1. National Innovation System and the Role of National Institute
Prof Otto C C Lin
The Hong Kong University of Science & Technology
Clear Water Bay, Kowloon, Hong Kong
Tsing-Tech Innovations, Ltd
New World Centre, Tsim-sha-Tsui, Kowloon, Hong Kong
Six Countries Programme Conference, Canada
June 5-6, 2003

2. Outline From science to industry: the myths
The Innovation process and the players
The national innovation system
A case study of Taiwan:
The roots of hi-tech industry
The way forward

3. Hi-Tech Industry
Technology
Science

4. Hi-Tech Industry National Vision Physical Infrastructure Strategy
Policy Commitment
R&D Funding
Taxation & Banking
Legal System
Regional Planning
Physical Infrastructure
Basic Sciences
Education & Skilled Workforce
Entrepreneurship
Venture Capital
Social Support
Project Management

5. The Research to Commercialization Process
Basic
Research
Sales &
Services
Product &
Process
Development
Pilot
Production &
Field Trial
Applied
Research
Manufacturing
Research
Science
Development
Industrial Technology
Mid-stream R&D
Commercialization

6. Mission Jobs/Outputs Criteria Success Talents needed Difference
Commercialization
Research
Mission
Jobs/Outputs
Criteria Success
Talents needed
Rewards system
Risk
Difference
Similarity
Excellent People
Excellent Management

7. The Innovation Process: Creating Wealth from Knowledge
Applied Research
Product Development
Process Development
Pilot Production
Technology Diffusion
Developing Industrial Technology
Scientific
Research
Product
Commercialization
Policy / Planning / RD Funding Taxation/Legal Systems
Infrastructure
Skilled Manpower
VC Funding / Entrepreneurship
Social Support and Stability
Nurturing Business Environment

8. National Innovation System: the Players
© Professor Otto C C Lin
March 2002
National Innovation System: the Players
Developing Industrial Technology
INSTITUTE
BUSINESS
INDUSTRY
UNIVERSITY
Nurturing Business Environment
GOVERNMENT

9. The National Innovation System: The Dynamics
Technology Development
INSTITUTE
BUSINESS
UNIVERSITY
Scientific Research
Product
Commercialization
GOVERNMENT

10. National Innovation System: The Role of the Institute
Business
Government
Pilot
Production
Product & Process
Development
Applied
Research
Technical
Services
Manufacturing
Industrial Technology
Basic
Focus
Funding
UNIVERSITIES
Institute ??
INDUSTRIES

11. National Innovation System: USA
Basic
Research
Industrial Technology
Manufacturing
Technical
Services
Focus
Applied
Research
Product & Process
Development
Pilot
Production
Funding
Government
UNIVERSITIES
NATIONAL INSTITUTES
NATIONAL LABORATORIES
INDUSTRIES
Business

12. The Economic Growth of Taiwan

13. THE STRATEGY: A Case Study of Taiwan
A Developing Human Resources
B Acquiring Foreign Technologies
C Establishing Indigenous Technology Capability
Converting Science / Technology to Industry
Ref: O. C. C. Lin, in “Behind East Asian Growth: the political and social foundation of prosperity ,” Editor, H.S. Rowen. Rutledge, 1998

16. National Innovation System : Taiwan
Manufacturing
Focus
Basic
Research
Industrial Technology
Technical
Services
Funding
Applied
Research
Product & Process
Development
Pilot
Production
Government
Academic Sinica
Universities
Industrial Technology Research Institute (ITRI)
All
INER, FIRDI, MIDC, CBD, III, TL, CPC
Aerospace
Pollution Control
Industrial Safety
Industrial Standards
Materials
Energy
Chemicals
Machinery
Micro-Electronics
Opto-Electronics
Computer &
Communications
ITRI
SCIENCE-BASED INDUSTRIAL PARK
(Host for Hi-Tech Companies)
Business
Industrial Companies

17. Industrial Technology Research Institute (ITRI)
Founded in 1973
A statutory national institute established by law
A non-profit R&D corporation under the auspices of the Ministry of Economic Affairs (MOEA)
The technical arm of the government’ s industrial policies
A partner to local industries

18. ITRI Missions
To spearhead the development of high-tech industry in Taiwan
To upgrade the competitiveness of traditional industries in the global market

19. ITRI: Scope of R&D Activity
ELECTRONICS
MATERIALS
CHEMICALS
VLSI Fabrication
IC Design
Flat Planel Display
Microwave Technology
Electronics Packaging
Material Design
Material Application
Material Reliability Improvement
New Material
Chemical Engineering Process
Applied Chemistry
Speciality Chemicals and Pharmaceuticals
Polymera and Fibers
COMPUTER &
COMMUNICATIONS
ENERGY & RESOURCES
Computer
Communication
Consumer Electronics
Energy Conservation
Systems Design
Resource Application
Environment Engineering
ITRI
OPTO-ELECTRONICS
MACHINERY
Optical Information
Electro-Optical Components & Materials
Optical Components & Systems
Automation
Precision Machinery
Power Machinery
Precision Parts & Components
METROLOGY
INDUSTRIAL
SAFETY
& HEALTH
INDUSTRIAL
POLLUTION
CONTROL
National Measurement Standards
Laboratory Accreditation
Industrial Quality Assurance &
Service
Measurement Technology &
Instrumentation
AEROSPACE
Chemical Accident
Prevention
Industrial Hygiene
Engineering Safety
Treatment & Control
Waste Reduction &
Reuse
Pollutant Analysis &
Monitoring
Quality Assurance
Aviation System & Components
Inspection/Testing
Market & Technology
Information

