IFISE Project

Third MeetingPavia, 15th February 2001

Computer hardware, semiconductor devices and electronic components.

The Italian case

Patrizia Gattoni

UNIVERSITÀ di PAVIA

DATA SOURCE AND METHODOLOGY

GEOGRAPHIC AREAS ACTIVE IN THE SECTOR

CATANIA AREA

START UPS and case study

MILANO AREA

START UPS and case study

POTENTIAL ENTREPRENEURS (CATANIA AND MILANO)

PRELIMINARY CONCLUSIONS

OUTLINE

DATA SOURCE AND METHODOLOGY

R&D MANAGERS OF MULTINATIONAL COMPANIES OF THE SECTOR (15)

NATIONAL INSTITUTE OF STATISTICS AND EUROPEAN PATENT OFFICE DATA (MAPS)

UNI PROFESSORS, INSITUTIONS’ OFFICIALS, EXPERIENCED RESEARCHERS AND MANAGERS (13 in Catania + 6 in Milano)

START UP MANAGERS (9 in Catania + 2 in Milano)

POTENTIAL ENTREPRENEURS (19 in Catania + 13 in Milano)

MAIN COMPANIES AND THEIR RESEARCH CENTRESCOMPANY R&D SITES TYPE OF RESEARCH

STMICROELECTRONICS 3,000 2 Milano area semiconductor physics and devices 1 Catania

ALCATEL 1,000 2 Milano area optical fibre and optical communication devices

BULL 900 2 Milano area general purpose systems, software1 Avellino (new generation mainframe, system

integration projects, billing systems)

TELECOMITALIA LABS 850 mainly in Torino mobile internet, multimedia systems, broadband networks, voice technology

ERICSSON 800 1 Milano area, 1 Roma wireless broadband access, high capacity 1 Bologna, 1 Salerno radio, WCDMA (wideband code division

multiple access)

SIEMENS 800 1 Milano area second and third generation mobile networks

INFOSTRADA 110 Milano area interactive video and streaming, communication protocols, ADSL technology and last mile

PIRELLI 100 Milano optical fibres and material, nanotechnologies for optical transmission

#

IVREA

#

TORINO

#

MILANO

#

AVEZZANO

#

FROSINONE

#

ROMA

#

MILANO

#

TORINO #

BOLOGNA

#

ROMA

Production units of computer hardware, semiconductor devices and electronic components firms per Local Labour System

Employees of computer hardware, semiconductor devices and electronic components firms per Local Labour System

0 - 4849 - 191192 - 574575 - 15641565 - 33123313 - 12966

Number of employees

0 - 2

3 - 9

10 - 23

24 - 48

49 - 124

125 - 260

Number of production units

Total production units in computer hardware,

semiconductor devices and electronic components: 1,906

Total employees in computer hardware, semiconductor

devices and electronic components: 49,668

#

MILANO

# CATANIA

Nunber of patents

1 -0.2 - 1.731.73 - 55 - 11.1711.17 - 20.2520.25 - 49.8149.81 - 227.88

#

MILANO

#

CATANIA

Inventors in computer hardware, semiconductor devices and electronic components per Local Labour System

Patent applications in computer hardware, semiconductor devices and electronic components per Local Labour System

1 -23 -56 - 1011 - 1819 - 3738 - 186

Nunber of inventors

Total inventors in computer hardware, semiconductor

devices and electronic components (years 1995-2000): 655Total patent applications in computer hardware, semiconductor devices and electronic components (years

1995-2000): 644

CATANIA AREA

TERRITORY

POLICIES AFFECTING HIGH-TECH INDUSTRIES

LOCAL INTITUTIONS

THE ROLE OF STMICROELECTRONICS

WEAKNESSES OF THE EMERGING TECHNOLOGY POLE

ENTREPRENEURIAL MENTALITY

TERRITORYLOW COST OF QUALIFIED LABOUR FORCE around 25,000 Euro the cost of an engineer

HIGH LEVEL OF UNEMPLOYMENT (22% in the South)

LOW MOBILITY (no many large companies in the sector apart from ST)

HIGH RISK AVERSION ( entrepreneurial mentality)

HIGH QUALITY OF LIFE Revitalisation of the historical centre Relevant reduction of criminality Low cost of living

experienced managers and engineers of Catania origin are willing to come back

RACKET typically related to commercial activities, high-tech activities seem to have no problems

CATANIA

POLICIES affecting high-tech industriesEU LEVEL:

OBJECTIVE 1 AREA (fiscal benefit for employment, advantages in the selection for different support programs...)

