Q1 2012 www.businessmonitor.com SINgaPore information technology Report INCLUDES BMI'S FORECASTS ISSN 1750-5143 Published by Business Monitor International Ltd. SINGAPORE INFORMATION TECHNOLOGY REPORT Q1 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI's Industry Report & Forecasts Series Published by: Business Monitor International Copy Deadline: January 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2012 Business Monitor International. All rights reserved. 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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 Q1 2012 © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 CONTENTS Executive Summary . SWOT Analysis . Singapore IT Sector SWOT Singapore Telecom’s SWOT Singapore Political SWOT . Singapore Economic SWOT . 10 Singapore Business Environment SWOT . 11 Business Environment Ratings 12 Regional IT Business Environment Ratings . 12 Asia IT Markets Overview 17 IT Penetration 17 IT Growth And Drivers 19 Sectors And Verticals . 21 Singapore Market Overview 24 Background 24 Hardware . 25 Software . 28 Services 30 Industry Developments 34 Industry Forecast . 36 2012 Outlook . 36 Market Drivers 37 Segments 38 Services 38 Table: Singapore's IT Sector – Historical Data & Forecasts (US$mn Unless Otherwise Stated) 39 Industry Forecast Internet . 40 Table: Internet – Historical Data & Forecasts, 2009-2016 . 40 Competitive Landscape . 42 PC Market . 42 Tablets . 42 IT Services . 43 Operating Systems . 44 Macroeconomic Forecast 48 Table: Singapore – Economic Activity . 50 Company Profiles . 51 IBM Singapore . 51 Hewlett-Packard Singapore . 53 Chartered Semiconductors . 55 Singapore Computer Systems . 56 © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 Country Snapshot: Singapore Demographic Data . 57 Section 1: Population . 57 Table: Demographic Indicators, 2005-2030 57 Table: Rural/Urban Breakdown, 2000-2030 . 58 Section 2: Education And Healthcare 58 Table: Education, 2000-2004 58 Table: Vital Statistics, 2005-2030 58 Section 3: Labour Market And Spending Power 59 Table: Employment Indicators, 2001-2006 59 Table: Consumer Expenditure, 2000-2012 (US$) 59 BMI Methodology . 60 How We Generate Our Industry Forecasts 60 Transport Industry . 60 Sources . 61 © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 Executive Summary Market Overview Singapore's IT market is projected to record 6% growth in 2012, with slower growth compared with 2011. BMI expects the total size of the domestic IT market to increase from US$6.4bn in 2012 to US$9.6bn in 2016, with drivers including a new government ICT masterplan and cloud computing deployments fuelled by Singapore's Next Generation Nationwide Broadband Network roll-out. In 2012, a slowing economy is expected to mean moderate growth in IT spending. PC sales stagnated in annualised terms in H111 due to price-cutting. While the sustainability of the global economic recovery is less certain over the next two years, cloud computing and government spending will help to sustain Singapore's IT market in the long term. With the Intelligent Nation 2015 (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 Healthcare IT is a major focus for IT vendors in the Singaporean market. Singapore's Ministry of Health is overseeing the creation of a National Health Electronic Register (NHER), which aims to have all healthcare institutions, public and private, linked to the same information system. The NHER is a key component of the government's healthcare plan. An initial launch for the new system was expected in April 2011, after the first phase of the project was launched in November 2010. In 2011, the Singaporean government continued to implement its eGovernment Masterplan, which has an emphasis on participation, through the utilisation of social networking tools and greater sharing of data. The greater use of data analytics is likely to be one aspect of this programme. The government is also designing a new ICT infrastructure for government, which uses cloud computing and energy efficient technologies. Company News Cloud computing is on the rise in Singapore, boosted by the city-state's excellent telecoms infrastructure. In 2011, SingTel is expected to roll out a wider range of cloud computing products aimed at small and medium-sized enterprises (SMEs), including solutions for human resources and logistics management. The company has forecast a cloud services CAGR of around 70% over the next three years. In May 2011 SingTel, in partnership with Canon, launched a cloud-based printing service. © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 During H111 major players British Telecom Global Services (BTGS) and Tata Communications launched cloud services in the city. British Telecom's Next Generation Contact Centre (NGCC) is a portfolio of cloud-based services for call centres. Meanwhile, Indian giant Tata Communications has made Singapore a regional hub for its cloud services, InstaCompute. Meanwhile, Microsoft was promoting the Office 365 module of its BPOS (Business Productivity Online Suite) which was recently launched in Singapore. Among early adopters of the online software in Singapore was Kah Motor, the Singapore and Malaysia distributor for Honda cars. Microsoft