House of COMMONS
MINUTES OF EVIDENCE
INNOVATION, universities, SCIENCE AND SKILLS COMMITTEE
PLASTIC ELECTRONICS ENGINEERING
WEDNESday 18 jUNE 2008
PROFESSOR SIR RICHARD FRIEND, DR IAN FRENCH AND DR SUE ION
MR MIKE BIDDLE, MR VINCE OSGOOD, DR HERMANN HAUSER
and MR FERGUS HARRADENCE
USE OF THE TRANSCRIPT
Taken before the Innovation, Universities, Science and Skills Committee
on Wednesday 18 June 2008
Mr Phil Willis, in the Chair
Dr Roberta Blackman-Woods
Mr Tim Boswell
Mr Ian Cawsey
Dr Ian Gibson
Dr Brian Iddon
Dr Desmond Turner
Witnesses: Professor Sir Richard Friend, Cavendish Professor of Physics, University of Cambridge, appearing on behalf of the Institute of Physics, Dr Ian French, Philips Research Laboratories and Dr Sue Ion, Vice President, The Royal Academy of Engineering, gave evidence.
Q1 Chairman: Welcome to our first panel of witnesses to the first evidence session on a case study of plastic electronics engineering, which is part of an overall inquiry into engineering which the Innovation, Universities, Science and Skills Committee is undertaking. I welcome in particular Professor Sir Richard Friend who is here on behalf of the Institute of Physics. Welcome to Professor Sue Ion, Vice President of the Royal Academy of Engineering, and an old friend of the Committee - sorry, a friend of the Committee, who is here quite often! Welcome to you, Sue. Last but by no means least, welcome to Ian French of Philips Research Laboratories, who is here representing himself today and certainly is not here in an official capacity on behalf of Philips Research Laboratories.
Dr French: That is correct.
Q2 Chairman: I confess that when plastic electronics was mentioned as an interesting area by Sir David King, at his valedictory session with the Committee, before he stood down as the Government Chief Scientific Adviser, it was he who said that this could be the most exciting development for UK plc. Logystx UK said in evidence to us: "Plastic electronics will disruptively impact every aspect of conventional living across the globe over the next decade." What did they mean, do you think, Dr French?
Dr French: I think they have taken some basic developments and extrapolated far, far too far. I think that plastic electronics has potential in relatively small areas short-term; and these areas would have to be very successful before it could be extended to much larger areas. For instance, David King said that it could replace silicon chip technology. If that happens, it is beyond 25 years from now and the plastic electronics then will be unrecognisable to the plastic electronics we have today. I think that the case has been very overstated.
Q3 Chairman: Professor Friend, do you share that pessimism of this new exciting technology?
Professor Sir Richard Friend: No, I do not. I think one has to look back to see how radical technologies innovation has been and understand that what we take as technology here for ever is not a wise course of thinking. You can look at almost any aspect of current electronics and reckon that it is a pretty crazy way of making things, and a lot of it is very susceptible to revolution. I do agree with the statement that it would not be wise to try and replace silicon in areas where silicon works very well; but the opportunity is to take electronics into areas where it currently does not play.
Q4 Chairman: Like where?
Professor Sir Richard Friend: At the moment, in order to make a circuit with electronic devices in it, you really have to make it on a very stable, expensive substrate - a slice of a silicon crystal, or a sheet of very expensive glass - and that means that these are prized items that have to be placed carefully and used carefully. If, on the other hand, we can have functionality painted or printed everywhere, then there are huge ranges of applications for semi-conductors that are currently not served.
Q5 Chairman: Dr Ion, does it have remarkable potential to be disruptive technology; in which case, what do you consider is the real potential from your own point of view and from the Academy's point of view?
Dr Ion: From the Academy's point of view, and indeed from the view of the Council for Science and Technology, which undertook a report on the plastic electronics area as part of a wider study for strategic decision-making for technology policy last year, we have seen plastic electronics as a disruptive technology, one that would have application in many areas from medical devices right through to retail and fashion, through to potentially new forms of photovoltaic cells - so a very broad spectrum of products and processes together, and therefore worthy of strategic investment by the UK because of the academic lead in many of the essential elements to get towards these products. We thought it had a very large potential. The timescale though, because of the variety of products and processes, is less predictable. Some will come earlier to market and some will come out in 15 or 20 years or maybe beyond a 20-year time frame. That is why we classified it as high potential, high risk in the report that we wrote.
Q6 Chairman: What do you think are the limitations and bottlenecks? We were excited by David King's vision - and I take the point you are making, Dr French - but let us just get excited for a little while: what are going to be the bottlenecks; what will stop us really making the sort of progress, even over the next 25 years, that these disruptive technologies can bring? I know that Professor Friend may have different views. I am coming to him in a moment.
Dr Ion: Access to capital is a key issue to get you from good laboratory scale work through to a prototype that you can then industrialise. That is true of many areas in the UK where there has been high potential and where traditionally big, vertically integrated companies would have been able to make those kinds of investments. They would swallow the hits as part of their long-term R&D investment and they would get you from lab to prototype, where the design may change significantly in order to industrialise it to enable mass manufacture. That is a bottleneck for this sector. The ability to bring together key players in electronics, electronic design, chemical engineering and material science, in order to deliver you the sort of products that you might envisage is absolutely essential; and it is not clear that the UK has the wherewithal to do that effectively. Initiatives like PETeC up in the north-east have that sort of aim in mind; but whether or not that investment is sufficient or geographically correct or whatever may not be enough.
Q7 Chairman: Dr French - come on now, be more positive here! I am pretty sure that you do see huge disruptive potential for these technologies, but what is holding this back?
Dr French: The main problem for disruptive technologies is always existing technologies. If you want to try and replace the functionality, it is very, very difficult for a disruptive technology to enter. If you want price reduction, you have to think of price reduction of a greater that an order of magnitude to justify disruptive technology, because existing technologies always improve and always get better and cheaper; so anything you are aiming at now will have moved on. The real opportunity for plastic electronics is in areas where you create new devices that currently do not exist. The first real application for plastic electronics will probably be in flexible displays. There are a lot of technologies being developed to make them in different companies, and there are lots of permutations, but you need a new application area for disruptive technologies to really take hold. Once it is established, and once there is the infrastructure and the knowledge base, then it can probably be spread out sideward. A lot of proposals for what plastic electronics will do, apart from the plastic displays, will be largely for replacement technologies. LCD is getting better and cheaper all the time. Electronics and functionality are getting faster. More and more TFTs, transistors, crowd into smaller areas. It is very difficult for new technologies to compete in an existing area.
Q8 Chairman: Obviously, Professor Friend, displays is an area where this technology is currently envisaged; and yet when we received evidence from the TSB, they did not believe that it would play at the high end of this market; that it would not fit into that high-end space. Do you agree with that?
Professor Sir Richard Friend: If you are looking at where a relatively radical technology is going to get into the market place, it is not going to be, as Ian French has said, as a replacement of something existing; you have to go in with new functionality. The e-books space looks very attractive, where the chance of having something flexible and not breakable and easy to read is very appealing. Once it is established, that will then reduce the cost base or improve the quality of manufacturing. Off that, doubtless other applications will flourish. That has been the pattern all the way through. If one looks at what was done with thin-film silicon that is currently used to make transistors for liquid crystal displays, that was originally produced as a kind of curiosity, as little solar cells in Japan; but it turned out that that gave them the competence to be able to translate it into making large areas of transistors. Along came liquid crystals in need of an active matrix backplane technology, and off it went. No-one looking at the state of that early application for amorphous silicon would have foreseen what it turned out to be very important for. We have to recognise that we are at an early stage of this technology. We can identify that there are all those indicators to say that it can be disruptive; that it has reached a level of manufacturing competence that it ought to be able to find its way into some useful products. Beyond that, everything is possible.
Q9 Mr Boswell: Following on from that, I think that the Members of this Committee with a humanities background will be rather tickled to know that e-books are a likely runner, as you have identified. I just wonder if the other two wanted to give their own thoughts about areas that they see as being relevant to this. Could it be, for example, that plastic provides the option for overcoming some of the constraints in relation to medical devices, for example, that might have to use silicon?
Dr Ion: The area of medical devices in its widest sense was an area that was discussed with us when we looked at it - for example, smart bandages, where you are able to put an electronic carrier on that would send signals that are very cheap - and so in health service space, throw-away. That is only one area. There is potential yet to be realised, but medical devices certainly, and wider than I have just described.
