Published by BUSINESS MONITOR INTERNATIONAL LTD Singapore Information Technology Report Q4 2009 ISSN: 1750-5143 Including 5-year industry forecasts Business Monitor International Mermaid House, Puddle Dock London EC4V 3DS UK Tel: +44 (0)20 7248 0468 Fax: +44 (0)20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2009 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Singapore Information Technology Report Q4 2009 © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 CONTENTS Executive Summary .5 SWOT Analysis .9 Singapore IT Sector SWOT . Singapore Telecoms Business Environment Industry SWOT Singapore Political SWOT . 10 Singapore Economic SWOT 11 Singapore Business Environment SWOT 12 Industry Business Environment Overview 13 REGIONAL IT BUSINESS ENVIRONMENT RATINGS . 15 Asia Regional IT Markets Overview 16 IT Penetration 16 Market Growth And Drivers 17 Sectors And Verticals 19 Market Overview .22 Government Authorities . 22 Industry Developments 28 Industry Forecast .31 Singapore IT Sector - Historical Data & Forecasts, 2006-2013 (US$mn, unless otherwise stated) 33 Country Context . 34 Consumer Expenditure, 2000-2012 (US$) . 34 Rural & Urban Breakdown, 2000-2030 . 34 Internet . 35 Table: Telecoms Sector - Internet - Historical Data & Forecasts . 35 Competitive Landscape .36 Company Profiles .38 IBM Singapore 38 Singapore Computer Systems 40 Hewlett Packard Singapore 41 Chartered Semiconductors . 42 Country Snapshot: Singapore Demographic Data .43 Section 1: Population . 43 Table: Demographic Indicators, 2005-2030 . 43 Table: Rural/Urban Breakdown, 2000-2030 44 Section 2: Education And Healthcare 44 Table: Education, 2000-2004 . 44 Table: Vital Statistics, 2005-2030 44 Section 3: Labour Market And Spending Power 45 Table: Employment Indicators, 2001-2006 45 Table: Consumer Expenditure, 2000-2012 (US$) 45 BMI Methodology .46 © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 How We Generate Our Industry Forecasts . 46 IT Industry . 46 IT Ratings – Methodology . 47 Table: IT Business Environment Indicators . 48 Weighting 49 Table: Weighting Of Components . 49 Sources 49 © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 Executive Summary Market Overview Singapore's IT market is projected to continue to provide opportunities in H209 despite the difficult economic climate. The total size of the domestic IT market is expected by BMI to increase from a projected US$5.0bn in 2009 to around US$6.1bn in 2013 as significant government information and communication technology (ICT) spending helps to compensate for deferred consumer and enterprise IT spending. The IT market is projected to remain in positive territory this year, although growth will be down on last year. There were signs in H109 that spending on IT and office equipment hardware was surprisingly robust despite the overall gloomy retail outlook, which saw private consumption dip by 5.1% year-on-year (y-oy) in Q109. Sales of computer hardware advanced by a low single-digit factor, according to industry estimates, driven principally by sales of low-cost notebooks. However, growth is still expected to remain subdued even as the economy makes a mild recovery in H209. Despite challenging trading conditions in 2009, there are a number of factors that will to some extent immunise against slowdown in demand. With the iN2015 plan placing IT at the heart of the government's strategy to improve competitiveness, complex government tenders will drive considerable spending in years to come in areas such as education, e-government, transport and healthcare. Industry Developments In 2009, the government continued to roll out its ambitious cross-governmental Standard Operating Environment (SOE) initiative, while also announcing boosts to IT spending in some key sectors, including healthcare and public sector construction. As of Q309, four agencies had begun actual implementation of SOEasy, while between 30% and 50% of public officials were estimated to have begun to utilise the centralised services. Public sector spending on ICT remained a significant source of IT market opportunity in 2009. The Singaporean government had previously revealed that it plans to invest around SGD1.73bn in ICT projects in the current financial year through March 2010. To be put out to tender were 392 new projects, with 40% of the planned projects expected to be worth more than SGD500,000. The 2009 budget pledged an additional US$4bn for healthcare, including US$200mn specifically earmarked to develop a better electronic health record system. The first phase of the electronic health record (EHR) system implementation was due to start in November 2010. The system, part of the government's IN2015 ICT masterplan, will cover hospitals and doctors in both the public and private sectors. © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 Company News Against a backdrop of increased government ICT spending in 2009, IT vendors continued to compete for major tenders. As of mid-2009, the winning consortium in last year's massive SOE1 tender, One Meridian, led by HP unit EDS, had taken over the computer systems of 62 public sector agencies, although only about four had reportedly started the transformation. By the end of 2010, all 75 government agencies were scheduled to be connected to one common platform. Microsoft hopes that the launch of its Windows operating system, scheduled for October 2009, will boost its local sales. However, the