Setting the scene The ICT landscape in BRIC countries

1 Setting the scene The ICT landscape in BRIC countries / Disclaimer The views expressed are those of the presenter and may not in any circumstances be regarded as stating an official position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this presentation. Prepared by Jean Paul Simon For the IPTS workshop, Johannesburg, October 5

2 European Commission Joint Research Centre Institute for Prospective Technological Studies (IPTS) IPTS Part of DG JRC of the EC Mission to provide customer-driven support to the EU policy-making process by developing science-based responses to policy challenges that have both a socio-economic as well as a scientific/technological dimension

Fast growing economies The size of the ICT sector: a global view The size of the ICT sector: BRIC countries Toward a new global equilibrium? 3

Fast growing economies 4

Brazil is the world's seventh largest economy by nominal GDP (US$ 2.090 trillion) and the ninth largest by purchasing power parity (US$ 2.172 trillion). The Indian economy is the world's ninth-largest economy by nominal GDP and fourth largest economy by purchasing power parity (PPP) On a purchasing power parity (PPP) basis and by nominal GDP, China is the second largest economy in the world after the US, representing about 41.56% of total EU27 (World Bank, 2009). Russia has the world's 11th largest economy by nominal GDP or the 6th largest by purchasing power parity South Africa is ranked 25th in the world in terms of GDP (PPP) as of 2008 5

Engines of the global growth 6 An intensive process of redistribution of production across the world is taking place. The BRIC (Brazil, Russia, India, China,) countries are proving to be the major engines of the global growth. They were far less impacted by the financial and economic crisis than developed economies or recovered more quickly The growth rates for these emerging economies have been far above average during the last decade, and have exceeded those of the more advanced countries (EITO 2011). Consequently these four countries are driving most of the world s GDP growth.

China and India are among the fastest growing economies in the world. China s GDP has achieved more rapid growth than most other countries. 7

The size of the ICT sector: a global view 8

Economic weight of the ICT sub-sectors, % of sub-sector s value added in GDP, 2008, or latest data available 9 Taiwan_2007 1.0% 5.7% 2.3% 1.3% 0.14% Korea_2007 0.3% 3.9% 0.3% 1.9% 0.8% Japan_2007 0.5% 1.9% 0.5% 2.0% 2.0% China_2006 1.1% 2.7% 0.3% 1.9% 0.6% 0.14% US_2008 0.6% 0.6% 2.7% 2.4% 0.10% EU_2008 0.4% 0.5% 1.9% 1.8% IT Equipment India_2006 0.03% 0.11% 1.7% 0.02% 2.7% Components, Telecom and Multimedia Equipment Measurement Instruments 0.02% 0.12% 0.14% Post and Telecom Services Australia_2007 2.2% 1.0% Computer Services and Software 0% 2% 4% 6% 8% 10% 12% Source: JRC-IPTS based on data from EUROSTAT, OECD, EU KLEMS, IPTS (2010,a,b) and IPTS

R&D investments in the ICT sub-sectors by EU, US, Japanese, Asian and RoW ICT Scoreboard companies, in billions of (2008) 10 25.0 23.3 20.0 19.7 15.0 10.0 9.4 8.8 10.1 9.1 11.8 11.5 9.1 5.0 0.0 0.3 1.3 0.9 4.8 IT Equipment IT Components Telecom Equipment 1.3 4.6 2.3 1.8 1.7 2.1 0.3 0.7 0.1 0.5 0.5 0.9 0.6 0.1 0.3 0.1 Multimedia Equipment Telecom Services 3.7 Computer Services and Software EU US Japan Asia RoW Note: Bold numbers above bars represent total sectoral R&D investments Source: IPTS Predict Report 2011.

Location of ICT R&D centres by region of ownership, 2009, in % 11 EU 51% 18% 3% 18% 10% 743 R&D centre ownership US Japan Asia 14% 11% 21% 12% 14% 3% 50% 56% 69% 2% 16% 11% 1078 15% 1% 678 5% 273 RoW 28% 35% 1% 14% 21% 85 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% R&D centre location EU US Japan Asia RoW Source: JRC-IPTS ICT R&D Internationalisation Database, 2010.

