GLOBAL R&D BENCHMARKING STUDY - FY20 June, 202 This report is solely for the use of Zinnov client and Zinnov personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Zinnov
Executive Summary Overall Global R&D spending After witnessing a decline in the FY 200, Global R&D spending has increased significantly in FY 20. Both Net Sales and R&D Spending has increased significantly with a growth of 3.55 percent and 8.2 percent respectively 2 Geographical split of R&D spending 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 % 3 Vertical split of R&D spending Telecom & Networking, Electrical & Electronic equipment witnessed a marginal increase in their Global R&D spending while Industrial sector witnessed a decline 4 India presence of top 000 R&D spenders About one-third of the Global 000 R&D spenders have centers in India About 30 percent companies with HQs in EU are in India and about 5% which have their HQs either in Japan or APAC, are in India 5 Vertical wise Intensity of top R&D spenders in India Software and Semiconductor are mature verticals in terms of R&D headcount intensity in India. Automotive and Aerospace are fast growing verticals Source: Zinnov analysis of global top 000 R&D spenders and India R&D landscape, The analysis has been done for FY20
Vertical and Geo Definitions Verticals Definition Sample Companies Software/ Internet Semiconductors Telecom & Networking E&E** & Computer Hardware Aerospace & Defense Includes companies from software domain and Internet based companies Include companies from semiconductors (Chip design, ASIC design) and power semiconductor companies Includes companies operating in areas of mobile communications, Telecommunication equipment, wireless services and Networking etc. Includes companies manufacturing consumer electronic equipment, motors, heavy electrical equipment Computer Hardware, etc. Includes companies working on designing and manufacturing of aerospace equipment Oracle, Microsoft, Amazon, SAP Labs, Google Intel, TI, AMD, Broadcom Erickson, Nokia, Cisco,NTT LG, Sony, Whirlpool, Apple, IBM, HP EADS, Rockwell Collins, Boeing, Bombardier Chemicals Includes Chemical companies BASF, Dupont, AKZO Noble Automotive Biotechnology & Pharmaceuticals Includes companies which are into automotive, Transportation and commercial vehicles Includes companies working in areas of healthcare, pharmaceutical manufacturing, biotechnology Toyota, Volkswagen, GM, Honda 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 Asia Pacific Japan Rest of the world Source: Zinnov analysis of global top 000 R&D spenders and India R&D landscape. **Electrical and Electronic equipment
Agenda Global R&D Investment Analysis R&D Globalization Analysis 4
Agenda Global R&D Investment Analysis R&D Globalization Analysis 5
Global R&D spend has Increased; however, R&D Spending as percentage of Net Sales has remained constant from 2007-08 to 200- Global R&D Investments Growth Trends, 2007- (USD Billion) Global Net Sales Trends, 2006- (USD Billion) 600 7,500 580 560 582* 7,000 6,500 6,684 6,980* 540 549 538 6,000 5,500 5,336 520 500 5 5,000 4,500 4,953 480 4,000 460 2007-08 2008-09 2009-0 200-3,500 2007-08 2008-09 2009-0 200- R&D spending in FY 20 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 20 Source: Zinnov analysis of global top 000 R&D spenders *Conversion Ratio from EURO to USD-.324. 6
The Top 500 R&D spenders account for nearly 90% of the total corporate R&D spending in the world Contribution of Top R&D Investors in the Total Global,000 R&D Spend Company Name 200- Rank 2009-0 Rank Change 2008-09 Rank Change 400000 350000 300000 250000 200000 50000 00000 50000 0 60% of R&D spend in 200- was from top 00 companies, a similar trend from the previous year 200 Roche + +3 Pfizer 2 +3 +4 Microsoft 3 0 - Toyota Motor 4-3 -3 Merck US 5 + +20 Volkswagen 6-2 -3 Samsung Electronics 7 +3 +7 Novartis 8-2 +2 General Motors 9 +3-4 Johnson & Johnson 0-2 -3 Nokia -4-3 Intel 2 +5 +5 Daimler 3 + 0 R&D Investments rank Source: Zinnov analysis of global top 000 R&D spenders Sanofi- Aventis 4-5 -2 Panasonic 5 +3 - Companies marked in Red have shown continuous decrease in rank in last four years. The Scenario is opposite for companies marked in Green.
