“Entrepreneurship in Asian High-Tech Industries”

OPPORTUNITIES & CHALLENGES in VIET NAM

US – ASIA TECHNOLOGY MANAGEMENT CENTER STANFORD UNIVERSITY – SCHOOL OF ENGINEERING

May 6th 2008

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Scale Image of Semiconductor Market
33 trillion $US
(World GDP) 1 trillion $US
Electronic Products Electronic Devices (Semiconductor/FPD) Semiconductor/FPD Production Equipment

The World Economy

Solar Cell App, emerging

275 Billion $US
40 Billion $US

Source: Gartner Dataquest

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WW Semiconductor Capital Equipment Annual Spending from 2006 - 2009
Projection indicates most semiconductor manufacturing capacities are in Asia

North America 15%

Asia 78%

Europe 7%

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New Waves of Growth In the Semiconductor Market

, going green

Expanding from Advanced Nations to Economic Zones, Developing Nations
Source: TEL GES Company Confidential

New Wave II – Geographical Expansion
Expanding from Advanced Nations to Economy Zone, Growing Nations

Asia

Central & South America

East Europe Russia Czech Slovakia Hungary Poland Turkey Rumania etc.

Middle East, Africa Saudi Arabia Egypt South Africa Nigeria etc.

Mexico China Brazil India Viet Nam Argentine Indonesia etc. Malaysia Philippine Thailand Nam Viet etc.

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New Wave II – Geographical Expansion

Emerging Country: China, India, Viet Nam, Africa, Latin & Central America, Eastern Europe, Middle East
Source: Goldman Sachs, Nikkei Market Access GES Company Confidential

New Wave II – Geographical Expansion

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OPPORTUNITIES IN VIET NAM

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Thriving Economy

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A population of 85 million people
A huge potential electronics product consumer market

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Domestic Consumption Trends on the Rise

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Vietnam Country Profile Vietnam
• Population: 85 million
(~60% under the age of 30) 13th largest in the world

• Government: Socialist State • Literacy: 90.3% • Languages: Vietnamese (official), English (increasingly favored as second language)
Age Structure Age Structure
1 2
Thai 2%

Ethnic Breakdown Ethnic Breakdown
Others 1 2%

8

4

0 0-4 1 4 0-1 20-24 30-34 40-44 50-54 60-64 70-74 80+

Kinh (Viet) 86%

Source: CIA World Factbook, May 2007; TNS, Oct 2007; AC Nielsen, Nov 2007

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Integrated into the World Economy
• • • • • • • • 1998 Member of APEC 2001 US – VN Bilateral Trade Agreement 2003 Japan – VN Bilateral Trade Agreement 2003 Korea- VN Bilateral Trade Agreement 2006 Full Membership of WTO 2006 Full Realization of AFTA 2008 Member of UN Security Committee July 2008 VN will chair the UN Security Meeting

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Vietnam: Economic Overview
Macroeconomic Indicators:
• • • • 2006 GDP Growth: +8.2% 2006 Retail Spending Growth: +20.4% 2007 GDP Growth: +8.2% 2008 GDP Growth: 9% (est.)

Educated and Eager Labor Force:
• • • •

ACNielsen survey ranked Vietnamese as most optimistic in Asia Labor Force: 44 million Urban Unemployment: 5.5% University and college attendance rates increased 56% in 2005 over 2000

2007 GDP Growth 2007 GDP Growth
12.0% 10.5% 9.0% 8.5% 8.2%

6.0%

4.8%

4.5%

4.4% 3.4% 2.8% 2.8%

3.0%

0.0% China India Vietnam South Korea Israel Taiwan

Source: Source: World Bank, CIA Factbook, TNS, ACNielsen

United States

Japan

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European Union

Vietnam: Industry Market Analysis
Internet Usage Statistics:
• 18mm users in 2007 – Up from 13 mm users in 2006, a 38% increase – ~20% Internet Penetration For ages 15 -19: 82% (Feb. 2006) For ages 20 -24: 74% (Feb. 2006)
Internet Population and Penetration Internet Population and Penetration
50.0 100%

Mobile Usage Statistics:

18.2mm mobile phone users in 2007E – Up from 12.2mm users in 2005, a 49% y/y increase ~21% mobile phone penetration Three major carriers hold 95% of the market

• •

• •

Mobile Population and Penetration Mobile Population and Penetration
50.0 100%

Internet Population (in millions)

40.0 33.2 30.0 22.6 20.0 13.1 10.7 10.0 15.5% 26.5% 12.8% 0.0 2005 2006 2007 2008 2009 38.2% 32.3% 27.8

39.5

80%

Mobile Population (in millions)

40.0

Internet Penetration (%)

36.2 30.1 24.4

80% Mobile Penetration (%)

60%

30.0

60%

44.9%

40%

20.0 12.2 10.0 8.4

18.2 41.2% 34.6% 28.3% 21.3%

40%

20%

20%

0% 2010

0.0

10.0% 2005

14.5% 0% 2006 2007 2008 2009 2010

Source: VNNIC, Ministry of Post & Telematics, World Bank, CIA Factbook

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Vietnam Online Advertising Market Poised for Growth
Internet Penetration Rate (%)
100.0%