launch of Windows was not in time for the roll-out of the latest phase of the SOEasy government project, which will be based on Windows Vista. Agencies due to implement SOEasy next year could potentially move directly onto the platform, if authorities were satisfied as to its stability. Significant opportunities for IT vendors exist in the healthcare sector. IBM Singapore is implementing a major contract from SingHealth, the nation's largest public healthcare group, to standardise hardware and software platforms. Meanwhile, New Zealand software company HSAGlobal, in co-operation with SingTel, was planning a multimillion dollar roll-out of its outpatient care solution across all SingHealth outpatient and GP clinics. Computer Sales Singapore's spending on IT hardware is projected at around US$2.2bn in 2009 from around US$2.1bn in 2008, with a deceleration evident as the global economic crisis impacts upon consumer and business confidence. In H109, spending remained in positive territory, even as spending on many other consumer products declined. Vendors cut prices, and there were signs in H109 that most demand in the notebook segment was being driven by sales of models, which retailed at prices of below US$1,000. According to the latest report from the IDA, 74% of Singaporean households now have a PC, and, following demand growth of close to 20% over 2001-2005, this level of saturation would be expected to act as a constraint. However, consumers have appeared willing to spend on upgrading their notebook computers, and there is a trend for households to own more than one unit. Given an expected 300% growth in broadband penetration by 2013, the increasing number of products and services available on the internet will be a major driver of demand for computer hardware. Software Spending on software is projected at around US$781mn in 2009 from around US$775mn in 2008. Software accounted for about 16% of the domestic IT market in 2008. The share of IT spending accounted for by software should rise to nearly 18% by 2013, with enterprises seeking greater leverage from their investments. Compliance with government and international regulations will also be a driver in © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 financial, manufacturing and other sectors, as will the continued expansion of Singapore's e-government systems and e-commerce. Over the forecast period, enterprise resource planning (ERP), customer relationship management (CRM) and other e-business applications will find increasing popularity with the small and medium-sized enterprise (SME) market as enterprises look to enhance productivity through the automation of essential functions. Meanwhile, the launch of Microsoft's new Windows operating system, scheduled for October 2009, has the potential to have an impact, although much will depend on consumer and business confidence. IT Services In 2009, the IT services sector is projected to be worth around US$2.0bn, with growth down compared with the previous year. IT services compound annual growth rate (CAGR) is expected to be 6% over 2009-2013. IT services accounted for around 40% of the domestic IT market in 2008 with spending of US$2.5bn forecast for 2013. Key IT spending sectors such as government, telecoms, healthcare and banking have continued to supply demand for implementation, consulting and managed services. The economic situation, and credit tightening, has had an impact on projects in some market segments, but government ICT tenders were worth an estimated US$1bn in 2008, and other verticals such as telecoms, healthcare and banking should offer areas of opportunity. In 2009, government ICT projects, such as SOE2, will again provide significant opportunities. In the last few years, there have been growing business process outsourcing (BPO)-related opportunities. E-Readiness The National Broadband Network (NBN) is at the core of the government's 'Intelligent Nation 2015' initiative. The contract for the first phase of the project, which will link businesses, schools, hospitals and homes, involves 45% of the network being rolled out within three years and the entire network by 2012. The IDA recently said that, within two years, 60% of homes and offices should have access to the network. The second phase of the project will place emphasis on pervasiveness and the provision of wireless access at affordable rates. The project is expected to lead to 68% broadband penetration by 2012. The NBN will be capable of offering high speeds of 1Gbps or more and aims to provide affordable broadband for 95% of all homes and businesses by 2012. Reviewing one year of the landmark Intelligent Nation 2015 (iN2015) plan in 2007, Minister for Information, Communications and the Arts Dr Lee Boon Yang said that much progress had been made but much remained to be done. © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 Key Issues For Investors Further government-enforced reductions in labour costs and mandatory corporate contributions to pensions; Cuts to corporate and income taxes if the government sticks to its budgetary commitment to lower business costs; and Competitiveness is at risk of being eroded by cheap labour in China. © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 SWOT Analysis Singapore IT Sector SWOT Strengths Weaknesses Opportunities Threats Strong government support for ICT programmes Well positioned to benefit from links with