13thWorld Electronic Forum

Israel 4-8 November 2007

Elisha Yanay- ChairmanIAESI – Israel Association of Electronics &

Software Industries

WORLD ELECTRONICS

RFID for MfgWebinar in a box

Warehouse SDMDirect MailManufacturing

Sequential DPMGoogle ad words

Teleseminar in a boxLunch &

LearnRFID

Healthcare

USA

JAPAN

CHINA

TAIWAN

HONG KONG PHILIPPINES THAILAND

INDIA

SOUTH AFRICA

BRASIL

FRANCE

SLOVAKIA

GERMANYISRAEL

WORLD ELECTRONICSAUSTRALIA

EUROPE

October 2007

Worldwide Economic and Market Conditions

-20

-10

0

10

20

30

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

ELECTRONICS

0

1

2

3

4

5

REAL GDP

World Electronics & Economic Growth(Year-Over-Year % Change)

Blue - Elec., Green - GDP

Economics Matters…

GDP

Electronics

-30

-15

0

15

30

45

60

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

PERCENT

-30

-15

0

15

30

45

60

PERCENT

New Orders Electronics Equipment(Rates of Change)

Latest Plot: July 2007 Green - 3/12, Blue - 12/12

Hi-Tech Orders Growth OK

For 2007 - World Expansion Continues• 2007 will be a good (but not great) year

• World growth will remain uneven

• U.S. economy weakening; Asia charges ahead

• Expansion in broad hi-tech industries continues

• Double-digit sales upside for 2007 – weaker U.S. consumer may impact handset sales

• Plan for other contingencies

Region/Country 2003 2004 2005 2006 2007 2008

Americas 2.4 4.0 3.4 3.3 2.7 2.9US 2.5 3.6 3.1 2.9 2.2 2.6Canada 1.9 3.1 3.1 2.8 2.5 2.6Latin America 2.2 6.5 4.8 5.6 5.1 4.4 Brazil 1.2 5.7 2.9 3.7 4.8 4.5 Mexico 1.4 4.2 2.8 4.8 2.9 3.4 Argentina 8.8 9.0 9.2 8.5 7.6 5.4 Venezuela -7.6 17.7 10.3 10.3 8.2 4.5

EMEA 1.8 2.9 2.4 3.3 3.2 2.8Western Europe 1.2 2.3 1.8 2.9 2.7 2.3Middle East & Africa 5.5 5.3 6.0 4.7 5.2 5.3Central/Eastern Europe 5.0 6.4 5.2 6.9 6.5 5.6Russia 7.3 7.2 6.4 6.7 7.4 6.8

Asia 3.6 4.7 4.1 4.4 4.5 4.4ASEAN 5.3 6.5 5.5 6.0 6.0 6.0Australia 3.1 3.7 2.8 2.7 4.1 3.6China 10.0 10.1 10.4 10.7 11.3 10.6Hong Kong 3.2 8.6 7.5 6.9 5.8 5.1India 8.4 8.3 9.2 9.4 8.5 8.3Japan 1.5 2.7 1.9 2.2 2.4 2.3New Zealand 4.4 3.7 2.6 1.9 2.6 2.3South Korea 3.1 4.7 4.2 5.0 4.8 5.1Taiwan 3.5 6.2 4.1 4.7 4.4 4.8

World 2.5 3.8 3.2 3.6 3.3 3.3

World Economic Growth Solid…Real GDP Growth

(Year-Over-Year % Change)

Key Takeaways• Good world growth into 2007 – U.S. weaker

– Consumer spending off– Capex/government solid

• Probability of downside shock at ~25%

• Industry expansion continues at 8-10% pace

The Electronic Industry Is The Locomotive Of The Economy

The Technology Adoption Curve Is Faster and Faster ……..

Sources: IEC Resources, Gartner, NetRatings, Scarborough Group

Number of years

US percentageof ownership Telephone

Electricity

Radio

PC

TV

Cell Phone

Internet

Aerospace & Defence

IndustrialConsumer

CommunicationsComputer Hardware

Security Applications Semiconductor Transport

Aftercare

Medical

The Stimulating Effect Of Public Funding on R&D

5 10 15 20 25

OEC

D

םמו

טיפ

או

U.S

.

Increased public funding

strengthens the stimulating effect

Growth of the stimulating effect

decreases

Public funding compensates

corporate efforts

The chart is directional and the figures include uncertainty.

Share of public fundingin corporate

R&D spending, %

The stimulating effect ofpublic funding on R&D

Source: Tekes 2005. (statistics from 17 countries, compiled over a period of 15 years).