From a geography perspective, the n and EU region continues to dominate both in terms of numbers as well as the overall R&D spend Split of Top 000 Companies by Geography NA 35% APAC % ROW Split of R&D Investment of Top 000 Companies by Geography Total R&D Investment USD 582 Billion ROW, % 2% APAC, 7% NA, 36% Japan 20% EU 32% Japan, 22% EU, 34% Top companies by Net Sales Top companies by R&D investment Company Geography Company Geography Exxon Mobile Merck US Royal Dutch Shell Toyota Motor China Petroleum & Chemicals Petro China Europe Japan APAC APAC Pfizer Microsoft Roche Toyota Motor Europe Japan Source: Zinnov analysis of global top 000 R&D spenders 8
A positive sign is that despite widely varying macro economic variables, companies across regions increased their R&D Investments in FY 20 250000 200000 50000 R&D investments in year 2008-20 and split by Geography R&D in 2008-09 R&D in 2009-0 R&D in 200- % 3% 6% Though the number of companies in APAC region has marginally increased from 9.8% in FY 200 to 0.6% in FY 20, 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 7%. 00000 50000 28% 6% More than 75% of the n 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 APAC EU Japan NA Others Source: Zinnov analysis of global top 000 R&D spenders
R&D Investments as Percentage of Net Sales Comparative R&D Spend vs Net Sales for Telecom, EEE, Automotive and Aerospace have remained constant since last year Total R&D Investments as Percentage of Net Sales (Top,000 R&D Spenders), 200-20 20.0% 8.0% 6.0% 4.0% 2.0% Semiconductors Software Telecom & Networking. 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 0.0% 8.0% 6.0% Aerospace & Defense E&E** / Computer Hardware Automotive 4.0% 2.0% 0.0% Industrial 0 20 40 60 80 00 20 Total Vertical R&D Investments (USD Billion) Source: Zinnov analysis of global top 000 R&D spenders. **Electrical and Electronic equipment 0
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 Distribution of Top 000 Companies in Industrial Vertical by Geography and Revenue Ranges (USD) 69 2 4 Distribution of R&D Investments Top 000 Companies in Industrial Vertical by Geography ROW, 2% NA, 20% APAC, 0% 32 Japan, 24% EU, 44% 7 63 20 2 7 20 NA EU APAC Japan ROW - 500 Mn 500 Mn - Bn - 0 Bn 0 Bn+ 29 3 2 Company Siemens General Electric Honeywell ABB Mitsubishi Heavy Geography Europe Europe Japan Source: Zinnov analysis of global top 000 R&D spenders
accounts for around 67% of total R&D Spend in Semiconductor vertical Distribution of Top 000 Companies in Semiconductor Vertical by Geography and Revenue Ranges (USD) 53 5 5 Distribution of R&D Investments Top 000 Companies in Semiconductor Vertical by Geography APAC, 2% EU, 3% NA, 67% Japan, 8% 43 8 3 4 NA EU APAC Japan - 500 Mn 500 Mn - Bn - 0 Bn 0 Bn+ 5 2 2 0 2 8 Company Intel STMicroelectronics Advanced Micro Devices Broadcom Texas Instruments Geography Europe Source: Zinnov analysis of global top 000 R&D spenders 2
Companies from and Europe have a significant R&D spend in the Telecom & Networking vertical Distribution of Top 000 Companies in Telecom & Networking Vertical by Geography and Revenue Ranges (USD) 25 3 Distribution of R&D Investments Top 000 Companies in Telecom & Networking Vertical by Geography ROW, % NA, 37% APAC, 0% 2 7 EU, 43% 3 Japan, 9% 20 6 3 2 4 NA EU APAC Japan ROW - 500 Mn 500 Mn - Bn - 0 Bn 0 Bn+ 4 2 Company Nokia Cisco Systems Alcatel-Lucent Ericsson NTT Geography Europe Europe Europe Japan Source: Zinnov analysis of global top 000 R&D spenders 3