China IT-literate population Strong financial sector Singapore has a small and mature domestic market with relatively slow growth rates Sensitive to volatility in the global economy iN2015 programme will have many direct and indirect benefits for the IT market The SOE2 tender for schools in 2009 should provide a boost to the IT market Other major projects in areas such as healthcare and transport 'Green' IT as companies look to make power savings The biggest threat is a prolonged slowdown in the US economy and/or slowdown in China's economic growth rate, affecting Singapore's economic activity The financial crisis will hit Singapore's key IT spending financial services vertical Singapore Telecoms Business Environment Industry SWOT Strengths Weaknesses Opportunities Threats The country enjoys a mature mobile sector Competition exists in the market, chiefly between SingTel, StarHub and M1 The launch of high-speed downlink packet access (HSDPA) services by all three major operators should drive take-up of 3G Limited scope for growth exists in 2G mobile subscriber bases Strong increases to prepaid subscriber numbers could prove to be a downfall for blended average revenues per user (ARPUs) Mobile data usage is likely to increase significantly to 25% or more of ARPU An increasing tendency to annual handset replacement will benefit vendors The impressive take-up of 3G to date gives good growth indications Impending mobile saturation makes Singapore a less attractive market for multinational vendors more interested in the potential of China, India and Indonesia Economic recession will further exaggerate operators falling ARPUs as customers look to reduce costs © Business Monitor International Ltd Page Singapore Information Technology Report Q4 2009 Internet Table: Telecoms Sector - Internet - Historical Data & Forecasts 2004 2005 2006 2007 2008* 2009f 2010f 2011f 2012f 2013f 1,714 1,618 1,522 1,057 103.8 87.8 75.6 65.4 61.8 58.5 No. of internet users/100 inhabitants 41.1 37.9 34.6 23.0 2.1 1.8 1.5 1.3 1.2 1.1 No. of broadband internet subscribers ('000) 512 639 768 971 1,262 1,745 2,512 3,649 4,529 4,926 No. of broadband internet subscribers/100 inhabitants 12.3 15.0 17.4 21.2 26.1 35.7 50.8 73.0 89.6 96.4 No. of internet users ('000) e/f = estimate/forecast. *IDA change in internet user definition to users that have paid for their internet access subscriptions. Source: IDA, BMI Our assessment of the internet market remains the same. At the end of March 2009, there were Industry Trends - Internet Sector (2005-2013) 98,300 users, down from 103,800 at the end of March 2008. By the end of this year, we estimate around 87,800 users before falling further to 58,500 as of 2013. The fall in internet users is not particularly surprising, given that broadband household penetration rates have reached 109.5% as of March 2009. Additional growth in the broadband sector will e/f = estimate/forecast. Source: BMI also arise from the national high-speed broadband project, iN2015, while the state has also initiated a scheme under which wireless internet access via a Wi-Fi-enabled mobile device or laptop is provided in Singapore free of charge between 2007 and 2009. These schemes aim to push the growth of broadband services further. We have revised our current expectations for growth in the market reaching 1.745mn by YE09, after 121,000 net additions were reported in the first quarter of that year to reach 1.383mn. By the end of 2013, we forecast broadband penetration rates of 96.4%, with subscriber figures of 4.926mn. © Business Monitor International Ltd Page 35 Singapore Information Technology Report Q4 2009 Competitive Landscape Against a backdrop of increased government ICT spending in 2009, IT vendors continued to compete strongly for major tenders. The SOE2 attracted tenders from most of the companies that bid for SOE1, awarded earlier last year. SOE1 was awarded to a consortium called One Meridian, led by now HP unit EDS, and also including SingTel and its IT services arm NCS. ST Electronics and HP, which missed out on the SOE1 government sector tender, announced that they would team up again for the estimated US$1bn SOE2. Their Team Advance consortium had worked for three years on the phase one tender. The SOE project was described by the IDA as the largest government infocomm project to date in terms of scope, scale and value. Four consortia qualified at the pre-tender state: Inspire led by HP, NexGenea led by NEC Solutions, One Meridian led by EDS, and One Team led by NCS. As of mid-2009 One Meridian had taken over the computer systems of 62 public sector agencies, although only about four had reportedly started the transformation. By the end of 2010, all 75 government agencies were scheduled to be connected to one common platform. Meanwhile, Singapore Computer Systems (SCS), Singapore's largest IT company, came under the control of Singapore's largest telecoms company, SingTel. SingTel acquired a 60% stake in SCS for SGD140mn through its subsidiary Computer Systems Limited. The acquisition boosted SingTel's strategy to become a significant solutions provider in the Asia region. Singtel will now hope to extend its reach to countries where SCS has operations, including China, Indonesia and the Philippines. Significant opportunities for IT vendors exist in sectors such as telecoms, electronics and health. IBM Singapore is implementing a major contract from SingHealth, the