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Fórum Brasil-Coreia - Ricardo Riveira


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Apresentação do Dr. Ricardo Rivera, especialista em Tecnologias de Informação e Comunicação do BNDES no 1º fórum Brasil-Coreia.

Unisinos, outubro de 2011

Published in: Technology, Business

Fórum Brasil-Coreia - Ricardo Riveira

  1. 2. Brazil : the BRIC for Kingston invest in Painel: Estratégias de Desenvolvimento para a Cadeia de Semicondutores no Brasil (Panel: Strategies of Development for the Chain of Semiconductors in Brazil) Flávia Egypto/APEX Henrique Miguel/MCTI José Ricardo Sales/MDIC Ricardo Martins/ABDI Ricardo Rivera/BNDES São Leopoldo, 19 de outubro de 2011
  2. 3. Agenda 1. Brazilian IC Market 4. Taxes Incentives 5. Financial Support 6. Investment Support 2. Brazilian IC Envoirenment Agenda 3. R,D&I Incentives
  3. 4. Brazil soars to higher ground <ul><li>A country with 190 million inhabitants is forecast to be the 5th largest economy until 2015 </li></ul><ul><li>Stable democracy, strong institutions and sound legal basis to protect investment </li></ul><ul><li>Strong and healthy local financial industry </li></ul><ul><li>Fast growing and huge open economy (2010 GDP Growth = 7.5%) with no macroeconomic imbalances: inflation under control and high level of foreign reserves </li></ul><ul><li>Great investment perspectives: US$ 890 Billion until 2014 – Industry, Infrastructure and Housing (source: BNDES) </li></ul><ul><li>No limit to capital remittance: more than US$ 110 bn during the world crisis (’07-’10) </li></ul>Source: Ipeadata and IBGE. Elaborated by APE/BNDES (*) Forecasts based on IIF GDP Growth Rates ( % ) Purchasing Power per Class Distribution (%) Source: Ministry of Finance
  4. 5. Increasing foreign interest in Brazil Source: UNCTAD - World Investment Prospect Survey (2011-13) * Frequency of response given by transnational executives Top priority host economies for FDI for the next 3 years* Selected R&D Centers in Brazil <ul><li>US$ 100 M to be invested w/ focus on O&G, Energy, Mining, Railways and Aviation </li></ul>New announcements <ul><li>US$ 250 M to be invested w/ focus on O&G, Olympic Games and World Cup Soccer </li></ul>
  5. 6. A high potential semiconductor and memory market… Information Technology Telecom Consumer electronics cce Transportation & Auto Parts Local Manufacturing and/or R&D Operations 4th largest market in Cell Phones - More than 210 million cellphones in the Brazilian market 4th largest market in Automotive 3rd largest market in Computers (behind US and China in 2011) 55 M households with TVs (12 M with cable TV) Market Size (world comparison) 3.6 M vehicles manufactured in 2010 (world #6) 11 M TV units manufactured in 2010 Non-exhaustive 60 M cell phones manufactured in 2010 (47 M sold) 14 M computers in 2010 Automation & Medical Equipment 2nd largest market in ATMs and 5th largest in Medical Equipments
  6. 7. … driven by a growing domestic electronics market: <ul><li>Brazilian Market (% world): </li></ul><ul><ul><li>Electronics: 4% </li></ul></ul><ul><ul><li>Semiconductor: 1.4% </li></ul></ul><ul><li>Semiconductors : penetration will increase more than 7% CAGR until 2014 </li></ul><ul><ul><li>PC penetration will jump from 30% to 66% in the next 3 years (140M PCs in 2014) </li></ul></ul><ul><ul><li>Government initiatives can leverage this growth even more (education, digital inclusion etc.) </li></ul></ul>Brazilian Electronics Market [B$] Integrated circuits US$ 3.9 Billion Diodes, Transistors, LEDs US$ 0.5 Billion Semiconductor products US$ 0.5 Billion Semiconductor Imports (2010) US$ 4.9 Billion DRAM memory US$ 0.78 Billion Flash memory* US$ 0.43 Billion Memory Imports (2010) US$ 1.2 Billion Total Semiconductor Market * US$ 10 Billion *estimated by the Ministry of S&T Source: Aliceweb/MDIC Total Semiconductor Market: Semiconductor + COB + Memory+ PCB
