The European electronic industries: outlook and perspectives

1
The European electronic industriesoutlook and
perspectives
Productronica 2007
2006 - 2011

• Sebastien Rospide
• Munich, November 2007

17 rue de lAmiral Hamelin 75116 Paris -
France 33 1 45 05 70 13, www.decision.eu
2
gt DECISION presentationMethodology

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialization
• electronic products
• European position and perspectives

3
Who we are and What we do

• DECISION is a consulting company, created in
  1991, which is composed of 20 industrial experts,
  focused on
• Electronic equipment and components
• Electrical and Energy industries
• Aerospace / Defence industries
• DECISION is also working with an international
  network of experts based in Europe, in North
  America and in Japan.
• DECISION provides market surveys, economical
  forecasts
• and strategic consulting for European and
  international
• companies as well as professional and
  governmental associations.
• In particular, DECISION provides every year 2
  multi-client surveys
• World Electronic Industries - production and
  markets - 2006-2011,
• World Market for Passives and Interconnection
  Components Database, 2006-2011

4
DECISION presentationgt Methodology

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialization
• electronic products
• European position and perspectives

5
A detailed approach

• Electronic equipment approx. 100 categories of
  equipment under analysis
• Audio video (TV sets, STBs, VCRs, DVD)
• Home Appliances
• Data Processing (mainframe, large systems,
  servers, dedicated terminals, PCs, peripherals,
  ...)
• Telecom (mobile, base station, fixed
  infrastructure, other terminals...)
• Aerospace and defense (airborne systems, space,
  communications, missiles, land and sea based
  systems...)
• Automotive (powertrain, chassis, safety -
  security - information)
• Industrial and Medical electronics (vehicle
  systems, power supply, power distribution,
  automation, medical electronics, instrumentation
  measurement - test...)
• World coverage for production AND market (Europe,
  North America, Japan, China, Other Asia, Rest of
  the World)

The World Electronic Industries 2006-2011
6
From the equipment to the component

• Component content analysis and forecast in the
  electronic equipment
• PCBs
• Connectors
• Keyboards and Switches
• MCM/Hybrids
• Magnetic components
• Capacitors
• Resistors
• Quartz/filters
• Over 40 categories and sub-categories of
  components under the scope, consumption per
  application and region
• The World market for Passive and
• interconnection components (2006-2011)

Passive and interconnection components
7
gt Global outlookMigration and specializationElec
tronic productsEuropean position and
perspectives

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialization
• electronic products
• European position and perspectives

8
Asia represents half of World electronic
productionEurope and North America still major
production areas
The World Electronic Industries in 2007,
production per application sector and region
Home appliances 75 Bn (6.3)
Rest of the World (Africa, Middle East, South
America, CIS) 49 Bn (4.1)
Aerospace defence 76 Bn (6.4)
Europe (WesternEastern) 253 Bn (21.1)
Asia-Pacific (Taiwan, Korea, Singapore, India,
Australia, ...) 178 Bn (14.9)
Telecoms 308 Bn (25.7)
Automotive 91 Bn (7.6)
Industrial medical 179 Bn (14.9)
China 321 Bn (26.8)
North America 241 Bn (20.1)
Data processing 286 Bn (23.9)
Audio video 183 Bn (15.3)
Japan 156 Bn (13.0)
Source DECISION
Total equipment production 1,198 billion
Hardware value is larger than the world 8th
economy (Canada). Together with IT and
professional software services electronic
ecosystem is larger than Japan (world 2nd
economy) !
prov. average 2007 exchange rate 1 euro 1.3461
(source ECB)
9
Towards new growth cycles ...
Growth cycles of the electronics industry
1970-2011
Individuals
Military / States
Enterprises
Medical
Large systems
DVB
Auto
Mini systems
Office PC
GSM
DSC, MP3 players
VCR
Internet
Defense
DVD
Portable PC
Color TV
Home PC
Audio CD
Flat screens
...
CHINA
INDIA
Source DECISION
At constant exchange rates
10
Different growth profiles for electronic
production the more developed countries
Electronic equipment production per zone, annual
growth, 2006-2011
8.5
8.0
6.2
6.2
5.0
4.9
4.8
4.2
4.2
4.2
3.6
3.0
2006-2011f
2006
2007p
2008f
2006-2011f
2006
2007p
2008f
2006
2007p
2008f
2006-2011f
At constant exchange rates
Source DECISION
11
Different growth profiles for electronic
production the developing countries
Electronic Equipment production per zone, annual
growth, 2006-2011
World
Asia-Pacific ()
China
16.5
13.7
9.6
9.9
10.1
10.0
8.5
8.0
7.9
6.6
6.2
6.2
2006
2007p
2008f
2006-2011f
2006
2006
2007p
2008f
2006-2011f
2007p
2008f
2006-2011f
At constant exchange rates
Source DECISION
() Japan not included
12
Global outlookgt Migration and specializationElec
tronic productsEuropean position and
perspectives