believes that the cloud offering will not cannibalise its existing software business. Computer Sales Singaporean spending on IT hardware is projected at US$2.8bn in 2012 with mid-single-digit growth continuing from 2011. In H111, vendors reported stagnant growth compared with the same period of 2010. One factor behind the flatlining was inventory clearing, with retailers cutting prices to clear stock, but there were also base effects, compared with strong growth in H110. According to data 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 the massive growth in broadband penetration expected in future, 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 US$936mn in 2012, up from US$865mn in 2011. Software accounted for about 14% of the domestic IT market in 2011. As the market focal point evolves from hardware to services and solutions, the share of IT spending accounted for by software should rise to nearly 17% by 2016, with enterprises seeking greater leverage from their investments. Over the forecast period, enterprise resource planning (ERP), customer relationship management (CRM) and other e-business applications will find increasing popularity with the SME market as companies look to enhance productivity through the automation of essential functions. Given the focus of many businesses on controlling costs, the pay-on-demand software-as-a-service (SaaS) model has grown in popularity and spread beyond the initial core application area of CRM. IT Services In 2012, the IT services sector is projected to be worth US$2.6bn. IT services' CAGR is expected to be 12% over 2012-2016. One significant demand driver will be organisations looking for help to utilise © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 efficiencies from cloud computing, with evidence that demand for cloud computing was not restricted to large organisations but has spread to the Singaporean SME sector. There should be opportunities in key IT spending verticals such as telecoms, government, healthcare and logistics. Regulatory compliance will continue to require spending by banks and investment by foreign banks is spurring new technology investments by local players. Expanding technology adoption in the logistics industry and public transport will be a source of IT services projects. E-Readiness The National Broadband Network (NBN) is at the core of the government's iN2015 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 said that within two years, 60% of homes and offices should have access to the network. The second phase of the project will have an 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. Key Issues For Investors ƒ Further government-enforced reductions in labour costs and mandatory corporate contributions to pensions. ƒ Cuts to corporate and income taxes if the government sticks to its budgetary commitment to lower business costs. ƒ Competitiveness is at risk of being eroded by cheap labour in China. © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 SWOT Analysis Singapore IT Sector SWOT Strengths Weaknesses Opportunities Threats ƒ Strong government support for ICT programmes. ƒ Well positioned to benefit from links with China. ƒ An IT-literate population. ƒ A strong financial sector. ƒ Singapore has a small and mature domestic market with relatively slow growth rates. ƒ Sensitive to volatility in the global economy. ƒ The iN2015 programme will have many direct and indirect benefits for the IT market. ƒ Major projects in areas such as healthcare and transport. ƒ 'Green' IT as companies look to make power savings. ƒ The biggest threat is a prolonged slowdown in the US economy and/or China's economic growth, affecting Singapore's economic activity. Singapore Telecom’s SWOT Strengths Weaknesses Opportunities Threats ƒ Singapore has a mature mobile sector. ƒ Competition in the market, chiefly between SingTel, StarHub and M1. ƒ The launch of high-speed downlink packet access (HSDPA) services by the three major operators should drive take-up of 3G. ƒ Limited scope for growth in the 2G mobile subscriber base. ƒ Strong increases in prepaid subscriber numbers could be the downfall for blended average revenue per user (ARPU). ƒ Mobile data use is likely to increase significantly to 25% or more of ARPU. ƒ An increasing tendency for consumers to annually replace their handsets will benefit vendors. ƒ The impressive take-up of 3G gives good growth indications. ƒ Impending mobile saturation makes Singapore a less attractive market for multinational vendors that are more interested in the potential of China, India and Indonesia. ƒ An economic slowdown will further exaggerate operators' falling average revenue per user (ARPUs) as customers look to reduce costs. © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 Singapore Political SWOT Strengths Weaknesses Opportunities Threats ƒ 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 founder Lee Kuan Yew – take over as prime minister in 2004. ƒ Official promises have been made to eradicate Singapore's reputation as an overprotective nanny-state, with efforts to enhance freedom of expression. ƒ Singapore is not a properly functioning democracy. The ruling People's Action Party has won all but six seats in parliament