Written evidence from E J C Thomas, Director
of the Centre for Electronic Product Engineering (CEPE), University
of Glamorgan
REVIEWING "MANUFACTURING AND TRADE IN
WALES"
1. INTRODUCTION
The Centre for Electronic Product Engineering
(CEPE) at the University of Glamorgan has been dedicated to the
provision of technology transfer support to companies in Wales
using microelectronics technology since its formation in 1994.
The range of services provided by CEPE include:
— Technical and business impact advice
and assistance.
— Feasibility studies and design reviews.
— Prototype and demonstrator product
design and development.
— Design tool and methodology demonstrations.
— Technology and knowledge transfer.
— Industrially sponsored research.
CEPE has been involved in direct EC funded UK
DTI funded and regionally funded programmes during this period,
with a consequent high level of interaction with industry in the
region. This industry interaction has been largely with smaller
and medium sized enterprises (SMEs). Currently CEPE is a WDA Centre
of Excellence.
This report is focussed on the experiences of
CEPE in its interactions with industrial companies, especially
SMEs, in the principality. It therefore principally addresses
its experiences in academic support provision for industry, especially
those gained under UK and EC programmes.
2. CEPE EXPERIENCES
IN INTERACTING
WITH THE
WELSH INDUSTRIAL
SECTOR
This section of the report identifies the experiences
gained by CEPE over the past 10 years of interaction with Welsh
companies. The following statistics for CEPE's activity since
1998 are presented to provide a reference for this level of interaction:
Number of commercial contracts 112
Number of Knowledge Transfer Partnership programmes 21
Average number of company contacts per year 123
The following observations have been drawn from these
contacts:
(i) The majority of these contacts are with
SMEs in the principality. This reflects the reality that the industry
structure in Wales is dominated by SMEs (approximately 98.5% of
the total company numbers, approximately 81.5% of which have less
than 30 employees, and 17% with between 30-250 employees[9]).
(ii) The average contract value with these
SME companies is therefore relatively low (below £5,000).
This is generally consistent with the recent Lambert Review report
findings that "in 2000-01, UK business signed 10,951 research
contracts with universities worth £261 million. Of these
around 4,000 contracts were signed by SMEs. The average research
contract signed by SMEs was for £8,500, compared to £32,800
for larger companies". An interpretation of these figures
would indicate a natural tendency that most academic interfaces
to industry would favour collaboration with large organisations
and not SMEs. CEPE however, structures its delivery to meet needs
of Welsh industry and to support the predominant smaller company
sector in innovation.
(iii) The level of industrial research programmes
amongst these commercial contracts is low (to date only two with
SMEs have been instigated). The majority of the commercial contracts
have been targeted at shorter-term applications of technology
new to the end user company and not in developing new technology
in itself.
(iv) The majority of contacts (90%) were
with established companies, although there was a demand to support
start-up businesses.
(v) CEPE's practical experiences indicated
that the opportunities for licencing technology to the companies
it supported were very limited. Several factors influenced this
including the preference of many Directors to own the IPR on which
their products were based, the limited manufacturing volume of
SMEs which implied relatively low licencing income, and the specific
demands of each company's problems which were often related to
the niche markets in which they operate. The Lambert review[10]
indicated world-class levels of licencing income to be about 2.5%
of a University's research income (for example, in the USA the
world renowned MIT's revenues are only 3% of its research income).
The opportunity to support large sectors of indigenous Welsh industry
through a licencing only mode of academic support is considered
to be very limited.
(vi) Company contact management is not linearly
related to contract value. The level of project support required
by SMEs can often be more demanding than that for larger organisations
with a wider skills set to draw upon. This implies that the overheads
involved in the provision of industry support by academic groups
such as CEPE makes the operation unsustainable without public
recognition and financial support for the "third stream"
activities. Again, this is consistent with the Lambert report's
view that "third stream activities are not likely to generate
large sources of funding for universities. For some activities,
such as collaborating with SMEs, many of the benefits go to the
outside world rather than to the university. There is particularly
strong case for continued support of these activities from third
stream funding".
CEPE's assessment of the demand for its services
is that Welsh industry's requirement is biased towards technology
transfer and application contracts of modest value, rather than
research. This presents a major challenge for organisations such
as CEPE who seek to serve SMEs in the principality unless third
stream funding support is available.
3. CEPE'S EXPERIENCES
IN TECHNOLOGY
TRANSFER PROGRAMMES
Since its formation in 1994 CEPE has been involved
in several technology transfer programmes operated by the EC,
the UK Department of Trade and Industry, and at the Welsh regional
level. The experiences of the main EC and DTI programmes only
are discussed here to reflect the remit of this review.
