NEWSLETTER - MARCH / APRIL 2004

INNOVATION AND MO(O)RE

Innovation drives growth. This statement holds for companies, for industries but even more for the microelectronic industry. It is also valid for the economy of countries.

It is therefore not surprising that governments, economists and scientists are increasingly using the term 'innovation' and European governments are discovering innovation and growth initiatives as viable tools for fighting against shortfalls in national budgets, as well as for job preservation and employment.

Not all industries or industrial domains are suitable to achieve a high leverage effect on investment in R&D but the electronic industry with micro- and nanoelectronics can be considered as fundamental in achieving significant returns, innovations and long term growth.

• The electronics industry is the leader amongst manufacturing industries. It generates more added value than any other manufacturing industry; its market size is $900 billion, even more than the automotive industry.

• The electronics industry plays a vital role in the transformation of our society in almost every aspect;

• Interconnected as it is with the economic and social fabric, the electronics industry indirectly controls three times more jobs than it represents directly in the manufacturing industry, as well as in service sectors such as telecommunications. And unlike all other technologies, its development has not led to cut more jobs than it has created. Its economic and social balance sheet is strongly in the black.

Micro- or nanoelectronics are part of the electronic industry dedicated to semiconductor technology, design, process technology and chip manufacturing and are as such key enablers for progress and innovation of all the electronic activities.

Twenty years ago Europe was still a dot on the landscape of a highly developed microelectronics industry. It has successfully managed to play today a major and in some domains a leading role.

In recent years, major innovations at macro-economic level have come from Europe - mobile phones using the GSM standard, automotive, security and environmental protection electronics, compression and encoding of sound and images opening the way to fully digital 'consumer' applications, very high-speed access to the Internet (x-DSL).

For more than a decade now European microelectronic companies have strengthened their global position by entering into partnerships with other European players with the objective of bringing together resources in order to perform highly innovative R&D. In doing so effective and lasting networks between industry and research institutes have emerged.

The programmes launched as part of the EUREKA initiative, JESSI, then MEDEA and MEDEA+, complementing the Framework Programmes of the European Commission, backed up the industrial efforts both politically and financially. These programmes, widely recognised as being successful, did more than provide indispensable financial support, they played a key role in the construction of efficient co-operation throughout the value chain, by generating synergies between manufacturers of equipment for semiconductors, hardware producers, semiconductor manufacturers, electronics companies and 'design houses'.

Many of the participating companies and organisations have gained world wide top ranking and reputation and can be considered as Europe's 'back bone' in microelectronics.

In line with the well known "Moore's law" (Gordon Moore observed in 1965 an exponential growth in the number of transistors per integrated circuit and predicted that this trend would continue), the International Technology Roadmap for Semiconductors (ITRS) sets the technological pace for process technology until 2018. The European semiconductor companies and their suppliers have heavily invested in technology R&D to stay on the cutting edge when approaching the next technology node. Strong interaction between microelectronics companies and system companies will be required to develop the right processes for the application platforms and to reconcile the need to embed increasingly complex functions on-chip with the need to decrease the cost of the end system. Resulting are R&D efforts and risks, whose cost impact from one to the next chip generation are almost equalling an exponential curve as well.

In light of these facts, governments in various regions in the world are offering preferential 'operating conditions' to microelectronic companies willing to invest in R&D or in new manufacturing premises/processes. The European region appears to be the underdog in this race in alluring companies as it can no longer compete with operating conditions offered outside.

And what are the quasi-certain consequences' Europe, becoming a follower in high tech? Europe loosing the vital basis for prosperity and innovation? Semiconductor industry's relocation of manufacturing, design, and R&D jobs to other regions? Deterioration of Europe's economy by even more unemployment?

The so far well proven model of private public partnership has to be readjusted. On industry's side the window for unrevisable decisions is still open. A pragmatic approach of Europe's semiconductor industry, national governments and European Union to form an alliance, where all parties are committed to contribute, is necessary. Innovation, the driver for growth, profitability and competitive advantages has to be put back on top of the agenda in micro and macroeconomics. Governments must create attractive operating conditions for Europe's semiconductor industry and in return industry will commit to further presence and to innovations made in Europe.

Imagine, unemployment will be solved by innovation!