Dr French: My main activity is in plastic displays that we are trying to industrialise through a Taiwanese company. I spend a lot of time looking for applications. There is a range of smaller specialist applications like intelligent bandages, maybe implantable drug delivery - where having flexible electronics compared to silicon is advantageous in a large area - and plastic imaging. I see potentially lots of small specialist areas that may be more suited for the UK, with high added value. Personally, I do not see any large break-through areas.
Q10 Mr Boswell: I wanted to ask a question about the people end of this in areas of operation, as to whether or not this is research or whether it is realistic to look at long-term manufacturing in the UK because of levels of expertise that are difficult to reproduce elsewhere - but also, given that we are looking at engineering generically, researchers in this field - do they think they are engineers? Do they call themselves engineers and what is their typical profile? Are these materials scientists who have got some electronics or are they electronics specialists who are looking now at materials or something else? What is the pattern of this?
Professor Sir Richard Friend: At the moment this is not a well-recognised mainstream occupation, and the strength is that it has been hiring into it people from many different backgrounds, from chemistry, from materials science and a significant amount of physics, and increasingly from engineering of all sorts. That is one of the areas where the UK does very well; that we do seem to be quick to be able to pull together these different skills.
Q11 Mr Boswell: You can make a team with the various areas of expertise!
Professor Sir Richard Friend: The evidence seems to be that in the larger early-stage industrialisation activities in the UK we have been very successful in hiring really excellent teams that do have this breadth.
Dr Ion: I would agree with what Richard has said there. Traditionally, in the United States you would probably find this sort of activity in a materials-science and engineering department where the breadth of coverage would encompass that which you would expect to see in the plastic electronics arena. In the UK, as Richard said, many of the current experts have their origins in physics departments or in electronics departments, where people with an interest in nano electronics have decided that this is a rich field of research for them. EPSRC's initiative to bring together multi-disciplinary work under this sort of banner is also quite helpful in bringing together materials scientists, physicists, chemists, chemical engineers and electronics experts to move towards challenge-based initiatives rather than particular narrow areas of research.
Dr French: I think you need a whole range of experts from very narrow specialists that typically work on materials, to generalists, to systems people and a whole range. They can be pulled together if there is an interesting proposal for them. Plastic Logic has shown that very admirably.
Q12 Mr Boswell: Is it an area where it is too early to organise representation in terms of either authenticating professional expertise or, dare I say, lobbying government or research councils?
Dr Ion: Lobbying for its own sake it is difficult to justify; but initiatives that would move the platform along, and not consider it as a narrow area but consider it as it is, which is a very broad spectrum of technologies with potential uses and different process routes to market and different products to market - because you do not know which one is going to win out. Richard gave an earlier example in the silicon-based area - it is important to treat it as a platform and not something that is narrow.
Q13 Dr Turner: Can I go back to a very basic question? Can you define for us in terms that an intelligent layman might understand, just exactly what plastic electronics is?
Professor Sir Richard Friend: Everyone will give a different definition. To go back to what I said earlier, traditional electronics requires that you manufacture - usually at high temperatures on to an extremely rigid substrate. That limits the materials set you use, and it particularly limits the substrates you could use. We would like to deposit or print a wider range of materials on to a wider range of substrates, and a way of doing that is to use materials that one would call "plastics", that is more correctly polymers, that would provide the semi-conducting behaviour. They are not unique. There are interesting developments with nano crystalline inorganics, which can be processed in the same sorts of ways. I would describe plastic electronics as the move away from the traditional semi-conducting manufacturing environment towards a large-area, low-temperature process, which enables flexible displays or, for example, low-cost solar cells, which I believe will be a very important area in the future. It is fair to say that the difference in principle is not one of electronic principles but of materials and fabrication methods.
Q14 Dr Turner: Can you envisage any situations where you might want to produce a hybrid product, which embodied both traditional solid-state electronics and plastic technology?
Professor Sir Richard Friend: If you were to look inside the prototypes around at the moment, they embody both technologies; but there are the bits that you want to have plastic and flexible, and of course there is considerable need for innovation of the conventional bits of silicon that might provide some of the drive support for the device.
Q15 Dr Turner: Are there applications where the organic semi-conductor can have such advantages over silicon-based or inorganic that they will essentially out-perform not necessarily in physical performance but commercial performance? One obvious example is photovoltaics, which are extremely expensive to manufacture using traditional technology; but is there potential for making an order-of-magnitude reduction in the manufacturing cost of photovoltaics?
Professor Sir Richard Friend: There is. There is an interesting figure of merit which is the right one to use for solar cells, and that is: if you buy a solar cell and put it on your roof and leave it switched on all the time so that all the electrons are used to displace carbon-generated electricity, how long should you have to have it on your roof in this part of the world before it has repaid the carbon debt involved in making it and putting it there? The figure I hear for silicon is five years, which means that most silicon solar cells do harm to the environment and not good, if they are not switched on all the time. We have to reduce that period of time by an order of magnitude, and I think that will be very hard to do with silicon; I think that it will need a radical technology, and plastic electronics in its broad sense is probably the way that is going to happen.
Q16 Dr Turner: What about medical applications? Would it be possible, using plastic technologies, to produce, say, an automatic pancreas that you could implant in a diabetic - that sort of application?
Professor Sir Richard Friend: I am not particularly expert in that area. I think one has to be very careful to understand what the advantage is. It may be an issue of bio-compatibility, and there are certainly some organic conductors that appear to show good properties in that respect; or it may be about flexibility of the final structure. The thought of being able to make something as complex, where there are all the physiological operations as well, is certainly challenging. It may happen!
Dr Ion: When you are looking at plastic electronics it is important not to look at it as a competitor to silicon but something that is different. The silicon-based industry has moved for many years now to higher and higher device performance, and smaller and smaller means to achieve that. At the moment the response in the plastic electronics arena is nothing like as good as that, but it will improve over time. That is where the innovation in the electronics side, coupled with things like printing technology and mass manufacture of much larger devices, will come into its own. Very simplistically, you could envisage a plastic sheeting that is rolled out across rooms, which is able to be deployed as photovoltaic delivery of electricity. It may be quite some time off, but it is that kind of challenge that will bring together the electronics experts, the chemical engineering experts and the materials experts to hit a challenge of that type.
Q17 Dr Turner: We have discussed two obvious areas of application. Dr French, can you tell us something -----
Dr French: Can I make a comment on plastic electronics? To me, plastic electronics is really thin flexible devices, and they can be made by a whole range of different techniques, including organic and inorganic semi-conductors. I do not think that polymer TFTs will be the successful technology in the long run; and that will be decided by the market and the industry over the next few years.
Q18 Dr Turner: We talked about two examples of possible areas of application, which essentially use functionalities or desired functionalities we are already familiar with. You rightly suggested that to get real disruption you have to introduce new functionalities that at the moment we have not even dreamt of. Can you give us some examples?
Professor Sir Richard Friend: It may not meet your criterion, but lighting is a very important area where there is obviously a huge premium now on energy efficiency. Semi-conductor, light-emitting structures, both inorganic and organic, appear to be able to offer more efficient ways of converting electricity into light and are vastly more efficient than current technologies.
Q19 Dr Iddon: Plastics become brittle over time, as the plasticisers in them leach out. Is there any evidence so far about the stability and durability of plastic electronics devices, or is it too early days?
Professor Sir Richard Friend: There is no single statement about how stable a plastic is or is not. The evidence to date is that you can take a technology that emerges out of a university environment, where it lives for a day, good enough to get a letter published in Nature but not enough to make a technology; but you can spend some tens of millions doing some proper engineering and then the transformation of performance is absolutely spectacular. The original light-emitting diodes that were made in Cambridge in the early 1990s would last for long enough to get our letters published in Nature. They now last for in excess of 100,000 hours, which is a very long time. The message that I picked up when starting my life as a physicist is that one should never under-estimate the power of engineering to convert something that appears not necessarily to be promising into something that is spectacularly good.
Dr French: I think all the indications are that the plastic electronics being developed will be good for lifetimes of five to ten years and probably beyond.
Q20 Dr Iddon: Which is probably as long as the device is needed!
Dr French: Yes, I think so.
Q21 Dr Iddon: Another concern, particularly of younger people, is the environmental friendliness of new devices. Can you compare the environmental friendliness of existing silicon devices with future plastic electronics devices? Are there any advantages to be gained on disposing of the devices, for example?
