UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 599-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INNOVATION, UNIVERSITIES, SCIENCE AND SKILLS COMMITTEE

 

 

PLASTIC ELECTRONICS ENGINEERING

 

 

Wednesday 2 July 2008

PROFESSOR SIR DAVID KING, MR CHRIS WILLIAMS, DR TOM TAYLOR

and MR NIGEL PERRY

 

DR RICHARD PRICE, MR STUART EVANS and DR KEITH ROLLINS

Evidence heard in Public Questions 103 - 184

 

 

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Oral Evidence

Taken before the Innovation, Universities, Science and Skills Committee

on Wednesday 2 July 2008

Members present

Mr Phil Willis, in the Chair

Mr Tim Boswell

Dr Roberta Blackman-Woods

Dr Ian Gibson

Dr Evan Harris

Dr Brian Iddon

Ian Stewart

Dr Desmond Turner

________________

 

Examination of Witnesses

Witnesses: Professor Sir David King, former Government Chief Scientific Adviser, Mr Chris Williams, UK Displays and Lighting Knowledge Transfer Network, Dr Tom Taylor, Plastic Electronics Technology Centre, and Mr Nigel Perry, Centre for Process Innovation Ltd, gave evidence.

 

Chairman: Could I welcome our first panel of witnesses this morning to the Innovation, Universities, Science and Skills Committee's plastic electronic engineering inquiry and welcome Chris Williams from UK Displays and Lighting Knowledge Transfer Networks (what a mouthful, Chris), Dr Tom Taylor from Plastic Electronics Technology Centre, welcome to you Tom, and Sir Nigel Perry, from the Centre for Process Innovation Ltd, welcome to you. I wonder if I could ask my colleague, Dr Turner, to begin this morning.

Q103 Dr Turner: Chris, your organisation, with the name that does not trip off the tongue very easily - we will call it UKDL for the time being - how do you measure its success as a knowledge transfer network? Can you give us any examples of the success stories to date?

Mr Williams: We have a very large number of examples of success. We are officially measured by the Technology Strategy Board on four metrics. The first metric is how many active members do we have who come and participate in our events and training sessions and what percentage of the total market does that represent? How many events do we hold and how many projects are we able to create between our members that are then subsequently submitted for funding under collaborative research, either under the Technology Strategy Board programme or into Framework Seven, and, finally, how much commercial money have we helped our members raise? Since companies like Plastic Logic and Dupont Teijin are founding members of my network, of course I am going to claim sole responsibility for the success of Plastic Logic raising $140 million in its recent funding round. That is probably a slight overstatement, but we certainly have been instrumental in creating consortia of companies to bid into the technology programme in the UK.

Q104 Dr Turner: You can truthfully say then that the landscape in plastic electronics in the UK would not be where it is now without your organisation?

Mr Williams: I believe that is an accurate statement.

Q105 Dr Turner: What do you find the big challenge in commercialising technology in this particular field, or is it the same story as innovation across the whole field?

Mr Williams: The biggest challenge I see is overcoming prejudice in the UK. Plastic electronics is not conventional electronics, so our conventional electronics industry has mostly disappeared with the end of the Cold War, and, with the move of whole consumer electronics to the cheaper labour countries, it is assumed that anything with electronics will be done in the Far East, and that is simply not the case. There are so many examples already of companies that are integrating simple elements of plastic electronics into their existing product portfolios to add value to what they already do, and of course the very highly sophisticated developments of the likes of Plastic Logic, who you heard at the previous session, Polymer Vision, who are producing part of their assembly in Southampton. They are coming to the market later this year, and with the colleagues that I have here at the table, with the PETeC Centre and their supplementary colleagues around the UK, with CIKC, with the Welsh Centre for Printing and Coating, with OMIC in Manchester and with the activities of Imperial in London, there is a solid base of research support for bringing this technology to the market place.

Q106 Dr Turner: You collaborated with what was then called the DTI (we now know that as something that sounds like a character from Jane Austen, and behaves like one as well) on a proposal for a managed funding programme for plastic electronics. This never actually came to pass. Is the Technology Strategy Board taking up this line of approach and, if not, do you think it worth trying to revive the principle of the managed programme?

Mr Williams: I think the concept of a managed programme is essential for this nascent industry, and part of the problem that we have is that we are creating new solutions, we are adding value into other product areas. I am able to point out that plastic electronics will be used in life sciences, it will be used within the food packaging industry and it will be used within the pharmaceutical industry. All of those areas need help to understand what it can do for them and what it can bring to them, and the idea of a managed programme, the basic concept, was that the community of plastic electronic interested companies in the UK would determine what it needed to move to mass exploitation but it would not be a dictat down from DTI, "We think this is a good idea. Let us do that, chaps." It would be the community saying, "These are the problems that we have got. Let us address those", and then the community as a whole will benefit and will drive the technology into commercial exploitation.

Q107 Dr Turner: Why did it not happen and what are the chances of making it happen in the future?

Mr Williams: It did not happen because the proposal run by DTI and the report that was created, which was very well received inside DTI, came just at the time that DTI was going to then split itself into two and the responsibilities travelled down to TSB. TSB have their own interpretation of innovation: they have their innovation platforms, they have the collaborative research programme, they have the knowledge transfer networks, and we are very supportive of those activities, obviously, they pay us, but at the same time they have no vehicle in position today to run a managed programme in the way that DTI used to do - they have no facility at all - and it would be very valuable for our sector, and I am quite sure it would be the same for other sectors, if that were added to their armoury of tools.

Q108 Dr Turner: But at the moment you cannot see any receptiveness to that in BERR?

Mr Williams: Not at the present time, no.

Q109 Dr Iddon: Could you tell us how valuable the support EPSRC gives to plastic electronics is and whether you feel they can do more in this field?

Mr Williams: The support that the sector is getting from EPSRC is a curate eggs: some very good bits and some bad bits. The good bits are the programmes that they are running on responsive mode research and the investment that they have made into some universities round the UK. If you were to go to some of the lesser universities - Nottingham, Trent, Strathclyde, Hull, Bangor, Aberystwyth - you would find that the equipment centre they are working on is not up to the quality level of those in Cambridge, for example, or in Manchester, but there is a big problem in that the whole ethos of EPSRC is set up to support excellence in science, and in taking the technology forward there are bits of work that have to be done that are, frankly, boring and that will not contribute in any way to a universal RAE rating, and we at UKDL, on behalf of the PE community, have been told, quite bluntly, by our university members they are not interested to do the boring bits because it will not help them in the RAE, and that is where I think EPSRC do need to make some form of contribution in helping the boring bits of science be done because they are essential to complete the whole package.

Q110 Chairman: Can we ask Nigel and Tom if they could comment on that, in terms of EPSRC?

Dr Taylor: We see a continuum here. EPSRC is funding fundamental research, but the challenge for this industry, the challenge for the innovation, is to make those connections that Chris was making to the market place, to applications. The sheer scale of this industry requires private sector investment on a large-scale. So what we have to do is to take the innovations that have come in the UK and get them to a point where they are attractive, to attract investment, and this is something the UK has struggled with. I am not going to suggest any one particular solution, but all the players have a role to play here, including EPSRC. I do not think it is our place to say that they should change their model, but they need to be cognisant of the fact that some of these research areas, particularly plastic electronics, will have commercial application, and it is possible to align the work that is coming out of universities to make that attractive to the private sector.

Mr Perry: I think I would agree with Tom's point. It is a supply chain, if you will, that reaches from the basic research in universities right the way through to the market, and it is important that that supply chain is connected. An understanding of where plastic electronics and printable electronics will be used in the market place is still only emerging. There are lots of applications, there are lots of potential opportunities ranging from smart bandages, through wallpaper, through displays, through to lighting, et cetera, and being able to make the connection so that messages pass up and down that supply chain is critical. I think what EPSRC is doing in pursuing excellence is to be very celebrated. It is the connection then into the support that TSB gives and then the TSB gives on, through devices like CPI and others, and then into industry that is crucial.

Q111 Dr Iddon: I thought we had convinced those who judge universities formally by the RAE that they had to take applied research into account. What you are telling us is that you do not think they are taking applied research into account.