  7. 8. Smartphones and Tablets <ul><li>Smartphones accounts for 28% of the mobile market in 2011 </li></ul><ul><li>World Sales Forecast: from 27M units to 70M units in 2011 </li></ul><ul><li>Brazilian Market </li></ul><ul><ul><li>2010: only 100 K </li></ul></ul><ul><ul><li>2011 forecast (IDC): 400k to 500K </li></ul></ul>Source: Juniper Research e IMS Research * Forecast     Smartphones Tablets World Sales (in million units) Brazil wants to participate in both markets as a great manufacturer and exporter, not only as a consumer
  8. 9. Industrial Policy and Market response - Recent Timeline Project in Minas Gerais State: Foundry (US$ 500 M) ‘ 99 ‘ 05 ’ 09 ‘ 03 ’ 10 ‘ 07 ‘ 11 Government Efforts Market Response IC Brazil Program Launch Industrial Policy (PITCE ‘03-’07): IC became top priority PADIS: Specific law for IC Industrial Policy (PDP ‘08-’10): IC remains top priority Industrial Policy (PDP ‘11-’14): IC remains top priority SMART S.Paulo start of production in Brazil: M Memory Freescale start-up in Brazil Hana Micron JV with Teikon: BACK-END IC Brazil: 21 DHs - 500 designers CEITEC - R. G. Sul Foundry start of production SMART Start of production: BACK-END Gemalto : investment announcement : BACK-END
  9. 10. IC Manufacture and Design in Brazil <ul><li>SMART (DRAM and Flash Memories - back-end ) </li></ul><ul><li>AEGIS e SEMIKRON (discrete power devices) </li></ul><ul><li>HT Micron = Hana Micron & Teikon ( DRAM and Flash Memories ( back-end )) (*) </li></ul><ul><li>GEMALTO/SAGEM-ORGA and LC (Smart Card ( back-end )) </li></ul><ul><li>CROMATEK (LED ( back-end )) </li></ul><ul><li>TECNOMETAL Energia Solar ( solar cell and photovoltaics panels) (*) </li></ul><ul><li>CEITEC S.A. (Foundry and IC Design) </li></ul><ul><li>(*) implementation phase </li></ul>IC Manufacture <ul><li>24 IC Design Companies </li></ul><ul><li>Global IC DHs </li></ul><ul><ul><li>Freescale (American Company) </li></ul></ul><ul><ul><li>Perceptia (American Company) </li></ul></ul><ul><ul><li>STI Semiconductor Design Brasil (JV) </li></ul></ul><ul><li>Local DHs </li></ul><ul><ul><li>State Owned DHs: 17 </li></ul></ul><ul><ul><li>Private DHs: 4 </li></ul></ul><ul><ul><li>Independents DHs: 3 </li></ul></ul>IC Design
  10. 11. CEITEC – Wafer Fab and Design Center <ul><li>Building 1 - 9.600 m 2 </li></ul><ul><li>2.000 m2 Clean rooms: production, training and R&D - (800 m2 class100) ‏ </li></ul><ul><li>Building 2 - 5.100 m 2 </li></ul><ul><li>Design Center </li></ul><ul><li>Marketing </li></ul><ul><li>Process engineering </li></ul><ul><li>Technological incubator </li></ul><ul><li>Training Facilities </li></ul>1 2
  11. 12. IC Industry: Government structure and support Human Resources and R,D&I Infrastructure Ministry of S&T Law Incentives IT Law, Innovation Laws and IC & Display Law Financial Support Brazilian Development Bank (BNDES) Investment Support (APEX-BRASIL / ABDI) <ul><li>Taxes Exemptions and IP Protection </li></ul><ul><li>Equity, Financing and Grants </li></ul><ul><li>IC Brazil Program </li></ul>Industrial Policy A fast growing, resilient and business oriented economy with a huge electronics market <ul><li>Investment promotion and site location assistance </li></ul>Business Environment <ul><li>Microelectronics as a Strategic Area </li></ul>
  12. 13. Brazil Package of Incentives for R,D&I Taxes Incentives Funding and Grants Fellowships State & City Incentives IT Law Innovation Laws 10.973/04, 11.196/05, 11.774/08 IC & Displays Law (PADIS, 11.484/07) FINEP + + Federal Fellowships SIBRATEC BNDES IP Protection
  13. 14. Institucional Consolidation of the National S,T&I System INVESTMENT STRONG INTERACTION Universities Technology Institutes R&D Centers Technology Institutes R&D Centers IDEA START UP INVESTMENT IDEA START UP INVESTMENT IDEA START UP