Professor Sir Richard Friend: There are two aspects. The first is the environmental unfriendliness of making it in the first place; and that is both the energy used and the chemicals used in making it. The silicon industry is notoriously bad in that respect because it uses some very toxic chemicals and huge amounts of energy, but what we are calling plastic electronics should be an order of magnitude better. The devices themselves contain less material, and most of it is carbon based and essentially it is non-toxic, so disposal should be relatively trivial.
Dr Ion: I would not disagree with what Professor Friend has said there.
Dr French: I think most devices you make will only be hybrids anyway for the next 15 or 20 years, with very, very small areas of silicon giving very fine functionality and computing, and a larger functionality at lower levels being given by plastic electronics. If you take the total hybrid on its own, then I think having an book keyboard compared to paper-making, shipping books around the world, printing and disposal, will give us significant environmental benefits.
Dr Ion: The plastic electronics component of new devices and new products will probably be small in the overall scheme of things, so the overall environmental impact of the total product is likely to be greater than that of the plastic electronics component of it.
Q22 Dr Blackman-Woods: I have seen some of this research in Durham on lights and materials, and it looked pretty exciting to me, I have to say! Some of the academics at Durham expressed to me that it is quite difficult moving from the laboratory into manufacturing. Do you think that is true? What is the biggest challenge in doing that?
Professor Sir Richard Friend: I think that question has in part been answered earlier in respect of the need for capital to be able pay for what can happen in the early stages of a recession environment. The current challenge we have is that across the West we have lost the large corporate R&D labs. Bell Labs has gone. We never quite had Bell Labs! We do have a much better R&D base in the universities than we used to. The UK is rather good at the moment. The challenge is in understanding the instruments that are needed, and it is not just government money in various forms but it also needs to come from the markets to be able to those next stages. I do not believe it is a skill shortage that is critical; it is more capital and management commitment.
Dr Ion: It is not just the financial aspects; it is bringing the right players together at that point in time. Whilst the initial breakthrough might have been in the physics or the materials science or whatever the proposition is, the delivery of it to the marketplace will involve manufacturing of some sort; so the addition of relevant mechanical engineers and electronic engineers at that point to industrialise the process is absolutely essential. That is an area where we have not been as good as we could have been at bringing the right people together and financing their activities.
Q23 Dr Turner: You have outlined what is essentially a generic problem in the UK with, for want of a better word, the innovation process and its capital input. It does not function, and so we have lost out in many areas, and other countries then reap the commercial benefit. Can we make a case to institutions that if UK plc is to benefit from plastic electronics, then it has to do something about its capital provision processes? Do you think that the new engineering technology - is it board or institute - I can never remember because we create institutions with such rapidity -----
Dr Ion: The ETI.
Q24 Dr Turner: The ETI - has the potential to fulfil the function you have identified; and have you made that case to it?
Professor Sir Richard Friend: I have to say that I do not know in great detail what the ETI is going to do, but my understanding is that it is likely to put support into existing industries because a pre-requisite is that there be a large company that puts its support in. I am not convinced that it is an instrument that is likely to nurture new technology across into the manufacturing environment. I believe it has been created for a different purpose.
Dr Ion: I think the jury is out on that one. Richard is right that the combination of private sector and public sector monies into it - given the way it has been set up you would think it ought to yield some demonstrated benefits. However, because of the influence of the private sector and its wish to have certain technologies pushed forward as part of their right of passage, then it may well still not do what you want it to do, which is to allow interesting and innovative energy technologies to get beyond that research and early development stage, out to a point where they can be successfully deployed. It is the energy sector - and the plastic electronics arena covers a much wider sector than just energy. It is clear that something has to move. We just do not seem able to get beyond the valley of death in the UK, where universities get to a certain point and then cannot get any further.
Professor Sir Richard Friend: If I am allowed to make a parochial plug for Cambridge, the capital markets in Cambridge have been relatively successful, not just in the plastic electronics sector; but there does seem to be some ability to raise money to have got a number of technologies to a relatively large scale.
Dr French: I think Dr Blackman-Woods's comment was very interesting because one thing that is capital, but also manufacture is getting harder as we have less manufacturing in the UK. NESTA talks about hidden innovation: there is a lot of knowledge in making things that is not captured in research labs, and it is getting harder to transfer things into manufacturing.
Q25 Dr Blackman-Woods: Can I go back to the point you made, Sue, about bringing engineers into that process. Why is that not happening? Is it because of the organisation of universities, or because they are not available, or does this only happen when the technology goes out to be commercialised? I would like you to say something more about that?
Dr Ion: I guess it is at the point where you decide you are going to make the investment in the prototype and beyond stage, which, if the finance were there, would automatically bring those sorts of people into play. It is not just the availability of the money; it is the timescale to get it. If you look at the initiatives that we already had in place in the UK, it has taken a long time to get them to realisation. Even with PETeC in Sedgefield, it has taken a long time to get it to where it is even beginning to have a point to make. We are behind the pace in other areas. Plastic Logic, and its investment in Dresden took 15 months from nothing to a working factory! We just do not appear to be able to do that in the UK.
Q26 Dr Blackman-Woods: One of the points that UK Displays and Lighting make is that academics here do not have access to research facilities and materials in the UK. Is that the case, do you think?
Professor Sir Richard Friend: I do not believe we are disadvantaged. I think the UK academic sector is relatively well placed.
Dr French: I have visited lots of research institutes in Japan, Korea and Taiwan; they are different, but I do not believe the UK is that disadvantaged, personally.
Q27 Dr Blackman-Woods: We have mentioned the plastic electronics technology centre at Sedgefield. I was very interested in your comment as to why geographically that could be a problem. It is just outside my constituency, but I am very glad it is there, I have to say! We are expecting great things of it. Will that help improve access to research facilities, do you think? Will it help commercialise some of this research - and what is wrong with where it is?
Dr Ion: I am not saying that where it is is wrong per se in terms of regionally, but when you look at where you would choose to site things, in terms of where there is an existing lead, then the Cambridge endeavour and what has been done there is a very big success story, with not a lot of public money in taking it forward. The north-east initiative is potentially a good one. You are effectively asking everybody who was a player in it to move to the location that is identified. There is expertise in Newcastle; there is expertise at Durham and there is expertise in Teijin and the other big chemical industries that are around the Teeside area - so everybody has to move to take part in the Sedgefield initiative.
Q28 Chairman: They would have to move to Cambridge -----
Dr Ion: That was not the point I was making, Chairman! It was just that - why would you not choose to site it more closely to one of the players in the region that was an existing player and make local transport easier not national transport necessarily?
Chairman: I am rebuked!
Q29 Dr Blackman-Woods: I just thought I would sidestep that and say why it should be absolutely where it is, but I am not going to do that. However, the question is still: will it help?
Dr Ion: It should because one of the areas of weakness is the area that PETeC has been set to address, which is basically a small prototype factory where you can plug and play, where you can have your ideas for commercialisation, for industrialisation, in what has hitherto been in one of the universities or even the industrial sector located close by, and actually try it out. The scope is there for there to be a number of different prototype units at any point in time; so the benefit it ought to bring will be technicians, who are multi-skilled and able to switch from one area to another; and a general scientific knowledge base that is able to help those who are seeking to commercialise get there faster, so it ought to work.
Dr French: I think there is a more fundamental problem - not where it is but whether it is doing the right thing. In the area of plastic electronics there are several different permutations of materials and manufacturing techniques that have been tried by different establishments and companies around the world. PETeC has chosen a very specific one, which is roll-to-roll manufacturing of organic semi-conductors. If in five years' time that is proven to be the wrong technology to back, then it would not matter where PETeC would be; it would be a failure.
Q30 Dr Blackman-Woods: So it needs diversification.
Dr French: I think it is wrong to try to second-guess the industry at the moment as to which will be the dominant technology in ten years' time.
Q31 Dr Blackman-Woods: That is interesting! We are picking up that this area of research is being hampered by the fact that it is not really recognised by the RAE in the research on materials and process.
Dr French: I think the UK is doing rather well so far.
Dr Ion: The recent RAE exercise took into account the ability to do inter-disciplinary research as well as to do the normal mainstream single discipline research. If the panels have done their job properly, then they will have taken it into account and the industrial interest into account and the inter-disciplines into account. The jury is out because we do not know what the outcome is but they ought to have taken that sort of initiative into account.