Mr Williams: They are still looking at the excellence of applied research, and in taking little elements of superb science and integrating them together, there are some very boring little bits of work that need to be done, and the universities, generally, are finding it very difficult to be motivated to address those areas.

Q112 Dr Gibson: Can I follow that up? Fundamental Blue Sky assessments can be pretty boring too, as the speaker who has just come in will vouch for, I am sure. You have to repeat things, for example, to establish it. When you say that the RAE is pressurising these people to do things, is that because it is only to get publications? Is that what it is all about? Is that what they mean by boring, that there is no publication and so they will not do it? All research can be boring in a sense?

Mr Williams: It is not so much that the performance of the work itself is boring, it is the review of the proposed activities by the panels within the EPSRC college. When they are looking at the scientific content of a proposal they will grade a project proposal and deem it suitable for funding, or not, above the line or below the line, as to the quality and the excellence of the science or the engineering within that project proposal, and if bits of the work are simply, you do not have to be a super scientist to achieve that, it is just tedious work, that project will not get rated as strongly as a project that does contain excellent science.

Q113 Dr Gibson: It is their individual judgment, is it?

Mr Williams: Yes.

Q114 Dr Iddon: Can I pursue this argument a little. You tried to engage the EPSRC to sponsor case studentships in this area and that did not come off. Why do you think you failed to get that engagement going and what do you have to do to reverse the position?

Mr Williams: As the KTM we were new boys on the block, and we have not had involvement with the case studentships before; so I can understand the historic arrangements that existed for the award of case studentships going against us in that instance. We are working very closely with the EPSRC in different ways. We are working closely with Imperial to help them create their case for the DSC proposal that they are submitting through to EPSRC, and that has a very heavy focus on industrial content and industrial training of graduates and postgraduates with plastic electronics, and we are also learning more from liaison closely within EPSRC how can we create a better case for a proposal for securing case studentships next time round.

Q115 Dr Iddon: I guess this question is to all three of you. Countries like Taiwan and Japan seem to have an ability to drive early stage technologies like this one forward much quicker than we can in Great Britain. There seem to be barriers in our country, and so we lose out to the Far East. What do we have to do to emulate the Far East in getting these early stage technologies to the market?

Mr Perry: It is something we looked at very closely when we set up CPI, which is to understand how this innovation supply chain worked, and what we discovered by looking at the American system, where the numbers are quite clear and easy to get hold of, is that for every dollar, pound, euro or yen, or whatever, is spent on the basic research, it can take up to three-times that amount of money to actually commercialise and turn the research into a useful product or service. The interesting question is where does that 63-times extra money come from? The answer, we believe, in CPI, is that it comes from the private sector. So the innovation pace is really set by the ability to engage the private sector in actually translating that research into useful goods and services. The CPI model is based on bringing industry, together with academia, together with the rest of the necessary know-how and, very importantly, the necessary assets to actually allow industry to de-risk innovation. Innovation is a risk-management process. Reducing that risk and getting the investors in to support it is what it is all about. I would suggest, though I have never studied the Japanese system, that there may be a greater industrial involvement and there may be a greater risk-management consciousness in that process. Certainly in those systems that we have looked at, like the American system and potentially like the Dutch system and the German system, we see more industrial involvement, more de-risking processes and more use of devices like the Centre for Process Innovation earlier on in the process.

Q116 Dr Iddon: But Tom, we are risk averse in this country, are we not?

Dr Taylor: I think I go back to the comment that Nigel put. We tend to be risk ignorant; in other words, not understanding all the factors in order to manage the risks. We can create a culture similar to the Dutch models by working in a connected way across the institutions you have got arrayed before you at the committee this morning, across the EPSRC, the TSB, intermediate organisations like CPI, to tackle the risks. The risks in innovation are most manifest early on when the technology uncertainty is highest, and that is something that is done often very well in other countries. So when ideas are thrown out of universities, at that point you need to create a climate in the UK where private sector finance, private companies, find it acceptable to invest, where we are a competitive place to do that work, and that is the challenge. The city institutions understand financial risk. They need to engage with bodies which can help them appreciate the technology risk, and that is that, and that is something where there has historically been a gap. CPI, as Nigel has said, was set up to address that very point, but we are almost unique as an organisation in the UK doing that.

Q117 Dr Iddon: Can you help in this context, Chris, your organisation, UKDL?

Mr Williams: Yes, we are totally committed. We are spreading the word so that we can encourage the pharmaceutical companies to bring the plastic electronics into their area by the implementation of anti-counterfeiting circuitry on the packaging. Looking at food packaging that can detect if the food has gone off is very attractive to major stores in the UK. A project in both of those areas submitted into the technology programme did not receive funding because the risks were high and they fell below the point at which the funding had to be cut off in recent calls of the programme. So the interest is there in large industries in the UK to adopt this technology, and it will happen, but it is the function of funding being available.

Q118 Chairman: Can we welcome Professor Sir David King to our panel? It is very nice to see you again, David. This particular inquiry, looking at engineering in the broad sense but plastic electronics as a specific case study, one of the motivations for it was as a result of your valedictory appearance before the old Science and Technology Committee where you said this, "In Britain we have a world leading position in a technology that could wipe out silicon chip technology and convert photovoltaics into easily accessible materials at a much cheaper price, and I am talking about plastic electronics." It was a very bold statement that you made at that time before the committee. Are you still as excited? Do you still feel that you under-egged rather than over-egged the possibilities of this technology?

Professor Sir David King: I am probably not guilty of underrating the possibilities, but I do not draw back from those comments at all. What I, of course, was emphasising is the need in Britain to get away from the idea of: let us not back winners. I think, fine, let us not back losers, let us not back companies that are no longer fit for purpose, but when we see something on the horizon that has a real potential for our economy, and I am looking particularly at the high added value end of the manufacturing economy, then think we should back it and back it to the hilt, and so I was just using plastic electronics as an example of that. If we look across to South Korea, when Broadband was developed in South Korea it had no foothold anywhere, I would suggest, just as plastic electronics had no foothold anywhere a few years ago. The South Korean Government stepped in with massive funding and, within a relatively short space of time, Broadband had taken off in South Korea before the rest of the world even knew about it; and that was the Government backing a winner, and that winner has massively turned their economy around. So I am simply saying sometimes we have to have the courage of our conviction and back something where we appear to be in the lead. We have this massive strength in the science base, we all believe in science, innovation and wealth creation, so we see it as an investment into our future. How do we make sure that that develops? I think we have become good at first stage development, at VC development, so the number of small high-tech companies we have in the UK is now actually exemplary; we lead the way in Europe. All I am looking for is the next stage of development where we take these small companies that are showing promise into the plus 50 million valuation level, where they become real players in our economy, and what are the blocking points there.

Q119 Dr Iddon: In the previous set of questions, the one thing that was not mentioned is that Taiwan and Japan have a partnership approach between industry and government. Do you think that that partnership approach exists in the UK? If it does not, should it be developed in line with what you have just said?

Professor Sir David King: Yes, and you could use other examples as well. If we look at the Fraunhofer Institutes in Germany, they are directed at particular sectors of their manufacturing industry as a back up, and it is very real government money that goes into those Fraunhofer Institutes. We have the knowledge transfer networks, I think we are toying with getting into that position, but we are not big players in the way these counties are in backing nascent industries.

Q120 Chairman: In terms of the UK Government, do you feel that they are making sufficient efforts to support this emerging technology? I take your point that the Government has been averse, and the old DTI was averse to picking winners.

Professor Sir David King: Yes, and the Treasury.

Q121 Chairman: The Treasury, then, all right. They rule everything, but do you feel that there is a sense of change as a result of the changes to the machinery of government, the way in which we are now looking at innovation, innovation is at the heart? Do you feel the Government is backing plastic electronics?

Professor Sir David King: I do not think I see sufficient signs of progressive change in this area, but it is not just government action. We have the one of the leading financial centres in the world in the City of London, and my question really was why in the City of London the big financial players had not developed an expertise to examine what is happening in our science parks to invest into these promising high-tech companies. So it is not just government funding that I am looking for, it is stimulating that wonderful city and its financial sector to understand the opportunity on its front door step. I think we need to look at that as an infrastructure issue and see what needs to be done to help.

