The Role of Clusters in the Successful Development of the Micro and Nanosystems Industries

1. The Role of Clusters in the Successful Development of the Micro and Nanosystems Industries Micro and Nanotechnology in PIM 2004 Manau, Amazones, Brazil September 15-18, 2004 Roger H. Grace President, Roger Grace Associates Co-Founder and Past President MANCEF

2. Outline • Definition • Benefits • Requisite Constituents • Overview • Summary of Microsystem Clusters • Lessons Learned • Summary/Conclusion

3. Roger Grace Associates Background • Founded in 1982 • Over 35 years in the electronics industry in various roles including design, manufacturing and marketing • Focus on semiconductors, sensors, microsystems, semiconductor capital equipment • Expertise in strategic marketing • market research • product planning • company positioning • branding • Adjunct Faculty Member Univ. California Berkeley since 1990 • Past President of MANCEF

4. MANCEF Overview • Founded in 1999 as a US IRS 501. c.3 not-for-profit educational foundation • Approximately 300 members worldwide • Ojective is to create and disseminate information to facilitate the commercialization of Micro and Nanosystems • Completed a very successful COMS Conference in Alsterdam September 8-11, 2003 • Created the industry’s first top-down Nano and Microsystems Roadmap, published in February 2003

5. Definition • A cluster is: • a geographical concentration of firms, supplies and related industries and specialized institutions that occur in a particular field in a nation, state, city (or region). • (Ref: M. Porter, On Competition)

6. Cluster Benefits • Enhance the competitive stature of the region and the organizations within • Help create an environment that will foster economic growth in the region • Create jobs vis-à-vis startups and increased business at existing organizations • Create an enhanced tax base • Retain existing employees • Attract qualified employees from other regions

7. Requisite Constituents • For a successful technology cluster, all three of the following must exist: • Intellectual property • Universities and research labs patents • Individual know how of designs and processes • Educational /Research resources • Entrepreneurs • Infrastructure • Fab facilities (from R&D through production) • People (engineers, technicians, production, marketing/sales, finance, administration, consultants) • Suppliers (services and materials) • Financing • VCs • Angel Investors • Industrial Partners • State/local/federal government

8. Industry Situational Analysis • Over 20 MNT clusters exist worldwide,all with a fab • Some have a technology focus e.g.Michigan-bio • Over 60 silicon foundries worldwide with more to come • Beginning of consolidation e.g. Sony, Standard MEMS, Corning Intellisense exiting the market/closing down • Large volume production requirements are limited due to limited number of “killer applications” • Significant need for low-cost manufacture (historically) favors Asia • Packaging and testing (P&T) are major cost factors in MST • Limited expertise exists in P&T vs. wafer fabrication due to similarity/dissimilarity of MST vs. Semiconductor technology • P&T can be a product competitive advantage

9. M3 Commercialization Report Card SUBJECT 1998 1999 2000 2001 2002 2003 2004 Change R&D A A A A A A- A- 0 Marketing C- C C+ C+ C+ C C 0 Market Research C B- B- B- B B B+ 1 Design For Manufacturing C+ B- B B B B B 0 Established Infrastructure C+ B B+ A A A A 0 Industry Association INC INC INC B B+ B+ B+ 0 Standards INC INC INC INC C B- B- 0 Management Expertise C C C+ C+ C+ C+ C+ 0 Venture Capital Attraction C B- B+ A C C- C +1 Creation Of Wealth C B- B+ A C C- C- 0 Industry Roadmap N/A B- B B+ A- A A 0 Profitability C- C- C- C- C- C- C- 0 Employment INC INC INC INC INC C C 0 Cluster Development INC INC INC INC INC B B+ 1 Overall Grade B/B- 0

10. Technology Cluster Overview • Technology Clusters have been around since the late fifties in • Silicon Valley and Boston Route 128 • Technology clusters were formed in these areas largely because • The IP of Stanford (Silicon Valley) and MIT (Boston Route 128) • Silicon Valley and Boston Route 128 companies had no “formal” • federal or state funding other than through military contracts • (Ref: A. Saxenian, Regional Advantage) • The first MEMS/Microsystems cluster was formed in 1989 • Dortmund, Germany. Steag Micropacts and HK Planertechnik • were successful startups created by this • continued

11. Technology Cluster Overview, continued • Although a number of regions have attempted to create MEMS/Microsystems clusters over the past five years, only a few have succeeded to date: • Albany, New York • Washington • Dortmunnd, Germany • Other regionsare currently attempting to develop MEMS/Microsystems clusters but it is premature to judge their level of success • Florida • Georgia • Texas • Four Corners (New Mexico, Colorado, Utah, Arizona) • New Jersey • Ann Arbor, Michigan • Minatec, Grenoble France • Hsinchu, Taiwan • Korea • The Netherlands(East) • Edmonton, Alberta, Canada

12. MINATEC - Grenoble, France Dortmund - Germany Bremen - Germany Thuringia - Germany Rheinland Palatinate - Germany Aachen - GermanyJena - Germany Flanders- Belgium Neuchatel - Switzerland Lausanne - Switzerland Twente - Netherlands Gothenberg - Sweden Northwest UK Hsinchu-Taiwan Korea SUNY - Albany, New York Washington State 4 - corners California - Nanotechnology Florida Texas New Jersey Michigan Glennan - Ohio Southwest Florida Edmonton, Alberta, Canada Summary of Microsystems Clusters (Partial List)

13. Lessons Learned • “Those who do not remember the past are condemned to relive it”…George Santayana, The Life of Reason (1905-1906) • What have we learned from actual case studies over approximately 15 years of cluster history?

14. Lessons Learned, continued • Sufficient regional/national government funding commitment over time • Product offering(s)/ focus must be unique and differentiated to create a market position e.g. packaging and test • There must be a market need • Promotion is a critical item-must develop and integrated strategy/position/brand • Edmonton, Alberta, Canada (COMS2004) • Albany-Nanotechnology,300mm/Conference (yearly) • Michigan-bio/Ad program, Michigan Technology Consortium • IVAM-Dortmund/Integrated program • Dutch High-Tech Connections Conference in Silicon Valley USA • Taiwan/Taipei Technology Conferences in Silicon Valley USA • Need “flagship” organization to join cluster as “anchor” • Need attraction for people/organizations to commit vs. “build it and they shall come”

15. Lessons Learned ,continued • Significant drawing factors include: • subsities and tax exemptions (e.g. Bolivia and Brazil nuts) • educated and skilled labor pool • quality of life of region • Educating the current/future work force is imperative • Michigan WIMS/NSF K-12 program • Current and near-term economic issues • Venture Capital • Corporations • Private Investors (angels)

16. Summary/Conclusions • Clusters have had an important role in the creation of the microsystems industry since the first cluster in Dortmund, Germany in 1989 • Clusters tend to emerge from R&D-centric regions, vis-à-vis, universities and/or research labs • Clusters provide many financial and market competitive advantages • Microsystems clusters are proliferating - approximately 20 worldwide to date. Nanosystem clusters presently forming. • Over 100 companies and thousands of high skill jobs have been created thus far with many more to come in the immediate future

17. Acknowledgement • The author wishes to acknowledge the Michigan Economic Development Corporation for the funding of the basis of this work and especially Mr. Mahendra Ramsinghani for his helpful assistance.

18. MUITO OBRIGADO