3.1 EC Programmes
The main programmes that CEPE has been engaged
with at the European levels have been Best Practice projects conducted
under the Esprit programme (EC Framework IV) and the IST programme
(EC Framework V). The objective of these projects was to stimulate
the best practice adoption of emerging technology by industrial
enterprises in a wide range of industrial sectors.
The main programme in which CEPE has engaged
in during the period was the First User Action (FUSE), which operated
for a four-year period (1998-2001). Subsequent programmes (2001-)
have been instigated on a smaller scale with similar outcomes.
The FUSE objective was to achieve a technology
increment in European companies' electronic design capability.
The programme was not a "high technology" programme,
although high-level technologies such as microsystems and multi-chip
module technologies were included in its scope. The objective
was to increment a company's capability relative to its current
level of technology competence; this included non-microelectronics
companies using electronics technology for the first time.
The results achieved in Wales by CEPE are:
— 54 company projects initiated out
of a total European population of 550 projects. This clearly demonstrated
the demand for such technology adoption support projects by SMEs
in Wales.
— The average direct funding leveraged
directly from the EC for each of these 54 companies was £41,790.
The companies' average projected return on investment was 250%
over two years.
— 96% of the companies involved were
SMEs. Again this indicated the relevance of technology adoption
and innovation as objectives for SMEs.
— Of the companies involved in this
programme 48% were from the non-microelectronic industry sectors,
and included companies involved in such diverse applications as
slate quarrying to dairy product production. The majority of these
non-microelectronics technology companies were engaged at the
lower end of the technical complexity spectrum, but nevertheless
achieved significant benefits.
CEPE believes that the lessons of the EC FUSE
project can be summarised as:
— SME innovation can be widely stimulated
by promoting the best practice adoption of existing or emerging
technologies that are new to these companies.
— SMEs are attracted by the objectives
of such programmes, which promise short to medium term benefits.
CEPE's experiences are that alternative EC programmes dedicated
to supporting SMEs with longer-term research objectives were less
attractive to such companies.
— Such programmes can be designed to
be relevant to a wide range of industry sectors.
The best practice projects CEPE has been engaged
in are considered to be highly relevant to SMEs. The evidence
indicates this mechanism is the type of support required by SMEs
from centres such as CEPE. The relevant components of these mechanisms
are:
— Emerging technology identification
and promotion to a wide range of industry sectors.
— Assistance in preparing technical
feasibility assessments, including cost to market quantification.
— Through life project support, including
independent technical advice, to provide confidence of a successful
outcome.
Signposting to innovation funding support agencies
is also often requested.
It should be noted that such programmes are
no longer included in the portfolio of EC direct programme funding
models, and that EC priorities have moved towards a much longer-term
objective of establishing the European Research Area (ERA) concept.
The operation of Best Practice type programmes is now considered
a "subsidiary" item that is devolved to the state or
regional level. It is proposed that the regional development agencies
will in future have a more significant impact in determining the
focus and priorities of these schemes, and in their operation
on a devolved basis. This provides an opportunity for Wales to
influence this agenda.
3.2 UK Department of Trade and Industry Programme
experiences
CEPE has been engaged in business support programmes
aimed at the microelectronics industry sector originally initiated
in 1997. The consecutive programmes funded by the DTI and recently
terminated, were the Microelectronics in Business programme
and the ISI Electronic Design programme.
The objectives of these projects were to promote
best practice technology use and design methodologies. The main
mechanism for the delivery of this objective was to provide limited
technical feasibility study support to SMEs with the objective
of identifying best practice approaches to the technology/business
problem presented. No company funding sources were integrated
into the programme. Over 1,000 companies were contacted across
the UK per annum by the eight support centres engaged in the network.
Programmes assessments indicated that:
— 47% of the companies engaged in the
programme reported an increase in its innovation capacity.
— A survey of participating companies
indicated that an average revenue increase from new products of
40% was achieved. Productivity gains of over 150% were also achieved.
— 95% of the companies engaged were
SMEs, with 62% of the companies having less than 10 employees.
— 97% of the projects conducted used
programmable, "low end" technologies that were however
new to the companies engaged.
— The companies assisted were engaged
in a wide range of industrial activities, and can be generally
classified as users of microelectronics rather than microelectronics
companies.
The outcomes of these projects again support
the proposition that SMEs engage actively in support programmes
that promote appropriate, new technologies and support innovation.
The services required from a support centre such as CEPE again
focus on technology scanning and dissemination, and bespoke feasibility
studies that apply the optimum technology to a problem presented
by a company.