Q122 Dr Gibson: Do you think sometimes, David, that in this country they say, "Other countries are good. We will let them get on with it and then we will buy it in", and so on? We are always saying that America does everything, but then the Japanese, Indians, and so on. The second question, where does this sit with some of the other industries that have been overlooked in the last few years where we also missed a trick or two? Is this one of many or half a dozen in your opinion?

Professor Sir David King: I am sure it is one of many. To take that point, I see plastic electronics as a very obvious exemplar, but I am sure there are many other examples. Around Cambridge alone there are 1,600 small companies. Within that you will find a whole range of interesting activities, and many of them world leading; so this is really just an example. If we look at what Britain does, I think we play cricket. This is all about fair play.

Q123 Chairman: We try!

Professor Sir David King: Winning is not the point, and that is what I am trying to drive at here. Somehow we feel that we should not be backing companies because this gives an unfair advantage. I know that within the rules of the game that is correct, you are not supposed to give unfair advantage, but at the same time are not the Fraunhofer Institutes giving German industry precisely that? It happens in the United States as well, of course. I do not believe Silicon Valley would have taken off if it had not been for the Department of Defence spending masses of money in the nascent industries in that area. So we just need to look how other countries have nurtured the development of new industries from the science base, and I think you will find that we have got very little in that space.

Q124 Chairman: Can I take one area where the Government does have some control, and that is over the whole procurement issue. The Government talks a very strong tale about using this procurement muscle, 150 billion or whatever it is, in terms of fostering and supporting British industry and its development. Do you feel that there is an avenue there, Sir David, to use that procurement to actually support these emerging technologies?

Professor Sir David King: Chairman, this is a drum I have been banging on for quite some time. My example here was the development of the electronic breathalyser. Some years ago the Home Office put out an advertisement for an electronic breathalyser. There was nothing on the market at that point, you had coloured crystals that you blew through, and a Welshman developed an electronic breathalyser in his garage at home. His name is Tom Jones, but it was not that other Tom Jones. He formed a company round the development and wrote to the Home Office. The Home Office announced that they could not procure his gadget without having competition from at least two other manufacturers. At this point he had patented the device. His company was then bought out by an American group, prompted by DARPA, and DARPA then procured the device and then the Home Office bought it from the American company. I just give that as an example of how we have lost out in the past, and it just seems to me that procurement, wisely used, could really transform this whole picture. The Americans understand that: they have been playing this game through DARPA for a long time. As I said, Silicon Valley would not have come into being without this process. If you take the 150 billion procurement, the problem (and I was always up against it) is that if you have a voluntary scheme where you simply encourage each permanent secretary to use a proportion of their budget for procurement, which I believe is still the Government's position, those permanent secretaries will be pulled hard in the other direction to demonstrate value for money on their purchases, and we are talking about risk procurement here. You are buying an object which is as yet unproven and you are asking for the product to be delivered in five years' time. That in itself means, in my view, you have to ringfence a proportion of the procurement budget and take it from each department, and then that money must be spent in the interests of that department, but it must be seen to be risk procurement.

Q125 Ian Stewart: Does that not also indicate that in this country our government is good in terms of funding research and development but not so good in implementation funding?

Professor Sir David King: That is right, but, Ian, what is interesting here is, we have already now got past first base, to use an American term, and to second base. In other words, we have got all these small high-tech companies, I believe the highest density of small high-tech companies possibly in the world down here in the south of England. It is the next stage that we have lost track of. How do you pull these companies through when they have become very promising?

Q126 Chairman: Can I broaden this out? Chris, you were nodding. The record will show that Chris Williams was nodding as Sir David King was speaking there. I suspect the whole panel agree - is that a fair comment - with Sir David's assessment in terms of the use of government procurement? Do you have a quick comment, any of you, to make on that?

Mr Williams: I have 430 member companies that would ask me to say, "Hear, hear", to everything that Sir David was just saying.

Q127 Chairman: Can I broaden this, Chris, to the issue of what else is happening around the world. Sir David has mentioned the United States, but if you take liquid crystal display and the amorphous silicon industry, both started here and yet the huge commercial exploitation occurred elsewhere. What are other countries doing, taking aside the United States? What else is happening in Europe, for instance, which is allowing these technologies to be fully developed?

Mr Williams: Europe is working probably in parallel with the general thrust of activities that we have in the UK, but Europe and the UK are certainly ahead of most of the rest of the Far East. The Far East has invested so heavily into conventional semi-conductor manufacturing, conventional display manufacturing on glass, that most of those companies are loath to simply say, "Right, here is a new cheap way. Throw away all of that kit; we will go and make it on plastic instead." They have to make very good use of those facilities. Certain European companies who have developed processes compatible with the older technologies of making on glass are, of course, trying to promote that technology on glass, and you heard from Ian French that is such a process, so their end users will be in the Far East.

Q128 Chairman: But in terms of plastic electronics, which countries are actually taking this seriously in terms of doing the very things which Sir David is saying that we ought to be doing in the UK?

Mr Williams: Germany, very strongly, a little bit in Korea, a little bit in Japan. The little bit in Korea happens to be with Samsung and LG, so it is likely that it will potentially explode forwards, but the range of activities that we are doing in the UK and that we see taking place in Germany are much wider than they are looking to do in the Far East at the present time.

Q129 Chairman: Nigel, huge opportunities?

Mr Perry: I think so, but I think if you concentrate on the end device, then we may be missing the story in its totality. The reality is that the UK contributes to those industries in Korea and in Germany very significantly with materials and very significantly with knowledge. So if we just say, "Here is a television screen", or, "Here is a light", or something, the country in which that is made is one part of the story, but the materials that have been procured and actually assembled in that country and where those materials have come from is very significant. Tom will perhaps comment on some of the experiences that we have, but we believe the UK has a very strong materials position, irrespective where the devices actually end up being constructed.

Q130 Chairman: Tom, very briefly please; I am running out of time.

Dr Taylor: A couple of issues that were raised just then. In the submission from Dupont Teijin, they highlight a couple of good examples of where value is extracted throughout the supply chain. The UK is very strong in certain areas in the existing industry, so it is a misnomer that, because those liquid crystal screens are made in Korea, all the value ends up with the OEM. In fact, 70 per cent of the value is in the constituent parts that go into the whole, some of which is supplied from overseas. Hitachi make more money now supplying materials and chemicals into the flat panel industry than making flat panels themselves. Merck Chemical make a return on sales of 55 per cent - that is a billion euros a year - supplying the liquid crystals. They have research and development here in the UK that is an extension of a UK invention. We sometimes focus on the negatives here, but the positives are that the UK is contributing widely to this.

Q131 Chairman: Tom, can I stop you there, because one of the things that I want to challenge you on is this notion that somehow large-scale manufacturing has to be outside of the UK. Surely one of the challenges to us, if we have emerging technologies, is not to accept that automatic premise that the large-scale manufacture must automatically occur somewhere else. Why can it not occur in Britain?

Dr Taylor: I would agree with you. I support what Chris said earlier; that we must overcome the perception (and I have picked that up sometimes within the Civil Service system within the UK) that the UK is no longer a manufacturing country. We are the sixth largest manufacturing country in the world to date, and the point we have been making about the supply chain is that we think the iPod is made by a US company, but the circuit design is made by a UK company; so we are extracting value. What we have to do here is understand that in a supply chain there are value points (so there are points where you can get competitive advantage and extract large amounts of a value), there are commoditised points, there are very competitive points where the UK does not compete, and it would be dangerous for us, or you would need a very long pocket, to change that. If we play our hand right, we can leverage what we have already got to get a big position in this industry. That, I believe, is already emerging, I think, in the UKDL, and I think we play a part in that. Coming back to your question, the UK has a large materials industry. Dupont Teijin Films is a leading player across the globe with research headquarters in the UK, driving innovation from the UK. There are many other examples, particularly in the supply chains, and we must not get fixated always with the end product. Having said that, there are certain end products where the UK, potentially, has a competitive position to win in. So there are some very complicated products. I think supplying a video colour display is a particularly difficult challenge to do the whole chain. The point we have just made is that it is better that we have a small piece of a very big pie than to try and go and for the whole pie, but there are other technologies, particularly emerging plastic electronics lighting, printable lighting solutions, printable photovoltaic solutions, printable sensors, where the manufacturing chain could well be in the UK. So I think the two points are firstly, do not give up on this because the UK is competitive in a number of spaces; secondly, the picture is not purely the OEM bit at the end, but getting UK technology (and our whole centre is set up to do that) into that supply chain so that the products of tomorrow contain a lot of value created in the market.

