LATVIA’S BREAKTHROUGH TO A HIGH-INCOME ECONOMY: THE ROLE OF PLATFORM TECHNOLOGIES

Fotonika.lv kolokvijs June 7, 2012

Topics

• What science and which innovative technology matters

• History lessons – challenges for Latvia and Europe

• Key enabling technologies (KETS)

• Nanotechnology as the key enabling technology for all KETS

• KETS and EU 2014-2020 R&D priorities

• KETS and R&D priorities in Latvia

• Platform technologies and clusters

• HIPMS as a platform technology

• HIPMS potential with NMP FP7 call

• Steps to develop clusters in Latvia based on HIPMS Platform

• Recommendations

SIA “Kaija Consulting” // FOTONIKA-LV XIII kolokvijs 07-06-2012

What science and which innovative technology matter• NAP2020 Goal – achieve economic breakthrough to a high

income country by 2020.

• Strategies:% increase R&D investment to at least 1.5% of GDP by 2020,

3% by 2030% significantly expand science and engineering education% Catalyze more innovation

• Given that Latvia spent even 3% of GDP on R&D it may not have desired results.

% R&D by itself is not highly profitable. % To make money and generate economic development

R&D investment must result in new products that sell.

% To benefit from R&D production must occur in Latvia or be done in 3d countries with profits returning to Latvia.

R&D investment must result in new products that sell.

4 SIA “Kaija Consulting” // FOTONIKA-LV XIII kolokvijs 07-06-2012

History lessons

• 1990 - Latvia had over 30,000 researchers, R&D >2% of GDP.% Much of the research was aimed at USSR military needs% A significant share of R&D was related to specific production

issues. Innovation was tied to production.

• Latvian R&D was rated world class in several key fields – wood chemistry, organic synthesis, magnetohydrodynamics, solid state physics, electronics, biomechanics, and others.

• Collapse of Soviet Union led to loss of customers for Latvian R&D.

% VEF, Alfa, Ellar, Radiotehnika, other industries that used R&D collapsed

% Without paying customers R&D became a drag on the Latvian economy

% The Latvian government saw no role for the large R&D capability

% Scientists attempted to survive in the emerging private economy. Large numbers of specialists emigrated to the West and to Russia

Current status

• Latvia has about 4,000 researchers, R&D = .46% of GDP

• Most research is now supported through EU funding mechanisms.

• Very little research has a customer• Of the research that has a customer

an even smaller share is oriented towards new product development.

Challenges for Latvia

• For R&D to have a multiplier effect enterprises must be found, developed or created that innovate and transform R&D results into value in Latvia.

• Securing R&D contracts with major foreign firms will not have a multiplier effect. Even creating a major R&D center in Latvia for a foreign firm would have little multiplier effect on the Latvian economy.

• No established R&D based business is likely to move its headquarters to Latvia.

• Latvia must create R&D based enterprises that innovate in Latvia

• Latvia will be largely dependent on EU funding of R&D

Given that Latvia wins sufficient R&D funding, does Latvia have critical mass of R&D entrepreneurs to drive economic breakthrough?

Does Latvia have the time to develop an indigenous pool of R&D entrepreneurs in view of global challenges?

Can Latvia import R&D entrepreurs?

Challenges for Europe

• The EU is now facing growing and overwhelming global competition from both developed and emerging economies in particular in North America and East Asia.

% Emerging economies such as China, India and others are rapidly mastering traditional European strengths

• For Europe to remain a “high income region” it must innovate with products and services that will out-compete other regions in the future.

• There is no guarantee of success. • Volvo was bought by a Chinese firm.• China is emerging a leader in genome sequencing, other

technologies

• Major change is on the way...

STRATEGIC IMPORTANCE OF KEY ENABLING TECHNOLOGIES FOR EUROPE Europe’s Horizon 2020 strategy:

• Industrial competitiveness for growth and jobs as well as for Europe’s ability to address grand societal challenges in the coming years.

• The European Commission High-Level Group of Experts (HLG) identified Key Enabling Technologies (KETs) as central to strengthening Europe’s capacity for industrial innovation and the development of new products and services needed to deliver smart, sustainable and inclusive European growth.

European Commission’s top R&D priority

The HLG recommended that an integrated KETs policy should be implemented --

• KETs should be visibly prioritized in EU policies

and financial instruments• The European Investment Bank group should

pro-actively support KETs initiatives in Europe

.

“A European integrated initiative to pass the KETs ‘Valley of Death’, High-Level Expert Group on Key Enabling Technologies, Final Report”, European Commission, June 2011

A THREE PILLAR BRIDGE TO CROSS THE "VALLEY OF DEATH" The HLG has identified the major difficulties Europe

has in translating its ideas into marketable products – in crossing the internationally recognized "valley of death". To cross this valley, it recommends a strategy comprising three pillars:

% A pillar focused on technological research% A product demonstration pillar focused on product development

% A production pillar focused on world-class, advanced manufacturing

Source: Executive Summary; “A European integrated initiative to pass the KETs ‘Valley of Death’, High-Level Expert Group on Key Enabling Technologies, Final Report”, European Commission, June 2011

Addressing grand social challenges

Some may feel that addressing societal challenges may distract ETPs from their focus on industrial competitiveness.

In reality, societal challenges provide the largest growth markets for businesses.

Key Enabling Technologies (KETs)

Should KETS be the priority for Latvia?• The HLG is a committee of experts making educated

guesses about the future.

% Experts can be wrong...% Success with KETs may not lead to products that dominate global

trade.% In fact – some market leaders do not have superior technology.

