R&D Development in China

1. R&D Development in China Golfen Guo (guo_golfen@emc.com) ATV, CTO Office, EMC Mar. 9, 2009

2. Agenda • Digital Universe • EMC & EMC China COE • Why China? • China R&D Development Research Result • Global Economic Recession • Discussion

3. Digital Information Around Us

4. How To Measure Digital Data • A byte (pronounced IPA: /baɪt/) is a basic unit of measurement of information storage in computer science. • by wikipedia • There is no standard but a byte most often consists of eight bits.

5. How To Measure Digital Data (cont.) • KB – Kilobyte • 1000 byte

6. How To Measure Digital Data (cont.) • MB – Megabyte • 1000,000 byte

7. How To Measure Digital Data (Cont.) • GB – Gigabyte • 1000,000,000 byte

8. How To Measure Digital Data (Cont.) • TB – Terabyte • 1000,000,000,000 byte

9. How To Measure Digital Data (Cont.) • PB – Petabyte • 1000,000,000,000,000 byte

10. How To Measure Digital Data (Cont.) • EB – Exabyte • 1000,000,000,000,000,000 byte

11. Digital Universe • The digital universe in 2006 was 180 exabytes • The digital universe in 2007 was 281 exabytes or 281 billion gigabytes. The number is 10% bigger than previous estimation. • In 2011, the amount of digital information produced in the year should equal nearly 1,800 exabytes, or 10 times that produced in 2006. • The compound annual growth rate between now and 2011 is expected to be almost 60%. Source: IDC 2008

12. What EMC Is • The world leader in storage systems, software, services, and solutions • Focused on building and managing secure and flexible information infrastructures • Mission: To help organizations of all sizes get the most value possible from their information

13. StorageCompany 1991–2002 Storage andInformationManagement 2003–2005 InformationInfrastructure 2005+ EMC has Evolved as the Market has Evolved

14. EMC’s Evolution Software and Services Are Now 54% of Revenues Software 16% Software 37% $3.575B Services 10% Systems 46% $4.487B Systems 74% Services 17% $1.569B Revenue Mix 2000 Revenue Mix 2005

15. 2003 2004 2005 2006 EMC Strategic Software Acquisitions Legato VMware Smarts Captiva Internosis Protection/ RecoveryIntelligent Data Movement Server Virtualization Information Capture,Digitization, Categorization IT Services for Microsoft Environments Real-time NetworkSystems Management RSA Rainfinity Acxiom Documentum Dantz Expert in online security Unstructured Data Content Management Backup/Recoveryfor SMB Extends Virtualizationto NAS Environments Acxiom’s InformationGrid Software Invested >$7 billion 2003–present • EMC’s Acquisition Approach: • To strengthen and extend its core • To extend marketplace into brand-new areas

16. EMC’s Strategy

17. EMC’s Long-term Results

18. External Storage Market Share Worldwide External Storage 2008 Revenue Market Share • EMC ranked #1 with a 23.3% share • EMC/Dell* revenue accounted more of the external storage market in 2006 *Includes EMC revenue and revenue generated through the sale of CLARiiON systems by Dell, which IDC attributes to Dell market share Source: IDC, March 2009

19. Storage Software Market Share Worldwide Storage Software 2008 Revenue Market Share • EMC ranked #1 with a 26% share Source: IDC, March 2009

20. EMC’s Best-of-Breed Partnership Ecosystem HP IBM Sun

21. China R&D Journey Start… • Jun 23, 2006 EMC unveiled plan to open a software R&D center in Shanghai. • Plan to invest $500 million in China over the next five years, underscoring EMC’sdeepened commitment to the rapidly growingChina marketplace. • Nov 2, 2006 China R&D center opening

22. Evolved into an EMC Center of Excellent • EMC COEs are units that work on core EMC technologies, collaborating and leveraging global talent for engineering excellence. • Jan 2007, China R&D center evolved into an EMC Center of Excellent.

23. Second R&D Center in China • Nov 1, 2007 EMC officially opened its new R&D center in Beijing. • Open the first EMC Research Lab outside of the United States. • Committed to double its planned investments to US$ 1 billion in China over the next five years.

24. Made in China -- StorageCredenza • Apr 3, 2008 EMC unveiled StorageCredenza in China. • EMC StorageCredenza: The first EMC-branded product released in a country first with the country not being U.S. • It is also the first EMC China R&D Center owned product.