Chairman: You have made that point. Tim.

Q132 Mr Boswell: I would like to go a little bit further back into looking at the array of research we have already got in place, because we have now gone well down stream but interestingly so, and really pick up a point that Sir David has already made implicitly when he talked about the south of England. We are not here wanting to start a hare in full about regional policy, but I am interested, in a way, as to the relationships between the centres of expertise we have got - the PETeC, Welsh Centre for Printing, and so forth - how they have come into being, where they are, whether there is, as sit were, an overall strategy for establishing a network of centres and what is the value-added in having centres like that rather than injecting them one way or another into the existing university provision? Is there somebody controlling this? Has somebody planned it? Have you sorted it out for yourselves or how have we got what we have got?

Mr Williams: It is the desire of the TSB (Technology Strategy Board) that there should be a unified programme.

Q133 Mr Boswell: So some of this would have come into inception at least before TSB got going?

Mr Williams: Yes. It certainly was the desire of the DTI that there should be a co-ordinated national activity. One of the risks that plastic electronics has is that it is very easy to become totally regionalised, because one of the roles that the KTM has, the UKDL, is to work with each of these centres of excellence and bang heads to bring them together in a national strategy - so we now have PETeC represented on the board of CIKC, CIKC represented on the Board of PETeC, likewise with WCPC - so the regional centres are actually fully aware what each of them are doing and how they can work together. I think we have actually created a multi-legged support platform, and each of them have a specialty focus. To pick up the point that Mr Iddon has raised: high volume manufacturing. The programmes are funded to implement high volume manufacturing on reel-to-reel plastic, or paper, or card in the UK based on programmes run through the Welsh Centre for Printing and Coating.

Q134 Mr Boswell: And because they are regionally based they can plug into the local SMEs very readily.

Mr Williams: Yes.

Q135 Mr Boswell: So, realistically, you do all talk to one another, if I might suggest modestly, under your remit, Chris?

Mr Perry: Absolutely. We talk each other, and it is willingly, it is not with our heads banged together, with due respect to Chris.

Q136 Mr Boswell: In terms of plugging gaps or wanting to steer particular institutions in particular directions where they may already be inclined, who is running that? Is that you, Chris, in conjunction with the players?

Mr Williams: In identifying the skills of a particular centre or particular university, we have a responsibility as part of our mandate to introduce to them industrial companies who have an interest in those skills and resources wherever they are around the UK. So we are acting as a national sign-posting mechanism to bring people in.

Q137 Mr Boswell: You are the clearing house?

Mr Williams: Exactly. We are the technology marriage bureau.

Q138 Mr Boswell: That is helpful. Can you bring into this bit of the equation (and all of you can, please, contribute) to the UK universities? A lot of them have got big research groups in these areas?

Mr Williams: Yes.

Q139 Mr Boswell: We have now created separate centres. How is the band being orchestrated altogether and to some extent is there a conflict between commercial considerations, including the potential of their own spin-off companies, for example, as against the overall benefit for the UK or the gap-filling that you are, presumably, anxious to achieve?

Mr Williams: There is a tension inevitably, a mild commercial tension, but we are simply driving forward a programme of interest for UK PLC. So we try and overcome that by pointing out the benefits of companies working with universities, universities working together and looking then at the best way to exploit that in every possible way.

Q140 Mr Boswell: If I were, hypothetically, in the position of having a good idea and maybe some pre-developed technology, you would be able to fit me up with the people I needed to get hold of?

Mr Williams: Yes.

Q141 Mr Boswell: There is a specific point to you Chris, and others may want to contribute. I think in your evidence you suggest that academics are often unable to access state of the art facilities. Richard Friend rather said the contrary. Maybe he can, but why is there this difference of view? I have set it up for you by saying, if I have got a good idea it is going to be all right, somebody will get hold of it and eventually, if Sir David works his miracle, we will have finance as well, but are there gaps here and how can we address them most effectively? How can we expose them and how can we then address them?

Mr Williams: There are severe gaps in the quality of resource available to universities around the UK that are interested in engaging in plastic electronics.

Q142 Mr Boswell: I think you did mention that earlier, did you not?

Mr Williams: Yes. It is really when they are looking to bid in for project work and to create the industrial consortia to work with them. They can be extremely limited in terms of the resources available to them, so it can very often be a self-fulfilling prophecy that companies will prefer to deal with a Cambridge or a Manchester, simply because the resources are better, rather than with a Brunner, or with a Hull, or with a Bangor.

Q143 Mr Boswell: Nigel, you wanted to come in.

Mr Perry: I was going to make a point in the CPI context. What we discovered again when we looked at starting it up is that the skill-set that is required to actually do some of these things is different but complementary to the skill-set you find in universities? If you talk to industry, if you actually examine the market place, you will find this integrating role is needed, which is people pulling everything together. That is exactly what CPI is there to do. So the industry will talk to CBI; we will then talk to and engage with the academics; we then provide the assets, and so it is actually recognising where the skills are that are needed, what part of the chain you are in, what part of the process you are in. Putting large assets of the sort that we have going into PETeC into a university may not yield the results you want because you would then have to complement it with the skill-set that you would need to commercialise and drive the---

Q144 Mr Boswell: Specifically, if you need access to a higher grade facility, be it Cambridge or Manchester or wherever, in order to support a particular piece of development on behalf of one of the members or otherwise, are there levers that you can use, as it were, to bang heads together and say, "Do not sit on this kit. Make sure that it is available to somebody so they can then develop it"? Have you got some, if not sanctions, at least some fairly strong moral persuasion if necessary?

Dr Taylor: There are always moral arguments present and available, but there are two challenges for us. The first one is CPI is not an academic institution, so we cannot be funded by Research UK, we can only be funded by the TSB and by the RDAs, et cetera. Where a university has a particular piece of kit, we do provide very strong encouragement that that piece of kit is made available, but we have noticed that there are differing policies across the UK universities as to how to access that kit depending on IP policy, depending on full economic costing, et cetera. It is for that basis that we would strongly argue that the kit is located at CPI, because we are about as independent as you get. We are not privately owned; we are in the centre space.

Q145 Dr Blackman-Woods: I think these are questions probably for Tom and Nigel. PETeC is going to open later this year. What is it going to do? What facilities is it going to have and why will it benefit the plastics electronic community?

Dr Taylor: We have been involved in this endeavour now for four years. It started in flexible electronics with a joint venture with Dupont Teijin Films, creating what has been termed an open access facility. That is a facility that is shared with Dupont Teijin Films and then shared with the rest of the population, and the PETeC Centre has grown into an extension of that model. We received keys to the building last week and it is currently being kitted out to open in September. It has been set up to provide as broad a range of high technology, leading-edge capability as is possible given our existing resources. We have been very careful not to pick any one technology winner and not be too narrow, but to have as broad a range of technology as we can afford, while at the same time starting off with a focus. We have had to do that, otherwise we would be diluted. Our initial focus was on the display area, and that was informed by the market. It was also informed by the particular skill base in the north of England, the material strengths and the capability that was arranged to us. The capability in that area is broader than some of the evidence that I heard or saw at the last session. The underlying technology starts roll-to-roll. The film that is made is manufactured in a roll process. Some of the technologies that add value to that are done on a roll process and roll technology is being looked at to add further value. Currently there is no technology developed to have complete roll-to-roll manufacturing throughout the whole chain, so at a point down the chain you get more diverse technologies, and we have been able to secure a sufficient private sector and public sector backing to get a range of technology solutions, so companies in the UK will have access to high technology capital equipment. The open access model allows for public funding to establish such a facility and then a trading vehicle to give people access to that, and that includes advanced printing technologies, a review of flexigraphic printing, advance patterning technologies, a novel UK technology that is being pioneered, inkjet printing, and some of these other technologies, will all be present within PETeC. So there is a diversity of technologies. This was initially focused in the display area, but, as it has evolved and we have achieved a critical mass in that area, we have been able to enter the lighting and one or two other sectors, particularly where the UK has strengths, and we have been able to get consortia together to do that. Recently a large TSB sponsored project is allowing the acceleration of a UK LED lighting solution.

