Trends in R&D Investments Global ICT Companies

2007 to 2011Alain Stekke

DG INFSO Economic and Statistical UnitGeorg Kelm

DG INFSO Nanoelectronics Unit

R&D Data

• 2010 Digital Competitiveness Report– Eurostat BERD + Predict Report (IPTS) + EU

KLEMS• 2011 Digital Agenda Scoreboard

– No new Eurostat and EU KLEMS data

=> R&D expenses as reported by companies in their quarterly and annual reports

Firm level analysis"Nations do not trade; it is firms that trade. This simple truth makes it clear that understanding the firm-level facts is essential to good policy making in Europe."

The happy few: the internationalisation of European firms. New facts based on firm-level evidence, Thierry Mayer and Gianmarco I.P. Ottaviano,

"Geography matters for R&D" given the strong link between R&D and growth driven by ‘knowledge spillovers’ between firms located close to each other

Why geography matters for R&D, John Van Reenen

The European Union’s business research and development deficit relative to the United States can be almost entirely accounted for by the EU having fewer young leading innovators"

Europe's missing yollies, Reinhilde Veugelers and Michele Cincera

EU Sample - Net Sales

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Siemens (Healthcare)PhilipsAutonomyAtosSoftware AGDasault SystemesSageWincor NixdorfAmdocsIndraLogicaCap GeminiSAPARMASMLNXPInfineonSTMNokiaAlcatel LucentEricsson

€28bn €27bn

Impact of the economic crises

Post Lehman Brother bankruptcy recession

Q4/2008 & Q1/2009 Panic

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ASMLApplied MaterialsUMCTSMCNXPInfineonSTMFreescaleNational SemiconductorTIAMDIntel

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EU ICT Sample - Net Sales (Revenue) in $m

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Siemens (Healthcare)PhilipsAutonomyAtosSoftware AGDasault SystemesSageWincor NixdorfAmdocsIndraLogicaCap GeminiSAPARMASMLNXPInfineonSTMNokiaAlcatel LucentEricsson

2%

EU ICT Sample - R&D in $m

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WincorSoftware AGAmdocsAutonomyDassault SAPPhilipsARMASMLNXPInfineonSTMNokiaAlcatel LucentEricsson

EU sample - Revenue and R&D in $m

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R&D is pro-cyclical

EU ICT Sample - R&D Intensity (% sales)

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US Sample - Net Sales in $m

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YahooAmazonGoogleeBayCSCEMCOracleMicrosoftDellHPIBMQualcommFreescaleAppled MaterialsTexasAMDNational SemiconductorIntelBroadcomAppleRIMMotorola (Devices)JuniperCisco

US ICT Sample Net Sales in $m

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YahooAmazonGoogleeBayCSCEMCOracleMicrosoftDellHPIBMQualcommFreescaleAppled MaterialsTexasAMDNational SemiconductorIntelBroadcomAppleRIMMotorola (Devices)JuniperCisco

46%

US sample - R&D spending ($m)

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YahooAmazonGoogleeBayOracleMicrosoftDellHPIBMQualcommFreescaleApplied MaterialsTexasAMDNational SemiconductorIntelBroadcomAppleRIMJuniperCisco

40%

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YahooAmazonGoogleeBayCSCEMCOracleMicrosoftDellHPIBMQualcommFreescaleAppled MaterialsTexasAMDNational SemiconductorIntelBroadcomAppleRIMMotorola (Devices)JuniperCisco

Internet Platforms

Apple

2007 – 2011 is about innovationGlobal Internet platforms / Social networks / Smartphones / Tablets / Cloud computing / LTE and Fiber– Demand for 24/7 internet connectivity– Mobility– Software “Renaissance” (apps)– More e-content (publishing)Industry shake up

semiconductors, telecom equipment & devices, software and publishing industry, telecom operators etc.

Policy digital agendaNet neutrality, broadband deployment, cloud computing regulation, privacy,

2007 – 2011 is about innovation

• Innovations of a magnitude (probably) never experienced before

• Truly disruptive– Big winners (and losers)– Bankruptcies/ Exits / Entries / Acquisitions– Goodwill and intangible asset impairments– Wave of patent litigation & gold rush for patents

• Very different from an economic downturn– Where you go down and up together

US versus EU

• US– Extending the ICT universe

• Devices + content + platform

– Re-integrating software and hardware• Oracle/Sun, HP/EDS, Dell/Perot

• EU– Technological leadership– Silicon driven– Extending outside rather inside ICT

The European Semiconductor Industry – Application Driven

Largest market shares in application fields as:Automotive, Industrial, Security, Communication, Medical

Silicon Technologies used to fabricate such devices:- From 0,32µm down to 40 nm CMOS, both bulk CMOS and FD SOI- From 0,16 µm Smart power to IGBT high power devices- From 77 GHz BiCMOS RF to- CMOS cameras (65 nm CMOS) and to MEMS based sensors

Both large IC makers as STM, Infineon, NXP and GlobalFoundries as well as smaller European foundries as X-fab, L-foundry or Elmos are competitive in the market place with high volume production or specialised products for niche markets respectively.

Value chain:It is important to note that the critical elements of the supply chain are still present in Europe; special strenghts in Lithography, Metrology and Materials.

European S/C Component Suppliers in Global Context

A

EU IC suppliers are competitive !!!Courtesy STM

Leading edge NanoE and PowerE Technology for your Car

Courtesy STM Advanced nanoE components down to 40 nm CMOS processors

Source: IC-Insights, 01/2008

Reduction of cost / transistor by factor of 1 million over past 40 years

The other side of “Moore’s Law”

after IHS iSuppli 2011

16/14 nm 12/11 nm

?

?

? ?

TSMCGlobalfoundriesSTMicroelectronicsIntelSamsung

22/20 nm

Outlook

The global technology race does not stop. There is visibility for another decade of eversmaller features (3nm!), larger Si wafers (450 mm), both boosting functionality & performance and keeping cost per function low. In the long run Europe cannot afford to be out of

this race as the system know-how is more and more integrated in the chip

Outlook

The global technology race does not stop. There is visibility for another decade of eversmaller features (3nm!), larger Si wafers (450 mm), both boosting functionality & performance and keeping cost per function low. In the long run Europe cannot afford to be out of

this race as the system know-how is more and more integrated in the chip