and the opposition is restricted from campaigning through tight control over political debate and frequent use of libel laws. ƒ The government has yet to improve the situation for the less well off in Singapore and there is a rising wage gap between the top earners and the lowest paid. ƒ Lee is proving himself a capable leader, moving away from the shadow of his father by repeatedly calling for more openness. ƒ Singapore is leading its regional neighbours in signing free trade agreements. Increased regional integration is likely to give the country more influence in Asia. ƒ There are fears that Singapore's foreign policy alignment with the US will cause the city-state to become a target for terror attacks launched by Muslim extremists. ƒ The last election showed that segments of the electorate are becoming disenchanted with the People's Action Party and its repression of opposition voices. © Business Monitor International Ltd Page Singapore Information Technology Report Q1 2012 said by IBM to reflect the increase in demand for cloud solutions and services by its clients in the region. The first offering from the facility will be for IBM's IaaS cloud portfolio. IBM also plans to roll out a range of software from IBM and third-party companies, available in a variety of payment models for medium and large enterprises. Indian IT services company Infosys is building a new centre near Singapore Airport. Singapore is viewed by the company as a nodal point for the expansion of its business in Asia. Infosys' Singapore centre can seat up to 450 people and the company expects to increase this to 1,000 by the end of 2012. Another Indian IT company, Wipro announced in December 2010 that it planned to offer a range of cloud computing services to clients in South East Asia, using Singapore as a hub. The company said that Singapore's banking and financial services sector, an important client sector, was a key factor behind the decision. Wipro will also target telecoms, government, healthcare and utilities sectors as it aims for 100% growth in the region over the next five years. Tata Communications emulated Wipro by announcing that it was opening another enterprise-class data centre for providing outsourced IT services for its customers in the Asia Pacific region. The company said it was spending US$180mn to provide data centre infrastructure and managed services in the region between 2009 and 2011. The projected rapid growth of the cloud computing market in Singapore has fuelled significant investment in data centres and other infrastructure. In June 2010, Nasdaq-listed data centre firm Equinix announced that it had invested US$135mn in two Singaporean data centres. In the same month, networking firm Cisco and IT company Ingram Micro announced that they were jointly launching a Cisco Centre for Unified Computing in Singapore to provide Ingram Micro's customers and channel partners with a datacentre platform to accelerate the delivery of new services. © Business Monitor International Ltd Page 47 Singapore Information Technology Report Q1 2012 Macroeconomic Forecast Technical Recession Avoided, But Headwinds To Persist BMI View: Singapore's Q311 real GDP growth printed above consensus estimates at 5.9% year-on-year, an improvement from Q211's weak 0.9% figure. However, in line with our view, the economy continues to cool from its record 14.5% growth in 2010, and we now see full-year growth at a rate of 5.0% for 2011 before the economy slows further to 3.8% in 2012. Buoyed by strong growth from the volatile biomedical manufacturing sector, Singapore's economy managed to avoid a technical recession by posting 1.3% quarter-on-quarter, seasonally adjusted annualised growth in Q311. The numbers were a welcome improvement from Q211's -6.5% figure, and represented a 5.9% year-on-year (y-o-y) increase over Q310. Overall manufacturing rose 13.2% y-o-y as a result of a 145.8% y-o-y surge in biomedical production, improving upon a decline of 5.8% y-o-y in Q211. However, Singapore manufacturing data are susceptible to large swings from quarter to quarter based on activity in the pharmaceutical sector, as big firms such as GlaxoKlineSmith will often shut down factories when preparing to switch production from one product to another. Electronics Lead Larger Story Of Export Weakness Tellingly, excluding biomedical production, the manufacturing sector actually contracted 10.5% in August y-o-y. The slowdown is mirrored by the purchasing managers' index (PMI), which has printed below 50 for three consecutive months. As a result, we view the quarterly boost in manufacturing as transitory and maintain our expectations for the industry to contribute to the slowing trend for the overall economy, growing an average of 4.75% through 2011 after jumping an astounding 29.7% in 2010. We retain our forecast for 5.3% growth for the sector in 2012 with downside risks in the event that external demand weakens further. Particular weakness is seen in the electronics sector, where exports fell 14.0% in September from a year earlier as a result of flagging demand for disk drives and ICs. Further supporting this assertion is the country's electronics PMI, which arrived at a very weak 47.2 in September. Given the