Professor Sir Richard Friend: I am not aware that the RAE has influenced this positively or negatively.
Q32 Dr Blackman-Woods: Where should we say the key institutions leading research are - or can you suggest three that we should go and look at?
Professor Sir Richard Friend: There is a useful list of active institutions in the assembled evidence that you have, simply in terms of people on the ground doing research. The two largest are Cambridge and Imperial College, but there is very distinguished work distributed around the country, and Durham is certainly one of these.
Q33 Mr Cawsey: I want to go back to manufacturing. We know about Plastic Logic going to Dresden because of the 15 months and, as you said, we do not seem to be able to do that in the UK. Is that a God-given decree so there is nothing we can do about it? Do you envisage that we will end up with mass manufacture of plastic electronics in the UK; and, if we are going to, what steps do we need to take to ensure we can do what other countries already are?
Dr Ion: In general terms there is no reason why manufacturing could not take place here in the UK. It is not an established industry world-wide. It has potential for modularity and a number of modules - small manufacturing pieces of a value chain - before a product is brought to market - not necessarily the mass investment that is required for a silicon fab, say - so you are talking of tens or hundreds of millions of investment as opposed to billions of investment to take it forward. Capital investment is high, but the differentiator between the Western world and Asia is getting less as expenses rise in the Asian market place. There is no reason why the UK could not play a role in manufacturing in a yet-to-emerge market. We need a faster way to get integrated, joined-up decision-making. At the moment people have to go to many different places to get the money together - a mixture of central government, RDA and private sector. I do not have any magic answers here, but it just seems there ought to be some merit in looking at how moneys are released, tax benefits given, et cetera, to make the decision chain an easier one - a one-stop shop instead of a many-stop shop - for an emerging SME that might become a larger company.
Professor Sir Richard Friend: It is dangerous to argue from the particular, which was the decision of Plastic Logic to go to Dresden, to the general. There are examples of manufacturing going on in the UK, and there is some mention in the submissions of G24i, the company in Wales attempting to produce novel solar cells in a large area of technology - not exactly plastic electronics but nearby. I do not know why that came to be in Wales, but presumably the capital and manpower was found to be attractive. On the whole, I would take comfort from the fact that Plastic Logic went to Dresden and not to Asia. I do not believe that the fundamentals in Germany are very different from those in the UK. We should perhaps learn from the Dresden experience and take that as something we ought to be able to replicate here.
Dr French: I do not see manufacturing of plastic electronics as being significantly different from other forms of manufacturing, so I imagine that high-volume manufacturing will tend to be done more towards Asia, and there will be significant small specialist manufacturing in the UK. I am not an expert, but I think small manufacturers need a whole raft of help from the Government still, in changes.
Q34 Mr Cawsey: Can plastic electronics be considered purely a printing process? Is that a desirable way to describe it?
Dr French: No. The technology I have invented that is being commercialised in Taiwan at the moment uses traditional TFT LCD factories to make plastic displays. The displays are made on a glass substrate and then released by a data process, but the end result - the product that would be delivered to a customer would look identical to the Plastic Logic TFT devices that are made by printing.
Q35 Mr Cawsey: I understand that plastic electronics devices can be printed at room temperature as opposed to silicon being in fabrication plants. Is there going to be a long-term requirement for fabrication plants and do we utilise the ones we have in the UK to the full extent?
Professor Sir Richard Friend: This is existing silicon plants?
Q36 Mr Cawsey: Yes.
Professor Sir Richard Friend: There has been some recycling of these in the Polymer Vision activity - a former Philips plant.
Dr French: I think that this plant has become redundant and it will either be discontinued, or hopefully we will find new uses.
Q37 Mr Cawsey: It strikes me - and this is particularly true of this sector - that one of the things we do well in the UK is R&D and coming up with ideas, but then the manufacturing of them in the end is done elsewhere, for all kinds of reasons. We saw the silicon semi-conductor industry establish some fabless companies. Do you think in plastics that will be the same in the UK?
Professor Sir Richard Friend: I enjoyed reading the submission from Teijin Films, which pointed out that in the LCD industry the two most profitable companies are not Asian. One of them is Merck, that is principally in Germany but also in the UK, that sells liquid crystals into that industry; and the other is Corning Glass which has a unique technology for making the glass back panes and is extremely profitable. Those are materials technologies. There is no reason why the UK should not be an extremely successful model in the plastic electronics world.
Dr Ion: I agree with that. Going back to your point about re-use of existing silicon fab organisations, Innos, in their polymer division at Southampton, made very good use of an existing silicon fab factory down in the Southampton area, and that was part of the reason that they have been as successful as they have been and as speedy as they have been.
Dr French: I agree with what Richard says about materials. Materials can be provided to the display industry, but the question of design, the model for fabrics design - the amount of design content and IP content in the design of a display is a small fraction of that for an IC. At the moment, all the design for TFT LCDs is done on site by small design teams.
Chairman: Thank you very much indeed. I do not know whether to be excited or depressed at this moment in time, but we thank you very, very much indeed for your contributions this morning.
Witnesses: Mr Mike Biddle, Technology Strategy Board, Mr Vince Osgood, Engineering and Physical Sciences Research Council, Dr Hermann Hauser, Amadeus Capital Partners Ltd., and Mr Fergus Harradence, Deputy Director of Innovation Policy, Department for Innovation, Universities and Skills, gave evidence.
Q38 Chairman: Welcome to our inquiry on plastic electronics. We welcome in particular Vince Osgood of the EPSRC, Mike Biddle of the Technology Strategy Board, Hermann Hauser of Amadeus Capital Partners Ltd., and Fergus Harradence from the Department of Innovation, Universities and Skills. Welcome to you all, gentlemen. Can I start with you, Fergus? Funders such as EPSRC and TSB support plastic electronics research and development. To what extent do the funding arrangements of the EPSRC and TSB overlap so that therefore we are not getting perhaps the best bangs for our bucks - or do you feel there is not a problem?
Mr Harradence: I do not think that they overlap. The TSB and the EPSRC work together as closely as possible as part of a wider arrangement between the Technology Strategy Board and the research councils, whereby the research councils will align £120 million of funding with TSB activities over the three financial years of the current Comprehensive Spending Review period, starting from 1 April 2008 and running to 31 March 2011. The TSB and the Research Councils are both co-located in Swindon, and working relationships between the organisations are very strong. That is certainly the perception of the Department, and we seek to encourage that.
Q39 Chairman: Mike, in terms of funding, just to give the Committee a clear idea, are we talking about co-funding, or replacement funding, or overlapping funding? What is the mechanism for sorting that out?
Mr Biddle: The competition process itself is very collaborative. We have the proposals in; everything is marked on its merits by the independent assessment panel. We end up with a ranked list and then we go through that with the research councils to look at what they might fund and what we would then invest in separate to that. A recent example - the Advanced Lighting and Laser Displays Competition that we have just held was over-subscribed. Some of the money that came in from EPSRC helped us to put some more projects through, so that was a good example of where we do work together.
Q40 Chairman: Vince, the EPSRC report on investment stated you had £68.2 million in projects "of direct relevance to plastic electronics". What does "direct relevance" mean?
Mr Osgood: It means we support long-term basic strategic and applied research. We can identify within that £68 million of research, training and Knowledge transfer activities that feed in directly to the plastic electronics chain. Some of the things that Richard Friend mentioned this morning - the chemistry, physics, engineering and materials science that underpin plastic electronics, we can identify specifically. There are broader areas of chemistry, and other areas, even mathematics, that may in time relate to it, but do not have that direct link at the moment. It is things that we can identify that are playing within the plastic electronics space that is the 68 million.
Q41 Chairman: We will come on to the funding of developments later with Hermann, but sticking with research at the moment, is there a tendency to be - if not quite picking winners in terms of research, actually moving in the direction of saying, "We are only going to fund this research council in those areas which we can actually see having some tangible benefit"? Does that not militate against your core mission?
Mr Osgood: Our prime criterion is to fund high-quality research. Unless it is high-quality research in whatever area, we will not fund it. You are right to say that there has been an increased emphasis in recent years on demonstrating that the research that we fund has an impact. That requirement has been there on the research councils since the original research councils of 1965. Certainly building on the White Paper of 1993, Realising our Potential, we said that the research that we should do should contribute in some shape or form to both the economic competitiveness of the UK and its quality of life. It has to be high-quality research first.
