Sustaining competitiveness through technology advancement

Sustaining Competitiveness through Technology Advancement

Strengthening Semiconductor Ecosystems

Dr. Ali A. Iranmanesh Nov. 29, 2010

Outline • Information Economy

• Dawn of Globalization

• New Growth Model

• Knowledge Economy

• Technology Frontiers

• Business Ecosystems

• Semiconductor Ecosystem

• Conclusion

11/29/2010 - MIDA Dr. Ali Iranmanesh

Information Technology Three Laws of ICT

• Moore's Law - Maximum processing power of a microchip at a given price doubles roughly every 18 months. In other words, computers become faster, but the price of a given level of computing power halves.

• Gilder's Law - the total bandwidth of communication systems will triple every 12 months - describes a similar decline in the unit cost of the net.

• Metcalfe's Law - Value of a network (e.g. Internet, Telephone) is proportional to the square of the number of nodes. So, as a network grows, the value of being connected to it grows exponentially, while the cost per user remains the same or even reduces.


Dawn of Globalization

• Regional economies, societies, and cultures are becoming integrated through a global network of communication, and transportation

• Workers and goods can move nearly at the speed of sound, and information, ideas, IPs move nearly at the speed of light

• The pace of change is accelerating, technology plays a new and critical role, and advanced research is flourishing around the globe


This new environment is turbulent and unforgiving of ignorance. Nations that can harness technology under these conditions will prosper.

Competing through Technology • Capital, raw materials, land, and labor are not enough for

economic sustainability and growth

• Technology is the most important factor driving the economic engine of nations

• Nations which have mastered the management of technology are rewriting the rules of global industrial competition

• Countries with obsolete technology can not survive and strive in today’s highly competitive global economy

Technology absorption, innovation, R&D, and fusion dominate the contemporary world industry


Neoclassical Economic • For years, neo-classical economics

recognized only two factors of production: labor and capital – Capital input (tangible assets like

factories, machinery) is the most important source of economic growth

– Labor input is the next most important source of economic growth

Technological progress is the least important

Law of Diminishing Returns dominates


Technology and Economy New Growth Theory

• Following the work of economists such as Joseph Schumpeter, Robert Solow and others, Paul Romer of Stanford University, proposed new growth theory

• It broadens the concept of capital to encompass both physical capital, human capital and technology (and the knowledge on which it is based) as an intrinsic part of the economic system.


• Technological Progress is at the center of economic growth

• Creativity is the main driver for economic development.

Evidence of NGT Japan’s Economic Miracle

• A small island nation with a geographic area of only 0.37 million km2. About 90% of this small area is mountainous and barren. On the remaining 10 per cent live and work its 120 million people.

• Food production is insufficient for the population’s consumption. The country is deficient in natural resources of raw materials and minerals.

• Heavily dependent on imports of fuel, energy, and all types of raw materials for its industries, and of food for its people.

• The country’s urban and industrial base was almost destructed in Second World War.

• The industrial cities of Hiroshima and Nagasaki were obliterated by atom bombs, other cities and industrial units were reduced to ruins, and the surviving population was starving and destitute.

Source: Management of Technology and Innovation, P. N. Rastogi, 2010


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Transition and Transformation Phase I

• This phase, lasting from the early 1950s to the late 1970s, was characterized by achievement of very high levels of productivity, quality, and efficiency in manufacturing.

• Powerful innovations in the management of production, such as JIT, kaizen, TQM, cross-functional integration, QCs, fluid organizational structures, lifelong training of employees, concurrent engineering, and the development and refinement of various productivity techniques.

• During this phase, Japanese enterprises established themselves as global market leaders in several branches of industry and product lines.


This phase may be termed the phase of productivity and diversified technological capabilities of a high order.

Transition and Transformation Phase II

• From early 1980s Western firms were narrowing down the cost and productivity differentials, while countries like South Korea and Taiwan were gaining a competitive edge in low—end technology goods owing to their low labor cost advantage.

• Under these conditions, Japanese industry began to rely on endogenous R&D as the basis for sustaining growth and development.

• Japanese industry and government together in tandem fashioned a highly effective system of technological innovation.


This system has enabled Japan to sustain the dominant position in the global marketplace and to rewrite the rules of global industrial competition.

