Memorandum 125
Submission from Plastic Logic
1. SUMMARY
Plastic electronics[11]
exemplifies Lord Sainsbury's theme of being engaged in a race
to the top. The sector has already benefited from significant
government support which has been well earned and well spent,
and is completely justified by the stunning global opportunities
for the UK in plastic electronics. In our submission, we: (a)
encourage continuing support from EPSRC, TSB and others; (b) comment
on some implications for UK engineering; (c) express concerns
about the PETeC project; (d) encourage renewed efforts to introduce
an effective SBRI program; (e) propose an important role for government
in supporting pilot projects; and (f) remain optimistic about
the prospects of UK manufacturing. All in all, we need to run
not just fast, but faster.
2. INTRODUCTION
Plastic Logic (www.plasticlogic.com)
is the leading UK SME in the plastic electronics sector. It spun
out of Cambridge's Cavendish Laboratory from research by Prof
Sir Richard Friend FRS and Prof Henning Sirringhaus. The company
raised US$50 million during 2000-06 to develop its technology,
and a further $100+ million in 2007 to build its first factory
in Dresden, Germany. Funding has been led by UK-based Amadeus
Capital Partners. Other financial investors include Oak Investment
Partners and Tudor Investor Corporation, both multi-billion dollar
US-based funds. The company's corporate investors include Bank
of America, BASF, Dow Chemical, Intel, Mitsubishi and Siemens.
It has also received financial support from the UK's TSB, via
R&D tax credits and from German/Lander governments, as well
as the European Commission. Plastic Logic's first target market
is "take anywhere, read anywhere" electronic readers
that are wirelessly connected and will incorporate flexible active
matrix displays that are thin, light and robust. This enables
a reading experience closer to paper than any other technology.
3. Plastic Logic has always thought of itself
as a global company that happens to be based in Cambridge, rather
than a British company that operates internationally. So by the
time we had 20 employees, we had eight nationalities. We saw this
as a strength and cause for celebration, rather than as a problem.
According to The Financial Times (14 March 2007), Plastic Logic
has the best chance of becoming a £1 billion company among
UK university spin-outs. The company occupies 20,000 sq ft on
the Cambridge Science Park, including clean rooms/prototype line.
UK headcount is nearly 100, of whom 70% are highly qualified technical
staff. It continues a close scientific collaboration with the
Cavendish Lab.
4. This submission on behalf of Plastic
Logic has been prepared by Stuart Evans and Dr John Mills-brief
biographical details are at Annex A and illustrate their experience
in plastic electronics.
5. THE STORY
SO FAR
The UK plastic electronics community comprises
SMEs, multinationals and academic groups. It has already received,
and values highly, significant government support over the years.
This has included longstanding EPSRC support of the science base[12]
as well as more recent TSB funding of collaborative R&D projects
and a very effective Knowledge Transfer Network in Displays and
Lighting (www.ukdisplaylighting.net).
However, plastic electronics exemplifies Lord Sainsbury's theme
in being engaged in The Race to the Top[13]
and we absolutely agree we have to run fast. Plastic electronics
is an area in which UK science remains pre-eminent on a global
scale. Early commercial efforts (like Plastic Logic) are very
significant, with high prospects of success. But UK plc mustn't
become complacent. Independent data from IDTechEx shows 200 organisations
in the US, 140 in Asia and nearly 250 in Europe active in plastic
electronics. Fortunately, the nature of the industrial opportunity
means manufacturing is not inevitably destined to migrate to Asia
or the USA as is discussed further in paragraph 18. In terms of
national competitiveness, it's clear that all the key governments
are providing significant support to their local plastic electronics
communities-the UK must continue to do likewise if it wishes to
sustain its strong early position. In other words, we need to
run not just fast, but faster.
6. Scope of, and opportunities in, plastic
electronics. This is an emerging global industry based on most
if not all of the following
- New materials (solution-based semiconductors,
both organic and inorganic; printable metals etc)
- New processes (solution processing, printing,
laser patterning etc; while trying to avoid mask alignment, high
temperatures and vacuum processing)
- New flexible substrates (plastic, paper
or thin stainless steel-all with no or minimal encapsulation;
replacing rigid glass or silicon substrates)
The leading groups are pragmatic and not purist,
and most first generation approaches are hybrid in some way. The
eco-system to support this new industry is complex and still forming.
Fortunately, the UK already has a significant presence across
many elements of this.
7. The promise of plastic electronics is
innovative, compelling products in attractive markets:
7.1 The first significant product categories
are (a) electronic-paper readers, books and newspapers; and (b)
OLED televisions. Initial products are based on rigid glass substrates,
with flexible displays just around the corner.
7.2 There is increasing activity in photovoltaics
and solid state lighting. The "green" agenda and government
subsidy to consumers all over the world are key drivers in these
markets.