Again it should be noted that the current DTI
business support programmes have been restructured to a more limited
number of generic programmes and that the IST Electronics Design
programme is no longer operational. A limited number of new generic
products have been introduced (for example, as disseminated on
the DTI web site www.dti.gov.uk/innovate/) which will replace
such schemes. The in-practice operation of these schemes is yet
to be experienced and cannot yet be assessed.
4. CONSIDERATIONS
FOR THE
DESIGN OF
ACADEMIC-INDUSTRY
SUPPORT MECHANISMS
As a result of its 10-year experience in interacting
with Welsh companies, the following major lessons are suggested
for consideration in developing industry—academic links
1. Over 80% of Welsh industrial companies
have less than 30 employees. This pool of indigenous companies
represents a resource that could support the development of sustainable
growth within Wales. Support from academic groups in Wales should
target these companies.
2. The most widely required support by Welsh
industrial companies, especially the 97% of companies that are
classed as SMEs, is for technology application and transfer support,
and not for services related to new technology development (ie
research).
3. The overwhelming demand from SMEs in
relation to technology transfer will be to apply existing technology
in new product or process improvements/developments. The demand
for commercialisation of leading research technologies will be
small, as evidenced by experience and the benchmarking conducted
in the Lambert Review of Business—University Collaboration.
4. The value of commercial technology transfer
contracts will be very modest in relation to most research programmes,
although the overheads in supporting these are significant in
proportion to the contract costs.
5. Market "failures" mean that
large industry suppliers of technology often focus their promotional
activities largely on companies with the potential for higher
volume consumption, and not the smallest SMEs. SMEs, as a result,
therefore often then have poorer technology information to work
with than larger organisations; a situation that can limit technology
led innovation by these SMEs.
6. SMEs face barriers in technology scanning
and identifying the available emerging technologies with short
to medium term economic potential to support innovation. These
barriers arise as a result of the lack of spare technical capacity
that often does not arise in larger organisations. Academic centres
such as CEPE can perform a valuable role for SMEs by performing
this technology-scanning role and disseminating the results to
industry.
7. The technology-scanning function proposed
should be conducted widely, involving the identification of technology
opportunities on a worldwide basis. The technology-scanning role
should not just be focussed on the promotion of technologies developed
within a particular institution.
8. The technology scanning-function should
incorporate a technical feasibility service for SMEs to maximise
the utility of the service.
9. As the Lambert review identified, third
stream activities are not likely to generate large sources of
funding for universities, and "many of the benefits will
go to the outside world rather than to the university. . . There
is particularly strong case for continued support of these activities
from third stream funding".
10. The current funding model for Universities
involves the review and recognition of academic research centre
achievements by the provision of subsequent long-term (five year+)
income from public funding. This funding is referenced to academic
centres with credible achievements. No such established model
operates for the recognition and further development of long-term
third stream activities on an academic centre basis.
11. The involvement of academics in third
stream, industry support activities is a new proposition for many
universities (except where such activities involve larger industrial
research contracts or possibly licencing, in which case the activity
is recognised in the core academic role of research). As a consequence
career progression, reward and recognition issues have yet to
be fully resolved for academics operating in this role. This issue
can be related to the point (x) above.
12. Academic research achievements are universally
transferable throughout the academic community. Technology transfer
and academic-industry support achievements are not recognised
on such a basis. The provision of third stream grant funding in
a similar fashion to research funding allocations would assist
in addressing this issue.
5. CONCLUSION
The need to increase level of innovation in
Welsh industry is recognised as a key priority for the development
of the economy of Wales. However this innovation is not necessarily
led by leading edge research and more modest technology increments
can deliver significant economic benefits to smaller companies
in Wales. Academic—industry structures should recognise
this fact.
Appropriate academic centre—industry support
structures can assist in delivering increased innovation levels
amongst SMEs. These structures should recognise the merit of a
broad range of technology transfer activities on an academic centre
basis, and not necessarily only on a central organisational basis.
Long term structures should be considered that enable academic
centres with an assessed record of achievement in industrial collaboration
to be treated similarly to research expertise centres in academia.
The Centres of Excellence programme operating in Wales with the
support of regional agencies is an excellent initiative in recognising
and strengthening academic—industry support services. An
institutionalised, long-term corollary of this programme embedded
in the academic funding stream is suggested as a model for such
a development.
A long-term approach to academic—industry
support mechanisms is required. Amongst other benefits, this would
enable higher levels of integration and co-operation with other
industry support players in the region to be developed maximising
synergies in delivery and effectiveness of industry support to
be gained.
26 April 2004
9 Source Business Statistics 1998. Back
10
Lambert Review of Business-University Collaboration-Final Report,
December 2003, HMSO. Back
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