Contribution of the IT Industry to Economic Development

Contribution of the IT Industry to Economic Development Hanan Achsaf President, Motorola Israel Ltd. Former President Israel Electronics Association Advisor to the Prime Minister Infrastructure Communications and Information July 16, 1999

“Today we are witnessing the early turbulent days of a revolution that may prove to surpass all previous revolutions”

IT Developments More use of consumer electronics like TV sets, video recorders, video games, CD players, PCs, etc. Computer-based communications, information, commerce and entertainment services Internet, Intranet, Extranet usage spreading fast Globalisation trends and trade increase productivity and flexibility People spend more time on the move and want to communicate and be informed when travelling

Classifications For New Media Industry n Communications facilities Household A/V equipment Telephone and telegraph equipment Broadcasting and communications equipment Radio and TV broadcasting n Computing Computer equipment Semiconductors Electrical equipment and supplies Search and navigation equipment n Content Newspapers, Periodicals, Books, Greeting cards Advertising Business services Motion pictures Libraries, vocational and schools Source: The Digital Economy, Don Tapscott

Convergence trends n Mobility n Convergence personal n terminal n service telephony n data n information/Internet n broadcasting n n n Integration fixed/mobile n cordless/cellular/ satellite n n Information Society n services Towards the third generation systems

Technologies For The New Economy

Multimedia Applications Internet applications • WWW Browsing • Video Telephone • E-mail • News push • Networked games • Electronic commerce Video conference Voice/Audio Remote LAN & Intranet • High-quality voice • Music • File transfer • Groupware • E-mail • Corporate info The Future Network ISDN/PSTN Video terminal • High-quality tailor-made appl. • Standard ISDN package Corporate LAN Internet Wireless Post Card and Electronic Business Card • Multimedia electronic mail Application Servers Internet Service Providers

A View of the Future The “Portable Tool Set” Handwriting Recognition Video Conference Fax, E-Mail, WWW Camera Voice Input and Output foldable Global Mobile Communications Personal Communicator

Enabling Technologies “Portable Tool Set” PC Workstation Video/Still Camera TV/Web TV Fax Copier Scanner DVD/CD-ROM GPS Navigation Organizer Cellular/Satellite Link Answering Machine Electronic Dictionary Electronic Translator Single Portable Unit ~ $500

Technological solution for the “Tool Set” 40 Years: Transistor Radio Credit Card Size 10 Years: 1 kg Cellular Phone 80 g Star. Tac 10 -15 Years ? ? “The Tool. Set”: 20 kg 100 -200 g

10 Themes Of The New Economy n Knowledge n Innovation n Digitization n Immediacy n Virtualization n Globalization n Molecularization n Discordance n Internetworking n Convergence

IT - A Major Engine of Economic Growth in Industrial Nations GDP Growth In The US 1995 -1998 (Percent) IT contribute 35% of US economic growth and accounting for only 8% of GDP

Comparison Of Multimedia Output 1996 and 2005 Source: The Digital Economy, Don Tapscott

IT Changing Productivity standards US Computer Output Per Worker ($US terms) $K Source: US Industry and Trade Outlook, 1998.

Foreign Employment By Global Companies )Percent of Total( Source: World Investment Report 1997

New Media Industry Job Growth Million of Jobs 1995 -2005 Source: The Digital Economy, Don Tapscott

IT Investment - Top 15 Industries IT investment per worker Source: The emerging digital economy II, June 1999

Shifts To The Internetworked Government Source: The Digital Economy, Don Tapscott

Internet is showing the way into the new world!

World Wide Web Users Traffic on the internet doubles every 100 days !!!! Source: US Industry and Trade Outlook, 1998

New Era of Digital Economy n The Internet - is evolving to an open network infrastructure and a unique venue for commercial opportunities @ Expanded customer base @ Cost effective delivery channel @ Efficient customer service

Huge Increases In Sales Volume n Amazon. com - Went from $16 m to $300 m in sales between 1996 and 1998 n Cisco systems - Went from $100 m to $4 Bn in internet sales over the same period n Dell computers - Went from $1 m per day over the net sales to $6 m between Jan 1997 - Jan 1998. n Auto-by-tel - Went from $2 Bn to over $10 Bn in sale over the net between 1996 -1998.

How well Are We Measuring The Digital Economy ? n E-Commerce - Retail sales transactions are not broken out by method of selling n Firm/Industry - Not yet developed the micro data sufficiently outside of manufacturing n Prices - New products, services and ways of selling are yet to be modeled.

$M Israel Electronics Industry Profile 1998 Total Revenue - $8. 0 Bn Exports - $6. 2 Bn 47, 000 workers are employed in the industry Sales per employee amount to $172, 000 The Israeli electronics industry has 65% added value rate 12% of employees in the electronics industry are engaged in R&D

Israel Electronics Industry Outlook $Bn Accelerated Growth Path 2005 ~ $25 Bn (17% CAGR) Current Growth Path 2005 ~ $17 Bn (11% CAGR) Total electronics industry revenue is expected to reach $10 billion by 2000 Strong government support for accelerated growth of the industry Increased emphasis on technological education to close the human resources gap The Israeli economy will be increasingly technology-based

Israel Start-Up Phenomena Largest number of start-ups outside of US Highest concentration of start-ups outside Silicon Valley Expanding volume of venture capital nearly $1. 8 billion has been invested in 300 -400 start-ups since 1992 In 1998, $150 M of US venture capital was invested in Israel - more than in any other country outside the US Over 100 Israeli companies traded on U. S. & European exchanges. More than $1. 5 billion raised from placements in 1998

Total Capital Raised by Year ($Million) Total Capital raised is estimated at $2. 87 Billion An estimated 60% have been invested already A total of $1. 1 Billion is yet to be invested

Capital Distribution by Industry 1998

Acquisition of Israeli Technology 1998 Elcint by GE valued @ $100 M n Wave. Access by Lucent valued @ $56 M n Teledata by ADC valued @ $200 M n Memco by Platinum valued @ $412 M n Lannet by Lucent valued @ $117 M n Class Data by Cisco valued @ $50 M n Mirabilis by AOL valued @ $407 M n Picture Vision by Kodak n

More acquisition of Israeli Technology 1996 & 1997 Armon Networking by Bay Networks @ $36 M n Instent by Medtronics @ $200 M n Scorpio Com by US Robotics @$72 M n Orbot by Applied Materials @ $100 M n Opal by Applied Materials @ $175 M n Biosense by J&J @ $400 M n Rad. Net by Siemens @$75 M n

Leading Start-Up Technologies Data Compression ADSL, HDSL - wide band com. Artificial intelligence Cryptography, security, encryption Firewall, Compression Data bases, data mining, Development tools, Semiconductor Design, Asic, DSP Digital imaging, printing Internet connectivity, multimedia, navigation, protection, service, telephony Internet Video Streaming Smart cards Voice and Handwriting Recognition Wireless LANs Automatic PCB quality control Image processing, Audio, video Bio imaging, bio informatics E-commerce, E-mail, E-publishing Bio sensors, Cardiac imaging Distance learning, training Dental diagnostic and imaging

H. Achsaf@Motorola. com