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Electronics Industry An Opportunity for Egypt

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Title: Electronics Industry An Opportunity for Egypt


1
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.

3
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

4
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.

6
Electronics Industry
  • Hard Core
  • Equipment Manufacturing.
  • Component Manufacturing.
  • Soft Core
  • Design and RD.
  • S\W and Embedded Systems.
  • System Integration.
  • Service and Maintenance.

7
Electronics Industry Segmentation
8
Sector Classification
  • Computer Office Equipment
  • Mainframes.
  • Servers, Workstations, Datacoms,.
  • PCs Desktop Laptops etc.
  • Displays.
  • Peripherals (printers, copiers, scanners,.)

BACK
9
Sector Classification (Cont.)
  • Telecom
  • Mobile terminals.
  • Mobile infrastructure.
  • Public switching (subscribers bay).
  • Public switching (access and transportation).
  • Private switching, PABXs.
  • Terminals and others.

BACK
10
Sector Classification (Cont.)
  • Industrial / Control
  • Railways.
  • Power supplies, converters.
  • Power distribution.
  • Control equipment.
  • Medical other instrumentation.

BACK
11
Sector Classification (Cont.)
  • Consumer Electronics
  • TV sets.
  • Set-top boxes.
  • VCR, DVD,
  • Digital cameras
  • Watches, etc

BACK
12
Sector Classification (Cont.)
  • Automotive
  • Engine control.
  • Security (air bags, brakes, etc..)
  • Sensors
  • Instrument panel.
  • Comfort.
  • Other.

BACK
13
Components Manufacturing
  • Passive Components.
  • Semiconductors.
  • Electromechanical

BACK
14
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)

BACK
15
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

BACK
16
Semiconductors
Source IC Insights, 2003
BACK
17
Semi conductor Market Evolution (WSTS)
BACK
18
Total Semiconductor Sales By End Market
Source UBS, 2003
BACK
19
Major World Players
Pac Rim expanding mainly on the expense of the US
Source IC Insights, 2003
BACK
20
World Market Share (B US)
BACK
Forward
21
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

BACK
22
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.

BACK
23
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.

BACK
24
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

25
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
26
Egypts Electronics Industry
  • Do we have a chance.
  • ?????
  • Yes ..
  • If we study the success models

27
Asian Tigers
  • Clear Strategy
  • All Parties Commitment
  • Different Incentive Packages
  • SUCCESS

28
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.

29
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
30
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).

BACK
31
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.

BACK
32
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
33
Part II
A Pragmatic Approach Towards a New Electronics
Industry in Egypt
34
Ideal Approach
35
Pragmatic Approach Look for Windows of
Opportunity
36
Industrial Phases in Electronics
  • Silicon Wafers
  • IC design
  • Embedded SW development
  • IC manufacturing
  • IC packaging/testing
  • PCB design
  • PCB manufacturing
  • System design and assembly

37
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

38
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
39
Explosion of Applications Opportunities
Convergence of Consumer, Computer Communications
40
The Modern VLSI Chip
? Very Complex Design Process
Source Intl Technology Roadmap http//notes.sema
tech.org/ntrs/pub1NTRS.nsf
41
The Productivity Gap An Opportunity !
Need for more design efforts to bridge the gap ?
IP providers and Fabless Companies
42
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

43
Hot Areas For Investment
44
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

45
Project Concept
46
Outline
  • Project Description
  • Mission Goals
  • Project Concept
  • Incubator Services and Mechanisms
  • Keys to Success
  • Products and Services
  • Deal Flow
  • Financial Model
  • Summary

47
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.

48
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

49
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.

50
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

51
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

52
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

53
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

54
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

55
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

56
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

57
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

58
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

59
THANK YOU
BACK
60
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.

61
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.
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