20. Impacts of ITRI Technology I. Establishing New Technology / Industry
VLSI
Computing
Communication
Materials
Sp. Chemicals
Automation
Opto-Electronics
IC: CMOS DRAM/SRAM PC
Peripherals
Telecom, ISDN
PLC
Auto Engine
ELE Components & Parts

21. Taiwan IC Company Family Tree (Ref: Dr. F.C. Tseng, 2002)
1980 : First IC Co.
UMC
Team
2μm , CMOS
Team
3.5μm , CMOS
TSMC
1987 : First Foundry
6-inch Fab.
IC Products
Team
2μm , CMOS
7μm , CMOS
ERSO
/ITRI
Winbond
1987 : First IDM
RCA
IC Products
(3-inch Fab.)
Team
0.5μm , CMOS
1974 :Technology Transfer
Vanguard
1994 :First DRAM
8-inch Fab.
SRAM/DRAM
Products TI
IPR
TI-Acer
1992 :First JV DRAM
DRAM Tech.

22. Taiwan IC Outperform WW IC
$M USD
Source: ITIS/IEK, Nov-2001; SIA, Jan-2002

24. Foundry Business Model
IDM/ASIC
Fabless Co.
IDM/ASIC
IDM/ASIC
Fabless Co.
System Co.
System
Design
System
Design
System Design IP
System
Design
IC Design IC
Design
IC Design
IC Design IC
Design
System/IC Design
Design
Services
Foundry
Fab
Fab
Fab
Foundry
Assembly & Test
Assembly
& Test
Contract
Assembly
& Test
Assembly
& Test
Assembly
& Test
Before 1986
1990s
After 2000

25. Outlook Taiwan IC Industry
M US$
23%
36%
31%
CAGR= 31%
40,000
IC Testing
34,721
IC Package
35,000
IC Design
IC Fab
30,000
25,332
25,000
18,056
20,000
15,558
15,000
10,000
5,000 -
2001(e)
2002(f)
2003(f)
2004(f)
Source: ITIS/IEK, Mar-2002

26. Fabless Industry Growth
Numerous Fabless Companies Were Formed Since 1987
Taiwan
From 10 to over 200
Many successful IPOs: VIA, Acer Lab, SIS, Realtek, Sunplus etc. US
Several hundreds
Many successful IPOs: Cirrus, Trident, ISSI, S3, nVidia, ATI, Broadcom, Oak, ESS, C-Cube, Mosys, Altera, PMC-Sierra etc.
China
Emerging with more than 100 companies

27. Taiwan IC Key Success Factors (Ref.Dr. F. C. Tseng, 2002)
1. Insightful Government Policies and Effective Execution
Industry Policies
Strategic Industries
ITRI
Financial Policies
Government VC arms
IPO for hi-tech companies
Successful Commercialization
Tax shelters and RD incentives
Shielded from government bureaucracy
Science park

28. Taiwan IC Key Success Factors (Ref: Dr. F. C. Tseng, 2002)
3. Good Model of Innovation
Technology
Continued own development to be among the leaders
Business Model
Foundry/Fabless model
Human Resources
Many local universities and technical institutes.
Thorough training in fundamentals
Advanced degrees in US universities
RD/management experiences in leading SC companies

29. Notebook PC Consortium
Project Management
Project Leaders
The Team
Motherboard (Hitran)
Components (King Tel)
CCL
EMI / Battery (Wiso)
Mechanical Design (Tek Star)
ITRI
CCL
TEAM A
Software (Cal Roc)
Testing (CCL)
Reliability (CCL)
PARTNERS
System Integration (CCL)
Promotion (TEAMA)

30. *
Reference: MIC / IDC
* Estimated for 2000

31. CD-ROM/DVD-ROM Production Scale Forecast World v.s. Taiwan
The Taiwanese forecast volume will reach 45 Million units, at 40% world market share

32. The Industrial Strength

34. Impacts of ITRI Technology
II. Upgrade Existing / Traditional Industry
• Design • Sporting: Bicycles, Tennis rackets, Golf clubs
• Material  • Plated Plastics
• Manufacturing • Machine Tools / Parts
• Quality - EHS • Fashion Fabrics
• Pharmaceuticals
• Green processes