nation's largest public healthcare group, in order to standardise hardware and software platforms across its various institutions. IBM was commissioned to consolidate the varied IT infrastructure into a single platform to create a better flow for patient care delivery. Meanwhile, New Zealand software company HSAGlobal appeared to be close to a multimillion deal with SingHealth. The company recently teamed up with telecoms company SingTel to run a 200-patient trial of HSAGlobal's Community Care Management Solution to help manage outpatient care. SingTel hosted the software as an SaaS product with a US$100-per-user monthly fee. The trial was deemed a success, and planning has begun for a full deployment across all SingHealth outpatient clinics and GP clinics. Healthcare is a promising area of opportunity for IT vendors, with US$4bn in investment announced for the sector as part of the government's recent stimulus package. In 2009 Microsoft hopes that the launch of its Windows operating system, scheduled for October, will boost its local sales. In Summer 2009 Microsoft continued to lay the groundwork for the new operating system launch and released the enterprise version of the software in August. Microsoft anticipated that support from leading PC makers would underpin success for the new system. However, there has © Business Monitor International Ltd Page 36 Singapore Information Technology Report Q4 2009 been some scepticism from businesses, following the perceived problems with Microsoft's Vista operating system. Moreover, the launch of Windows was not in time for the roll-out of the major SOEasy government project, which will be based on Windows Vista. However, agencies due to implement SOEasy next year could potentially move directly onto the platform, if authorities are satisfied as to its stability. Meanwhile, starter editions of Windows will be available to manufacturers of netbooks sold in Singapore, marking the first time a scaled-down version of a Microsoft operating system has been available in this developed market. Microsoft's XP Starter Edition had its regional launch in Thailand and was also subsequently released in Malaysia, Indonesia and India among other markets. The SaaS model is on the rise in Singapore, boosted by the city state's excellent telecoms infrastructure. HP and SCS led a consortium that was awarded the major Grid Service Provisioning project by the IDA. The project was to enable delivery of pay-on-demand online services through the National Grid. The consortium will deliver computing power and storage on a pay-per-use basis to both enterprises and public sector agencies. An SCS data centre will power the grid. Meanwhile, in an economic environment of rising power costs, Singapore is one of the more advanced economies in the region in moving towards adoption of green IT. The main focus for vendors is reducing data centre energy consumption, much of which goes on cooling. Billions of dollars are spent every year in Asia on power to cool servers, and vendors are competing to offer cost savings. The Land Transport Authority (LTA) has linked its ambitious applications masterplan to a drive for energy-efficiency savings. A series of 'green' specifications were being drafted to guide procurement decisions. HP Singapore is promoting solutions to help companies to reduce data centre power consumption by as much as 50% through smart cooling technologies. HP also promotes other technologies like consolidation and virtualisation, which can help reduce costs. In August 2009 the company announced that it had teamed up with Singapore's Institute of Technical Education (ITE) to launch a new centre to help SMEs with business continuity planning. Meanwhile, IBM has committed US$1bn globally to its Project Big Green (PBG) to deliver technologies that help clients increase energy efficiency levels in their data centres. IBM has rolled out the programme in Asia Pacific, including Singapore. The LTA is current in the middle of a three-year agreement with IBM to reduce energy consumption in its data centres. © Business Monitor International Ltd Page 37 Singapore Information Technology Report Q4 2009 Company Profiles IBM Singapore Services Presence Manufacturer, distributor and provider of advanced IT solutions, including Singapore is one of IBM's two hardware, software, peripherals and data processing equipment. global procurement centres and crucial to the company's global manufacturing operations. It currently has around 100 local employees. In a sign of the strategic significance it places on Singapore as a regional hub, IBM has made Singapore the worldwide manufacturing facility for IBM's newest mid-range disk storage products, as well as the location for a new warranty repair centre for its Linear Tape Open (LTO) drives, serving the markets of Europe, the Middle East, Africa and the Asia Pacific. Recent Developments Sectors IBM has rolled out its green PBG IT programme in the Asia Pacific, including Along with some other vendors, Singapore. It has committed US$1bn globally to the programme in order to IBM has enjoyed particularly strong deliver technologies that help clients to increase energy-efficiency levels in demand from the electronics, their data centres. financial services and healthcare IBM is currently promoting solutions for SMEs in the country. In May, it began making visits to SME premises with the IBM Mobile Express, a marketing