dour state of the global economy, with a particular emphasis on poor demand from the US (whose imports from Singapore declined 35.5% in September from a year earlier), we expect further headwinds for both electronics exports, and exports as a whole. We have thus revised down our 2011 and 2012 forecasts for export growth in the city-state from 6.0% to 5.7%, and 4.7% to 4.5% respectively. This will create a further drag on the economy, especially as exports represent 208.5% of Singapore's nominal GDP. Domestic Economy Resilient, But Won't Escape Unscathed While we continue to see domestic demand outpacing external demand as Singapore's domestic economy appears to be finding its way to a soft landing following blowout growth in 2010, private consumption © Business Monitor International Ltd Page 48 Singapore Information Technology Report Q1 2012 may only play a middling role. Positively, all indicators point to sustained health for Singapore's labour market. A recent report published by the country's Ministry of Manpower found that there were 116 job openings for every 100 applicants, and average weekly paid hours worked per employee remain at the pre-crisis level of 46.2, indicating a taut labour market in which businesses should continue to recruit. Still, while the domestic economy will find strength in Singapore's job market, consumption is typically hit hard as exports fall. Whereas the vigorous labour market will provide some support for the domestic economy, private consumption should still fall. While we not expect the metric to fall as sharply as it did in 2009, we see private consumption in the city-state, which accounts for 37.2% of the total economy, growing at a revised 4.0% in 2012, down from our previous forecast of 5.0%. We also see Singapore's real estate boom entering its final stages. Private home prices, a bellwether for the larger market as more than 80% of the Singapore's housing is considered public and is limited to Singaporeans or Permanent Residents, rose 1.3% in Q311 from Q211, indicating that while prices are still rising, the pace has slowed significantly. As we wrote recently (see our online service, September 27, 'CPI Peak Is Nigh'), we expect the housing market to lose steam moving into mid-2012, especially as demand from foreigners, who are the marginal buyers, wanes against the backdrop of the slowdown in China and the developed world. MAS Policy Shifts Towards Growth Support Amid slowing growth and poor export performance, the Monetary Authority of Singapore (MAS) eased policy for the first time in two years at its October 14 meeting. The MAS, which relies on the management of the Singapore dollar as its sole monetary policy tool, decided to allow Singapore dollar appreciation to continue on a slower path by reducing the slope of appreciation while keeping the trading band and centre unchanged. However, the currency actually jumped from SGD1.2781/US$ to trade above the SGD1.2700/US$ level following the news, indicating that markets had priced in a more dovish shift from the MAS. Likewise, we not expect the MAS's slight tweak to markedly support growth, although its shift towards a more dovish stance could portend more easing in the future, especially if exports continue to struggle. Property Bubble, External Conditions Create Moderate Downside Risks Downside risks to our forecast for 2012 could stem from a more acute deterioration of the external macroeconomic environment. Singapore's huge trade and investment exposure to the US, EU, and China makes it one of the most vulnerable economies in the region to a slowdown in the world's three largest economies. In particular, should the EU and US enter a renewed recession, languidness in Singapore's export sector could prove an even larger drag on headline GDP growth. A hard landing in China, Singapore's largest national export market, could also seriously inhibit the city-state's growth trajectory in 2012. © Business Monitor International Ltd Page 49 Singapore Information Technology Report Q1 2012 An acute 'bursting' of what we view to be a bubble in Singapore's real estate market could also effect downside risk for the overall economy. In particular, we view this as the key risk to the strong Singapore consumer story, as a sharp drop in real estate prices would coincide with a rapid fall in loan and credit growth, potentially derailing robust personal consumption. Table: Singapore – Economic Activity 2011 2012f 2013f 2014f 2015f 2016f 338.4 358.8 380.0 409.4 437.3 464.8 268.5 291.7 311.5 359.1 397.6 434.4 5.0 3.8 4.1 4.1 4.4 4.2 51,764 55,496 58,760 67,289 73,962 80,166 5.2 5.3 5.3 5.3 5.4 5.4 Industrial production 1,3 index, % y-o-y, ave 4.8 5.3 6.1 6.0 5.8 5.7 Unemployment, % of 2,5 labour force, eop 2.2 2.5 2.5 2.5 2.5 2.5 Nominal GDP, SGDbn Nominal GDP, US$bn 3 Real GDP growth, % change y-o-y GDP per capita, US$ Population, mn f = BMI forecast. Manufacturing data used; Seasonally adjusted figures used. Source: Statistics Singapore/IMF/BMI. World Bank/BMI calculation/BMI; Ministry of Manpower/BMI. © Business Monitor International Ltd Page 50 Singapore Information Technology Report Q1 2012 Company Profiles IBM Singapore Services Manufacturer, distributor and provider of advanced IT