Chairman: Okay, I think we have got a good flavour.

Q146 Dr Blackman-Woods: What would you say to your critics who say you are putting all your energies into one production process: if that fails the PETeC is going to fail, that this is a dangerous route to go down?

Dr Taylor: I would say that that is misunderstanding the complexity of the situation. People see the very impressive roll technology that we have assembled at Wilton in combination with Dupont Teijin. We have not been able to show people all the new technology that is emerging in PETeC, I think it is probably fair to say, but it is diverse. It has to be. It cannot be everything to all people. One of the things we have to do is to focus and to make choices, and in doing that we will not satisfy all quarters.

Q147 Dr Blackman-Woods: What about Plastic Logic's assertion that PETeC has only a 50 per cent chance of success?

Dr Taylor: Given the chances of success in a high-tech industry are often put at one in ten, I would take that as a compliment. A 50:50 chance, I think, says we are above the curve, and I believe we are above the curve. Our order book, our business development, is well ahead of the business plan that we assembled 18 months ago. We have seen more interest, we have been able to diversify our operation faster than we thought, we were able to achieve critical mass much sooner than we first thought. On the metrics that were set with the fund providers, with the bids that we won, we are ahead on those, so at the moment we are particularly confident about the business plan going forward.

Mr Williams: Could I make one comment? The review that was done of the PETeC Centre last year was not done by Plastic Logic, it was done by Stuart Evans and David Monk acting on behalf of UKDL, where we were invited to pass comment, and they, very kindly, agreed to visit the very senior experienced people in the UK with tremendous business acumen and were able to prepare a detailed report that was submitted back through to PETeC and also through to us at UKDL. We expressed concern at the time that the business plan appeared to be predicated on focusing in the Far East to secure off-shore research programmes. We felt that there was a far greater need for focus in the UK, that the UK community would be more than enough to satisfy the business requirements of the PETeC Centre, and we were very concerned that there would be a loss of focus on the UK's lead, but it was very frustrating because we could see that the RDA places very strict sustainability issues on to the PETeC Centre, but the business growth from the UK has shown that the UK will be sustaining the PETeC Centre very strongly as it goes forward into the future.

Mr Perry: Can I make a couple of comments? First of all, we are setting our stall out to be a better than 50:50 chance of success. There is a risk-management process, we do have a technology and industry advisory group that guides us, UK Lighting and Displays, amongst other people, at present on that so people are very fully informed and very involved in what PETeC is doing and how it moves forwards. Secondly, on the commercial sustainability issue and drive, there are a number of reasons for doing that, but, obviously, there is the sustainability issue. The RDA is keen that we reduce our dependence on them, quite rightly, but it is also very important that we prove our capability on the international stage. The way I would like to phrase it is that we can do more good for the UK by proving that we are genuinely internationally capable than ranked really as well-meaning, gifted amateurs grown up in the north-east of England. I think the international competitive pressure that we sense is absolutely crucial in setting the standards and setting the ambition to which the centre can and will operate.

Q148 Dr Blackman-Woods: I am obviously very pleased that you are located where you are, because you are just outside my constituency, and I hope you are really successful, but we have had a previous panellist query whether it was entirely sensible to be located where you are. How would you answer that challenge? Why is it important that you are located at NETPark?

Mr Perry: There has been a strategic intent from the north-east to have an interest in printable and plastic electronics in the region. There are a number of significant initiatives which indicate that that is the right thing to do. The Siemens' facility at (?) unfortunately is now being closed down, but the skill-set in the region is also very significant. So, driving forwards off that strategic intent, the RDA has been very keen to establish the centre and it has followed on from that. The other point, you look at places like MIT and Harvard, and you are very often given and pointed at those as good examples, but having been there, the activity is within 100-mile radius of Harvard and MIT. If you draw a 100-mile radius around Leeds, you encompass an awful lot of the UK. I think it is very important that we stop thinking about the UK regionally and start thinking about the UK operating together as a whole. PETeC has a role in the north-east of England. Chris has already mentioned OMIC in the north-west. We have got the Cambridge IKC, we have got the Welsh Printing Centre, we are starting to assemble a national capability.

Q149 Chairman: Briefly, can you say whether you feel this is a good idea? Is it good use of government money to actually put in the PETeC centre and the Welsh Centre?

Professor Sir David King: Briefly, yes, I do.

Q150 Chairman: You would have more of it?

Professor Sir David King: We need more of it. Absolutely.

Q151 Chairman: It was not a foolish decision to put it in the north-east?

Professor Sir David King: No, but there is a real question around that. A good decision, but the question I have is in terms of RDA support and the different levels of RAD support for different parts of the country. Is the distribution the right one? I understand the political need to see that there is a more even distribution of development around the country, but we might lose a few development arguments around the south-east, because the RDA is relatively poorly funded. So, when it comes to a competition, the south-east is going to tend to lose out.

Q152 Dr Turner: PETeC is undertaking contract work for Samsung. Is this a harbinger of things to come? Is the plastic electronics industry about to go big in manufacturing in the Far East rather than in the UK? What other contract work have you got?

Dr Taylor: I will just put it into perspective. We are currently working with 30 institutions, 23 of whom are in the UK, at this early stage in our development. So of companies identified active in the UK, we are working with half of them already. The plastic electronics industry is going to become pervasive, and you can make an analogy, I think, to the ".com" industry. Most transactions today over the Internet are done by supermarkets, most trading is done by the existing players who have taken advantage of a new technology, but at the same time it has created opportunities for new business models to emerge, such as eBay. You can imagine that happening in plastic electronics. Plastic electronics is on the road map of all the big manufacturers, so they are below the surface, but in Korea, Japan, Taiwan they have plastic electronics road maps. They are going to incorporate plastic electronics in their products of the future. One of the unique things about PETeC and CPI, in competition with the Fraunhofers and the others, is we are very commercially networked, so we are privy to the road maps of the world's leaders. That is why we are doing business with them, to understand their needs, and so we are working with customers in the Far East to put UK solutions into their road map. In the future you will see, I have no doubt, the Far East manufacturing plastic electronics containing UK technology. You will also see emergent new models. You will see the Plastic Logics, the CBTs and the UK success stories. We have 23 UK initiatives and we have seven overseas initiatives, and that is partly a sign-posting exercise; it is partly a demonstration of our competitive strength in the UK, that we are able to licence UK technology abroad.

Q153 Dr Turner: Does that imply that you do not see a prospect of large-scale manufacturing in plastic engineering in the UK?

Dr Taylor: Not at all. The advantage of a sea-change in technology is its levels of playing field. The people out in Asia understand silicon very well; plastic is completely new to them. They are very pragmatic people. One reason they succeeded in flat panel displays was their pragmatism in incorporating UK and US technology into their devices, and they are out doing that now and they will get the technology from wherever, whoever is prepared to co-operate, and they will pay handsomely for it. The UK benefits at the moment from the materials that go into the existing chain, and we will benefit in the future, but it does not mean to say that we cannot compete with that and that we cannot assemble the innovation. I think that model, the preparedness to go out there and be confident that we can compete abroad and engage and inform the UK sector of what it needs to do and help join that supply chain, is a winning formula.

Q154 Chairman: I am going to have to finish there because we have literally run out of time. There are a number of issues that we would like to write to you about, if we could. I wonder if we can finish this session, Sir David, by just asking you, as briefly as possible, to say what advice would you give to our committee for a recommendation in terms of this particular inquiry? What would you like to see us recommend?

Professor Sir David King: I think each of the issues that we have been looking at and discussing this morning (but you have been hearing evidence for longer) inevitably lead to the conclusion that government needs to provide much more focus for this range of activities. We discussed procurement, and I would very much hope that you would look at the procurement issue. We have discussed what other countries are doing, the Fraunhofer Institutes, for example. I think you see a nascent Fraunhofer emerging here, and so my interest is for you to take as a committee plastic electronics as an exemplar of what we can do in other areas. It is building rather well here, it could go much faster, with more support and that procurement issue, but what are the general issues that arise in terms of British manufacturing from this high-tech sector?