Q42 Chairman: You do not believe that has been compromised!
Mr Osgood: I do not believe it has been compromised. We have certainly given increased emphasis in our delivery plan over the next three years to a number of mission-focused programmes and cross-Council programmes in areas of national priority, energy being one, healthcare another, and security. All of those require high-quality research and training, and that is where the research councils come in.
Q43 Chairman: Fergus, talking about specific missions, were you with the old DTI?
Mr Harradence: Yes. Technically, I am on loan from the Department for Business, Enterprise and Regulatory Reform.
Q44 Chairman: You have just been loaned! Right - so long as you are not loaned to the Scottish Office we are all right! The DTI developed a proposal together with UK Displays and Lighting, for a managed funding programme for a very exciting programme for plastic electronics; and yet the proposal was never funded. Can you tell us what the stumbling block was there and the lessons to be learned; and is this something that could be funded in the future with perhaps TSB filling the void?
Mr Biddle: The programme that was discussed was prior to myself joining the Technology Strategy Board, which became an executive non-departmental public body in July of last year. What I can say is that in regard to current investment of Technology Strategy Board money, some of it, in conjunction with Research Councils, amounts to £38 million to date, which is not a million miles away from that £50 million that was discussed as part of that investment programme. We look at things on a case-by-case basis. We always justify any investment we make against four criteria: can the UK do it; is now the time to act; can we add value; and is there a global market? You mentioned earlier about picking winners; I would not say we are doing that, but we are trying to pick people who make sure they can exploit the science and technology within it. It is all very well to do good science for science's sake, but at the end of the day we are trying to help UK businesses to make money. That is where we are trying to put our investment, and that is the amount of investment we have made.
Q45 Chairman: You listened to my earlier comment that part of the motivation for this particular case study was the comments of Sir David King. He spoke so passionately about this area, but there was a hidden criticism that I picked up in his comments to the Committee: that we do need to start picking winners, and that plastic electronics is a potential winner; and that unless we start to back it we will not move anywhere. Yet this project with UK Displays and Lighting, which seemed to be an incredibly exciting project, has just died a death.
Mr Biddle: The important part there, though, is that it is not just a case of throwing money at the problem - if you will excuse the phrase. That always helps, but, let us be honest; there is also a recognition in businesses themselves. I was at meetings with UK Displays and Lighting when they were discussing what they should be doing for the future, and some of those people have submitted evidence to this session. They recognise that part of the value-added is to try and attract new thinking into the area through entrepreneurship, business leaders and creative designers. There is an element where you can help by investing in the centre and there is an element - we talk about innovation climate in the Technology Strategy Board and part of that is making sure we bring people together. Our recent strategy was entitled Connect and Catalyse for that very reason: we recognise that although we have £1 billion to spend over the next three years in conjunction with the regional development agencies and the research councils, that that is just a pot of money; it is what you do with that and how you can leverage that investment for the benefit of the UK.
Q46 Chairman: The TSB has identified, quite rightly in my view - I do not speak for the rest of the Committee - a role for it in bringing things together and acting as this very, very strong broker, particularly in the plastic electronics industry, which is an emerging technology with significant potential, as we have seen. Clearly, you have identified that there is a lack of joining-up, but what is it that is not joined up?
Mr Biddle: One of the examples I can give is not in the plastic electronics arena but it is something we are doing through our innovation platforms, and that is to do with low-carbon vehicles. We are working on an integrated delivery programme that tries to do exactly that; recognising that there is a lot of good research going on in the science base; recognising that there is a lot of business-applied research going on; and also looking for businesses and venture capitalists to pull that through. Sometimes, seeing the pathway through that can be difficult for people trying to interact with organisations like ours. We are trying to show that there is a path there, so through that integrated delivery programme, which admittedly is in the low-carbon vehicle space, we are trying to achieve that joined-up approach which you mentioned.
Q47 Chairman: But you see that there is a need for that within plastic electronics?
Mr Biddle: I think the need there is for us to connect and catalyse. I know it is the tag line for our strategy, but we will look at investment decisions on a case-by-case basis with regard to whether we may have competitions et cetera; but there are things we are already doing. We need to be looking at what we are already doing and how we can leverage that. Part of that £38 million I mentioned was approved just last week, which is a large project totalling £12 million, and it is an investment of over £6 million by ourselves, which is not something that is currently public so I cannot announce it here, but the new investment now is in something that is very, very exciting for this technology area. That is something that we will continue to be interested in in the future.
Q48 Chairman: So you are excited by this!
Mr Biddle: I did pick up on that, whether we should be excited! I do think it is exciting. I think the UK has an opportunity within this. One point I would like to make, if possible, is that everyone always looks and says that we can do R&D in this country, but we cannot do manufacturing, but I am all for "bigging up" the UK and I think we should sing about ourselves a bit more. For example, in our high volume manufacturing strategy that we published recently we pointed out that by GVA the UK was the sixth largest manufacturer in the world last year. People forget that and say it has all gone, but if you accept that fact and you do not fight for it then it is going to happen; and it is important that we try and champion it and make sure that things can happen.
Q49 Dr Iddon: Mr Hauser, how important has venture capital been in starting up the UK's plastic electronics industry?
Mr Hauser: I am only familiar with two companies that are Cambridge-based: Cambridge Display Technology and Plastics Logic. In terms of the amount of capital we have raised in the CDT, I think it was in the order of £50 million - although this is a dollar-denominated industry so if I make a mistake in dollars, please forgive me. We have raised about £100 million, $200 million for Plastic Logic.
Q50 Dr Iddon: What made Plastic Logic, in your estimation, such a good investment? Was it people, invention or what?
Mr Hauser: Well, I am excited about this. In fact, I am very excited!
Q51 Chairman: This is the theme now!
Mr Hauser: You have to be a believer and put your money where your mouth is in this industry of venture capital. What I see is that although it might not blow the silicon industry out of the water tomorrow, the potential of plastic electronics is at least equal to the potential of silicon technology, which has been around since the 1950s and so has had sixty years to mature. We are just at the very beginning of plastic electronics, but it is such a historic and unusual event that practically 100 per cent of our electronics is made out of a material called silicon and here we are at the threshold of a new material that the world accepts is a very interesting new way of doing it, which is a lot cheaper to produce and a lot more environmentally friendly, and addresses new products. It reaches the parts that silicon cannot reach and so you can make light, flexible e-readers out of it; and silicon systems cannot do it because you need a glass substrate, which makes the e-book brittle and too heavy. If you want a reading experience that is akin to paper, where you hold it in one hand and lean back and change hands and read it with the other, as we do with paper, then at the moment this is not possible with the silicon-based industry. I have a prototype in my briefcase - but this is a public meeting and we are only launching the product now so I cannot show it to you. I am happy to show it to you afterwards, and I hope that you will be very excited when you see it! It is the best quality I have seen to finally replace paper.
Q52 Dr Iddon: In your estimation, why could we not keep Plastic Logic in this country and why did we lose them? The point has been made earlier that it was better to lose them to Germany than to Asia, but why did we not spin them out as a manufacturing company in Britain?