solutions including hardware, software, peripherals and data processing equipment. Recent Developments 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. IBM is promoting solutions for SMEs in Singapore. In May 2009, 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. IBM was part of the One Team consortium that was not 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. According 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 with the LTA to work on green IT savings that will enable the latter to make savings on energy use. Future Plans IBM has rolled out its green IT programme in Asia Pacific, including Singapore. It has committed US$1bn globally to the programme in order to deliver technologies that help clients to increase energy-efficiency levels in their data centres. As elsewhere, IBM has been extending its 'on demand' concept, making available the managed services that it already promotes to larger firms and to SMEs. Revenue In Q110, IBM reported a 5% year-on-year rise in income to US$22.9bn. In the Asia-Pacific region, which includes Singapore, revenue hit US$5.3bn. 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 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. Presence Singapore is one of IBM's two global procurement centres and is crucial to the company's global manufacturing operations. It currently has around 100 local employees. © Business Monitor International Ltd Page 51 Singapore Information Technology Report Q1 2012 In a sign of the strategic significance it places on Singapore as a regional hub, IBM has made Singapore the worldwide manufacturing facility for its newest mid-range disk storage products, as well as the location for a new warranty repair centre for its Linear Tape Open drives, serving the markets of Europe, the Middle East, Africa and the Asia Pacific. Sectors Along with some other vendors, IBM has enjoyed particularly strong demand from the electronics, financial services and healthcare sectors. IBM is also collaborating with the government in the e-business infrastructure, e-government, financial services, telecoms and education segments. © Business Monitor International Ltd Page 52 Singapore Information Technology Report Q1 2012 Hewlett-Packard Singapore Services Technology services, consulting and integration. Recent Developments In August 2009 HP announced that it had teamed up with Singapore's Institute of Technical Education to launch a new centre to help SMEs with business continuity planning. HP is also working with government IT authority the IDA on a continuing cloud research initiative and has collaborated with SCS to develop a joint cloud offering. 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 enterprises and public sector agencies. An SCS datacentre will power the grid. HP has launched a partnership with local IT services vendor Singapore Computer Systems (SCS). The partnership, called Alatum, has around 70 customers to date according to HP. HP Singapore is promoting a strategy of helping companies to reduce data centre power consumption by as much as 50% through smart cooling technologies. HP also promotes other technologies such as consolidation and virtualisation, which can help with green aspects of the data centre. Future Plans HP plans to expand its enterprise business in the Singapore market. In 2009 the company announced its intention to try and capture customers from Sun Microsystems, following the latter's acquisition by software leader Oracle. HP will also target the local healthcare sector as a source of opportunity. 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. Revenue For the quarter ending January 31 2010, HP reported revenue of US$5.4bn for the Asia Pacific region, which includes Singapore. This was growth of 26% on the same period of 2009, almost triple that of other regions. HP Asia Pacific reported 40% growth in its fiscal year ending October 31 2009. HP's Asia Pacific revenue had declined by 1% y-o-y in Q409 to US$5.4bn. Presence HP employs more than 32,000 people across Asia Pacific and Japan, including 6,000 in Singapore. The country hosts HP's global research and development 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. © Business Monitor International Ltd Page 53 Singapore Information Technology Report Q1 2012 Sectors HP's disaster recovery centre based in Singapore offers business continuity and disaster recovery services to businesses across the Asia Pacific. HP has 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 product line. © Business Monitor International Ltd Page 54 Singapore Information Technology Report Q1 2012 Chartered Semiconductors Services One of the world's top dedicated semiconductor foundries, Chartered Semiconductors offers leading-edge technologies down to 90 nanometres (nm). The company makes chips for Microsoft's Xbox gaming console as well as computer processors for advanced micro devices (AMDs). Recent Developments Chartered reported declining orders from August 2008 due to the negative macroeconomic environment and was expected to report a sequential decline in revenues of around 21% in Q408. Chartered had previously warned that it expected a loss in Q308, due mainly to economic environment factors including