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialization
• electronic products
• European position and perspectives

13
Specialisation at work in the West
Electronics industry, Average annual growth per
application sector, 2006-2011
World
Europe
6.2
4.8
Total
Total
7.6
Industrial medical
8.2
Industrial medical
6.5
Aerospace defense
Aerospace defense
6.7
6.4
Audio video
6.1
Telecoms
6.2
3.3
Automotive
Data processing
6.2
Data processing
Automotive
2.8
4.9
Audio video
Telecoms
2.4
4.2
Home appliances
Home appliances
2.0
Source DECISION
14
and globalization in the Far-East
Electronics industry, Average annual growth per
application sector, 2006-2011
China
World
Total
6.2
9.9
Total
Automotive
7.6
19.7
Industrial medical
6.5
13.6
Aerospace defense
Industrial medical
Data processing
6.4
10.1
Telecoms
6.2
Telecoms
10.0
Automotive
6.2
Data processing
9.5
Aerospace defense
4.9
Audio video
8.0
Audio video
Home appliances
4.2
Home appliances
7.8
Source DECISION
15
The world factory
Between 2000 and 2006, China doubled its share of
world electronic production from 11 to 24 !
Chinese share of World electronic equipment
production (in value)
Equipment Chinese share of world production 2007 Chinese share of world production 2011
TV 35 39
Mobile 37 42
PC 43 46
DVD 71 70
DSC 27 27
STB 41 48

• 2007-2011 evolution
• strong focus on mass market products 37 of
  world production in 2007, 41 in 2011
• some dependency in professional equipment 17
  of world production in 2007, 20 in 2011

Source DECISION
16
Towards a new balance between market and
production
Comparative growth of production versus market,
per region 2000-2011
Production
CAGR 2006-2011
CAGR 2000-2005
Market
Source DECISION
17
Global outlookMigration and specializationgt
Electronic products - mass market electronics -
professional electronics - automotive
electronicsEuropean position and perspectives
18
Mass market products the Asian domination
Mass market products Regional production in 2007
Mass market products Regional production growth
2006-2011
5.4
World
RoW
Europe
2.2
Europe
Asia-Pac
North America
North
2.0
America
2.6
Japan
8.3
China
Asia-Pac
5.2
Japan
Rest of the World
7.2
China
Source DECISION
Source DECISION
World total production 620 billion in 2007
19
TV the flat screen tsunami

• Facts and figures
• World production 210 million TV sets in 2007 to
  235 in 2011.
• Flat screens from 33 to 80 in units.
• In value, flat screen market is already larger
  than CRT and will be 9 times larger in 2011.
• European share (production) is 10 in units with
  massive transition from legacy CRT technology to
  Flat screens flat screens final assembly
  capacity is larger than previous tubes.
• World market is 90 billion in 2007, growing 5.7
  in average
• Trends and stakes
• Digital set increase share, up to 90 in 2011
• IPTV HD capability
• Larger flat panels North America to become the
  first market before Europe in 2010