promotion involving buses fitted with computers. IBM said that it hoped to visit 10,000 firms through the programme and promote its ERP, CRM, supply chain solutions and collaboration and data security software. sectors. IBM is also collaborating with the government in the ebusiness infrastructure, egovernment, financial services, telecoms and education segments IBM is expected to bid for the SOE2. It was part of the One Team consortium, which failed to be selected for the government's SOE1 tender following reports of disagreements between IBM and consortium leader NCS. However, IBM Singapore is building on local market growth in consulting and systems innovation, with an expanded focus on application management services (AMS). Some predictions saw hosted software market spending in Singapore growing by around 17% in 2007. Most recently, the company won a major contract from SingHealth, the nation's largest public healthcare group, to standardise hardware and software platforms across its institutions. According © Business Monitor International Ltd Page 38 Singapore Information Technology Report Q4 2009 to IBM, enterprises are looking to improve business efficiency and evolve their business models to enable growth for the long term. In September 2007, the company signed a memorandum of understanding (MoU) with the LTA to work on green IT savings that will enable the latter to make savings on energy use. Future Plans As elsewhere, IBM has been extending its 'on demand' concept, making available the managed services that it already promotes to larger firms to SMEs. Local Market Performance In 2007, IBM's Asia Pacific revenues increased by 11% to US$19.5bn. In H108, IBM reported that revenues were up by 20% y-o-y. Along with some other vendors, IBM has enjoyed particularly strong demand recently from the electronics, financial services and healthcare sectors. IBM's local clients include the Media Development Authority (MDA) of Singapore, which has outsourced some IT functions to IBM, Singapore Airlines, which outsources its IT infrastructure functions to IBM in a seven-year contract valued at around US$300mn, and Equinox, the leading provider of network neutral data centres and internet exchange services. © Business Monitor International Ltd Page 39 Singapore Information Technology Report Q4 2009 Singapore Computer Systems Services Presence Formerly known as ST Computer Systems and Services, SCS provides SCS is a member of the Singapore services in IT consulting, systems integration, software development, Technologies Group, a networking and e-commerce. multinational conglomerate headquartered in Singapore. Recent Developments Sectors Singapore continued to be the main revenue and profit contributor of the SCS In Q308 the main contributor to the Group in 2008 according to the company's financial statements. SCS came company's 17.5% y-o-y growth was under the control of Singapore's largest telecoms company, SingTel, which its infrastructure division, Both acquired a 60% stake in the company for SGD140mn through its subsidiary SCS's business solutions and its Computer Systems Limited. The acquisition supports SingTel's strategy to be a infrastructure divisions reported significant solutions provider in the Asian region. SingTel will hope now to increased y-o-y revenues in Q108. extend its reach to countries where SCS has operations including China, Some 70% of SCS's revenues Indonesia and the Philippines. The company reported a record order book of come from the government sector. US$718mn at the end of Q108. SCS will focus on four key SCS received a big boost from its win in phase one of the government's SOE1 project. SCS was a member of the winning One Meridian consortium. The US$1.3bn project had been described by IDA as the largest government infocomm project to date in terms of scope, scale and value. SCS was expected to bid for the SOE2 tender in 2008 to supply computer systems to schools. business domains: healthcare, egovernment, financial industry and manufacturing and logistics. In addition to its new strategy to focus on verticals, the group will also repackage its intellectual properties as products and services SCS has announced the completion of the latest stage of the iPharm project implementation for Singapore's National Healthcare Group (NHG). The major project aims to create a centralised pharmacy system across health institutions with the integration of iPharm and the Electronic Medical Records (EMR). On taking over as CEO, Tan Tong Hai outlined a strategy to improve internal processes, project costing and management systems. Future Plans SCS will continue to focus on winning government contracts, as it believes that it is well placed in this segment. In addition to its new strategy to focus on verticals, the group is also repackaging its intellectual properties as products and services. Local Market Performance In the first nine months of FY08, the SCS Group achieved a net profit of SGD12.9mn on revenues of SGD264mn. This compared with a net profit of SGD7.0mn and revenue of SGD251.5mn for the same period in 2007. © Business Monitor International Ltd Page 40 Singapore Information Technology Report Q4 2009 Hewlett Packard Singapore Services Technology services, consulting and integration. Presence HP employs more than 32,000 people across the Asia Pacific and Japan, including 6,000 in Singapore. The country hosts HP's global research