  14. 15. IC Brazil Program: Training + R,D&I Infrastructure Design Houses <ul><li>IC Brazil launched the first 7 Brazilian IC DHs : infrastructure + EDA tools + fellowships </li></ul><ul><li>Designers Training Program </li></ul><ul><ul><li>Capacity of training 180 designers each year (around 400 already trained) </li></ul></ul><ul><ul><li>CNPq Scholarship: 1 year theoretical course + 1 year in company </li></ul></ul><ul><ul><li>Training centers: Porto Alegre and Campinas </li></ul></ul><ul><ul><li>Areas: Digital, Radio Frequency and Analogic Mixed Signal </li></ul></ul><ul><li>Training infrastructure (R&D Centers and Universities) </li></ul><ul><ul><ul><ul><li>Over 25 IC design groups </li></ul></ul></ul></ul><ul><ul><ul><ul><li>4 Silicon Device fabrication labs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>IC design tools program </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Scholarship program for M.Sc & PhD </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Brazil IP Program – fellowship for under-grad </li></ul></ul></ul></ul>
  15. 16. Brazilian Design Houses training process <ul><ul><li>Objective: Develop Business skills at the Brazilian Design Houses (DH) to allow its sustainable environment according to IC Brazil program. </li></ul></ul><ul><li>Target units – IC Brazil Design Houses </li></ul>Mentoring and Coaching program to Brazilian Design Houses Status <ul><li>1. Workshop – DHs </li></ul><ul><ul><li>Financing and incentives to DHs ecosystems </li></ul></ul><ul><ul><li>DHs business view – The Portugal experience </li></ul></ul>Accomplished 2 0 e 21/Set/2011 2. Entrepreneuring behavior – UNCTAD Training and Business Diagnosis based on FNQ scheduled for/ NOV/11 3. Brazilian demand for IC Design Study Scheduled for Fev - Jun/2012 4. Business Administration training – Based on FNQ metodology 5. Matchmaking with Brazilian companies 6. Establish DHs association 7. Training for Export (PEIEX) 8. Matchmaking for Venture Capital
  16. 17. Taxes Incentives – IT Law (Law 8.248/91) <ul><li>Main goal : To foster R&D activities in companies and through private and public institutions partnerships </li></ul><ul><ul><li>Benefited companies are required to invest at least 4% of their revenues in R&D activities¹ </li></ul></ul><ul><li>PPB (Basic Production Process): pre-requisite to benefit from IT Law taxes incentives: </li></ul><ul><ul><li>Defines, per product, production steps that must be realized in Brazil and/or % of components to be supplied by local production </li></ul></ul><ul><ul><li>Ministries (MCTI, MDIC) establishes and modifies the PPB; along with MF, approves projects; </li></ul></ul><ul><li>Tax Incentives : 80-100% reduction of IPI for local manufacturing with PPB </li></ul><ul><ul><li>IPI : a 10%, 12% or 15% value added tax </li></ul></ul>¹ Investments in R&D must be confirmed trough fulfillment of online form, containing annual information on research programs and technology and innovation achievements. PPBs creates local demand for local semiconductors production Tax Reduction (value added tax - IPI) % of local components % of local components Supplier Equipment/Good Manufacturer Equipment/Good Manufacturer Illustrative Example
  17. 18. PPB examples and possible reviews to foster local IC Industry <ul><li>Semicondutors, optoelectronics devices, TFT , PV cells and other devices </li></ul><ul><li>Standard memory modules, USB drive, SD memory cards, smart cards </li></ul><ul><li>Servers, Notebook, Netbook, Desktops, Tablets </li></ul><ul><li>Printers, cell phones, ATM, routers </li></ul><ul><li>Cell phones, Cameras, Videogames </li></ul><ul><li>SSD units </li></ul><ul><li>TVs, Set-top-box, GPS and other mobile devices </li></ul><ul><li>Printers, Modem e Routers </li></ul><ul><li>Smart Meters </li></ul><ul><li>Alarms and vehicle monitoring, ATMs </li></ul><ul><li>Medical Equipment </li></ul>Examples of PPBs (IT products) Not exhaustive Possible PPB Reviews To include minimum content of semiconductor acquired locally Brazilian Government is strongly committed with local electronic manufacturing and technology