Production Annual growth 2006-2011 in
World
Europe
Source DECISION
European production
in million units
(2007)

Source DECISION
20
Mobile phones 1.5 billion units in 2011

• Facts and figures
• Over 3 billion users in 2008 (2 billion in 2005)
• World production 1.14 billion units in 2007 to
  1.5 billion in 2011
• European share (production) is 19 in units
• World market is 104 billion in 2007, 5.1
  average growth from 2006 to 2011
• Trends and stakes
• Replacement market to reach 80 in 2011 (60 in
  2005)
• 3G, video, wireless connectivity, new services,
  Very High End sets are the most dynamic segment
  of the market (in value), see Apple strategy
• Ultra low cost handsets, only 3 of market in
  2011, in value (16 in units)

Production Annual growth 2006-2011 in
World
Europe
Source DECISION
European production
in million units
(2007)

Source DECISION
21
PC the essential digital platform

• Facts and figures
• World production 270 million units in 2007
• European production is 11
• 40 of World production in China
• World market is 140 billion in 2007, growing 8
  in average between 2006-2011
• Trends and stakes
• Laptop are continuing to develop fast,
  representing 40 of the unit market in 2011
• India from 1 to 5 of Asian PC production in
  2011, still a minor actor despite massive
  investment programs
• Low cost platforms to increase penetration in the
  less developed countries

Production Annual growth 2006-2011 in
World
Europe
Source DECISION
European production
in million units
(2007)

Source DECISION
22
Global outlookMigration and specializationgt
Electronic products - mass market electronics -
professional electronics - automotive
electronicsEuropean position and perspectives

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialization
• electronic products
• European position and perspectives

23
Professional markets
Professional products Regional production in
2007
Professional products Regional production
growth 2006-2011
7.1
World
RoW
Asia-Pac
6.5
Europe
Europe
North
4.6
China
America
4.7
Japan
China
13.0
Japan
Asia-Pac
9.1
Rest of the World
8.3
North America
Source DECISION
Source DECISION
World total production 489 billion in
2007 This represents the "hardware" output value,
associated services and/or software are easily 3
times larger.
NB automotive is presented separately (not
included in above figures)
24
IT infrastructures (computer telecom networks)
World production in 2007 share of European
output (bn)

• European production in 2007 is 51 billion
  representing 22 of World market ( 233 billion)
• European leaders in communication are completing
  their reorganisation after consolidation
  (Alcatel-Lucent, Ericsson-Marconi, Nokia-Siemens)
  
• Computer still US-based technologies (IBM, HP,
  Intel, AMD, Microsoft, ...) and Asian production
  (TCL, Acer, BenQ, Lenovo, ....) (50 of output)

Source DECISION
Source DECISION
25
Industrial and medical a Western leadership

• With 66 billion, European share is 37 of the
  world total production of 179 billion in 2007.
• Europeans are world 1 in the fields of
  automation, power and transportation with ABB,
  Alstom, Philips Medical, Siemens, Schneider,
  Invensys, ... They also have major market
  positions in medical or instrumentation while
  world 1 are Americans.
• A US domination in Medical (60 of world
  production) with leaders such as GE, Guidant,
  Medtronic
• Other competitors are Japanese (Mitsubishi,
  Hitachi,
• Matsushita, ...)
• No Chinese leader for the moment?