high oil prices and rising material costs. Chartered revealed that three customers accounted for more than 10% of revenues, excluding Chartered's share of significant market power revenues, in 2006. In order of revenue significance, these were Broadcom, IBM and AMD. Chartered's top five customers accounted for 60% of total revenues in 2006 compared with 56% the previous year. The company integrated with Globalfoundries in 2010 to create one of the largest chipmakers in the world. Future Plans In 2007 the company accelerated the development and qualification of a 45nm 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 a month. Revenue Chartered reported revenue of US$463.7mn in Q308, up by 30.7% y-o-y from US$354.8mn. Gross profit was US$65.6mn. Presence Chartered is the world's third largest producer of made-to-order chips. Sectors Revenue growth in 2008 was driven primarily by Chartered's strength in the communications sector and, to a lesser extent, the consumer sector. This offset weaknesses in the computer sector. A major revenue driver in 2007 was 90nm associated revenue, which more than doubled and contributed 27% of the company's total business base revenue for the year. Revenue from advanced technologies (0.13 micron and below, including those from 90nm) grew by 84% and accounted for 53% of total revenue. © Business Monitor International Ltd Page 55 Singapore Information Technology Report Q1 2012 Singapore Computer Systems Services Formerly known as ST Computer Systems and Services, Singapore Computer Systems (SCS) provides services in IT consulting, systems integration, software development, networking and e-commerce. Recent Developments Singapore continued to be the country from which SCS generated most of its revenue and profit in 2008, according to the company's financial statements. SCS came under the control of Singapore's largest telecoms company, SingTel, which acquired a 60% stake in the company for SGD140mn through its subsidiary Computer Systems Limited. The acquisition supports SingTel's strategy which will see it become a significant solutions provider in the Asian region. SingTel will now hope to extend its reach to countries where SCS has operations including China, Indonesia and the Philippines. The company reported a record order book of US$718mn at the end of Q108. SCS received a big boost after winning 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. SCS completed the latest stage of the iPharm project implementation for Singapore's National Healthcare Group. The major project aims to create a centralised pharmacy system across health institutions with the integration of iPharm and the Electronic Medical Records. After taking over as head of the company the 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 itself 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. Revenue In the first nine months of FY08, the SCS Group achieved a net profit of SGD12.9mn on revenue of SGD264mn. This compared with a net profit of SGD7.0mn and revenue of SGD251.5mn for the same period in 2007. Presence SCS is a member of the Singapore Technologies Group, a multinational conglomerate, with headquarters in Singapore. Sectors In Q308, the main contributor to the company's 17.5% y-o-y growth was its infrastructure division. SCS' business solutions and its infrastructure divisions reported increased y-o-y revenue in Q108. About 70% of SCS' revenue come from the government sector. SCS will focus on four key business domains: healthcare, e-government, financial industry as well as manufacturing and logistics. In addition to its strategy to focus on verticals, the group will repackage its intellectual properties as products and services. © Business Monitor International Ltd Page 56 Singapore Information Technology Report Q1 2012 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 2010 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 57 Singapore Information Technology Report Q1 2012 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 4,965 5,202 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 2010 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 58 Singapore Information Technology Report Q1 2012 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 2007 2008 2009 2010 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 f = BMI forecast. na = not available. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 59 Singapore Information Technology Report Q1 2012 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, 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 of all 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. Transport Industry There are a number of principal criteria that drive our forecasts for each transport variable: GDP Growth As transport activity is heavily influenced by real GDP growth, this factor is examined to ascertain its relationship with overall trade volumes. Projected GDP growth is calculated using BMI’s own macroeconomic and demographic forecasts. © Business Monitor International Ltd Page 60 Singapore Information Technology Report Q1 2012 Real Trade Volumes The sum of imports and exports plays a particularly important role in developing countries with a small domestic industrial sector. In