Other Cases • Japanese economic success has been closely followed by other Asian

countries notably Taiwan and South Korea, and now China.


Reference: JRC Scientific and Technical Report, “The Future of Semiconductor Intellectual Property Architectural Blocks in Europe”, EUR 23962 EN - 2009

Race Toward S&T Leadership

Forecasts of national R&D investment shares. Gross domestic expenditure on R&D (GERD) share of Organization for Economic Co-operation and Development (OECD) in percent. (Historical data through 2005.)

Forecasts of scientific publication share (after 2005) using forecasts of GERD share input to the model.

Reference: The Race for World Leadership of Science and Technology: Status and Forecasts, R. D. Shelton et al, World Technology Evaluation Center



“The lessons [of new growth theory] to be drawn for developing countries are straightforward:

In order to catch-up, a less developed country is well advised to invest in its education system and infrastructure and to try to get closer to the frontier of technological knowledge by providing incentives to domestic firms to imitate and innovate.”

Reference: New Growth Theory and Development Economics Heinz D. Kurz & Neri Salvadori, Sept. 2003

Knowledge Economy

• Generation and exploitation of knowledge play the predominant part in the creation of wealth

• More than 60% of US workers are knowledge workers

• Unlike capital and labor, knowledge strives to be a public good. Once knowledge is discovered and made public, there is zero marginal cost to sharing it with more users


The implication of the knowledge economy is that the way to prosperity is to make learning and knowledge-creation of prime importance.

Learning Economy, Human Capital, & Education

• According to New Growth economics a nation's capacity to take advantage of the knowledge economy depends on how quickly it can become a “learning economy”.

• In the "learning economy" individuals, firms, and countries will be able to create wealth in proportion to their capacity to learn and share innovation

• Creating a strong human capital requires education systems that impart higher-level skills to a greater share of the workforce.


Must foster lifelong learning, and education needs to become less about passing on information and focus more on teaching people how to learn.

Technology Frontiers • Advanced materials, nanomaterials, ceramics, polymers, metal alloys,

supercoductors,… • Life sciences applications, including biotechnology, medical devices, and

diagnostics, Personalized Medical Monitors, Single-Cell analysis, Engineered Stem Cells , Implantable Electronics,…

• Energy Technologies, quantum-dot PV, Green Concrete, Solar Fuel, Light-Trapping Photovoltaics, energy storage technologies, smart power grid,...

• Cloud Programming , Mobil 3D, Social Media,… • Manufacturing systems, including artificial intelligence, flexible computer-

integrated manufacturing, sensor technology,… • Advanced semiconductor technologies & devices, advance

semiconducting materials, flexible electronics, digital imaging technology, high density data storage, high performance computing, and optoelectronics, nano mechanisms, MEMS & NEMS,…


Technology Selection • Technology selection has serious problems of high uncertainty,

considerable risks of market and financial failure, and inordinate costs of investment in R&D over indeterminate long periods.

• Must consider all related issues regarding perceived needs, opportunities, threats, impacts, strengths, and weaknesses

• To obtain a dominant position in the global market place, Industry and government need to work together to develop a highly effective system of technology selection, acquisition and technological innovation.


Technology selection, acquisition, and innovations should be in the direction of reinforcing the country’s technology/business ecosystem

Business Ecosystem • In the early 1990s James F. Moore originated

the strategic planning concept of a business ecosystem, now widely adopted in the high tech community.

• A business ecosystem is a symbiosis relationships between organizations working together around a core technology platform.

• It replaces the traditional concepts of industry and market with business communities of interacting organizations that together create, deliver and consume goods and services.

• These ecosystems are complex networks of players, that go far beyond traditional competitors, customers, and suppliers.

Reference: The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems by James F. Moore (May 21, 1997)

Communities of organizations that

collaborate and compete in economic web of

relationships


Key Aspects of Ecosystem

• Actors (species) • Relationships (network) • Performance (health) • Dynamics (evolution) • Strategy and behavior of actors (role)


Ecosystem = Elements + Relationships + Evolution

Business Ecosystem Evolution • Pioneering Stage: create new working value chains

with partners based on efficiency, new opportunities, and new paradigms.

• Expansion Stage: Achieving market coverage while also blocking alternative ecosystems.