Mr Hauser: This is a very good point, and I have been asked this question many times. The answer is that we did not lose it to Dresden. The best way of thinking about it is in a number of dimensions. First, where did the £100 million end up that we spent on this? The first £30 million or so was directly spent in Cambridge on doing the R&D and employing the people - and there are about 100 PhD level people employed in Cambridge. That is where a third of the money went. Two-thirds of the money is going to be spent in the factory in Dresden - but look at where that money went! That money did not go to Germany; that money went to the equipment that comes from Asia. As you rightly said, we have got to be very grateful that we managed to get this into Europe at all. When we looked for a site to put our plastic electronics factory, we worked together with KPMG on 290 different sites all over the world because, clearly, it is our fiduciary duty, as investors, to find the best possible production site for this. Wales was the closest in the UK, and it made it up into the top six out of the 207, so that was not bad - but it was a sad experience. The three final sites were New York, where we got the best subsidy and a free part of the East Fishkill, which was the big IBM research laboratory for silicon. We could have had that one for free, and the politicians said we could have fantastic subsidies, but we had to meet the Governor. I said: "I do not want to meet the Governor. Tell me the formula you use." That left Singapore, where there was a clear formula: "You invest that much, employ that many people; this is the subsidy you get." It was the same as Dresden: it was formulaic, so we could make a business plan out of that rather than having to go and sidle up to politicians. The final decision for Dresden was based on the following criteria - and then I will tell you how we almost came a cropper. The first criterion was the availability of highly qualified staff. Dresden was Silicon Saxony and that has 10,000 people employed in large-scale manufacture for AMD - the number two microprocessor in the world - 100 per cent of AMD's microprocessors come from Dresden. They had shut down their Austin facility because Dresden was so much better. There is a large Siemens factory that employs over 5,000 people. So we had access to the right people who knew about high-quality, high-yield manufacturing, which is a skill honed over many years. The biggest surprise to me - because if you had asked me whether we were going to put this factory in Europe I would have said "absolutely no chance" when we started this - but when we arrived in Dresden we were met by the Burgermeister, the Mayor, and all his team. He said: "We really want you here. We want plastic electronics. It is a key strategic imperative for us to have this here - what do you want?" I said: "Well, in Singapore they are going to build us a factory in six months; can you build us a factory in six months?" He said: "Yes, sir. What else do you want?" This is Germany; this is Europe. I said to him? "Show me the last factory that you built in six months." He pointed out the window and said: "See that building over there?" I said "yes" - it was a huge thing. He said: "This is the central distribution hub for FedEx for the Eastern Bloc - we built that in four months." I said: "Okay, how do you get planning permission? If we try to build anything in the UK it takes a year before I get planning permission." He said: "It is very simple, sir. We will give you planning permission to dig a hole. By the time you have dug the hole we will have all the other planning permission."
Q53 Chairman: It is not like Harrogate - I will tell you that!
Mr Hauser: We signed this deal in May last year. They said: "We will have the building built in six months. They had it built in six months. We have put all the equipment in and we are switching on the factory in September. At the moment we are a week ahead of schedule. This is unheard of in Europe. The last reason, it must be said, of course, is that at that time it was the last year that they were a category 4 area in Europe, so they could give us more subsidies than anywhere else in Europe.
Q54 Dr Iddon: That is an interesting story, and I am sure there are some lessons to be learned there. It is a "can do" attitude, obviously, and I appreciate that. Are venture capital companies falling over themselves now to invest in this area of manufacture?
Mr Hauser: No, it is still a big risk. We have just managed to raise another $50 million, but it is still tough because you have to be a believer in this new category of e-readers and e-books. We believe that it is going to be the I-pod of text, but other people think that it might still take a few years yet.
Q55 Dr Iddon: You are interested in manufacturing devices. Would the venture capital industry invest in fabless production at the other end of the chain?
Mr Hauser: This is extremely rare; venture capital does not normally invest in manufacturing; this is the one exception we have made because it is so state-of-the-art. We normally only invest in very knowledge-intensive businesses, but here the factory is the first such factory in the world, so in that sense it is very knowledge-intensive. There was no factory that we could go to. As you rightly pointed out, what we would really like to do is to have a fabless model where we just go to somebody else to have it manufactured, but that was not possible here. I should just add that we were lucky that we finally ended up in Europe, because when we bought this equipment - and, as I said, most of the capital went to Japanese tool manufacturers - we asked them to deliver the tool to Dresden in Europe, and they said: "Sorry, we do not do Europe. We do not have factories in Europe and we do not have the CE mark." We actually had to pay for the CE mark so that they would deliver it into Europe.
Q56 Dr Iddon: Your three sites were Singapore, Dresden and Wales. It seemed that one of the important reasons you went to Dresden was the subsidy. Was that also available on the Welsh side?
Mr Hauser: It was, but not to the same extent.
Q57 Dr Iddon: How big a role does subsidy play in your decision-making?
Mr Hauser: In order of priority it was the availability of trained personnel, and that was in place in Dresden. The speed of response and willingness to work with us on a very, very tight timescale - again, Dresden won - and again the subsidy.
Q58 Mr Cawsey: Fergus, this is mainly for you. I want to talk a little bit about the small business research initiative. We talked to Lord Sainsbury some time ago now, and this was part of his review. There was some concern that this initiative is not as successful as its US counterpart, and his recommendation was that we should make it more so. Why has it been less successful in stimulating R&D than the American system?
Mr Harradence: I think that when Lord Sainsbury looked at this and wrote his report maybe identified three reasons. First, in the UK the initiative is seen as a stand-alone initiative for commissioning research across a whole range of areas - a lot of it policy-relevant. It is not seen, as it is in the US, as a process to facilitate and encourage technology development. That is the way that it is managed in the US, and it is managed in a fairly rigid way in order to achieve that objective. Second, the problem in the UK is that there is no link between SBRI and other support mechanisms and other programmes, and in particular no link at the end of the SBRI process to standard government procurement procedures, which again is one of the big strengths of the US system and one of the reasons that it is so successful in that it helps companies develop, grow and attract investors, because there is the prospect that if you develop the technology successfully a government body in the US in a very large procurement project will purchase that technology, and you effectively have first right on that. Third, there is a lack of a quality control and auditing mechanism, which meant that a lot of the projects that were tendered under SBRI notionally, as part of the Departmental research budgets, were not technology-relevant, unfocused; and there was no-one coral-ing these and auditing them and saying, "Is this the right project; is this consistent with the overall objective of the scheme?" - and, if not, refusing to advertise the product and make the departments go away and do some more work on it.
Q59 Mr Cawsey: If that is a good analysis of all the reasons why, what are you doing now to make sure it is more like that?
Mr Harradence: We are essentially taking forward the implementation of the recommendations that Lord Sainsbury made in his report. We have spent the last six months developing a model for a reformed small business research initiative that we are intending to pilot with the Ministry of Defence and Department of Health this year, and hopefully the Department for Transport as well. To give you an idea of what the reformed SBRI will look like, we are trying to define a minimum SBRI budget of about £100 million per annum that will be a formal budget, not simply a percentage of departmental external research and development budgets that fluctuate, and are parcelled out into different bits of the organisation. Again, there is no central management and no consistency. We would like to see each department have an individual budget with which it funds SBRI projects. Second, we want a more consistent structure for the contracts, again modelled on the American SBRI approach where you have phase 1 projects worth £50-100,000, which essentially support the feasibility and proposals you receive from companies; and a second phase value of between £250,000 to about £1 million, which enables you to take the development of the technology forward if the results of the first stage are sufficiently promising. Also, more transparent, open, systematic process for tendering SBRI contracts through the Technology Strategy Board and also through individual departmental websites with more regular procedures, more consistent templates for advertising, better information and consultative mechanisms with potential stakeholders or companies or academics who can bring forward ideas under the programme and put in place an auditing function which the TSB would manage, which will oversee the scheme and ensure the departments are meeting their commitments.
Q60 Mr Cawsey: Do we have any UK plastic electronics companies that have benefited from the programme at the moment?
Mr Harradence: Not that I am aware of, and I would say it is unlikely because there would be a lot of areas at the stage of development of plastic electronics that are too early for SBRI. SBRI is not intended and is not used in the US as a means of developing the platform technology or doing some of the early stage research into potential applications. Where it would add value for plastic electronics and other technologies is the point at which someone has an idea for how to use the technology in a particular way that would lead to a specific application; and the aim of SBRI would be to fund development of that with a view that at the end of that process they had achieved or were close to achieving a commercial product.
Q61 Mr Cawsey: To take the Chairman's theme, we have all got to be excited about this today. You presumably would say that the old scheme was not applicable yet but the new one might be.
Mr Harradence: The old scheme could have been, but I think it unlikely it would have been used in that way. I would hope that the new scheme that we are developing, which will be more tightly focused on R&D and technology development with a much tighter definition of R&D for a start - we are not going to move to the - we are fairly used to the Treasury definition they used in relation to the tax credit -----
Q62 Chairman: I find it quite strange that you have Amadeus Venture Capital prepared to raise $200 million to invest in a technology, and yet a Government scheme does not consider it worthwhile even looking at! I find that incredibly strange, in terms of Plastic Logic.
Mr Harradence: I have not said that we would not consider it.
Q63 Chairman: You said you had not considered it. Does that mean that Plastic Logic never came to you for support, because this seems to be a classic case to fit into the UK SBRI programme, existing or otherwise!
Mr Harradence: They may well have come for some form of support. I think it is unlikely they would have sought support under the SBRI initiative.
Mr Hauser: Plastic Logic had government support from a number of government schemes.