Isra

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EU

-25

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and

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nd

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UN

R&D expenditure as % of the GNPWW comparison

ISR

AE

L

SW

EE

DE

N

FIN

LA

D

JA

PA

N

ICE

LA

ND

US

DE

NM

AR

K

KO

RE

A

SW

ITZ

ER

LA

ND

OC

DE

GE

RM

AN

Y

AU

ST

RIA

FR

AN

CE

EU

BR

ITA

IN

CA

NA

DA

BE

LG

IUM

HO

LL

AN

D

NO

RW

AY

LU

XE

MB

UR

G

AU

ST

RA

LIA

CZ

EC

K

IRE

LA

D

ITA

LY

NE

W Z

EL

AN

D

SP

AIN

HU

NG

AR

Y

PO

RT

UG

AL

TU

RK

EY

GR

EE

CE

PO

LA

ND

SL

OV

AK

Y

ME

XIC

O

Africa2.0%

Middle East3.2%

Europe94.8%

Africa1.8%

Middle East3.0%

Europe95.2%

Africa1.7%

Middle East4.3%

Europe95.5%

Rest of World75.5%

EMEA24.5%

Electronics Market Growth

Rest of World72.8%

EMEA27.2%

Rest of World71.9%

EMEA28.1%

World

3.3% CAGR

4.9% CAGR

4.7% CAGR

4.5% CAGR

1996 2006 2016*

$940M $1,466M $2,328M

EMEA

$256M $412M $571M

*Forecast data do not include inflation Source: Reed Electronics Research

2006-20102004 2005 2006 2007 2008 2009 2010 CAGR

Elec. Data Processing 117,586 123,444 127,364 130,482 135,624 139,869 145,248 3.3%Office Equipment 5,196 5,354 5,464 5,531 5,580 5,555 5,559 0.4%Control & Instruments 35,381 36,135 37,674 38,776 39,881 40,706 41,770 2.6%Medical & Industrial 19,465 20,806 22,050 23,014 23,969 24,704 25,618 3.8%Radio Communications 48,061 52,543 56,519 59,943 62,888 65,051 67,797 4.7%Telecommunications 26,970 27,109 28,244 29,201 30,084 30,743 31,549 2.8%Consumer 43,118 45,977 48,653 49,706 50,332 50,314 49,985 0.7%Components 81,947 82,786 85,772 89,269 93,984 95,367 99,341 3.7%

EMEA 377,723 394,153 411,740 425,922 442,343 452,309 466,868 3.2% % of World Market 29% 28% 28% 28% 27% 27% 27%

Total World 1,314,247 1,394,976 1,465,932 1,534,104 1,625,214 1,676,950 1,757,232 4.6%

EMEA Electronic Market($ Millions)

Market FundamentalsEMEA Electronics Market 27% of World

*Forecast data do not include inflation Source: Reed Electronics Research

Global Electronic Productionover $1.5 trillion at end 2006Global Electronic Production over $ 1.5 trillion end 2006

220,439247,539

279,072 285,805317,620 314,137

334,255 341,882

162,400197,807 202,307

343,119

386,875

448,767

492,684

13,177 14,255 15,733 16,216

180,190

-

100,000

200,000

300,000

400,000

500,000

600,000

2002 2003 2004 2005

Year

$

Europe

Americas

Japan

Asia Pacif ic

Rest of World

Asia/Pacific 2002-2005China almost double in 4 years

Asia/Pacific Electronics Production 2002-05 US $M

120,214

147,410

177,130

210,297

62,36173,752

90,285

36,564 34,628 35,865 35,448

95,979

-

50,000

100,000

150,000

200,000

2002 2003 2004 2005

Year

$

China

South Korea

Taiwan

The Telecom Industry

Wireless Networking Infrastructure

Software: is The Next Big Wireless Challenge

Software

Hardware

Wireless

Imaging

Userinteraction

Nano platforms

Mobile middleware

Service discovery

Distributed architecture & algorithms

Distributed node and application management

Mobile agents

Security

Nano platforms

Mobile middleware

Service discovery

Distributed architecture & algorithms

Distributed node and application management

Mobile agents

Security

New wireless

Software defined radio

Cognitive radio

New wireless

Software defined radio

Cognitive radio

motion, touch sensitivity

Location

Image & gesture recognition

Sociable interfaces

motion, touch sensitivity

Location

Image & gesture recognition

Sociable interfaces

New hardware architectures

Low-power processors

Solid-state storage

Batteries & fuel cells

New hardware architectures

Low-power processors

Solid-state storage

Batteries & fuel cells

Flexible displays

Micro projectors

Passive displays

Flexible displays

Micro projectors

Passive displays

Ready for Take-Off