7.3 There is other significant activity in batteries,
memory, sensors and RFID
8. Plastic electronics also offers low manufacturing
costs without massive manufacturing investments. Manufacturing
is viable in much smaller scale facilities that conventional multibillion
dollar 300mm silicon fabs or gen 8+ display fabs. They are not
simply smaller scale but less capital intensive. As a result of
lower economic barriers to entry, we will see multiple plastic
electronics mini-fabs all over the world. Near to customers and
markets, they will be well suited to rapid turnaround, short run
length manufacturing. Of course, plastic electronics is not as
far down the experience curve as conventional electronics so this
adds to costs in the early days. To draw an analogy from another
market, the steel industry faced significant disruption in the
seventies/eighties with the emergence of mini-mills that were
superior to conventional massive integrated steel works in product
categories like reinforcement bars. Exactly the same will happen
as plastic electronics matures and mini-fabs become commonplace-they
will give glass- or silicon-based fabs a run for their money.
9. It's not easy to assemble credible independent
perspectives on the scale of the plastic electronics opportunity,
although it's much easier to assess the competitive strength of
the UK. IDTechEx are the leading independent experts and their
latest report[14]
estimates worldwide industry revenues of $5 billion by 2011, $48
billion by 2017 and up to $300 billion by 2027. The Council for
Science and Technology's November 2007 report Strategic Decision
Making for Technology Policy[15]
recommended plastic electronics as one of only six new technologies
that are crucial to UK's future prosperity and proposed it should
receive preferential investment from public funds. As the CST
detailed in its report, this is in part due to the very strong
base already established in the UK.
10. THE ROLE
OF ENGINEERS
From a business perspective, the boundary between
scientists and engineers is fuzzy. However, as Plastic Logic has
evolved we started by hiring more scientists than engineers but
now hire more engineers than scientists. This is not surprising
as we have moved from [mostly] invention to [mostly] exploitation.
Most scientific hires have come from academic groups that work
in or around plastic electronics (including of course, the Cavendish
Lab-for a spin out, hiring top PhDs is a wonderful way to increase
the effectiveness of Knowledge Transfer) so in a sense they were
relatively experienced. On the other hand, very few of our engineering
hires come with significant experience in plastic electronic as
there are so few companies and the industry doesn't really exist
yet. With a greater concentration on gritty real world engineering
problems like reliability/yield, and growing requirements to manage
supply chains and procurement, the need for technology-savvy managers/executives
increases. This has several implications for UK engineering that
are relevant to the Committee:
10.1 Training qualified engineers in plastic
electronics. A Master's level "plastic electronics conversion"
course would be very helpful and could build on the Displaymasters
course that has been run in recent years. The goal would be to
assist experienced electronics engineers learn how plastic electronics
is different.
10.2 Encouraging university engineering/industrial
research collaborations in reliability, yield, failure mode etc
would assist plastic electronics companies improve manufacturing
operations. If academic groups have access to plastic electronics
devices made in state-of-the-art industrial facilities (rather
than university labs) they are more likely to generate breakthrough
insights that will improve manufacturing effectiveness.
10.3 There are engineering skills in UK industries
other than electronics (such as Bio/Pharma/Oil) that could very
usefully be brought to bear on plastic electronics.
11. Support from EPSRC & TSB EPSRC funding
in this sector runs around £20 million per year, and TSB
funding over recent years has totalled around £48 million.
Results have been impressive in terms of scientific/technological
accomplishment as well as the development of a strong cadre of
UK plastic electronics experts. It is tremendously important this
level of support is sustained
12. Plastic Electronics Technology Centre
(PETeC). Taking into account all the various strands of public
sector financial support, this is easily UK plc's largest project
in plastic electronics and we all hope it will become a successful
flagship. It has struggled to define and articulate a compelling
vision of how it will benefit the UK plastic electronics community
as a whole. It proposes IP (Intellectual Property) arrangements
that many SMEs will find unacceptable. Not surprisingly, it has
struggled to build widespread stakeholder support. It completely
changed its strategy from May 2007 (when the CST team visited)
to November 2007 (when a team from UKDL visited). The latest strategy
has a significant financially-driven focus on contract research
for a small number of giant Asian electronics companies. We assess
its chances of success in its current strategy as approximately
50/50 but are even more concerned about the lost opportunity to
support a fledging UK industry. We encourage the Committee to
challenge the various public sector funding sources to ensure
PETeC delivers a positive outcome for the UK plastic electronics
community and becomes a well deserved flagship.
13. SMALL BUSINESS
RESEARCH INITIATIVE
(SBRI)
The Sainsbury Review supported a much more significant
role for SBRI along the lines proposed by Anne Campbell and David
Connell[16].
We understand the government has accepted Lord Sainsbury's recommendation.
And as we finalised this submission, it appears the government's
latest innovation white paper is also supportive.
14. It is widely recognised that the equivalent
US Small Business Innovation Research (SBIR) program has been
very successful. It has awarded over $12 billion since 1982 to
various small businesses through a 2.5% set-aside of US government
agencies' extramural R&D budgets to provide 100% funding to
"small business concerns to engage in Research/Research and
Development (R/R&D) that has the potential for commercialization".