Q64 Chairman: Not SBRI?
Mr Hauser: Not SBRI.
Q65 Mr Cawsey: The American programme provides 100 per cent funding to small businesses engaged in research that has the potential for commercialisation. Would this be what you could do in the UK, given the current state aid rules?
Mr Hauser: Yes.
Mr Harradence: The most fundamentally important point is that SBRI projects are awarded as contracts not as grants, which means state rules are less applicable in this area. Provided the contracts are tendered on the basis of an open, competitive process that is consistent with EU rules, and a market rate is being paid for the work done, the state aid rules do not apply.
Q66 Mr Cawsey: So you would consider 100 per cent!
Mr Harradence: That is the intention, yes.
Q67 Dr Turner: Does it have implications for IP ownership?
Mr Harradence: The intention is - this happens in the majority of cases at the moment, but the intention of the reform scheme is that ownership of the IP will be vested in the company that does the work. There might be exceptional cases where a Government department chooses to retain the IP, for example the defence sector or health technologies, but we would envisage that in the vast majority of cases the IP will remain in the companies that have the potential to exploit it.
Q68 Chairman: We understand that Cambridge Display Technologies received support under the SBRI scheme. Can you confirm that?
Mr Harradence: I cannot, but I can look into it.
Chairman: Thank you very much indeed.
Q69 Dr Turner: I would specifically like to ask Mike, whose board has made a significant investment in the plastic electronics technology centre: does it worry you that Plastic Logic only estimate a 50 per cent chance of success for the venture?
Mr Biddle: I think the important part of the PETeC initiative is it that it is the whole of the UK, so obviously Plastic Logic were involved with it in the early stages. The important thing is that we work with the industry to make sure that they can make it work for them. In fact, I have been part of some very robust discussions in the technology industry advisory group to make sure that industry gets what it needs out of that centre. What is very good is that the people running PETeC are listening to that and building on the input they are getting.
Q70 Dr Turner: Why do you think they were so concerned?
Mr Biddle: I do not think that is for me to comment really; Hermann may have some background on that. It is an important intervention for the UK, and it provides an open access facility. There was mention earlier by Ian French that it was not going to do what it needed to do, and it was going to be roll-to-roll. Roll-to-roll is one of the things that is on the evolution map, but it is not where they are starting off; they are starting on a sheet basis. Roll-to-roll is like a traditional printing house, so if you want newspapers you use the big machines and it flies through. It is almost like the vision for plastic electronics where you can add - where it can be most disruptive, but obviously there is an evolution path to that; you cannot just turn that roll-to-roll machine on; there is a lot of engineering and a lot of science that needs to happen first. This is some of the stuff that the PETeC will be doing. They are getting in some of the equipment and they are going to be honing some of the processes. This will then be something that different companies can play into. I am aware of a project that came in through our recent competition, and they are going to be using that centre to make sure they do iron out some of these pre-production issues because it is only when you turn the handle - and Richard made the point, never underestimate the value of engineering and I absolutely agree with that. It is when you turn the handle on these things that you start to see where the genuine issues are, and then you can address them.
Q71 Dr Turner: Hermann, perhaps you could throw some light on your concerns. There is almost a suggestion that it is perhaps not quite the right model.
Mr Hauser: Stuart Evans produced the paper, and he has a more detailed knowledge of this than I have. The point about roll-to-roll is very different from the Plastic Logic approach, which his much closer to a traditional LCD fab, albeit not on glass but on plastic. There is no doubt that the final vision is roll-to-roll, and this would be the cheapest and highest-volume way of producing plastic electronics. In that sense, it is even one step further than Plastic Logic.
Q72 Dr Turner: Do you think they would take too big a risk, trying to run before they can walk?
Mr Hauser: Roll-to-roll is being pursued in a number of places all round the world. It is not an exotic technology. It is longer term. There is a big debate on whether or not this is going to be the winning technology or not. It might well be.
Mr Biddle: They are actually trying to walk first in that roll-to-roll is something they are looking at, but it is not where they are starting from. They have a planned, phased programme. That is what they are looking to implement, and it is sheet processing along the lines Hermann described.
Q73 Dr Turner: Does the TSB have a role in development PETeC's business strategy?
Mr Biddle: We do not define their business strategy; they create a business plan and we look at that against the criteria I mentioned earlier, to see whether it warrants investment. We thought that by investing in the equipment - and the investment we have made is specifically in capital equipment - it would provide the open access facility the UK needs. There was talk earlier about whether it was in the right area; but there are important links between both PETeC and the CIKC in Cambridge, which is an EPSRC initiative. There are also links through that technology industry advisory group and through the knowledge-transfer network and UK Display and Lighting also into the Welsh centre for printing and coating. We are trying to make sure that we are investing in the right opportunities to make things open for the entire UK and try and join that up and make it clear where people can access it.
Q74 Dr Turner: Logystx UK have told us that the requirement for centres such as the PETeC and OMIC to become financially self-sustainable over a five-year period is perhaps going to distract them from carrying out their role of encouraging entrepreneurial activity in the rest of the UK because they are going to be so concerned about their own survival. Do you see this as a problem?
Mr Biddle: It creates dynamic tension, if you will excuse the phrase, in that obviously there is what they need to do for the entire UK and what they also need to do to make sure they are available for the UK; but they also point out that interacting with some of these companies across the world - because, at the end of the day I am for the UK, and hopefully that came across earlier but we are operating in a global supply chain. Part of the interaction with the people, possibly in the Far East, is almost a badge of honour; if you cannot interact with some of those people then maybe you have not got the right technology! It is fine line for them to walk, and they have addressed that in the business plan and are trying to walk that line. I will just point to the fact that through their advisory group, that is a sounding board for them to make sure they walk that line correctly.
Mr Osgood: EPSRC is not directly involved in the funding for PETeC, but the same issues of our funding apply for example in relation to Innovative Knowledge centres, which are for five years of funding initially; and there has to be the right tension between opening up an opportunity and a large amount of funding, but actually ensuring that things are delivered through that process. Many of our funding activities have - and we are moving more towards that - longer/larger - those sorts of tensions, in giving people freedom to operate but actually having a requirement that they are producing useful activities is one that is relevant in the science base as well.
Q75 Dr Turner: You do see the need to move to longer-term funding in appropriate circumstances?
Mr Osgood: As a research council, we are encouraging our research community to think beyond what is typically project-based funding, which is an RA - three years' worth of project funding into something more ambitious, which may be typically 2 million or so over a longer period. We have seen a growth in those programmes over the last few years and now we have something like 120 programmes of value more than £2 million -----
Q76 Dr Turner: ----- registered for much longer than three years!
Mr Osgood: Yes, and they would be typically five to six years. We would see over time about a third of our funding going into more of those longer-term ambitious projects.
Q77 Dr Turner: Can you see a role for rolling funding programmes when they could have a longer duration than that?
Mr Osgood: I could certainly see that we would have longer-term funding for particular areas - not necessarily the same programme, because the configuration may change over time. In this area of plastic electronics and its forebears, we have probably been providing university funding for at least twenty years. In the area of opto-electronics at Southampton, we have been funding that group almost continuously for 35 years - different projects, different emphases, different adjustments. Long-term funding is always available, but we tend to put it into somewhat shorter but now slightly longer packets.
Q78 Dr Gibson: I do not know whether you would agree with me, but the success of most enterprises in this country and across the world depends on bringing through young people not just to carry out the ambitious, exciting programmes that you guys are talking to us about; but they get involved and come up with the smart, crazy ideas that do make a difference. Vince, what are you doing to excite young people to come in and do PhDs and research fellowships? I know you have had partial success in the sense that people from Cambridge have gone on into big companies and run them. Are we doing much to get young people coming in to this field, and how?
Mr Osgood: In general, I think the nature of the research itself brings people in, and the fact that we have world-leading research groups in this country draws people in, not just home-grown but people from around the world who want to work with those research leaders that have been developed in the UK. We are certainly expanding our early-stage career fellowships to enable younger people to take more control of their research -----
Q79 Dr Gibson: How many have you got - tens or thousands?
Mr Osgood: Hundreds - not thousands but certainly hundreds. In this area of plastic electronics we have something like 80 PhD students both on research projects and through doctoral training grants at universities, using our money. There are a further 140 post-doctoral researchers on the research grants.
Dr Gibson: Can you give us a figure from the Council over the last five years for how that has increased or decreased or whatever, and roughly what is it worth in terms of research council investment?
