They're not the Valley—and that's the point
Silicon Valley is no longer the end of the rainbow for companies in search of R&D talent, advanced research opportunities, submicron-process expertise or applications development prowess.
In France, the Atomic Energy Commission and the National Polytechnic Institute of Grenoble have opened the doors of the micro- and nanotechnology research initiative. The French government has also launched a poles de competitivite (poles of competitiveness) project to install 66 R&D centers throughout the country. The Dutch government has also rolled out a similar program. In Germany, former Eastern Bloc industrial center Dresden has reinvented itself as a cutting-edge technology hub that welcomes multinational players across a swath of industries.
Advanced Micro Devices Inc.'s outlay of a whopping $2.5 billion to expand two microprocessor fabs in Dresden, Germany is testimony to the booming tech economy in Dresden and the surrounding state of Saxony.
Dresden today is home to "the largest cluster of microelectronics interests in Europe," said Thilo von Selchow, CEO and president of Zentrum Mikroelektronik Dresden (ZMD), a wafer fab once owned and operated by the East German government. In the past 10 years, the region has added 450 high-tech companies and 35,000 tech industry workers. Roughly 220 companies in the area are members of Silicon-Saxony.net, a trade association chaired by von Selchow that opens the door to collaborative work.
With investments of $4 billion each last year by Advanced Micro Devices (AMD) and Infineon Technologies AG (which has since spun out its memory business as Qimonda AG), Dresden boasts an infrastructure that spans the chip-manufacturing cycle. Beyond its fabs, Dresden has an enviable base of mask technology development expertise. Saxony hosts several of Germany's respected Fraunhofer-Gesellschaft institutes for applied research. The varied activity lends heft to Dresden's claim that it leads Europe in electronics innovation.
Dresden stands out for the synergy and competitive give-and-take seen among its diverse silicon vendors. The interplay nourishes an atmosphere of innovation that has kept Dresden hot and relevant, where others with a less diverse base might slip into stasis after an initial capital influx.
The international investment community has monitored the ramp-up and process conversion (from 90nm to 65nm) of AMD's 300mm wafer fab, as well as the activity at Qimonda's flagship memory fab. The Fraunhofer Center for Nanoelectronic Technologies, a public-private partnership among Fraunhofer-Gesellschaft, Infineon and AMD, grabbed headlines late last year, when its project for nanoelectronics got roughly $3 million in public funding.
Companies in Saxony cover far broader segments of the industry—from PCs to cellphones and automotive—than rival regions, said ZMD's von Selchow. He described that diversity as "a built-in shock absorber that helps us ride through the ups and downs of the electronics industry."
Markus Lotzsch, CEO of Saxony Economic Development Corp., described Dresden as a city reborn—"a cradle of old industrialization forces" that in its new incarnation has attracted an international field of tech players.
A look at Dresden's transformation reveals a combination of good timing, a little serendipity and well-executed investments in both technologies and human resources.
ZMD typifies Dresden's revival. Acquired by the state of Saxony in 1993, ZMD was privatized in 1999 when automotive-engineering company Sachsenring AG bought it for a symbolic 2 Deutschmarks (about $1.15).
The deal didn't exactly bring stability to ZMD. The company had to pull off a management buyout within less than two years of the acquisition, shortly before Sachsenring declared bankruptcy in 2002. Coming in at "the peak of the bubble" in the semiconductor market, von Selchow said, "saved our life." Hence the timing and the luck.
As for well-executed investments, ZMD has returned to its ASIC roots and focused its business on sensors and wireless chips, such as Zigbee transceivers. As long as it keeps its focus on specialty products such as sensors, von Selchow said, the company is well-positioned to gain analog/mixed-signal share.
The self-described "45-year-old startup" hopes to cash in on the emerging market for wireless sensor networks.
Investment at the state and federal levels has also been critical to Dresden's revival. Industry players here say Infineon reportedly considered pulling out of the city when the downturn hit the company hard, but changed its mind when it realized that the incentive package it received from the state was too good to abandon.
AMD received $469 million in German government incentives for its Fab 30 in 1997 and 545 million euros, in the form of capital investment subsidies and allowances, for Fab 36, a 300mm facility built in 2004.
Much of AMD's recent success against Intel Corp. in server microprocessors is credited to the "superior products" manufactured in Dresden and "superior time-to-market" enabled by AMD Saxony, said Hans-Raimund Deppe, corporate VP and general manager at AMD Saxony. "We've never missed a milestone in our ramp-up efforts," he said.