35. 30

36. 31

37. Composite Materials Technology
CAD
Design
Polymer
Matrix
Fibre
Reinforcement
Processing
Fabrication
New
Product
Metal
Parts
Materials
Joining
Non-
Destructive
Evaluation
Performance
Testing

38. ITRI: Characteristics of Projects
Specificity
Niche Advantage
Market Orientation
Economic Feasibility
Industry Participation
Transfer Mechanism
Championship

39. ITRI: Technology Diffusion
Technology Licensing
Contract Services
Technology Spin-off
Strategic Alliances
Workshops and Training Programs
Technical Publication

40. ITRI: Technology Output
Item
1994
1995
1996
1997
1998
Technology Transferred to Industry
Technologies
Companies
264
452
280
418
304
465
332
499
340
510
Services Contracts
Number
904
1,004
1,019
1,050
General Services to Industry
20,177
27,061
26,253
27,811
28,000
Patents Granted
368
381
447
548
560
Technology Conferences and Training Programs
Cases
Attendees
898
52,074
880
59,492
830
56,572
957
68,918
69,000

41. ITRI: Intellectual Property Rights - Patents Awarded and Inventions

42. ITRI: Contributions to Taiwan
Establishing new high-tech industries
Upgrading traditional industries
Developing human capital
Protecting the environment & increasing industry safety

43. Structural Change of Manufacturing Industry: Taiwan (1986 - 1998)
1995
1998
Manufacturing, as %GDP
As % of Manufacturing:
Capital Intensive
Labour Intensive
Technology Intensive
Technology Manpower % of
(Total Employment)
R&D, as % Sales
(7.73M) (9.04M) (9.17M)
Source: Cheng Sun, “Development of Knowledge Economy in Taiwan” (Chinese) 2001, Sun Min Books, Taipei, 2001
Data from (MOEA & NSC)

44. Shares of Taiwan’s Manufacturing Enterprises 1971-1996 (Unit: %)
Employment size (persons)
1-99
>500
By number of enterprises
By persons engaged
By value added
Data Source: Industrial & Commercial census, Executive Yuan, Taiwan, ROC,
Reference: M-W Hu, Futures 35 (2003)

46. Source : Lee, Miller and Rowen, “ The Silicon Valley Edge”, 2000

47. The Features of the Silicon Valley Habitat
Knowledge intensity
High quality and mobile work force
Result Oriented meritocracy
Climate that rewards risk-taking and tolerates failure
Favorable government policies
Open business environment
University-Institute-Industry interactions
Collaboration : business, government and non-profits
High quality of life
Specialized business infrastructure
Ref: Lee, Miller, Hancock, Rowen, “The Silicon Valley Edge,” Stanford University Press, 2000

48. The Roots of
Hi-Tech Industry
Resources
Knowledge
Network
Capital
Infrastructure
Human
Leadership

49. The Roots of High Tech Industry
LEADERSHIP
RESOURCES
National vision
Strategy content
Policy commitment
KNOWLEDGE
RESCOURCES
Basic research
R&D support
Technology capacity
HUMAN
RESOURCES
Education
Training & Re-education
Entrepreneurship
Project management
CAPITAL
RESOURCES
Taxation
Banking practices
Venture capital
INFRASTRUCTURE
RESOURCES
Physical infrastructure
Legal system
Social support
Effective governance
NETWORK
RESOURCES
Globalization culture
Regional planning
Marketing Channel

50. The Changing World. Three axes of change:. Technology. Globalization
The Changing World! Three axes of change: * Technology * Globalization * Democracy

51. New Environment: Science,Technology, Society
* Accelerated speed of change
* Ubiquity of personal computer
* Internet and wireless technologies
* Overlapping manufacturing and service
* Compressed and transformed “middleman” trade
* Prominence of small and medium enterprises
* Globalization based on localization
* Competition and cooperation
* Life time learning and continued education
* Participative management

52. The old vertical computer industry, circa 1980
IBM
DEC
Spery Univac
Wang
sales and distribution
application software
operating systems
computer
chips
The transformation of the computer industry
FROM Only the paranoid Survive, by Andrew S. Grove, © 1996 by Andrew S. Grove
Used by permission of Doubleday, a division of Random House, Inc.
Source : Lee, Miller and Rowen, “The Silicon Valley Edge”, 2000

53. The new horizontal computer industry, circa 1995
sales and distribution
application software
operating systems
computer
chips
The transformation of the computer industry
FROM Only the paranoid Survive, by Andrew S. Grove, © 1996 by Andrew S. Grove
Used by permission of Doubleday, a division of Random House, Inc.
Source : Lee, Miller and Rowen, “The Silicon Valley Edge”, 2000

54. Concluding Remarks
Establish a national innovation system with clear goals and responsibility for the players
Nurture the roots of hi-tech industry
Strengthen national institute as linkage
Improve effectiveness of national institute by project selection, project management, and technology diffusion
Enable SMEs to take lead in innovation and technology entrepreneurship
Re-educate people for creativity & innovation

55. Thank You! occlin@ust.hk occlin@tsing-tech.com.hk