Q80 Chairman: Can I ask a rider to that, Ian, in terms of information? Can you also let us know how many of these are working in university labs or out in industry labs?
Mr Osgood: We have a number of schemes where we give the case awards to the industrial ----
Q81 Dr Gibson: Case awards, yes.
Mr Osgood: There are industrial case awards, where the student spends a proportion of their time - 30 per cent typically, within the industrial collaborator. We also have Engineering doctorate programmes where the Research Engineer will spend 70 per cent of their time working on an industrial project in an industrial environment.
Q82 Dr Gibson: Is that increasing too? I remember when case awards came in it was quite an exciting idea. Are you decreasing it or increasing it?
Mr Osgood: We are increasing both the level of Industrial Case and we are also increasing the proportion of user-led research.
Q83 Dr Gibson: Can you give us some figures on that?
Mr Osgood: I can provide you with them.
Q84 Dr Gibson: Are there any success stories to say that because you had this programme a company of the stature of Amadeus arose in the middle of Cambridge Research Park -----
Mr Osgood: Yes.
Q85 Dr Gibson: You have one or two super heroes!
Mr Osgood: I have one or two examples. We took part in an RCUK-led study by external consultants on the economic impact of research council investments, and there was one particular research engineer that they identified. The capitalisation of his research work was to the value of £100 million.
Q86 Dr Gibson: But I am looking at how many you found and how many come through it and where they go on to. When you talk about funding these case fellowships, what about the reports I have in front of me here of one company that was refused a case fellowship, called UK Display and Lightings application: on what basis was that turned down? How do you make a decision whether one company is going to make it or not?
Mr Osgood: That was a highly competitive process this year. I do have the case in front of me. We had something like 80 Industrial Case awards each year which we reserved for working with agents - that is both the KTNs and RDAs. All the KTNs, of which UK Display and Lighting were one, made a bid for proposals. They were looked at competitively. Some of the comments led to them not getting them.
Q87 Dr Gibson: Read them out. These are the referees' reports. Go on, tell the world.
Mr Osgood: They did not demonstrate any added value to -----
Q88 Chairman: They did not get money from the DTI either, so -----
Mr Osgood: Yes. They did not demonstrate any added value to the student as a result of that award being awarded through the KTN; so some of the other KTNs, for example, had proposed to put in place mentoring schemes for the individual students and gave them showcase opportunities for working with members, so it was comparing one with the other. In the electronics space the Electronics KTN received three, Photonics KTN one, and Integrated Electronics and Products KTN two, all for three years. So there are six per year in the electronics space awarded through the KTNs, although none to UK Display and Lighting; but we do have a pool of 30 awards and we are encouraging the KTNs, particularly their innovative SMEs, to apply to the pool; so although the KTN may not have received any indirectly, its member companies can be bidding against the pool. Those decisions will be known next week.
Q89 Dr Gibson: Since you are so excited and passionate about this area, how far short do we fall in terms of the studentships that you acknowledge are important for now and the next few years and the future? How far short are we in numbers? You are talking for the Department, I guess as well. Are we three thousand short or four thousand, because it often depends on numbers? I do not know if it does entirely, but are we short, and do you ever get angry about it, that will curtail your success?
Mr Osgood: I do not get the feeling that we are short at the levels of PhD students and RAs. I do not think we have any evidence that we are short in this area.
Q90 Dr Gibson: How do you make that judgment then - one PhD student and -----
Mr Osgood: Total numbers come in through a variety of avenues, not all supported directly by EPSRC. There may be a shortage of domestically produced PhDs in this area. We do enable universities to apply for project students on the research projects.
Q91 Dr Gibson: Only universities?
Mr Osgood: Largely universities we fund, yes. Any students that we fund directly like CASE have to be UK nationals.
Q92 Dr Gibson: Why is that then?
Mr Osgood: It is part of the general Government policy of -----
Q93 Dr Gibson: I thought they liked foreign students; they pay astronomical fees.
Mr Osgood: The universities certainly like foreign students, both at the undergraduate level and the postgraduate level, but our studentship funding is for UK nationals.
Q94 Dr Gibson: How many universities have we that are engaged in these studentships, roughly? I do not know how many universities there are now - they grow by the day.
Mr Osgood: I was going to say that we support up to about a hundred. The vast majority of our funding, something like 75 per cent - and this would relate to studentships and grants - go to the top twenty, so it is concentrated in twenty, but the remainder has spread more thinly; there are some which have a small number of students.
Q95 Dr Gibson: What other sources of money could there be to help studentships in this area? Would regional development agencies put money in?
Mr Osgood: And we can encourage them. Our arrangements for our own studentships are such that if somebody else is prepared to pay up to 50 per cent, effectively you can double the number of studentships. If we awarded a KTN three students a year and they drew in other funding, they could double that and have six.
Q96 Dr Gibson: How many are involved in that kind of transaction, roughly? Is it on one hand?
Mr Osgood: It is probably not more than two hands.
Q97 Dr Gibson: It is not that many, so there is a great opportunity to increase the numbers.
Mr Osgood: There is certainly an opportunity, and that applies equally to the universities across the whole of their doctoral training accounts. It is something like 2,000 studentships, new PhDs, per year that we will support. Equally, the universities can attract additional funding to make use of those and potentially double them.
Q98 Dr Gibson: As a research council man, then, do you think universities have got the message about the importance of this field, to the level you feel it is important for the nation?
Mr Osgood: It is certainly growing in importance and excitement. We have just had a call for doctoral training centres, where we put more of our students into cohorts - so ten per year per centre for up to five years - a totality of 50 PhD students. We had 280 outline bids last week. We have short-listed 90, with the intention of funding 45, and a number of those are in this space. So, yes, I think universities are getting excited and -----
Q99 Dr Gibson: Is there any grade 5 assessment in research in your programmes attached to any of this kind of work, do you think? Can you point out any to me? You can point to Imperial for engineering areas and so on. Can you do that anywhere else, in terms of grade 5 plus?
Mr Osgood: Yes, Durham, Cambridge, Manchester.
Q100 Dr Gibson: So there are star outlets!
Mr Osgood: Yes. The ten most concentrated universities that we fund in this particular space will be 5 and 5-star.
Q101 Dr Gibson: Does the Government know this?
Mr Osgood: It is in our case - whether that has penetrated through or not -----
Dr Gibson: Whether they read it or not! Thank you very much.
Q102 Dr Iddon: Mr Hauser, one of the attractions of Dresden, going back to that lovely city, was the availability of skills. What is it about the availability of skills in Dresden; is it the fact that on reunification so many of the old industries were destroyed and therefore there was huge unemployment at reunification, or is the federal government of Saxony making a special effort to train skills for the electronics industry that is clustering in Dresden? These will be different lower skills from postgraduate skills that Dr Gibson has just been talking about?
Mr Hauser: The two main reasons were - one that I did not know was that Dresden was the micro-electronic centre of the Eastern Bloc before the Iron Curtain came down, so all the D-rams, the microprocessors that they were not able to import from the West because of the export restrictions that we had came out of Dresden. They had tremendous expertise. They have a university that is the best university in the Eastern Bloc on that, and arguably one of the best universities in electronics in the world. The Frauenhofer Institute is associated with it, again producing very high-quality people. In the end, our main criterion was the availability of highly qualified operators of the factory. My last comment on that really is that once the factory is fully staffed and up and running, we will be employing 140 highly skilled but comparatively lowly paid operators in Dresden, whereas we will continue to employ a hundred PhD level people in Cambridge; so our payroll in Cambridge is considerably higher than in Dresden.
Chairman: On that note, could I thank you very much indeed for being splendid and very enthusiastic witnesses this morning.
 Note from the witness: "research, training and Knowledge Training activities"
 Note from the witness: "Gross Value Added, or the difference between the value of a company's sales and the cost of brought in materials and services, which is used as a measure of the economic contribution of businesses. DIUS produces annual Value Added Scoreboard comparing the top 800 UK and 750 European Companies by Value Added."
 Note from the witness: "funded awards"
 Note from the witness: "currently funded by EPSRC"
 Note from the witness: "Studying for an engineering doctorate"
 Note from the witness: "These are CASE studentships, not fellowships"
 Note from the witness: "Member companies of the KTN"
 Note from the witness: "Studentships awarded through funding to research projects are open to non-UK students"