particular, the focus is on goods, as services not employ transport. The volumes are forecast based on the following criteria: ƒ Trends manifested through historical data; ƒ The impact of future step changes to the economy (such as future membership of the EU or some other regional body). Port Traffic Port traffic levels act as a ‘second opinion’ on trade volumes. However, this check needs to be used with caution as trade values and volumes not always move over time in the same way. Market Share The market share of each mode (road, rail, inland waterway, coastal shipping) for future years is based upon: ƒ Trends in historical modal split data; ƒ Evidence of government policy favouring one or more modes over others; ƒ Government and or private sector investment plans in specific modes. Sources Sources used in transport reports include local transport ministries, officially released company results and figures, established think tanks and institutes and donor agencies such as the World Bank and the Asian Development Bank. © Business Monitor International Ltd Page 61 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... will continue to impinge on the business environment Hardware Singaporean spending on IT hardware is projected at US$2.8bn in 2012 with mid-single-digit growth continuing from 2011 In Q11 1, vendors reported stagnant growth compared with the same period of © Business Monitor International Ltd Page 25 Singapore Information Technology Report Q1 2012 2010, although sales were up on the previous quarter One... openness, investor confidence could be damaged and domestic growth hindered Singapore' s exporters will need constantly to adapt to competition from low-wage economies such as China and India © Business Monitor International Ltd Page 10 Singapore Information Technology Report Q1 2012 Singapore Business Environment SWOT Strengths Singapore ranks fifth place in Transparency International's 2011 Corruption... sector is closely linked to exports Singapore' s IT sector benefits from close ties to regional economies, especially 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 © Business Monitor International Ltd Page 24 Singapore Information Technology Report Q1 2012 The state has been a major provider.. .Singapore Information Technology Report Q1 2012 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 20% of GDP and its external finances... indicates continuing that Singaporean companies have continuing reservations about the security of cloud computing solutions In a 2011 survey by Springboard Research, about 33% of Singaporean companies surveyed cited security, data privacy and loss of control as their main concerns © Business Monitor International Ltd Page 29 Singapore Information Technology Report Q1 2012 The rollout of Singapore' s NBN has... contracts such as that awarded by Idea Cellular to IBM Singapore and Hong Kong have both seen a trend towards larger outsourcing projects in the public and private sectors Market Structure (% Of Total IT Market) 2011e 2015f e/f = estimate/forecast Source: BMI © Business Monitor International Ltd Page 23 Singapore Information Technology Report Q1 2012 Singapore Market Overview Government Authority Government... Page 13 Singapore Information Technology Report Q1 2012 Meanwhile, South Korea's government is encouraging the utilisation of cloud computing by small businesses New cloud computing offerings and increased competition in this segment are expected to fuel growing demand for this technology IT outsourcing is also expected to show a strong demand trajectory Malaysia remains in fifth position in our Q11 2... 31 Singapore Information Technology Report Q1 2012 on in-house IT capabilities A massive SGD1.3bn outsourcing project is being deployed across government, which was extended to 75 government agencies in 2010 Singapore has enjoyed new popularity in recent years as a BPO location for financial sector organisations There have been large outsourcing contracts in recent years from companies such as Singapore. .. 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 33 Singapore Information Technology Report Q1 2012 Industry Developments eGovernment Masterplan In June 2010, the Singapore government launched the eGovernment Masterplan, designed to connect the government... internet protocol television (IPTV) will also feed demand for PCs and notebooks with entertainment features © Business Monitor International Ltd Page 27 Singapore Information Technology Report Q1 2012 Overall hardware CAGR is forecast at 11% over 2012- 2016 A further area of potential growth is the SME sector, with growth in spending by SMEs predicted across each of the next few years As elsewhere in . Copy Deadline: January 2012 Singapore Information Technology Report Q1 2012 © Business Monitor International Ltd Page 2 Singapore Information Technology Report Q1 2012 © Business. look to reduce costs. Singapore Information Technology Report Q1 2012 © Business Monitor International Ltd Page 9 Singapore Political SWOT Strengths  Singapore enjoys a very. of opposition voices. Singapore Information Technology Report Q1 2012 © Business Monitor International Ltd Page 10 Singapore Economic SWOT Strengths  Singapore& apos;s monetary