NATIONAL LEVEL:

STARTECH - SVILUPPO ITALIA - public VC

L297/99 - academic spin-off

L44/86, L95/95 - juvenile entrepreneurship

L46/82 - research and innovation

L488/92 - for depressed areas

MUNICIPALITY LEVEL:

FREE LAND TO MULTINATIONAL FIRMS FOR THEIR PLANTS, PRESELECTION OF PROJECTS AND ASSISTANCE IN PRESENTING BUSINESS PLANS FOR PUBLIC SUPPORT FOR NEW ENTREPRENEURSHIP

there is a plan of the municipality to create a BIOTECH pole in Catania

CATANIA

LOCAL INSTITUTIONS

TECHNOLOGY TRANSFER INSTITUTIONS

CONSORZIO CATANIA RICERCHE: consortium of different research agencies aiming at the development of applied research and at the co-ordination of technology transfer. Mainly addressed to SMEs through the INNOVATION RELAY CENTRE

AGENCIES FOR THE DEVELOPMENT OF ENTREPRENEURSHIP

BIC SICILIA Business Innovation Centre with incubator mainly addressed to traditional sectors.

INVESTI A CATANIA a municipality initiative aimed at supporting potential entrepreneurs by providing guidelines for the preparation of the business plan and assistance in the application to public support for young entrepreneurs.

RESEARCH INSTITUTIONS

SUPERLAB (Laboratory of Surfaces and Interfaces) linked to the Department of Chemical Sciences of the university is located in STM premises.

CNR-IMETEM research centre on methodology and technology for microelectronics. It is located in STM premises.

UNIVERSITY of CATANIA Departments of Electronic Engineering and Physics.

CATANIA

THE ROLE OF ST MICROELECTRONICSSTM is the 6th largest semiconductor company in the world. It offers over 3,000 main types of products to more than 1,500 customers. The group totals 42,000 employees, 12 advanced R&D units, 33 design and application centres, 19 manufacturing sites and 74 sales offices in 27 countries.

ST group was formed in 1987 as a result of the merger between SGS Microelettronica of Italy and Thomson Semiconducteurs of France.

The Catania site used to be an assembling site for the Italian company which had its headquarters in Agrate Brianza (Milano area). At the time of the merger it was undergoing a deep crisis. After the merging Catania site went through a relevant restructuring and drastically changed its mission. Now of 4,000 employees 1,000 are involved in the R&D.

IMPACT ON THE TERRITORY:

Development of previously existing firms (MERIDIONALE IMPIANTI)

SPIN OFF:

SAT, HITEC, ION BEAM, TECNOSMEDIA

“SPIN IN”:

• 23 multinational companies suppliers of ST positioned in the Catania area

• in some cases suppliers’ plants are directly connected to ST

• NOKIA and MAGNETI MARELLI decided the location of a plant in the Catania area

• IBM opened a research centre few months ago

CATANIA

WEAKNESSES OF THE EMERGING CATANIA TECHNOLOGY POLE :

• HIGHLY DEPENDENT ON STMicroelectronics

• FEW OTHER ENTREPRENEURIAL ACTIVITIES ARE HIGH TECH

• LACK OF VENTURE CAPITAL FUNDS

• LACK OF ADVANCED SERVICES

CATANIA

ENTREPRENEURIAL MENTALITY

“Historically open to commerce, Catania has a different mentality from the rest of the island.”

However:

SOCIAL ESTEEM

careers in politics, public institutions and university are more highly considered than entrepreneurial activities

RISK AVERSION

young people definitively prefer a job in a large company than starting their own activity.