World production in 2007 share of European
output (bn)
Source DECISION
Annual production growth 2006-2011
Source DECISION
World
Europe
26
Aerospace defence Battle over the Atlantic
World production in 2007 share of European
output (bn)

• With 25 billion, European share is 33 of the
  world total production of 76 billion in 2007.
• Market is dominated by US actors (Boeing,
  Lockheed-Martin, Raytheon, ... ) and challenged
  by Europeans (Airbus, EADS, BAE, Thales, ....)
• - The US market remains in the hand of domestic
  firms (USA appr. 40 of the market), defence
  oriented
• - Europe is now strong in civil markets
• Emerging countries with active aerospace
  defence strategies (China, Korea, India, ... )
• Russia has also an important potential even if
  its production remains small (appr. 700 million)

Source DECISION
Annual production growth 2006-2011
Source DECISION
Europe
World
27
Global outlookMigration and specialisationgt
Electronic products - mass market electronics -
professional electronics - automotive
electronicsEuropean position and perspectives

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialisation
• electronic products
• European position and perspectives

28
Automotive electronics
Automotive electronics Regional production in
2007
Automotive electronics Regional production
growth 2006-2011
6.2
World
RoW
Asia-Pac
2.8
Europe
Europe
North
1.9
America
China
Japan
3.4
19.7
China
12.7
Asia-Pac
Japan
Rest of the World
North America
9.4
Source DECISION
Source DECISION
World total production 91 billion in 2007
29
Towards a new acceleration ?
Share of electronic equipment per car in Europe
Source Siemens VDO
35
30
Design rupture driving automotive electronics -
Hybrid propulsion, Drive by wire, Driving
assistance and control
25
Exponential growth - injection, ABS, ESP, engine
control, power steering, etc.
20
Rationalisation phase - optimised designs, cost
reduction, most of the growth coming from
entertainment equipment
15
10
5
Source DECISION
0
1990
1995
2000
2005
2010
2015
30
Global outlookMigration and specializationElectr
onic productsgt European position and perspectives

• Presentation methodology
• Electronic equipment production
• global outlook
• migration specialization
• electronic products
• European position and perspectives

31
European strength
Transportation Automation Operator Carrier
equipment Automotive Power electronics Aerospace
defense Instrum., measuring test Base
stations Medical Home appliances Total
electronic Mobile phones Fixed
terminals Enterprise network comm. Servers
dedicated syst. terminals Set top boxes
(STB) Peripherals CRT TVs PCs Mainframe, large
systems Flat TVs DVD home readers
recorders Audio video misc. (Hi-Fi, MP3, DSC,
) Game console
Share of electronic equipment production in
Europe, 2007
Over total average (21)
Source DECISION
32
Toward a greater geographical bipolarisation? A
large impact on the supply chain
Emerging countries Mature economies
Low cost  boxes  New applications
 commodities  Multiple interactions in the value chain
Very short product life cycle Long life cycle
Poor value perceived by customer High value perceived by customer
Linear growth Very dynamic growth

PC Power savings
Telecom Power savings
Audio - Video Medical health care
Agile
Rigid
33
New opportunities emerging in mature economies
Power savings Home S e r v i c e O r i e n t e d
Power savings Transports S e r v i c e O r i e n t e d
Power savings Industry S e r v i c e O r i e n t e d
S e r v i c e O r i e n t e d
Individual well-being Living place S e r v i c e O r i e n t e d
Individual well-being Individual care S e r v i c e O r i e n t e d
Individual well-being Paramedical medical applications S e r v i c e O r i e n t e d
S e r v i c e O r i e n t e d
Protection Tracking S e r v i c e O r i e n t e d
Protection Infrastructure security S e r v i c e O r i e n t e d
Protection Personal security S e r v i c e O r i e n t e d
S e r v i c e O r i e n t e d
... S e r v i c e O r i e n t e d
34

• Note to the reader
• All the figures and forecasts for electronic
  equipment production and market as well as
  passive component consumption are available in
  deeper details in DECISIONs 2 multiclient
  surveys
• The World Electronic Industries 2006-2011
• The World Passive and Interconnection Component
  Database 2006-2011
• For more information about these 2 products
  please contact us or visit our website
  www.decision.eu
• DECISION
• 17 rue de lAmiral Hamelin, 75116 Paris - France
• 33 1 45 05 70 13