• Maintaining Authority and uniqueness in the maturing ecosystem. In this authority stage, it is important to maintain co-operation, contribution and encourage communitywide innovation and co-evolution when alternative ecosystems are created and ecosystem faces internal pressures.

• Renewal Stage: win the struggle against obsolescence, which already showed indications in the previous stage.


Ecosystem Health • Productivity : how innovations and raw materials

are converted into products, lowered costs and functions. Also, describes where investments are most efficiently used.

• Robustness: the ability to survive disruptions and unforeseen changes. A robust ecosystem provides its members a buffer against external shocks and provides some degree of predictability.

• Niche creation: ecosystem’s ability to create new, valuable functions and foster diversity that creates value.


Success Story: Apple’s Ecosystem


TV Industry Music Industry Network Operators Consumer

Developers Accessories

Apple

Providing Value to all Stakeholders = They all “Win”

Malaysia Semiconductor Industry

Semiconductor Fabs

Test Houses

Packaging

Design Houses

Equipment Vendors

OEM

Assembly Houses

Educational Organization

Professional Organizations

Standard Bodies

Direct Customers

Customer of Customers

Supplier of Suppliers

Trade Associations

Labor Unions

Government Agencies

Regulatory Bodies

Investors

Other Stake Holders

Competing Organizations

Suppliers

Service Providers


System Designers

Ecosystem Challenges Ecosystem Stage

Leadership Challenge

Cooperative Challenges Competitive Challenges

Pioneering Offer Value Work with customers and suppliers to define a new value proposition and paradigm

Protect your ideas from others who might be working toward defining the same offers

Expansion Develop Critical Mass

Bring the new offering to a large market Defeat alternative implementations of similar ideas

Authority Lead Co-evolution Provide a compelling vision for future that encourages suppliers and customers to work together to sustain the ecosystem

Maintain strong bargaining power in relation to other players – including customers & suppliers

Renewal Continuous Performance Improvement

Work with innovators to bring new ideas to the ecosystem

Maintain high barriers to entry Maintain high customer switching cost


Ecosystem Creation Identify powerful unmet market needs

Establish frameworks of co-evolution to bring together the ecosystem members

Look for creative ways to incorporate resources from ecosystem members

Inspire talented people, organizations, and companies to join in realizing a

common set of goals 11/29/2010 - MIDA

Dr. Ali Iranmanesh

invent new value chains that bring resources together in a creative way

Analyze technology needs and target technologies to be acquired

Strategies for Strengthening Semiconductor Ecosystem in Malaysia

• World Class Manufacturing (WCM) based on TQM, JIT, and CIM Responsive & Efficient Manufacturing High quality & cost effective Products Market share & Brand/competency Recognition

• Expand the ecosystem and increase diversity through technology development and acquisition of select semiconductor technologies, materials, and design know-how

• Employ latest educational systems and programs geared toward industry needs “learning” human capital for a knowledge economy

• Government and industry to promote technology research in universities, and commercialization of university research


References • Industrial Competitiveness and Technological Advancement: Debate Over Government Policy, CRS reports

for congress, February 23, 2010

• SUSTAINING AMERICA’S COMPETITIVE EDGE, Report from a Workshop sponsored by: NATIONAL SCIENCE FOUNDATION et al. DECEMBER 3-5, 2006

• New Growth Theory, Globalization, and the Economic Prosperity of U.S. Cities, Barry Bluestone, Northeastern University, February 24, 2009

• Nelson, R. (2005). Technology, Institutions, and Economic Growth. Cambridge, MA, and London: Harvard University Press.

• Nelson, R.R. and Winter, S.G. (1982) An Evolutionary Theory of Economic Change. Cambridge, Mass.: Harvard University Press.

• Romer, P. M. (1986). ‘Increasing returns and long-run growth’, Journal of Political Economy, 94, pp. 1002-1037.

• Romer, P. M. (1990). ‘Endogenous technological change’, Journal of Political Economy, 98, pp. S71-S102.

• Management of Technology and Innovation, P. N. Rastogi, 2010

• 2010 Global R&D Funding Forecast, Battelle, December 2009

• The Race for World Leadership of Science and Technology: Status and Forecasts, R. D. Shelton et al, World Technology Evaluation Center