The US program has both Phase 1 grants (typically $100k for proof
of principal over six months) and if successful can be followed
by Phase II grants (typically $750k over two years). It's crucial
that SBIR provides 100% funding (unlike TSB collaborative R&D
support or general tax credits), especially for small businesses
operating in early stage/immature sectors (like plastic electronics)
while continuing Research is as important as more downstream Research
& Development. SBIR has also helped many small companies onto
the first rung of the lucrative US government procurement ladder.
Indeed the sustained scale of the program is evidence of a closer
and more intimate relationship between small business and government
than we see in the UK.
15. Universal Display Corporation (one of
the key US start-ups in plastic electronics) has won approximately
10 Phase II awards in flexible displays and solid state lighting,
and reports SBIR has been very useful in enabling the company
to launch new initiatives as well as providing a good external
validation that is appreciated by the investment community. Other
beneficiaries of SBIR in the plastic electronics sector include
Kent Displays (flexible display), Imaging Systems Technologies
(flexible plasma display), eMagin (OLED microdisplay), and Dimension
Technologies Inc (3D display).[17]
16. The UK SBRI has had several false starts.
As a result, those of us from the SME community will be sceptical
until we see real evidence of something happening. After all,
the 2.5% SBRI target has to come from somewhere (we understand
it is not new money) and it's natural to expect a stiff rearguard
battle from existing stakeholders. Nonetheless, we consider it
is an important initiative for plastic electronics (and indeed
the wider SME sector). We hope the Committee can be persuasive
in the right places to facilitate a fresh start.
17. GOVERNMENT
SUPPORT FOR
PILOT PROJECTS
The public sector is already an important consumer
of the products and system that will be disrupted by plastic electronics-paper,
printing, energy and lighting among others. We assume there must
be somebody responsible for reducing government energy consumption
and purchases of paper and printing but no-one in the plastic
electronics community knows who they are. We would very much like
to see government support for early pilot projects on a relatively
large scale. Projects with electronic readers for book/newspapers
etc and new forms of energy and lighting would all simultaneously
benefit the governments as a customer and be widely welcomed across
the supplier base. It may already be too late for the 2012 Olympics
to use plastic electronics for lighting, heating and cooling,
but it's not too late to equip the 25,000-50,000 journalists and
officials with wirelessly connected electronic readers so we can
have a paperless Olympics. Other pilot projects can start well
before that-the new Plastic Logic factory has a capacity of 1
million readers per year.
18. POTENTIAL
FOR UK-BASED
MANUFACTURING
As stated in paragraph 5, the nature of the
industrial opportunity means manufacturing is not inevitably destined
to migrate to Asia or the USA, especially as the concept of mini-fabs
for plastic electronics becomes well established. Plastic Logic's
2007 decision to build its first factory in Dresden illustrates
this very nicely and comes after a word-wide competition in which
New York State and Singapore were runners up. The triumph here
is that we put the factory in Europe, and not Asia or the USA.
However, it also illustrates there is a race within Europe, and
it's now arguable that Germany is nudging ahead of the UK for
the number 1 spot in plastic electronics. Nonetheless, at the
same time as the Plastic Logic decision, Polymer Vision (a Dutch
spin-off from Philips) announced its manufacturing partner was
to be Innos in Southampton, and subsequently Polymer Vision acquired
Innos. The large electroluminescent display in the First Class
lounge at BA's new Terminal Five was manufactured by Elumin8 in
the UK. And Pelikon has manufactured electroluminescent displays
used in high-end Universal Remote Control Units at its factory
in South Wales. All in all, there is still significant potential
for UK manufacturing of plastic electronics. The Committee should
encourage UKTI, RDAs and other government bodies to seek out and
support plastic electronics manufacturing projects in the UK.
After all, the only way we can be certain of never having any
UK manufacturing of plastic electronics is by not trying.
19. EMERGING
VALUE-ADDED
OPPORTUNITIES
As plastic electronics technology matures over
the next few years, display modules and other sub-assemblies will
become available from several different sources both in the UK
and internationally. As with the existing semiconductor industry,
we expect there will be significant opportunities for fab-less
business models in plastic electronics that could in due course
be worth 20% of the market.
March 2008
11 Other terms meaning broadly the same as plastic
electronics include: organic electronics; polymer electronics;
printed electronics, flexible electronics and TOP (Thin-film Organic
and Printable) electronics. Back
12
eg http://www.epsrc.ac.uk/ResearchHighlights/TenYearsOfAchievement/PolymerOptoelectronics.htm Back
13
Lord Sainsbury of Turville's October 2007 report The Race to the
Top is available at http://www.hm-treasury.gov.uk/media/5/E/sainsbury-review051007.pdf Back
14
Organic & Printed Electronics Forecasts, Players and Opportunities
2007-2027. www.idtechex.com Back
15
Available at http://www.cst.gov.uk/cst/reports/files/strategic-decision-making.pdf Back
16
Available at http://www.cbr.cam.ac.uk/pdf/SBIR%20Full%20Report.pdf Back
17
Personal communications from Mike Ciesinski, CEO of the United
States Display Consortium; and Dr Michael Hack, Vice President,
Strategic Product Development, Universal Display. See also www.nsf.gov Back
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