in Egypt
• By providing
• The right environment, facilities, resources
  support to nurture hi-tech start-ups with the
  objective of spinning them off as world class
  independent companies.

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The Project

• Free Zone Technology Farm hosting a combination
  of
• Established companies (multi-national and local)
• Incubator for start-up companies
• Established companies provide
• Revenue by leasing facilities and services
• Symbiotic/synergistic relationship with start-ups
• Possible exit scenarios for start-ups
• Start-ups companies get full incubation services

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Concept

• Incubator and VC
• Incubation period 18-24 months
• Full financial support
• Strong professional/operational support
• Increasing the probability of success among the
  selected start-ups.
• ROI and Exit Strategy
• Holding company owns equity in all start-ups
• Early sell out to foreign / local investors,
  partner VCs, multi-national companies.

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Goals

• Achieve the highest possible percentage of
  success (higher than 60 ) among selected
  start-ups
• Spin-off at least 3 companies per year
• Gain international credibility and open doors to
  world markets for the incubator and its spin-offs
• Foster a culture of innovation, quality and
  ethics

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Incubator Services and Mechanisms

• Financing
• Auto financing through lease generated revenue
• Subsidized space, facilities and services
• Venture Capital investment in start-up companies
• Financing operations and product development
• Feasibility assessment business planning
• Core team, IMC, consulting and expert firms
• Technical support and access to lab facilities
  and design tools
• University partnership
• University liaison office

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Incubator Services and Mechanisms

• Logistics (IT, accounting, secretarial, etc..)
• Core team, consulting and service companies
• Training and human resource development
• Partnership with government agencies,
  NGOs/Associations
• Marketing support
• Eitesal
• Indirect support
• IMC
• ITIDA
• Other

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Keys to Success

• Eitesal partnership
• Identify start-ups
• Facilitate exit
• Network of experts, consultants, service
  providers, etc..
• Marketing support
• Access to high quality engineering talents
• Large pool of Egyptians working abroad
• University partnership
• Access to technical support, labs and design
  tools
• Partnership with EDA companies and foundries

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Products and Services

• Design services
• Intellectual Property
• Design IP
• Software for electronic systems
• System Level Products
• Focus on system design, development and
  prototyping
• Outsource manufacturing

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Deal Flow

• Capitalize on Eitesal network
• Solicit Egyptians working in the US and Europe
• Solicit multi-national companies to technology
  farm
• Seek a major customer/partner for each start-up
  to facilitate exit
• Reach for with Universities and RD Institutes
• Build partnerships with EDA companies and
  foundries

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Financial Model Pilot Phase

• Assumptions
• Model based on a modular and repeatable pilot
  tech-farm of 10,000 sq m
• Average area per engineer 10 sq m
• 70 for lease by established companies at LE30 /
  sq m / month
• Number of companies 5
• Total number of employees 600 800
• 20 hosting start-up companies
• Lease rate LE12 / sq m / month
• Number of companies 10
• Total number of employees 150-200
• 10 common facilities and support activities
• 500 sq m for lease at LE 20 / sq m / month
• Cost of facilities LE 2500 per sq m

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Financial Model

• Annual revenue from property lease
• Established companies 7000x30x12 LE 2520 k
• Start-up companies 2000x10x12 LE 240 k
• Facilities 500x20x12 LE 120 k
• Total LE 2.9 M
• Operating Expenses
• Rental LE 1800 k
• Wages LE 300 k
• Other LE 200 k
• Total LE 2.3 M

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Summary

• The electronics industry, by virtue of its vast
  size and huge growth, is our best gateway into
  the 21st century as a developed country
• Huge opportunities in three areas
• Design outsourcing
• Intellectual property
• Embedded SW
• Pragmatic approach to seize the above
  opportunities through the creation of private
  incubation company providing finance and
  technology/marketing support

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THANK YOU
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Glossary

• VLSI
• Very Large Scale Integration. Integrated Circuits
  with very high density of transistors.
• PCB
• Printed Circuit Board
• Fabless IC Company
• A company that designs and markets Integrated
  Circuits (ICs) while not having manufacturing
  lines.
• IDM (Integrated Device Manufacturer)
• An IC company having all activities required to
  design, produce, test and market their products.

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Glossary

• Pure Play Foundry
• A company specialized in manufacturing integrated
  circuits as a service for Fabless, IDM or system
  companies. A pure play foundry has no IC products
  of its own.
• EDA Company (Electronics Design Automation)
• A company developing, producing, marketing,
  selling and supporting software, hardware and
  services to help automate electronics design.
• IP (Intellectual Property)
• A pre-designed, pre-verified cell that is
  licensed or sold to be incorporated in a bigger
  design. IP may come in different forms, soft,
  firm or hard.
• MEMS
• Micro-Electro-Mechanical-Systems.