25. China Advanced Technical Support Center Opening • Aug 8, 2008 EMC Advanced Technical Support Center Opened in China

26. Rapid Growth • 2006 – < 100 • 2007 – 250+ • 2008 – 500+

27. China COE Conclusion • To establish a world-class software development center that will foster innovation for EMC's global offering • Activities scope: • Advanced, new feature and sustaining software development • Technical research • Hardware development • QA • Localization • Technical support

28. Not Only EMC… • From 1993 to 2002, MNC oversea R&D spending rose from $30 billion to 67 billon • During 2004-2005, over half of leading MNCs have set up R&D organizations in China or India • By different accounts, MNC R&D Centers in China: • 2001 <= 200; 2005 = 750; 2007 > 980 • Some leading companies have begun to consolidate its R&D organizations in China and established its China R&D system, such as IBM, Microsoft and etc

29. Why did They Chose China? • Surge of MNC R&D labs in China since the late 1990s • “Within five years, China could overtake UK, Germany and Japan as a • base for corporate research, leaving it second only to the US.” • (NYTimes, 2004; von Zedtwitz) • Top locations for offshore R&D: • China, US, India, UK (The Economist Intelligence Unit, 2004) • China, US, India, Japan, UK (UNCTAD, 2004)

30. Factors Attracting FDI Rich and excellent manpower Huge market Stable increase of Chinese economy Convenient infrastructure Favorableforeign investment policy

31. Factors Attracting Foreign Investment • Huge Market • Rapid Economy Growth • Favorableforeign investment policy • China Talent Pool • Convenient Infrastructure

32. Factors Attracting Foreign Investment • Huge Market • Rapid Economy Growth • Favorableforeign investment policy • China Talent Pool • Convenient Infrastructure

33. Dreaming with BRICs: The Path to 2050 • Over the next 50 years, Brazil, Russia, India and China—the BRICs economies—could become a much larger force in the world economy. • The results are startling. If things go right, in less than 40 years, the BRICs economies together could be larger than the G6 in US dollar terms.  Source: Goldman Sachs

34. BRICs’ GDP Growth Real GDP growth (Annual %Change) in 2007 by country

35. China’s GDP Growth • GDP growth statistics • 9% in 2008 • 2008 Quarters • 10.6% (Q1) • 10.1% (Q2) • 9.0% (Q3) • 6.8% (Q4) • 2009 target: 8%

36. Factors Attracting Foreign Investment • Huge Market • Rapid Economy Growth • Favorableforeign investment policy • China Talent Pool • Convenient Infrastructure Deng Xiaoping 1904-1997

37. The Development History of MNC in China

38. Factors Attracting Foreign Investment • Huge Market • Rapid Economy Growth • Favorableforeign investment policy • China Talent Pool • Convenient Infrastructure

39. Overview of The Chinese Talent Pool • Population: 1.3 billion • 19 million students in 1,500+ universities and colleges • 5 million fresh graduates in 2009* * Data Source: National Bureau of Statistics of China 2007

40. Factors Attracting Foreign Investment • Huge Market • Rapid Economy Growth • Favorableforeign investment policy • China Talent Pool • Convenient Infrastructure

41. China Transport Infrastructure  • By the end of 2007 • China's total length of expressways has reached 53,600 kilometers • the national passenger throughput of all airports across China totalled 387.59 million person-trips • the national cargo throughput of all ports above designated size reached 5.28 billion tons * Data Source: Research and Market 2008

42. China R&D Center Development Research Result • Industrial Distribution • Investor County Distribution • Location Choice

43. Industrial Distribution The industrial distribution of autonomous R&D settled by BusinessWeek 1000 MNCs in China

44. Investor County Distribution The country distribution of autonomous R&D settled by BusinessWeek 1000 MNCs in China

45. Location Choice The regional distribution of autonomous R&D settled by BusinessWeek 1000 MNCs in China

46. Barriers for MNC R&D in China • Barriers from policy environment • Strong and bureaucratic government • Import limitation • Imperfect IPR protect system • Difficulty for traveling to Taiwan • Barriers from local market • Increasing operation cost • Imperfect infrastructure • Barriers with Human Resource Management • Lack of innovative and experienced labors • High employee mobility • Difficulty in managing the diversified staff

47. Global Economic Recession

48. China Under Global Economic Slowdown • Export/import decline • Factories close • Unemployment increase • Registered unemployed labor in cities • Raised 2009 target to 4.6%, the highest since 1980 • Foreign direct investment decline • FDI flows weakened, with a 5.7% decline in Dec. 2008

49. Employment Crisis in China • According to a survey by FESCO, a Beijing-based recruitment services provider for multinational companies, by polling 356 of its clients spread across the country and engaged a wide range of industries for the survey. • nearly 70 percent of the firms it polled have said they would trim their recruitment requirements for 2009 • 27 percent said they had already started laying off employees.

50. China’s Stimulus Package • 4 trillion RMB ($586 billion USD) stimulus package for government investment in infrastructure, tax deductions and subsidies, to stimulate domestic spending • Announced Nov. 9, 2008, projects and spending already started in 2008