  18. 19. PPB: Examples of minimum local IC supply PPB by product Compulsory Local Assembly Minimum Local IC Components Semicondutors, standard memory modules, TFT, PV cells etc. <ul><li>Memory module: 100% assembled locally </li></ul><ul><li>100% of IC must be packed and tested locally: PV cells, memory chips etc. </li></ul>USB Drive <ul><li>Memory module: 100% assembled locally </li></ul><ul><li>NAND Flash IC: 50% (2012) and 80% (2013) must be packaged and tested locally </li></ul>SD memory cards <ul><li>Memory module: 100% assembled locally </li></ul><ul><li>NAND Flash IC: 50% must be packaged and tested locally </li></ul>Desktops <ul><li>Desktop assembly: 100% assembled locally with 100% of memory module locally assembled </li></ul><ul><li>100% of memory IC must be packaged and tested in Brazil </li></ul>Mobile <ul><li>Computer assembly: 100% assembled locally with 40% of local RAM module and 50% of local NAND module </li></ul><ul><li>Memory ICs: 50% (RAM) and 40% (NAND) must be packaged and tested locally </li></ul>UCA Program (One-laptop-per-child / netbook) <ul><li>Netbook assembly: 100% assembled locally with 25% of local RAM module and 50% of local NAND module </li></ul><ul><li>Memory ICs: 35% (RAM) and 25% (NAND) must be packaged and tested locally </li></ul>Servers <ul><li>Server assembly: 80% of local RAM module and 100% of memory module locally assembled </li></ul><ul><li>80% Memory ICs must be packaged and tested locally </li></ul>Tablets <ul><li>Memory Components: 20% (2012) , 30% (2013) e 50% (2014) must be packaged and tested locally </li></ul>
  19. 20. Tax incentives for IC and Displays Companies in Brazil: PADIS (2007 Federal Law) <ul><li>Diffusion and physical-chemical process </li></ul><ul><li>Back end (test and packaging) </li></ul>Electronic semiconductor device companies that invest in R&D in Brazil in: Profits <ul><li>25% </li></ul><ul><li>Corporate Income Tax -> 15% </li></ul>Companies included in PADIS Up to March 2007 Today Value Added Imports <ul><li>Variable (avg. 10%) </li></ul>0% Taxes <ul><li>Development and design </li></ul>
  20. 21. IP Protection <ul><li>TRIPS-compliant IP Laws </li></ul><ul><ul><li>Industrial Property Law (Patents, trademarks, industrial designs, geographical indications and semiconductor designs), Copyright Law , Software Protection Law, New Variety of Plants Protection Law, Design of Semiconductors Protection Law </li></ul></ul><ul><li>INPI (Brazilian Industrial Property Institute) </li></ul><ul><ul><li>Government agency in charge of all assigned IPRs * </li></ul></ul><ul><ul><li>Adopts the main international trademark classification systems and examination standards </li></ul></ul><ul><ul><li>An International Search and Preliminary Exam Extensive use of adapted European Patent Office (EPO) and World Intellectual Property Organization (WIPO) Information Systems and Databases </li></ul></ul><ul><ul><li>Nature : High-quality examination-based assignment of rights, Pre-grant and pos-grant oppositions allowed, Administrative Revision procedures in place </li></ul></ul><ul><ul><li>International Cooperation in Trademark and Industrial Design Examination </li></ul></ul><ul><ul><li>Brazil is prepared to join the Madrid System (trademarks) and is in the process of evaluating membership in the Hague Union (industrial designs) </li></ul></ul><ul><li>Enforceability </li></ul><ul><ul><li>Autonomous judiciary system </li></ul></ul><ul><ul><li>Active policies repression to piracy – National Council to Combat Piracy and Crimes against Intellectual Property Rights </li></ul></ul><ul><ul><li>Active border control </li></ul></ul><ul><ul><li>* Except from new plant varieties (which are operated directly by the Agriculture Ministry) and author rights (by the Ministry of Culture) </li></ul></ul>