Global perspective on ICT patenting 12 50.000 45.000 ICT patent applications 40.000 35.000 30.000 25.000 20.000 15.000 US China EU 10.000 5.000 Russia 0 Brasil South Africa 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Brasil Russia South Africa EU US China Korea India ICT priority patent applications by inventors from the EU, US, Brazil, China, Korea, India, Russia, South Africa and Taiwan Source: IPTS, 2011

Contribution of world regions to ICT inventive output, 1990-2007, % 13 100% Regional contribution to ICT priority patent applications 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Years EU ICT appl. US ICT appl. JP ICT appl. Asia ICT appl. RoW ICT appl. Source: JRC-IPTS calculations based on PATSTAT data (April 2010 release). Priority patent applications to the EPO, the 27 Member States National Patent Offices, the USPTO, the JPO, and 29 further Patent Offices. Inventor criterion.

Increase of ICT inventive activity: the EU, the US, China and Korea 14 1200% 1059% Average increase of ICT inventive activity 1000% 800% 600% 400% 200% 0% 74% 825% 259% 161% -3% 20% 1990-99 2000-07 64% -200% Countries EU US CN KR Source: JRC-IPTS calculations based on PATSTAT data (April 2010 release).

Regional distribution of collaboration (1990-2007) : co-invention 15 100% a: Co invention with the EU 100% a: Co invention with the US 80% 80% 60% 60% 40% 40% 20% 20% 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 US Japan Asia RoW 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 EU Japan Asia RoW a: Co invention with Asia a: Co invention with Asia 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 EU US Japan RoW EU US Japan RoW Source: JRC-IPTS calculations based on PATSTAT data.

The size of the ICT sector: BRIC countries 16

Share of BRIC countries in the 2009 global ICT market 17 Source: EITO in collaboration with IDC, PAC and Idate, published in EITO (2011).

Major players (1) In 2010, BRIC countries accounted for 13% of global demand, with spending of about 328 billion in ICT (EITO, 2011). Therefore, they are becoming major players, not just as plain ICT users/ importers but also as producers of ICT goods and services. The ICT sector is certainly representative of the massive changes in the Brazilian, Indian and Chinese industry and economy. China Mobile is the world largest mobile operator India is the second-largest (after China) and one of the fastest growing mobile markets in the world. China has become the world s largest producer of ICT products exports of ICT increased fourfold between 2004 and 2008, though many of these are re-exports from other Asian countries). 18

Major players (2) BRIC countries are also becoming major players in the entertainment and media markets. According to PricewaterhouseCoopers (Global Entertainment and media outlook, 2011), Brazil, India and China will be the fastest growing leaders: with a projected compound annual increase of 11.4%, 13% and 11.6% respectively between 2011 and 2015 (versus US: 4.7%, EMEA: 5.2%). 19

Innovators In 2009, 46% of Internet users (1.8 billion global Internet users) concentrate in five countries, the top Internet markets: China, USA, Brazil, India, Russia, four are BRIC countries. Several Chinese electronics firms have become global players, including Huawei Technologies, Lenovo, and ZTE. India produced an interesting case study of innovation with the budget telecom model or "bottom of the pyramid" (BOP) model. based on pre-paid and fitted to meet the demand of the poorest segment of customers. The lowest mobile rates in the world. The output of structural reforms of the markets 20

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Some remaining weaknesses Still, GDP per capita lags at a very low level. Despite the growth the overall domestic ICT market size is small. Truly global R&D in most countries companies is still a long way away. Besides, in spite of the growth of R&D expenditure, the level remains modest Strong presence of foreign companies in the ICT (FDI). 22

Toward a new global equilibrium? 23

Toward a new global equilibrium? Is the growth model sustainable? Resiliency to crisis: Russia and South Africa badly hit, Brazil and China more resilient Limits of the innovation model? Need to change pace for R&D? Shortage of skilled workers? Need for improvement of the quality and quantity of science? Role of the BRIC countries in global production's networks? As a part of a global value chain? Relationship with China: what kind of division of labour? China as the world s assembler not the world s factory. Potential evolution with increasing disintegration of innovation capabilities Moving up the value chain?. Is low cost different from low tech? 24

Drastic shifts in trade? The emerging trade relationships between Asia and Brazil displaced the former relationships with other regions like the EU and the USA. Between 1998 and 2007, the volume of imports from China toward Brazil grew at an "exorbitant" four digit rate (over 2000%) (Kubota and Nogueira Milani, 2009) with an average annual increase of 46.60%. Russia: «Northern locomotive between West and East» (S.Schandera) 25

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27 Thanks Jean-Paul.Simon@ec.europa.eu JRC-IPTS-idea-TEAM@ec.europa.eu Data from the set of Predict reports: Performance of R&D, Internationalisationof ICT R&D, ICT in BRIC countries 1, The 2011 Report on R&D in ICT in the European Union. IPTS publications page: http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=3759 All pictures: Jean Paul Simon