One-third of global R&D spend happens in India: Zinnov

21st June 2012
One-third of global R&D spend happens in India: Zinnov

Bangalore, June 21, 2012: After witnessing a decline in the Global R&D spending in 2010, the 2011 has seen an increase in spending and the potential for India to be among the top nations, finds a study by analysts and market advisors, Zinnov Consulting. 
Global Net Sales and Global R&D spending have grown at a rate of 13.55 percent and 8.2 percent respectively. The contribution of R&D spend is divided across North America, European Union and AsiaPacific at 36 percent, 34 percent and 7 percent respectively.
A key contributor to the APAC region is India which has the presence of one-third of all Global 1000 R&D spenders. One of the key facts highlighted by the report is that there is a total installed talent pool of 220,000 in Multinational subsidiaries in India and these MNCs have spent $ 7-7.5 billion on the headcount in India in the fiscal year 2011 alone. The study also found that the opportunity areas for India to attract R&D investment span over 13 sectors with Software being the most invested in sector.
Says Sidhant Rastogi, Director - Globalization Advisory, Zinnov:“The sentiment on the role of R&D in driving the future continues to remain positive across geographies, supported by the significant increase in R&D spending in FY2011. Global R&D investments have grown by 8.2 percent as compared to the previous year FY2010. This growth has been primarily driven by organizations in the Semiconductor, Industrial & Consumer Hardware and Electrical & Electronic sectors. India definitely has the right potential to become a key R&D hub, not only in Software for which it has gained recognition globally, but also in other verticals such as Aerospace, Automotive and Defense”.
Of the Top 1,000 R&D spenders globally, the Industrial sector led with 14.6 percent of the Total R&D spend. Software/Internet and Automotive constituted 9.4 percent each, while Semiconductor and Electrical/Electronic Equipment followed by contributing 8.6 percent and 8.3 percent of R&D spend, respectively.
Software/Internet: North American companies are the largest contributors to Software/Internet R&D making 77 percent of investments, with EU at a distant second with 18 percent. Though most Software/Internet R&D centers in India are mature, the need for diversification may increase competition from alternate locations such as China.
Semiconductor: North American companies are leaders in Semiconductor investment with 67 percent share in R&D. Though Indian R&D centers are mature with companies having 40 – 60 percent of their Global R&D talent pool in the country; competition from other APAC locations is rapidly rising.
Electrical / Electronic equipment and Computer Hardware: Equipment manufacturers are concentrated in the Asia Pacific region with Japan being the leader – together contributing 72 percent of R&D investment globally. Indian R&D centers operate at a low intensity, with majority of companies allocating less than 20 per cent of their talent pool in India.
Telecom and Networking: North America and Europe dominate this sector, contributing 37 percent and 43 percent of investments respectively, while APAC and Japan companies invest 19 percent in total. India has made great progress, with R&D centers becoming global hubs in less than 15 years since inception.
Aerospace and Defence: The Zinnov study observed that North America with 45 percent and the EU with 52 percent of investment also dominate the Aerospace and Defense vertical. There is significant potential for India to grow as an aerospace and defense R&D hub with many companies setting up centers over the past few years and many more expected to enter this space soon enough.
Automotive: Japanese and European corporations account for 76 percent of R&D spend in the Automotive vertical, with North America contributing 20 percent to the Global share. In India, this vertical is positioned for growth with several corporations planning an increase in headcount and ramping up capacity within the country.
‘Global R&D Benchmarking Study: FY2011':