and development (R&D) centres for inkjet printers and networking products. The company makes business PCs, workstations, servers, storage, networking products, imaging and printing products and supplies here. In 2005, HP outlined a plan to spend US$1bn over five years in order to ramp up its high-value-added manufacturing facilities. In 2007, the company opened an intellectual property licensing office in Singapore to market HP technologies to the Asia Pacific region. Recent Developments Sectors HP Singapore is promoting a strategy of helping companies to reduce HP's disaster recovery centre based in data centre power consumption by as much as 50% through smart Singapore offers business continuity and cooling technologies. HP also promotes other technologies like disaster recovery services to businesses consolidation and virtualisation, which can help with green aspects of the across the Asia Pacific. HP has data centre. established its first Asia Pacific Integrity Server R&D Centre in the country. According to a regional spokesperson, the centre will design and develop next generation Intel Itanium servers for the global market and is charged with extending the range of HP's current product line. Future Plans HP is aiming to push its managed services business across the Asia Pacific region to take advantage of the growing demand for IT outsourcing. Another item on HP's current agenda is to push its branded services delivered by its channel partners beyond just warranty services. About 25% of resellers in Asia have this capability. Local Market Performance HP's Asia Pacific revenues grew by 16% y-o-y in Q208 to US$5.2bn. © Business Monitor International Ltd Page 41 Singapore Information Technology Report Q4 2009 Chartered Semiconductors Services Presence One of the world's top dedicated semiconductor foundries, Chartered offers Chartered is the world's third- leading-edge technologies down to 90 nanometres. The company makes chips largest producer of made-to-order for Microsoft's Xbox gaming console as well as computer processors for chips. Advanced Micro Devices (AMD). Recent Developments Sectors Chartered reported declining orders from August 2008 due to the negative Revenues growth in 2008 was macroeconomic environment, and expected to report a sequential decline in driven primarily by Chartered's revenues of around 21% in Q408. Chartered had previously warned that it strength in the communications expected a loss in Q308, due mainly to economic environment factors including sector and to a less extent the high oil prices and rising material costs. Chartered has revealed that three consumer sector. This offset customers accounted for more than 10% of revenues, excluding Chartered's weaknesses in the computer share of SMP revenues, in 2006. In order of revenue significance, these were sector. A major revenue driver in Broadcom, IBM and AMD. Chartered's top five customers accounted for 60% of 2007 was 90nm associated total revenues in 2006 compared with 56% in the previous year. revenues, which more than doubled and contributed 27% of the company's total business base revenues for the year. Revenues from advanced technologies (0.13 micron and below, including those from 90nm) grew by 84% and accounted for 53% of total revenues. Future Plans In 2007, the company accelerated the development and qualification of a 45nm (nanometre) technology node. The company is also adding an additional phase for Fab expansion, focused on 65nm and 45nm technologies, bringing its total capacity to 45,000 12-inch wafers per month. Local Market Performance Chartered reported revenues of US$463.7mn in Q308, up by 30.7% from US$354.8mn in the period of 2007. Gross profit was US$65.6mn. © Business Monitor International Ltd Page 42 Singapore Information Technology Report Q4 2009 Country Snapshot: Singapore Demographic Data Section 1: Population Population By Age, 2005 And 2030 (mn, total) Population By Age, 2005 (mn) 70-74 70-74 60-64 60-64 50-54 50-54 40-44 40-44 30-34 30-34 20-24 20-24 10-14 10-14 0-4 -0.2 0-4 -0.1 0.0 Male 0.1 0.2 0.3 -0.6 -0.4 -0.2 0.0 2030 Female 0.2 0.4 0.6 2005 Source: UN Population Division Table: Demographic Indicators, 2005-2030 2005 2010f 2020f 2030f Dependent population, % of total 27.8 25.6 29.8 40.3 Dependent population, total, ‘000 1,229 1,198 1,482 2,099 Active population, % of total 72.2 74.2 70.1 59.6 Active population, total, ‘000 3,191 3,464 3,485 3,104 Youth population*, % of total 19.9 16.7 12.0 12.9 Youth population*, total, ‘000 881 781 599 674 Pensionable population, % of total 7.8 8.9 17.7 27.3 Pensionable population, total, ‘000 348 417 883 1425 f = forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 43 Singapore Information Technology Report Q4 2009 Table: Rural/Urban Breakdown, 2000-2030 Urban population, % of total Total population, ‘000 2000 2005 2020f 2030f 100 100 100 100 4,017 4,326 4965 5202 f = forecast. Source: UN Population Division Section 2: Education And Healthcare Table: Education, 2000-2004 Adult literacy, male, % 96.6 Adult literacy, female, % 88.6 Source: UNESCO Table: Vital Statistics, 2005-2030 2005 2010f 2020f 2030f Life expectancy at birth, males (years) 76.7 77.6 79.2 80.4 Life expectancy at birth, females (years) 80.5 81.3 83.2 84.4 Life expectancy estimated at 2005. f = forecast. Source: UNESCO © Business Monitor International Ltd Page 44 Singapore Information Technology Report Q4 2009 Section 3: Labour