Case of post graduate students in physics, who abandoned the plan of a service enterprise offering advanced archaeological analysis, for which they could obtain public funding, and have been hired by ST Microelectronics

Some complain a lack of long term thinking and of co-operative mentality of the business community

CATANIA

START UPS

FIRM ACTIVITY N.EMPLOYEES

YEAR OFFOUNDATION

ANTECHsatellitecommunications

40 1989

MASTERELETTRONICA medical equipment 10 1992

CITIES ON LINEInternet and tlccompany

130 1995

PAPALEOvideo-surveillancesystems

3 2000

GEOVERTICALgeophysicalinspections

6 1998

TECNOS MEDIAautomation systemdesign

5 1997

HITECequipment forphysical research

5 1990

SAT copper frames 215 1995

ION BEAMspare part supply, 2nd

mkt2 1998

START UPS

Case study: CITIES ON LINE

•The founder is a 34 year old engineer, graduated in Torino- Politecnico, who earned his MBA in the USA.

•He started the activity in 1995 as Internet provider, with own and family funds

•Until 1999 CoL had 30-40 employees, in 2000 it increased its size up to 130 employees and has now 7 gateways in Italy

•Now, apart from Internet provision and VOIP system, it offers free web sites to firms (revenues are made by getting a margin on firms’ sales made through the web site).

•Their most important project is the cabling of the whole Sicily and its connection to Malta and Milano, in order to create a transmission cross-connection for Mediterranean countries substituting for the current system through the UK. (Alcatel, Sielte and Metroweb)

•CoL obtained public funds for creating a new call centre in Ragusa (Sicily)

•No VC funds involved

•Problems encountered:

•personnel management (fast growth),

• being the 7th customer of Telecom, CoL suffers from the competition of the bigger companies which also rent Telecom’s lines; moreover there is no Service Level Agreement and the service of Telecom is not a good one

START UPS

FINANCING

The starting of an entrepreneurial activity is highly dependent on PERSONAL FINANCIAL RESOURCES. It is therefore necessary to start with activities requiring low initial investments (e.g. supply of technical assistance or distribution of large companies’ products).

PUBLIC SUPPORT has not been useful for starting an enterprise due to the uncertainty and delay in receiving answer to the application and subsequently the money. These aspects are especially penalising for high-tech activities for which timing is crucial. At the time of “tangentopoli” public support generated a bad reputation effect, which made it more difficult to obtain loans from banks. Public support to newly constituted firms requires the company structure not to be changed for a certain number of years. This limits the role of VC.

PRIVATE BANKS pay too much attention to the guarantees and very little to the project which needs funding (in the past banks did not ask information about the project at all).

VENTURE CAPITAL is scarcely known and the access is difficult. One case of public VC - IRITECH

MILANO AREALOW UNEMPLOYMENT (6.6% in 1998), HIGH SELF-EMPLOYMENT 24% of the people employed in the province of Milano (1.5m people) are self-employed. On average around 2,500 new businesses are established in the Province of Milano only in the manufacture sector every year.

The SMEs system in Milano area is characterised by a widespread INNOVATION CAPACITY. Lombardia region has its own measures for the support of innovation through a series of regional laws that help finance SMEs in innovative activity (L35/96).

There is a strong risk capital provision

TECHNOLOGICAL AND SCIENTIFIC POTENTIAL

7 UNIVERSITIES 24 NATIONAL RESEARCH CENTRES 4 INCUBATORS 8 TECHNOLOGY TRANSFER CENTRES

the sectors of excellence in the public research are: electronic engineering, computer sciences, robotics and meccatronics; biotechnology and new materials.

Almost a quarter of the Italian business enterprise research is carried out in Milano (Lombardia 34% of Italy)

Case study: T.R.E. TELERILEVAMENTO EUROPA

•The founders are a university professor, a university researcher and Politecnico di Milano, which is controlling the company (55%). The initial capital has been 10,000 Euro. TRE is the first case of academic spin-off from Politecnico di Milano. It was founded in February 2000 and it is located in Politecnico incubator.

•In the first year of activity it reached 1m Euro of sales.

•It utilises a patent owned by Politecnico and offers advanced services using a new method of land monitoring from satellite data.

•Most of their clients are found through contacts taken during the development of the patent and their scientific publications.

•TRE tried to obtain public funds through the regional law for innovative activities (L35/96), but being addressed to SMEs their project was not accepted (TRE is controlled by Politecnico). They are now preparing the application to the national law for academic spin-off (L297/99).