Q155 Chairman: On that note, can we thank you very much indeed, Sir David King, Chris Williams, Nigel Perry and Dr Tom Taylor. Thank you very much indeed.

Dr Taylor: Chairman, could we extend an invitation to the committee to come and see us? We would welcome to give you written evidence, but we would be very welcome to show you---

Chairman: We are intending to come to see you in September, if you can fit that in.

 

 

 

 

Examination of Witnesses

Witnesses: Dr Richard Price, Nano e-Print; Mr Stuart Evans, Plastic Logic Ltd; and Dr Keith Rollins, DuPont Teijin Films.

Q156 Chairman: If I can welcome our second panel this morning: Dr Richard Price from Nano e-Print; Mr Stuart Evans from Plastic Logic; and Dr Keith Rollins from DuPont Teijin Films; welcome to you all. I wonder if I could start with you, Richard, UK universities have spun out a number of plastic electronics companies. What has made the university sector so successful in supporting spin-outs? What do you think the Government could do to encourage more of it? We heard from Sir David King that there is a huge number, it is probably the most successful nation in the world, but what more can be done?

Dr Price: I think one of the reasons why the UK has been successful is that we have an extremely strong academic base, particularly in the materials sector, and this whole area is really predicated on material science. It is not to underestimate some of the challenges that still remain there, but certainly the likes of Plastic Logic and ourselves have benefitted from that expertise that has been built since the early 1990s when Richard Friend was doing his work at the Cavendish. In terms of spinning us out, I think certainly the work of the TSB and before that some of the DTI LINK programmes, bringing together different expertise, because this is a very complex area when you are trying to bring together materials with electronic design and various different processes, whether that be printing, coating and so forth, those targeted programmes and assisting in sharing that risk is very important. We have certainly benefitted from that under the TSB and the work that UKDL under Chris's leadership has done has been extremely important in building those relationships across the UK and also increasingly within Europe as well.

Q157 Chairman: Stuart, obviously Plastic Logic is an incredibly successful example of a spin out that has now gone off to Dresden as we were hearing a couple of weeks ago. What else do you think the Government could do to encourage that chain from very successful university science through to successful implementation in terms of successful companies?

Mr Evans: The level of resources that goes into the core research seems to me to be about right and the main message one would want to give there is that that should continue and modestly grow. I think there are three other areas where you could imagine expenditure being useful. The first is in the whole process of getting ready for manufacturing, and that was touched on a bit by the PETeC guys; the second is building the factory, and the UK lost to Germany, and we might talk a bit about why that was; and the third is putting it into use, the whole role of procurement, SBRI and prototype projects. Just to deal with Dresden is it well-known that we did a global search on that ---

Q158 Chairman: We have dealt with that with Alan Hauser.

Mr Evans: Indeed. I think in terms of customer readiness we are surrounded by paper. Electronic books and readers will be the first killer application in this space and I think it would be terrific to see government procurement initiatives to interact with our community so that you would have a single electronic book in front of you instead of all these pieces of paper you are about to throw away.

Q159 Chairman: Keith, when I came up to Teijin Films some time ago, before this was even on the horizon, I had a very interesting visit there. Clearly you are a huge multi-national company. How do you interact with small spin-out companies? Is your main objective to gobble them up and suck them of their life blood so you can make more profit?

Dr Rollins: No, I do not think that is the intent.

Q160 Chairman: But is that the outcome?

Dr Rollins: It is not the outcome either, no. Can I apologise for my slightly casual dress this morning, having returned from Korea and Japan yesterday for ten days, it was going to help me get through this morning I think, so just bear with me. I think it is important to understand that from a business development perspective this is very much a global game, so you need to position yourselves with different kinds of customers with different needs. Interacting with a major Asian multi-national requires a different approach to interacting with a start-up at a Cambridge science park. We have made an investment over the last five to six years to work with those companies to try to develop material sets as an enabler to this industry, because clearly without a piece of plastic of the right quality and specification, et cetera, you are not going to develop and build a plastic electronics industry. In terms of the R&D investment that our business has been prepared to make, we have taken a pretty open approach to the way in which we work with those companies and, of course, what we have tried to do is to pick winners. I am delighted to say we started to work with Plastic Logic six or seven years ago. That is a good example of a winner and there is no shortcut to that; you have to develop those relationships and work with customers and understand their technology and translate that into a product which can allow them to grow their business. Our job - profitably of course - is to allow those companies to grow their business for the future.

Q161 Mr Boswell: I am interested, as we have heard this morning, in the interplay between intellectual property and the various players who may or may not own that who claim it and other players who may want to exploit it. Clearly there is an interest, and you have just touched on this, in having a fairly open structure but on the other hand you are going to have bits that you want to keep to yourself. Conversely multi-nationals may, to follow the Chairman's formulation, want to collar not just the manufacturing and take things away to manufacture but collar the IP which then becomes no longer available in the UK. It sounded from the contributions that you three gentlemen have made so far that you were reasonably relaxed about this rather mixed economy at the moment. Is that the message we should be getting from you? Would any attempt, as it were, to intervene by anybody, whether it be TSB, the Government, or otherwise, destabilise and do more harm than good?

Dr Rollins: Maybe just to qualify my comment about the openness, that was more in terms of our willingness to operate in different parts of the value chain to the ones we would normally occupy, because in this very immature industry it is very difficult to get established companies who perhaps have not recognised the opportunity here to invest and commit resources to develop the industry, so we have worked further down the chain, and part of the investment that we made in CPI four years ago was a strategy to allow us to do that. My comment on intellectual property is of course, like any technology developing company, IP is extraordinarily important to us. It is one of the critical reasons why people like 3M and Merck have a very good sustainability model in the LCD space, and clearly that is a model that any materials company will seek to develop.

Mr Evans: As to IP arrangements between Plastic Logic and DuPont Teijin Films, that is dealt with by we buy his substrate and pay him money, and that is a straightforward kind of arrangement. We are all conscious of the need for a very broad ecosystem here because this is a big task and whether it is in the UK or other countries I think the public purse continues to play an important role in enabling some of that and if the UK chooses to do less of it then others then it will eventually suffer the consequences. Short term I think we are funding R&D research about right. Then there is the getting into manufacture which the PETeC guys and others are talking about and then there are pilot projects that take what comes out of the factories in Dresden and other places and put it on the desks of people like you guys.

Q162 Chairman: Richard, is not the very purpose of your existence to encourage companies to actually go into the pockets of larger players?

Dr Price: In terms of university spin-outs ---

Q163 Chairman: Is that not what you do as your job? How do you measure success?

Dr Price: You measure success by creating value and whether that is through an exit of a trade sale to a large global player, through an IPO or through generating sustainable revenues, there is a range of different options. When you go down the path of taking venture capital you are more constrained in your choices there but it does not necessarily mean that you are going to be acquired by a Samsung or Hitachi. Because of the possibilities that were touched on earlier about being able to enter into manufacturing or create various parts of the value chain within the UK, then it is not necessarily the case that this would go overseas. There are possibilities that UK companies over time could be acquiring each other.

Q164 Dr Blackman-Woods: Both Nano e-Print and Plastic Logic were spin-out companies based on venture capital. Did you look at any other funding possibilities, for example University Challenge funds? Was there anything else there or did you not look?

Mr Evans: For Plastic Logic our ambition was always such that the level of funding that it would take would be well beyond what was available initially from those kinds of resources. To hark back to what David King said, we are halfway through our journey. We have raised hundreds of millions of dollars and one of the key things to avoid the company being acquired is that public markets are opened. Some of our investors will eventually want to sell their shares and that is entirely reasonable but we do not want that to be a thing that forces the sale of the company. It is really important that whether it is on NASDAQ in New York or on AIM in London that there is an ability for some of the investors in Plastic Logic to make money at that stage. I tell everybody that an exit is not the end. Bill Gates is so rich because in the IPO of Microsoft he did not sell any shares, and that is the ambition that we have at Plastic Logic.

Dr Price: We are at a much earlier stage in our journey having just raised $1 million rather than several hundred.

Mr Evans: That is the hardest!