  21. 22. BNDES: main development agency in Latin America Source: BNDES IBRD = The International Bank for Reconstruction and Development (World Bank) (*) Unlike other institutions, 12-month fiscal years ends June 30th IDB = Inter-American Development Bank CAF = Corporación Andina de Fomento BNDES’ disbursements <ul><li>Main long-term financing provider, Exim Bank and dominant role as equity investor through BNDESPar </li></ul><ul><li>Key instrument for implementing industrial and infrastructure policies </li></ul><ul><li>Suitable profitability and good asset quality indicators : less than 0.2% in default rate since 2007 </li></ul>Global Crisis R$ billion US$ billion US$ billion BNDES (Dec/10) IBRD (Jun/10*) IDB (Dec/10) CAF (Dec/10) Total Assets 329.50 282.84 87.21 18.55 Loan Disbursements 96.32 28.85 10.34 7.70
  22. 23. BNDES: Financial Support for all kinds of IC Business Models Financing + Equity Fabless DH DF ATS Fabless IDM Fabless Customer Service Back End Front End Design Conception 4 1 2 3 5 Components Supply Chain - ICs OEM IDM IDM IDM IDM
  23. 24. BNDES: Financing + Equity for any company size Stocks and Debentures Private Equity Funds Venture Capital Funds Emerging Companies IPO Lines, Products and Programs Financing + Equity, Funds and Capitalization Machinery and equipment Exports Innovation Business Enterprise Projects Industrial Projects MSME Environmental Responsibility … Equity Best Conditions! Financing : Company R&D activities Grants (FUNTEC): R&D activities through local R&D Institute Capital Market Start-Ups Seed Capital Early Stage Mature Companies
  24. 25. Possible business model for International company with Local Supplier¹ Fiscal Incentives (Law) <ul><li>PADIS Law: Income and value-added taxes reduced to zero </li></ul><ul><li>IT Law: value added tax exemptions for companies that invest in R&D </li></ul><ul><li>Innovation Laws (laws 10.973/04 and 11.196/05) : grants to private firms, tax exemptions, cooperation research institutions/private sector </li></ul><ul><li>Industrial Policy  Microelectronics elected as a strategic area </li></ul><ul><li>CI Brasil: DH development and Trainning </li></ul>If an international company prefers to find a local partner, it is possible to mix equity and financing tools in any case, provided that more than 50% remains with Brazilian investors (local partner (s) + BNDES) Government Support 1 Illustration of possible models. Actual operations need to be analyzed case by case Equity + Financing Joint Venture ABC (International Company) Equity Local Partner Equity <ul><li>Financing: industrial investments, innovation, exports (buyer and supplier credit), etc </li></ul><ul><li>Equity: up to 1/3 of the total capital share </li></ul>Equity
  25. 26. Example of Investment model: R&D Activity through a Local R&D Institute and Company 1 <ul><li>Financing: innovation lines </li></ul><ul><li>FUNTEC: non-reimbursable funds for innovation, necessarily applied through an R&D Institute </li></ul><ul><li>Financing: innovation </li></ul><ul><li>Grants </li></ul><ul><li>PADIS Law: Income and value-added taxes reduced to zero </li></ul><ul><li>Innovation Laws (laws 10.973/04 and 11.196/05) : grants to private firms, tax exemptions, cooperation research institutions/private sector </li></ul><ul><li>Industrial Policy  Microelectronics elected as a strategic area </li></ul><ul><li>CI Brasil: DH development and Trainning </li></ul>If an international company decides to develop R&D activities in Brazil, grants and financing tools are available, as well as government incentives 1 Illustration of possible models. Actual operations need to be analyzed case by case Fiscal Incentives (Law) Government Support R&D Institute Grants (Funtec) Grants + Financing IC Company (Subsidiary or JV) ABC (International Company) Products Financing Local Partner (optional) Equity Equity