Market And Spending Power Table: Employment Indicators, 2001-2006 2001 2002 2003 2004 2005 2006 2,120 2,129 2,150 na 2,367 1,881 – % change y-o-y -3.3 0.4 1.0 na na -20.5 – % of total population 51.7 51.1 50.9 na 54.7 42.9 Employment, '000 2,047 2,017 2,034 1,632 na 1,797 – % change y-o-y -2.3 -1.4 0.8 -19.7 na na 1,149 1,137 1,123 961 na 1,037 – female 898 880 911 671 na 760 — female, % of total 43.8 43.6 44.8 41.1 na 42.3 Total employment, % of labour force 96.5 94.7 94.5 na na 95.5 Unemployment, '000 73 111 116 101 na 84 – male 42 65 66 57 na 45 – female 31 46 51 45 na 40 – unemployment rate, % 3.4 5.2 5.4 5.8 na 4.5 Economically active population, '000 – male na = not available. Source: ILO Table: Consumer Expenditure, 2000-2012 (US$) 2000 2007e 2008f 2009f 2010f 2012f Consumer expenditure per capita 9,751 13,559 15,369 16,731 17,644 19,589 Poorest 20%, expenditure per capita 2,438 3,390 3,842 4,183 4,411 4,897 Richest 20%, expenditure per capita 23,890 33,221 37,654 40,991 43,229 47,993 Richest 10%, expenditure per capita 31,983 44,475 50,410 54,878 57,874 64,251 Middle 60%, expenditure per capita 7,476 10,396 11,783 12,827 13,527 15,018 10,170 14,213 15,315 na na na Poorest 20%, expenditure per capita 2,542 3,553 3,829 na na na Richest 20%, expenditure per capita 24,915 34,822 37,522 na na na Richest 10%, expenditure per capita 33,356 46,619 50,233 na na na Middle 60%, expenditure per capita 7,797 10,897 11,741 na na na Purchasing power parity Consumer expenditure per capita e/f = BMI estimate/forecast. na = not available. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 45 Singapore Information Technology Report Q4 2009 BMI Methodology How We Generate Our Industry Forecasts BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms. Our approach varies from industry to industry. Common to our analysis of every industry, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable’s own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable’s own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part in all of our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. IT Industry Forecasts There are a number of criteria that drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base and methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and external political and economic factors. © Business Monitor International Ltd Page 46 Singapore Information Technology Report Q4 2009 Within best-practice techniques of time-series modelling, BMI’s quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: Overall economic context, and GDP and demographic trends; Underlying ‘information society’ trends; Projected GDP share of industry; Maturity of market structure; Regulatory developments and government policies; Developments in key client sectors such as telecommunications, banking and e-government; Technological developments, and diffusion rates; Exogenous events. Estimates are calculated using BMI’s own macroeconomic and demographic forecasts. IT Ratings – Methodology Our approach in BMI’s IT Business Environment Ratings is threefold. First, we seek accurately to capture the operational dangers to companies operating in this industry globally. Second, we attempt, where possible, to identify objective indicators that may serve as proxies for indicators that were traditionally evaluated on a subjective basis. Finally, we include aspects of BMI’s proprietary Country Risk Ratings (CRR) that are relevant to the IT industry. Overall, the ratings system, which integrates with those of all 16 industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas: Limits of potential returns: Evaluation of sector’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. © Business Monitor International Ltd Page 47 Singapore Information Technology Report Q4 2009 Table: IT Business Environment Indicators Indicator Rationale Limits to potential returns Market structure IT market value, US$bn Sector value growth, % year-onyear (y-o-y) Denotes breadth of IT market. Large markets score higher than smaller ones Denotes sector dynamism. Scores based on annual average growth over five-year forecast period Government initiatives and spending Denotes spending boost provided by public sector, which can be a crucial determinant of sector development Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales – compared to services/software – indicates that the overall IT market is immature Country structure Urban-rural split GDP per capita, US$ Urbanisation is used as a proxy for development. Predominantly rural states therefore score lower A high GDP per capita supports long-term industry prospects. Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws ICT policy Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Subjective evaluation of official policy towards IT development, as enshrined in statute and tax code Country risk Short-term external risk Rating from CRR evaluates the vulnerability to external shock, which is the principal cause of economic crises. Such a crisis would cut investment Short-term financial risk Rating from BMI’s CRR, to denote risk of currency crisis and stability of banking sector. The former would hit revenues in hard currency, while the latter would curtail investment funding Trade bureaucracy Legal framework Bureaucracy Corruption Rating from CRR to denote ease of trading with the state Rating from CRR denotes the strength of legal institutions in each state – security of investment can be a key risk in some emerging markets Rating from CRR denotes ease of conducting business in the state Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies’ ability to compete Source: BMI © Business Monitor International Ltd Page 48 Singapore Information Technology Report Q4 2009 Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 70% – IT market 65% – Country structure 35% Risks to realisation of potential returns 30% – Industry risks 40% – Country risk 60% Source: BMI Sources Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and international industry organisations such as the International Telecommunication Union (ITU), officially-released company results and figures, and international and national industry news agencies. © Business Monitor International Ltd Page 49 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Page 20 Singapore Information Technology Report Q4 2009 large contracts such as that awarded by Idea Telecom to IBM Singapore - where the government was to tender a major outsourcing contract in 2008 - and Hong Kong have both seen a trend towards larger outsourcing projects in the public and private sectors © Business Monitor International Ltd Page 21 Singapore Information Technology Report Q4 2009 Market... and its repression of opposition voices © Business Monitor International Ltd Page 10 Singapore Information Technology Report Q4 2009 Singapore Economic SWOT Strengths Singapore' s monetary policymakers have gained credibility by guiding the exchange rate to offset inflationary pressures while ensuring stable growth Singapore' s current account surplus remains about 15% of GDP and its external finances... openness, investor confidence could be damaged and domestic growth hindered Singapore' s exporters will need constantly to adapt to competition from lowwage economies such as China and India © Business Monitor International Ltd Page 11 Singapore Information Technology Report Q4 2009 Singapore Business Environment SWOT Strengths Singapore is the least corrupt country in Asia, according to Transparency.. .Singapore Information Technology Report Q4 2009 Singapore Political SWOT Strengths Singapore enjoys a very stable political system, following the country's second change of leadership in 40 years, which saw Lee Hsien Loong - son of the nation's founding father Lee Kuan Yew - take over as prime minister in 2004 Official promises have been made to eradicate Singapore' s reputation... years, with companies such as Singapore Airlines Local companies are also following the trend, with Singapore Computer Systems (SCS) handing business continuity and disaster recovery solutions provider SPRING Singapore a three-year deal to outsource its infrastructure and applications © Business Monitor International Ltd Page 26 Singapore Information Technology Report Q4 2009 The IDA has said that it... become increasingly important The Singaporean government offered financial incentives to multinationals to create a hub for international banks and funds One attraction of Singapore was its superior infrastructure compared with elsewhere in the region © Business Monitor International Ltd Page 27 Singapore Information Technology Report Q4 2009 Industry Developments 2009 Government ICT Spending Public... of Singaporean households do not have access to any computer at home © Business Monitor International Ltd Page 30 Singapore Information Technology Report Q4 2009 Industry Forecast Singapore' s IT market is projected to continue to provide opportunities in H209 despite the difficult economic climate The total size of the domestic IT market is expected by BMI to increase from a projected US$5.0bn in 2009. .. sector benefits from close ties to regional economies, especially © Business Monitor International Ltd Page 22 Singapore Information Technology Report Q4 2009 India and China To secure its IT hub status, the Singaporean government, through the IDA, has been proactive in cultivating the island state's technology strengths The government was a major provider of opportunities for IT vendors in 2007, with a... powerful government-linked companies (GLCs) These will continue to impinge on the business environment Hardware Singapore spending on IT hardware is projected at around US$2.2bn in 2009 from around US$2.1bn in © Business Monitor International Ltd Page 23 Singapore Information Technology Report Q4 2009 2008, with a market deceleration evident as the global economic crisis impacts upon consumer and business... positive growth territory in 2009, despite an expected impact on IT spending from the global economic slowdown Across the region, demand from both © Business Monitor International Ltd Page 17 Singapore Information Technology Report Q4 2009 business and consumer segments weakened in H208, after robust sales in the first half of the year The difficult economic headwinds will persist in 2009, but strong fundamental . Publication date: October 2009 Singapore Information Technology Report Q4 2009 © Business Monitor International Ltd Page 2 Singapore Information Technology Report Q4 2009 © Business. look to reduce costs Singapore Information Technology Report Q4 2009 © Business Monitor International Ltd Page 10 Singapore Political SWOT Strengths Singapore enjoys a very. Singapore Information Technology Report Q4 2009 © Business Monitor International Ltd Page 11 Singapore Economic SWOT Strengths Singapore& apos;s monetary