Dr Price: It is the hardest and of course we looked at a range of different options for funding. It is very difficult to get that funding particularly at the early stage when essentially, because of the nature of this industry, there is still an extremely high level of risk, it is still essentially in a research phase, albeit industrial research, and looking at other sources of funding other than equity investment was almost impossible at the time.

Q165 Dr Blackman-Woods: Richard, you mentioned earlier that you were getting funding from Technology Strategy Board. How important is that to your company?

Dr Price: It is incredibly important for several reasons. Firstly, it brings together consortia that would not necessarily have come together unless there was government support to share that risk. Secondly, it helps us in terms of our cash flow and enables us to further develop before we have to go back to the market for more investment. It also helps us build relationships with some of the knowledge transfer networks and to grow organically some of our networks within industry.

Q166 Mr Boswell: Just a little point, if I may, following this. Are you satisfied that there is adequate capacity in the UK for appraising these kinds of applications for funding for venture capital? I imagine for example if a small company were to go to a clearing bank they might have some difficulty in having a dialogue with them. At your sort of level and in your experience, is there somebody who at least knows what you are driving at and can give you if not necessarily the funding you require at least a sensible discussion about whether it is merited or could be considered?

Mr Evans: If I were to respond to that I think it is entirely unreasonable to expect clearing banks to be investing in plastic electronics at this stage. We have generally found that dialogues both with grant-making bodies like TSB or investors have been very reasonable; and I would want to pay tribute. In the UK, whether it was the DTI programmes or the current wave of TSB programmes, they are massively easier to work with than the Framework projects in Europe. With DuPont we have done a couple of projects and there have been three players and we were all complementary. We were in three Framework Six projects and each consortium had 20 players and the bureaucratic overhead was a nightmare, so there has been very much more successful stake funding from these things here in the UK.

Q167 Dr Blackman-Woods: So you would conclude that the TSB is doing something that is quite unique, it is not duplicating something that is being done somewhere else in the UK?

Dr Price: Absolutely. I would echo Stuart's comments about European projects. They frightened the life out of us, quite frankly, with the complexity of the projects. They are just not appropriate for what we want at this stage.

Q168 Dr Blackman-Woods: Would a reformed SBRI programme be helpful to spin-out companies in your sector?

Mr Evans: Absolutely yes. I think there are two problems there. One is that this has been a promise that has been around for many years and those of us in the entrepreneurial community are extraordinarily sceptical about whether anything will happen; we await with interest. I think they play a really important role in enabling pilot projects and because they provide 100 per cent funding, which is completely different to any other regime, they permit little companies like ours and Nano e-Print to do some different kind of stuff, so it is a very welcome initiative and I do hope it progresses.

Dr Price: If you look at the difference between, say, CDT in the UK and the Universal Display Corporation in the States, the number of projects that UDC got was phenomenal from the US Government. Despite the success of CDT, I think they could have done much better by having additional support.

Q169 Dr Turner: Stuart, Plastic Logic has gone down the manufacturing route as a business model rather than developing IP and licensing it. Why is it that you have done that? What is your rationale? Do you see that as a greater potential in profit in the future?

Mr Evans: Absolutely yes. The journey we have been on is quite interesting. When we started the company we did view IP licensing as an attractive business model, but one of the things that we realised as we developed the company is that we were going to be first and we concluded that it was much better for us to be first because it was a very attractive profit opportunity, a very attractive opportunity to deliver great value and in our field - and you say this carefully - it is only 100 million to build a factory whereas if it is a 300-build silicon fab or Gen 8 Fab in Asia it is billions and billions of dollars. Writ large the manufacturing story is much more optimistic in the sector than you might imagine because you would have lots of small facilities being very successful and competitive and there is bound to be some in the UK if we wanted to; we only have to try.

Q170 Dr Turner: Richard, what model is your company going to adopt? Are you going to go to licensing or manufacturing? Do you think that one of the factors in it is the attitude of venture capital funders? Are they more like likely to be interested in funding an IP model or a licensing model or a manufacturing model?

Dr Price: Like Stuart, we started off with a licensing hypothesis, but we have quickly moved away from that, partly because it is a very difficult model to implement successfully. There are few examples of it. ARM is the classically cited example of a successful licensing model but they spend enormous amounts of money on their business development activities, so it is very easy to underplay licensing and to assume that it is straightforward. It actually involves incredible amounts of investment and to have licensees that are committed to your technology and implementing that and manufacturing that for you to get a return on your investment. The model would be to develop products or product components and that is much more attractive to the VC market. They prefer to invest in products and something where there is more control over the risk than through a licensing model.

Q171 Dr Turner: Do you anticipate doing your manufacturing in the UK or elsewhere?

Dr Price: At this stage it is too early to say. We would very much hope to do it in the UK. What has been refreshing is that we have a slightly different technology to Stuart's company and we have been able to work with existing players in the UK within the holographic industry. It has been encouraging that there is such a wealth of expertise in that field within the UK and also within parts of Europe, so I would hope that very strongly we could do that within the UK or, if not, the UK within Europe.

Q172 Dr Iddon: Keith, companies such as Merck Liquid Crystals, Chiso or Corning with the glass substrates have been highly successful in the LCD sector. Should we in the UK follow a similar pattern to that in this field that we are talking about this morning? In other words, are we going to be enablers or are we going to be producing devices?

Dr Rollins: I think the attractive thing about the space at the moment, because it is so early, is that all of those options are open. If you look at the materials history in the UK, it would be astonishing if a range of companies did not participate in just the way that Merck have done in LCD but in plastic electronics, so develop the technology, develop products associated with that, and either export or manufacture domestically closer to where device manufacture is taking place. You would be surprised if that did not happen. Almost certainly the technology development and IP licensing piece is going to happen, again traditionally a UK strength. It would be very surprising if that did not happen. I have always felt, as I know Stuart does, that there is an opportunity for the UK to contemplate being a device manufacturing community. That race is not yet won and the opportunity therefore still exists. I think the UK needs to have a very clear strategic intent in this area if it wants to occupy that place in the future. I often think about examples like the German photovoltaic industry - which is a very interesting story to reflect on - which in very quick terms, to go back in history 20 or 25 years ago, the German Government introduced a set of tariff schemes to encourage the adoption of photovoltaics. Germany would not be the first country necessarily to think about building a major PV centre but they did. The German PV industry today is the largest adopting country world-wide for photovoltaic devoices. It is an industry that employs half a million people and it is a multi-billion euro industry. That is the kind of prize that if we are ambitious and have a real strategic aim in this area is the big opportunity. The other stuff is going to happen, I think, but I think that is the big prize.

Q173 Dr Iddon: Stuart, we know full well the hows and whys of you ending up of all the sites you looked at, including one in South Wales, in Dresden - there was a can-do attitude there and the skills were there in that fine city - but do you think you will be able to use your products for assembly in Europe, in Germany in the Dresden area, or will you also be an enabling technology when you are manufacturing?

Mr Evans: We are intending to have Plastic Logic be a manufacturer of electronic readers so what we will make in the factory will be display modules that will be assembled into complete readers probably with a park in Europe, but that is not finally determined, and is by and large a commodity purchase, with not great value added. I think it is a more interesting question where the second factory might go. Will it go next door to the one in Dresden; will it go somewhere in Asia; or might it come to the UK? I do not think the answer to that is clear, but it is not impossible it could come to the UK, I would have said.

Q174 Dr Iddon: It seems to me that the Asians have cornered final product manufacture whether it be a displaced screen in a satnav or a mobile telephone or whatever, and they are very reluctant to install manufacturing capacity in the West. Is that a big problem in this area?

Mr Evans: What you see there is maybe slightly misleading. It is very interesting to see the way, for example, the flat panel TV companies are doing more and more final assembly in Eastern Europe and that is the net result of having anchors in Asia. They have got so much invested in the gen eight fabs that they really cannot do anything about that but the other bits of value added they want to do close to the customer, so in the context of Plastic Logic in Dresden we are making the equivalent of what they make in the Gen 8 Fabs in Asia and the final assembly can take place in a wide range of different places, so I do not accept at all that it is a thing that cannot be done to our benefit. I think the product design of course is very interesting. We sometimes talk about Plastic Logic devices wanting to be like iPods but of course the designer of the iPod is a Brit. Jonathan Ive is the chief designer at Apple and he is a Brit. Whether you do it in California or whether you do it in the UK or Europe, if you looked at the mobile phone business, companies like Nokia make one million mobile phones a day and they are a European company.

