Zinnov has been closely following global trends for the past 8+ years. Periodically they undertake the surveys to understand the key drivers for globalization. Check - http://zinnov.com

1. KEY DRIVERS OF GLOBALIZATION
Semiconductorindustryis a pioneer in globalization. Sinceits inception in 1960s,
this industry had a global outlook for operations and markets. Though the
manufacturingwasthe initial activity in this industryto be globalized, in the past
few years, we have seen an increased activity in their R&D and engineering
activities globalization.
Large and small companies have global operations to grow in this highly
competitive industry. We are Zinnov have been closely following these trends
for the past 8+ years. Periodically we undertake the surveys to understand the
key drivers for globalization. In late 2011, we undertook an exercise to
understand the globalization drivers and compared the results with a similar
survey from 2009.
We observed that though the importance of cost for global operations has
slipped by few points, it is still the domain driver for globalization. 60% of the
surveyed companies mentioned it to be the most important driver for
globalization, especially for offshoring to an emerging country. All 100% of the
surveyed companies rated cost as a key driver, if not most important one, for
their global operations.
Access to talent has been rated as the 2nd most important driver for these
companies. The existing talent crunch in the developed countries, competition
across technology segment for this high end talent is also driving these
companies to scout for locations with availability of talent. We have observed
that the importance of this driver has remained statistically the sameacross the
past 2 years.
Access to market has been stated as a critical factor in determining the optimal
location in the merging countries. This has gained more prominence in the
industry as most companies have seen their international markets grow at a
significantly higher rate compared to their domestic markets.
Though itis still considernice to have, Innovationfromgloballocationsis gaining
traction as companies evaluate their global operations. Some of the companies
have mentioned that they will fail as a company if their resources in these
emerging locations do not participate in the innovation activities. For some
companieswith 30-70%oftheirtalent outsidetheir HQcountries,this is a critical

2. factor.
Though the global sourcing of R&D and engineering activities began in the
1990s, it gained full steam after 2000. Our analysis of the top 10 players in the
semiconductor segment shows that these companies have setup large number
of centers in the newemerging cities suchas Bangalore,Beijing, Shanghai, Taipei
etc.
Further evaluation of the data across the cities shows that, Bangalore, India has
been the biggest beneficiary of this trend. Bangalore, which had only one of this
top 10 semiconductor companies till 1995 has become host to 90% of the top
10 companies. Bangalore center for these companies have between few
hundreds to few thousands of employees working in their engineering and R&D
activities.
Major cities in China, South Korea and Taiwan have also seen their share of
success in attracting and growing the engineering centers for the leading
companies in this segment. Availability of high end talent has also prompted
these companies to set up new operations in high costlocations such as United
Kingdom, France, Israel and Singapore.
Outside the top 10 companies, we have observed similar trends in the
semiconductor industry. Many small and mid-size companies have followed
these industry titans in chasing the talent or in optimizing their cost of
operations.
We believe that the globalization has just started in many of these companies
and the trend to growinto global locations for talent, market, costor innovation
will be the norm rather than an short term trend.
For more information on this report or other global talent, cost and peer group
benchmarking details, visit www.zinnov.com.