Japanese and European corporations account for around 76% of the R&D spend in the Automotive vertical Distribution of Top 000 Companies in Automotive Vertical by Geography and Revenue Ranges (USD) Distribution of R&D Investments Top 000 Companies in Automotive Vertical by Geography APAC, 4% 29 29 NA, 20% 23 0 8 EU, 42% 4 4 3 3 Japan, 34% 8 8 5 2 NA EU Japan APAC - 500 Mn 500 Mn - Bn - 0 Bn 0 Bn+ Company Toyota Motor Volkswagen General Motors Honda Motors Daimler Geography Japan Europe Japan Europe Source: Zinnov analysis of global top 000 R&D spenders 4
Agenda Global R&D Investment Analysis R&D Globalization Analysis 5
30% of the Top,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 Top 000 India Globalization Landscape of Top 000 R&D Spenders 687 396 33 Total MNC Subsidiaries = 709 India MNC Subsidiaries Across Verticals & Geographies E&E**/ Comp. Telecom & Industrial Semiconductor Software HW Networking Automotive Aerospace/ Defense APAC 2/ 22 2/ 5 6/ 7 3/ 22 2/ 6 4/ 4 -/ 2 EU 4/ 70 4/ 8 4/ 24 6/ 9 5/ 20 2/ 28 7/ 5 Japan 2/ 32 -/ 0 -/ 3 8/ 38 2/ 4 8/ 29 -/ NA 9/ 2 34/ 53 44/ 58 5/ 3 6/ 27 3/ 23 8/ 4 ROW -/ 3 -/ - / 2 -/ - -/ -/ - -/ 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 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 6
India accounts for a small proportion of the total R&D investments by global companies despite having a strong talent pool across verticals MNC Subsidiary R&D Investment in India (USD millions) MNC Subsidiary Talent Pool in India MNC R&D spend on headcount in India = 7.0 7.5 billion USD MNC Subsidiary Installed Talent Pool in India = ~220,000 Semiconductors 799 Automotive 773 Industrial 595 Aerospace & Defense 49 Others 660 Software/Internet 284 Telecom & Networking 322 E&E** and Computer Hardware 97 Others 8.0% Industrial 7.0% Automotive 9% Total India Market Size = USD 6.9 Bn Semiconduct ors 0.0% Computer Hardware and E&E** 2% Telecom & Networking 7.0% Aerospace & Defense 2% Software/ Internet 34.0% Source: Zinnov analysis of R&D landscape in India. **Electrical and Electronic equipment 7
R&D Headcount Intensity as Percentage of Total Global R&D Headcount Large companies from Japan and APAC dominate R&D spending in Electrical and Electronic Equipment; most India centers are currently operating at low intensity E&E** and computer hardware R&D Intensity 60% Denotes companies with global R&D spend > bn USD Denotes companies with global R&D spend between 500 m-bn USD 40% Denotes companies with global R&D spend < 500m USD 20% 0% 0 5 0 5 20 25 Years Since Inception in India 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 Note: The data set analyzed in the chart on the right is a sample list from the top 000 r&d spenders which have an R&d center in India Source: Zinnov analysis of R&D landscape in India. **Electrical and Electronic equipment 8
R&D Headcount Intensity as Percentage of Total Global R&D Headcount 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 Aerospace & Defense R&D Intensity 60% Denotes companies with global R&D spend > bn USD Denotes companies with global R&D spend between 500 m-bn USD 40% Denotes companies with global R&D spend < 500m USD 20% 0% 0 5 0 5 20 25 Years Since Inception in India 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 Note: The data set analyzed in the chart on the right is a sample list from the top 000 r&d spenders which have an R&d center in India Source: Zinnov analysis of R&D landscape in India 9
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