Q175 Dr Iddon: When Keith Rollins told the Committee recently that you can develop technology in the UK and Europe generally but you have to manufacture in Asia; you would say he is wrong?

Mr Evans: Absolutely and I do not know that he said that, did you?

Dr Rollins: I do not think I did say that. I think what I said was this area offers the opportunity to break that paradigm.

Mr Evans: The point is you will manufacture everywhere because the product will be used everywhere and you are not forced to have a small number of giant plants. All we have to do is want to and try hard and we can have plastic electronics manufacture in the UK.

Q176 Mr Boswell: And it is worth being close to the market

Mr Evans: Absolutely yes.

Q177 Dr Iddon: I am glad we have qualified Keith's earlier comment.

Dr Rollins: I think the other comment I would make to that - because in the first session this morning there was a lot of discussion about barriers to implementation is - I think one of the great advantages that the Asian companies have because of the history of almost 20 years now of course is that in Tokyo, in Seoul, in Taipei, in a 30-minute taxi ride you can jump into the headquarters of the R&D centres for major electronic companies who are the supply chain champions for those industries. The US has something very similar; it is called the United States defense industry. Two years ago when they detected a gap in their capability around flexible displays, they threw, give or take, $50 million at the University of Arizona and set up a flexible displays early stage manufacturing facility. Again at the top of the pyramid there is an organisation that drives adoption and drives implementation of these technologies. I and a number of others in the submissions that we made to the Committee did make the point that, as Chris said earlier, the major electronics industry in the UK has gone but there is an incredibly important role that the UK Government can play in facilitating that domestic demand. I think that is a really important thing for us to think about and to consider if there are any opportunities to make that happen because if the UK Government or some procurement body, or whatever it is going to be, can sit at the top of that pyramid the supply chain will begin to assemble beneath that.

Mr Evans: If I could hark back to the theme you have asked about a couple of times which is the decision not to have this managed programme. I do not think that really matters in terms of the money because, by and large, government support financially has been broadly what was anticipated in the managed programme, but it is a missed opportunity to bring together the industry to lead itself into the future. I do not think that the PETeC guys are quite engaged with the stakeholder community in the way that would be ideal. You have got a very powerful cluster around Cambridge. We work quite closely together and Chris Williams has done a great job at building the UKDL into something cohesive, but there is a step further to go I think, and that would be a very desirable outcome, and I think if we had had the managed programme where essentially there had been a commitment to spend the money, which is being spent anyway, industry would have had more control over that and I think that would have been very helpful.

Q178 Ian Stewart: My interest is around skills and recruitment so the first question is are there skills shortages in relation to this in this work? If there are skills shortages, what can be done about that? Secondly, have you got problems recruiting in the industry? Do you recruit internationally and would you prefer local skilled workers?

Mr Evans: We have got the most people so maybe I could respond to that. When we had nine employees, six were foreign; when we had 20 employees, we eight nationalities. We thought that was fantastic. We thought that was really important but now we are nearly 100 people in Cambridge and I should think 70 per cent are British. I would say, broadly speaking, the science skills - and it not easy - you can do because we have got such great universities producing great people. Engineers, the guys who know about what Chris erroneously described as the "boring bits" (and I think that is part of the problem; they are not boring for the right kind of people) we have hired people from Intel who are great semiconductor engineers but who know nothing about plastic electronics, and of course that is inevitable because there is no industry. I think it would be very interesting to see an emergence of a plastic electronics conversion course at some kind of UK institution that could take guys who were basically electronics engineers in yesterday's technology and make them electronic engineers in tomorrow's technology. There is a very nice precedent in the UK displaced masters programme which does something like that and I think that would be very, very helpful.

Q179 Ian Stewart: Can I just press you on that because that would be the next question. Would you prefer then graduates who had specific skills in plastic electronics or would you prefer graduates with more generalist skills?

Mr Evans: For us we want people who are graduates with five, six, ten years' experience, so it is not so much what their first degree was, although obviously has to be some deeply technical degree, but when we hire them at age 28 or 30, we want them to have spent their time in the right industrial environment. We will do our bit to train them but that is where we would like some help.

Dr Price: Stuart is right that in terms of the science for the core research there are those skills available although we need to keep investing in those. I know certainly the University of Durham are putting together a doctoral training programme that they are helping to get funded for the next ten years that would generate a continuing pipeline, in addition to the Cavendish pipeline that is very excellent at producing scientists. Alongside that, as we transition from the research into the development and manufacture, those skills are completely different to the skills you need to understand the fundamentals of plastic electronics and that is really where there is a gap at the moment.

Dr Rollins: Obviously our company is a little bit different to Richard's and Stuart's in terms of we will recruit from traditional material science, polymer chemistry, physics and then a variety of brands of engineers, and we recruit generally from the UK, and that suits our needs very well, quite honestly. In answering the broader skills question, again it is important to think about what is the end point in this game; what is the model within UK plc because that will dictate the skills set that is required of course. So if the end point in terms of UK plc is PETeC-type scale, that dictates a certain set of skills sets and so on. It is always going to be very multi-disciplinary for sure and maybe does need to be multi-national as well. If you are going to get a German PV industry in ten years' time, then that is a large-scale manufacturing mind-set. It is a whole different skills set to the one that gets technology to a PETeC-type scale. I think you have got to answer that question before you really lay out the strategy that says what your people development part is to satisfy that need.

Dr Price: Going back to Stuart's point about their first nine employees, out of our first six we had four different nationalities, so it is a similar pattern.

Q180 Ian Stewart: Can I just move on to another aspect of training then. Would you prefer graduate training to include management skills or is that something you were saying, Stuart, that you would expect to do for yourself in the company?

Mr Evans: I think that is quite valuable early on. In Cambridge one of the most popular courses in the University is what they call Enterprise Tuesday. That is all about teaching young scientists about starting up their first company. It is fine that they know that but I want young scientists to know how to supervise people, how to write project reports, and how to do some of the basic blocking and tackling that represents the move from being a fantastic professional to being a young manager and then to be a great leader, so whether you do it in under-graduate degrees, I am not certain that is relevant; it is definitely relevant in post-graduate qualifications.

Dr Rollins: I think it is important the professional bodies provide some of that training as well. The Royal Society of Chemistry has a nice approach to that in which it delivers a mini general management training programme, I would call it, with elements around the finance, around project management, around people leadership, and I think that is a pretty valuable approach because in some senses it is the sort of programme that would have been delivered from some of the corporate organisations that perhaps are not quite present in the UK in the way in which they were at one time, and of course ICI is probably the highest profile example of that. That produced a stream of well-trained graduate and post-graduate scientists over a ten to 15-year period some of whom would stay with that organisation and some of whom would take those skills more broadly across the UK, and clearly we will have lost that piece. I think it is important to keep that being delivered.

Q181 Dr Iddon: Do you think our electronics courses in universities are up-to-date? You are at the cutting edge of technology. Are they training people for your industry?

Dr Price: Perhaps I ought to start there. I think there is varying quality across the different universities but I know certainly at Manchester we are starting to introduce courses in plastic electronics and the more emerging aspects - nano electrics, plastic electronics - that have some relevance but the predominant course is still very traditional.

Dr Iddon: Too traditional; is that what you are saying?

Q182 Chairman: Nobody is listening, you can be as honest as you like!

Dr Price: Slightly too traditional I would say.

Dr Rollins: As a materials company it is not really something that we engage in too much so it is difficult for me to make any great comment on that.

Q183 Dr Iddon: You mentioned the RSE; are you principally chemists or across the science base?

Dr Rollins: I am a chemist by training but within the company we have a very multi-disciplinary group.

Q184 Chairman: Stuart, are you happy with the quality of electronics engineers?

Mr Evans: I would say that, broadly speaking, what you want is top-notch people with an excellent technical education, whether they do plastic electronics probably does not matter today; in ten years it will look old-fashioned, but it is not a problem now.

Chairman: On that note, can I thank you very much indeed, Dr Richard Price, Mr Stuart Evans and Dr Keith Rollins, for your time this morning and thanks to my Committee.