•TRE has been contacted by VC funds, but prefers letting the company grow slowly for the moment. Very good knowledge of the market is the crucial feature asked to a VC investor.

•Problems encountered:

•financial constraints make the company grow very slowly, more money would have helped solving more quickly some problems: getting data from more than one satellite, hire somebody to work full time on the activity.

•Being the first case of spin-off from Politecnico they encountered problems of slow decision-making. Standard steps to follow are useful. There is need of rules.

MILANO

POTENTIAL ENTREPRENEURS

GENERAL DATA

CHARACTERISTICS OF THE WOULD BE ENTREPRENEURIAL VENTURE

FINANCING AND VENTURE CAPITAL

INCUBATORS

PERCEIVED DIFFICULTIES

POTENTIAL ENTREPRENEURS

GENERAL DATA (32 cases):

AGE from 26 to 51

SEX all interviewees are MALE

PLACE OF WORK 29/32 R&D IN HIGH TECH MULTINATIONAL COMPANY

3/32 RESEARCH CENTRES OR UNIVERSITY

EDUCATION 2/32 SECONDARY SCHOOL DIPLOMA

26/32 UNIVERSITY DEGREE IN SCIENTIFIC FACULTIES

4/32 PhD

EXPERIENCE IN THE SECTOR most of them are senior engineers, project and design managers and responsible of research groups. 17 have worked on more than 10 patents.

PREVIOUS ENTREPRENEURIAL EXPERIENCE 2/32 (non high-tech fields)

POTENTIAL ENTREPRENEURS

CHARACTERISTICS OF THE WOULD BE ENTREPRENEURIAL VENTURE:SERVICE OR PRODUCT no predominance of one type of enterprise, slightly more oriented to

services in Catania and to products in Milano. For 27/32 the intended market is made up of firms.

9 cases proposed DESIGN HOUSE or INDIPENDENT RESEARCH UNITS

COMPETITIVE ADVANTAGE

Technical knowledge, knowledge of the sector and personal contacts (Both groups)

The existence of a cohesive team is a competitive advantage indicated by the group of Milano only (3/13).

LOCATION it is important for 16/19 interviewees in Catania

and 7/13 interviewees in Milano

the most frequently indicated factors in determining the importance of the location are the presence of QUALIFIED MANPOWER and PROXIMITY TO CLIENTS. In the Catania group emerges also as important the presence of ADEQUATE INFRASTRUCTURES.

BUSINESS PLAN 3/32 made a business plan (only 1 in Catania)

COSTS TOMARKET

CATANIA(N. of cases)

MILANO(N. of cases)

TIME TOMARKET

CATANIA(N. of cases)

MILANO(N. of cases)

< 300,000 2 2 3 – 6 months 3 1

300,000-600,000 4 0 6m – 1 year 6 3

600,000 – 1m 7 1 1 - 3 years 7 4

1m - 2m 2 1 3 – 5 years 1 0

2m - 3m 0 0 5 – 10 years 0 0

3m - 5m 0 1 > 10 years 0 0

5m – 10m 2 0 Don’t know 2 5

10m – 50m 0 2 TOTAL 19 13

50m 0 1

Don’t know 2 5

TOTAL 19 13

COSTS AND TIME TO MARKETPOTENTIAL ENTREPRENEURS

9 design houses: time 6m - 3a600,000 - 1m (3 cases don’t know)

POTENTIAL ENTREPRENEURS

FINANCING

SOURCES OF FUNDS

CATANIA MILANO

PUBLIC FUNDING FAMILY AND FRIENDS

STRATEGIC PARTNER BANKS

VENTURE CAPITAL is taken into consideration by 3/19 interviewees in Catania and 2/13 in Milano

PERSONAL CONTRIBUTION: OWN TIME AND WORK

NATIONAL AND REGIONAL SUPPORT TO RESEARCH ACTIVITY are known by 13/19 interviewees in Catania and 5/13 in Milano

FIFTH FRAMEWORK PROGRAM is known by 10/19 interviewees in Catania and 5/13 in Milano

POTENTIAL ENTREPRENEURS

FINANCING

Not very wide knowledge of VENTURE CAPITAL FUNDS, slightly better in the Milano area