Opportunity market
Singapore (3.4m) Malaysia (15.1m) Philippines (19.7m) Thailand (12.1m) Indonesia (11.7m) Vietnam (13.1m)

80.0%

- Online penetration rate currently among lowest regionally, but with highest growth rate. - Total ad market in Vietnam approximately ~$US 300 million in 2006

60.0%

40.0%

20.0%

0.0%

-20.0% 0.0%

Internet User % CAGR (2006-2010F)
7.0% 14.0% 21.0% 28.0% 35.0%

Size of Bubble indicates value of ad market as of 2005 ( ) indicates internet user population as of 2006 Source: IDC, June, Nov, Dec 2006; For Vietnam: VNNIC, Dec 2006; ZenithOptimedia Global Adspend Forecasts, Dec 2005 Company Confidential GES

Global Top 20 Internet Countries 2007
Japan Korea USA

Vietnam

China India 50M

GDP / Capita
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Vietnam and Developing Countries

Vietnam 2009 Vietnam 2007 Vietnam 2005

China 2007

India 2007

50M

GDP / Capita
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READY to TAKE-OFF
Capital Investment Signals Strong Foundation • Annual FDI inflows surpassed US$20bn in 2007 and expected to remain strong in 2008 benefiting from the continued trade liberalization

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High-tech Economy in the making
A Singapore model • • • • • Intel $1B Test & Assembly plant, the largest in the world Renessa – IC design center with 1000 engineers VCAPP - $200M chip advanced packaging plant Altera - $30M IC software development center Rorze Technology – 300 mm Wafer and LCD robot handling company • Nidec Tosok - $1B investment in manufacturing of hard disk drive • JIBAL, Fujitsu, Sanyo, Toshiba, HP, IBM, Cisco, AMCC, … are investing in VN • Numerous home grown IC design, IT companies, …

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TAX STRUCTURE for High Tech Industries
(Within industrial zones and parks)

Tax Exemption
(from the 1st profitable year of operation

4 year 9 years 10% on project duration • No import duties for capital equipment
• No import duties for export goods No VAT for imported capital equipment export and re-exported goods Currently 0% withholding tax on profit repatriated by companies

50% Tax Reduction
(from subsequent years of operation)

Corporation Income Tax Rate Import Duties Value Added Tax (VAT) Withholding Tax on profit Repatriation

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The return of Boat People
2.7M overseas Vietnamese are tricking back, bring $ and skills

Brought in $5.5 billions in 2007, officially
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Private Sector in Viet Nam

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From command economy to free competition Free trade, free market, high tech economies • Entrepreneurship to flourish.
– Almost every household is running a micro-business on the side.

• Privatization of state owned enterprises • Ambitious companies are coming to the VN stock market

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Private Equity Funds in VN on the rise
• At the beginning of 2003 …

• And now … Over 40 private equity funds established and counting

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Viet Nam is the heart of its growth phase

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Exit Options

• • • •

Going IPO - Listing in VN stock exchange Listing in Hong Kong stock exchange or NASDAQ M & A with international firms “Built to Last” home grown companies
- FPT, Vina Milk, …, with market cap over $1bn

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Challenges as a developing country

• Uneven or lack of infrastructure • Education and training – Need improvement
– Shortage of people with higher skills – More competition

• Small high-tech internal market • Rising inflation • The slowing down stock market

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Viet Nam - An Investment Darling Its advantages …
Tax Incentives Safe Business Environment

Competitive Labor Cost

Stable Social-Political Environment

Potential Market of 100M people

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Area of Opportunities for Entrepreneurs
• • • • • • • • “China plus One” model Manufacturing and support industries Computer hardware & services Education & training Infrastructure and real estate development Tourism, hotels and resorts development Health care Distribution and retailing

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WHY GES?
SEMICONDUCTOR FAB SERVICE SOLUTION

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Opportunities for GES
• Growing high tech market in Asia • Semiconductor and LCD industry are searching ways to improve gross margin • Global shortage of skilled workers, especially in Asia • Outsourcing solution has been successful in the software space
– Successful stories: Infosys, Wipro, etc – Increasing demand in hardware space

• Industry growth, market liberalization and incentives Viet Nam is offering • Exciting and highly achievable Exit options • Team’s passion to be a part in building the high tech industry in Viet Nam
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GES Business
Outsourcing - Consulting - Manufacturing

• GES provides the semiconductor, Flat Panel Display and the emerging solar cell industry the quality and low cost outsourcing solution
Equipment design and engineering service Equipment training and field service support Device and equipment test and assembly service Turn key equipment manufacturing service

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About GES Inc.

• • • • •

A California corporation, established in July 2006 Employees: 100+ Profitable since Dec. 2006 Funded by venture capital and private investors Operations: – San Jose, California – Saigon, Viet Nam – Tokyo, Japan – Taipei, Taiwan

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GES VN MANUFACTURING & SERVICE CENTER

• Next to Intel’s world largest test and assembly plant. • Scheduled for completion in Dec. 2008 • 65,000 ft2 of high tech manufacturing/business operation space
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THANK YOU

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