Collaboration among competing chip vendors has also been critical to the success of the region. In 2002, AMD, Infineon and DuPont jointly established an Advanced Mask Technology Center (AMTC). Japan's Toppan took DuPont's place in the partnership after acquiring the U.S. company in 2004.
AMTC is both the R&D and pilot-production site for optical photomasks for advanced lithographic generations, including both dry and immersion 193nm processes and extreme UV. Pointing in the direction of AMTC—located just beyond the green fields that surround AMD Dresden's fabs—Deppe said, "We have the best mask house in the world available to us next door, just a three-minute bicycle ride away."
No high-tech campus is complete without a reputable R&D institution nearby. Dresden's industry players have the Fraunhofer Institute Photonic Microsystems (IPMS), one of the 58 centers under the Fraunhofer umbrella. After German reunification, Fraunhofer's Microelectronic Devices and Systems group, based in the western city of Duisburg, expanded to Dresden in an effort to leverage the region's engineering talent. Today, Fraunhofer IPMS' activities range from actuators and organic LEDs for displays to photodiodes and ASICs. While neither AMD nor Infineon is an IPMS client, the companies caused a sizable dip in IPMS' head count in the late 1990s when they convinced many of its scientists and engineers to join private industry, said Heiko Menzel, head of contracts and patents at IPMS.
Among all the possible places in the world, where should U.S. companies look for expert help in R&D? How about France?
This is the answer loudly emanating from the promoters of Maison des Micro et Nano Technologies (Minatec), a huge European R&D site dedicated to micro- and nanotechnology research. Backed by the French Atomic Energy Commission (CEA) and the National Polytechnic Institute of Grenoble (INP-Grenoble), Minatec represents a way to concentrate globally scattered nanotech R&D into existing and new research facilities in the city. "We did not start Minatec from scratch," said Jean-Charles Guibert, director of CEA, who is responsible for technology transfer and commercialization.
With 2,000 scientists and engineers participating, Minatec is based on the existing local high-tech infrastructure. Members include CEA-Leti, one of Europe's largest microelectronics research institutes; INP-Grenoble, a French technical university; and industrial partners like the Crolles 2 Alliance of STMicroelectronics, Philips and Freescale Semiconductor. What's new is a facility that gives actual space, tools and expertise to companies that want to come to Grenoble for their R&D projects.
"At a time when corporate America continues to downsize R&D, with big corporations more driven to 'buy' technologies through acquisitions, Minatec can serve as a source of innovation," said David Holden, strategic-marketing manager at CEA. For startups in the United States, Holden said, "Minatec could offer a stable pool of researchers and engineers."
In short, for high-tech companies interested in specific R&D projects, Minatec is pitching three attractions: "access to people, facility and funding," Holden said.
Minatec offers R&D office space with access to tools and equipment; research engineers from CEA-Leti and INP-Grenoble; and a chance to apply for European funding, an otherwise tough act for a company with no presence in Europe.
With an annual operating budget of $128 million to $192 million, Minatec has existing and new research facilities including 200- and 300mm pilot lines and 10,000m2 clean rooms. It expects to attract 4,000 researchers and engineers by the end of 2007. About 70 percent of Minatec's 100 industrial partners are French, Guibert said. The others include such global giants as Atmel, Freescale, STMicroelectronics and Texas Instruments.
For U.S. companies understandably leery of the notorious French bureaucracy and France's reputation for laid-back business practices, Guibert insists that Minatec is taking a decidedly "un-French" approach. CEA and INP-Grenoble avoided establishing Minatec as a "company," either private or public, thus eliminating at least one layer of bureaucracy. Rather, Minatec is "a brand," designed to attract researchers and engineers, and to bring in R&D projects focused on applied research and technology transfer. The research facilities here belong to CEA, not to Minatec. "There are no employees working for Minatec, as they all depend on their own laboratory or company," said Guibert.
'Un-French' U.S. model
Moreover, Minatec's 300mm pilot lines operate around the clock, seven days a week. This surprisingly "un-French" style of service raised eyebrows among visitors from Taiwan Semiconductor Manufacturing Co., said Guibert.
"We've learned from models in the United States," he said. "We want to be more practical and pragmatic." The U.S.-based alliances Minatec hopes to emulate include Albany NanoTech in New York and California NanoSystems Institute.
Finally, Minatec is not France's national project, but rather is driven by local government. Since Grenoble is a relatively small city (population 500,000), "it's easier to get agreement among people, and to react or move ahead faster," Holden said.
- Junko Yoshida
Additional reporting by Christoph Hammerschmidt