CATANIA 32% knows about it, only 1 contact taken

the expected difficulties are bureaucracy and loss of control

MILANO 38% knows about it, only 1 contact taken

the expected problems are related to disclosing information and loss of control

Relevant difference in the two areas in the knowledge of LAWS SUPPORTING ENTREPRENEURSHIP

CATANIA 84% know the laws, 3 asked for detailed information (2 applied for other projects)

MILANO 46% know the laws, only 1 asked for detailed information

POTENTIAL ENTREPRENEURS

INCUBATORS

very little knowledge of PRIVATE INCUBATORS

CATANIA 16% knows about them, NO contacts taken,

NO comments

MILANO 15% knows about them, NO contacts taken,

the expected problems are related to disclosing information

wide difference in the knowledge of PUBLIC INCUBATORS in Catania and Milano

CATANIA 74% knows about them, 1 contact taken,

the expected problems are related to disclosing information, and bureaucracy

MILANO 8% knows about them, NO contacts taken

the expected problems are related to disclosing information

LEVEL OF PERCEIVED DIFFICULTYAREAS OF THEENTREPRENEURIALACTIVITY

CATANIA MILANO TOTAL

FUND RAISING 3.7 3.9 3.8

MARKETING 2.9 2.8 2.9

CONTACTS CREATION 2.4 3.2 2.7

MANAGEMENT 2.2 3.1 2.5

INTERNATIONAL CONTACTSCREATION

2.1 3.2 2.5

TECHNICAL INFORMATION 1.8 2.2 2

PERSONNEL TRAINING 2.6 2.2 2.4

INTELLECTUAL PROPERTY RIGHTSPROTECTION

3 2.5 2.8

STRATEGIC PLANS DEVELOPMENT 3.3 3 3.2INFORMATION ON MARKET TRENDSAND TECHNOLOGICALDEVELOPMENT

2.5 2.7 2.6

LEGAL MATTERS 3 3.1 3

PERSONNEL SELECTION 1.7 2 1.8

POTENTIAL ENTREPRENEURS

PERCEIVED DIFFICULTIES

719

0

2

1

3

4

4

7

4

2

5

5

415

11

12

3

1

6

0

3

3

0

PERCEIVED DISADVANTAGES AND ADVANTAGES OF BECOMING ENTREPRENEUR

LEAVING AN ASSURED JOB is perceived more strongly as a disadvantage by the Catania potential entrepreneurs (2.84); and it is followed by the TOO HARSH LEGAL CONSEQUECES IN CASE OF BANKRUPTCY (2.67). This disadvantage has the highest index in the Milano group (3.5). It should be mentioned that 9/32 of the interviewees do not know the legal consequences of a bankruptcy.

In the Catania group of interviewees the POSSIBILITY OF HIGHER REWARD shows the highest index (4.11) as an advantage of becoming entrepreneur. PROFESSIONAL FULFILMENT is an advantage more highly valued by the Milan potential entrepreneurs (4.62 index for Milano, 2.63 index for Catania).

Only 11 of the 32 interviewees really intend to start an activity. (7/13 in Milano, 4/19 in Catania)

It is not only the crisis of the sector which affects the decision not to start the activity. In many cases researchers assert to prefer their job rather than playing the role of entrepreneur.

POTENTIAL ENTREPRENEURS

PRELIMINARY CONCLUSIONS•Milano is certainly the most important area active in the electronic sector.

•Catania has good potentialities as a nucleus of activities, but as a technology pole still shows relevant weaknesses.

•The only cluster of potential activity type consists of design houses.

•Several actions are taken by public institutions for the development of Catania area and support schemes for entrepreneurship are known and taken into consideration by potential entrepreneurs.

•Risk aversion is stronger in Catania than Milano, because of the difficulty of finding a new job in case of failure of the entrepreneurial project. Moreover researchers seem to prefer their actual job than playing the role of entrepreneur.

•Public incubators are known in Catania, unknown in Milano.

•Private VC funds and private incubators are unknown in Catania and Milano.

•Fund raising is the most difficult problem to start an entrepreneurial activity. Public intervention on this aspect is expected by most interviewees.

•Main sources of funds are public funds and strategic partner (STM) in Catania, family and friends, and banks in Milano.

•The need of public intervention for the weak reality of Catania VS competition of public support against private VC funds