  26. 27. Apex-Brasil: Investment attraction Export Promotion Investment Attraction Internationalization Support
  27. 28. APEX Brasil can assist International Companies with local partners <ul><li>Most common states and cities incentives </li></ul><ul><ul><li>Land </li></ul></ul><ul><ul><li>R&D: fellowship and grants </li></ul></ul><ul><ul><li>Training: tailor made courses </li></ul></ul><ul><ul><li>Taxes holiday </li></ul></ul>APEX Brasil can assist International Companies with local partners
  28. 29. Investment Promotion Activities for the Semiconductor Sector <ul><li>Outreach Campaigns: </li></ul><ul><li>Singapore - Nov. 09; </li></ul><ul><li>UK and Germany - May 10; </li></ul><ul><li>USA - Dec.10; </li></ul><ul><li>USA - Aug. 10 </li></ul><ul><li>Policy Advocacy ; </li></ul><ul><li>Matchmaking ; </li></ul><ul><li>DHs Matchmaking in São Paulo - May 11 </li></ul><ul><li>Aftercare ; </li></ul>
  29. 30. Industrial Policy: PBM (Plano Brasil Maior) <ul><li>The new industrial policy is under construction </li></ul><ul><ul><li>ICTs and (more precisely) microelectronics is one of the main priorities </li></ul></ul><ul><ul><li>Main ICT measures will be launched this month </li></ul></ul><ul><li>Initial ICT measures </li></ul><ul><ul><li>“ Buy Brazil Act”: ICT products developed in Brazil will have preference in Government Procurement </li></ul></ul><ul><ul><li>Payroll exemptions for software companies </li></ul></ul><ul><ul><ul><li>DHs/Fabless under negotiation </li></ul></ul></ul>Government Support for the development of the IC industry Human Resources and R,D&I Infrastructure Ministry of S&T: HR Qualification Law Incentives IT Law, Innovation Laws and IC & Display Law Financial Support Brazilian Development Bank (BNDES) Investment Support (APEX-BRASIL / ABDI) Industrial Policy
  30. 31. Industrial Policy: PBM (Plano Brasil Maior) <ul><li>Fostering Investments and Innovation </li></ul><ul><ul><li>Tax Exemptions or Reductions </li></ul></ul><ul><ul><li>Financing Investment and Innovation </li></ul></ul><ul><ul><li>Innovation Legal Act </li></ul></ul><ul><li>Foreign Trade </li></ul><ul><ul><li>Fostering Exports </li></ul></ul><ul><ul><li>Trade Defense </li></ul></ul><ul><ul><li>Funds and Warranties to Exports </li></ul></ul><ul><li>Trade Promotion </li></ul><ul><li>Support to the Industry and Internal Market </li></ul><ul><ul><li>Reducing taxes on wages (Software is one of the sectors) </li></ul></ul><ul><ul><li>Special Regimes for some economic sectors (Informatic Law, Semiconductor and Displays (PADIS), Broadband National Plan (PNBL), Software, and so on) – on discussion </li></ul></ul><ul><ul><li>Government Procurement </li></ul></ul><ul><ul><li>Harmonization of Funding Policies </li></ul></ul>
  31. 32. Obrigado! Thanks ! <ul><li>Brazilian economy is highly diversified and domestic market can be a plus </li></ul><ul><li>Most multinationals (buyers of Semiconductors and Displays) have been producing in Brazil for decades </li></ul><ul><li>Brazil is becoming an export platform for some goods highly intensive in embedded electronics (e.g. exports of cell phones) </li></ul><ul><li>Brazilian Government is ready to provide a package of incentives including financial support through debt and equity tools </li></ul><ul><li>Brazil could be the other choice for Semiconductor Companies in order to diversify and avoid a higher concentration in Asia </li></ul>