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 Definition Benefits Benefits Requisite Constituents Requisite Constituents Overview Overview Summary of Microsystem Clusters Summary of Microsystem Clusters Lessons Learned Lessons Learned Summary/Conclusion Summary/Conclusion

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

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

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

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

9. M3 Commercialization Report Card R&DAAAAAA-A-0 MarketingC-CC+C+C+CC0 Market ResearchCB-B-B-BBB+1 Design For ManufacturingC+B-BBBBB0 Established InfrastructureC+BB+AAAA0 Industry AssociationINCINCINCBB+B+B+0 StandardsINCINCINCINCCB-B-0 Management ExpertiseCCC+C+C+C+C+0 Venture Capital AttractionCB-B+ACC-C+1 Creation Of WealthCB-B+ACC-C-0 Industry RoadmapN/AB-BB+A-AA0 ProfitabilityC-C-C-C-C-C-C-0 EmploymentINCINCINCINCINCCC0 Cluster DevelopmentINCINCINCINCINCBB+1 Overall GradeB/B-0 SUBJECT1998199920002001200220032004Change

10. Technology Cluster Overview Technology Clusters have been around since the late fifties in Technology Clusters have been around since the late fifties in n Silicon Valley and Boston Route 128 Technology clusters were formed in these areas largely because Technology clusters were formed in these areas largely because n The IP of Stanford (Silicon Valley) and MIT (Boston Route 128) Silicon Valley and Boston Route 128 companies had no formal Silicon Valley and Boston Route 128 companies had no formal n federal or state funding other than through military contracts n (Ref: A. Saxenian, Regional Advantage) The first MEMS/Microsystems cluster was formed in 1989 The first MEMS/Microsystems cluster was formed in 1989 n Dortmund, Germany. Steag Micropacts and HK Planertechnik n were successful startups created by this n 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: Although a number of regions have attempted to create MEMS/Microsystems clusters over the past five years, only a few have succeeded to date: n Albany, New York n Washington n Dortmunnd, Germany Other regionsare currently attempting to develop MEMS/Microsystems clusters but it is premature to judge their level of success Other regionsare currently attempting to develop MEMS/Microsystems clusters but it is premature to judge their level of success n Florida n Georgia n Texas n Four Corners (New Mexico, Colorado, Utah, Arizona) n New Jersey n Ann Arbor, Michigan n Minatec, Grenoble France n Hsinchu, Taiwan n Korea n The Netherlands(East) n Edmonton, Alberta, Canada

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

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 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 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 There must be a market need Promotion is a critical item-must develop and integrated strategy/position/brand Promotion is a critical item-must develop and integrated strategy/position/brand n Edmonton, Alberta, Canada (COMS2004) n Albany-Nanotechnology,300mm/Conference (yearly) n Michigan-bio/Ad program, Michigan Technology Consortium n IVAM-Dortmund/Integrated program n Dutch High-Tech Connections Conference in Silicon Valley USA n Taiwan/Taipei Technology Conferences in Silicon Valley USA Need flagship organization to join cluster as anchor Need flagship organization to join cluster as anchor Need attraction for people/organizations to commit vs. build it and they shall come Need attraction for people/organizations to commit vs. build it and they shall come

15. Lessons Learned,continued Significant drawing factors include: Significant drawing factors include: n subsities and tax exemptions (e.g. Bolivia and Brazil nuts) n educated and skilled labor pool n quality of life of region Educating the current/future work force is imperative Educating the current/future work force is imperative n Michigan WIMS/NSF K-12 program Current and near-term economic issues Current and near-term economic issues n Venture Capital n Corporations n 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 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 tend to emerge from R&D-centric regions, vis-à-vis, universities and/or research labs Clusters provide many financial and market competitive advantages Clusters provide many financial and market competitive advantages Microsystems clusters are proliferating - approximately 20 worldwide to date. Nanosystem clusters presently forming. 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 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