• Some R&D frontiers that fall outside of KETS may have greater economic development potential for Europe than KETS.

% Stem cells, genome sequencing, space industrialization , quantum computing, robotics

• Nanotechnology appears to be driving change in the other KETs

Nanotechnology drives the other KETS

Electronics

Photonics

Materials

Manufacturing

Electronics

nano

Topic areas to address with nanotechnology commercialization

- Safety Research - Industrial Safety Strategy - Standardization - Technology Transfer & Innovation Financing - Regulation - Industrialization & nano-Manufacturing - Skills and Education - Networking - Communication - Research & Technology

KETs and R&D priorities for Latvia

• KETS should be a priority area for Latvian R&D because EU funds appear to be directed towards KETS,

• but all opportunities need to be approached with an open mind. The next globally significant product may have nothing to do with KETS.

• Regardless the topic of research, R&D must have a customer to lead to innovation and to generate value.

• Latvia now has few research-intensive firms that can be customers for university R&D

• IMPLICATION – THE PRIMARY GOAL MUST BE TO BUILD RESEARCH-INTENSIVE NEW BUSINESSES IN LATVIA

Innovation cycle:Money Knowledge Money

R&D

New Technolog

y

New Products

Marketing & sales

Profits & investme

nt

How to build research intensive firms in Latvia• Doing contract research for others will add capabilities

and good salaries for a few but will do little to achieve economic breakthrough.

• In most fields Latvian research is too weak to support new major developments

• Latvia’s strengths include geostrategic position and history:

% Latvia is part of the EU with its increasingly favorable climate for innovation and technology commercialization.

% Most Latvian researchers are fluent in Russian and many still have ties to scientists at research centers in the former Soviet Union.

% Russia, Ukraine, Belarus and other FSU republics have poor environments for innovation and technology commercialization.

% Latvia can offer a entrepreneurial haven for Russian and other FSU scientists to commercialize breakthrough technology.

“Naco Technologies” SIA is one example of what is possible

History can be important

• Latvia was a center of innovation for Russia prior to 1918• Latvia emerged as a major center for electronics, machine

tools, pharmaceuticals, biomechanics and other fields during the Soviet period.

• The Soviet Union developed strong R&D capabilities relating to several KETs, especially advanced materials. These capabilities have been weakened but Russia, Ukraine, Belarus and other FSU republics continue to be strong in key disciplines.

• Despite having large resources for investment, the climate for technology commercialization in Russia and other FSU republics is poor.

• Russian scientists and specialists from other former Soviet republics are familiar with Latvia

• Welcome to Latvia! Добро пожаловать в Латвию!

Repeating the Naco Technologies success Formula for success:

Researcher with commercializeable idea

+ Entrepreneur and management team

+ Investment + Innovation environmentSuccessful R&D-based enterprise

LATVIA’S RESPONSIBILITY:

• Become one of the best places in the world to start a business

• Create and nurture the innovation environment Openness to creativity and change Locations such as TechnoHub where new stuff can be

attempted at modest cost Multiple sources of investment Availability of mentors Mobility of people

• Attract and keep R&D talent capable of developing commercializeable technology

Funding vehicles for 3 pillar strategy for Latvia• Must be market focused but cannot be purely

commercially driven• Use EU funding to develop R&D infrastructure,

educational capabilities• Focus funding on high potential areas with global

potential• Key to achieve breakthrough - Fund R&D based startups

and growth of R&D based companies in Latvia% Properly fund Eurostars program. Latvian projects should be

funded like projects in other EU countries – 1.5 million Euro.

• Develop alternative funding sources to accelerate development beyond what is possible with EU funding which will be focused on KETs.

% Latvia’s Future bonds sold to the public with long term maturity (pensions, education costs for children) to fund startups. Risk managed through portfolio diversity.

Attract and keep R&D talent

Scientists are needed, but absolutely essential are innovators and entrepreneurs.

• Good wages and good living conditions are essential to attract R&D talent whether of Latvians who have left the country or of highly qualified foreigners looking for opportunity.

• Entrepreneurial opportunity – the chance to own a stake in a high potential business is key to attract potential entrepreneurs

• Given that Latvia has developed a package to offer then the package needs to be marketed.

• Programs such as Eurostars are essential to allow creative talent to develop equity in high potential businesses

Marketing Latvia to researchers in labs across the FSU• ICST - International Center for Science and

Technology is set up to help FSU researchers to commercialize their technology.

• ICST works with Virtual CEO, a Latvia-based company, to organize “Commercialization Reactors” to bring together researchers, entrepreneurs and investors.

% Naco Technologies resulted from a “Commercialization Reactor”

% 5th Reactor concluded on May 16

Naco Technologies in brief• Headquartered in Riga, Latvia, a major city of the European Union

• Naco HIPMS technology is the culmination of 30+ years of R&D at

leading Institute of Material Science (Moscow)

% 4+ years of production coating of aerospace, automotive, electronics and

nuclear industry parts

% technology strategy - move faster and smarter than competition. Stay at

least five years ahead

• Support from ISTC and JEREMIE Programs with financing from two

Latvian venture capital funds in 2011

• Two businesses

% Production operation: coating and surface engineering services to firms in

the aerospace, automotive, tools, electronics, medical device and other

markets

% R&D equipment sales: develop and sell Naco Process HIPMS equipment to

research organizationsSIA “Kaija Consulting” sagatavots Pārresoru koordinācijas centram 28-05-2012

KETs and Latvian R&D potential

SIA “Kaija Consulting” sagatavots Pārresoru koordinācijas centram 28-05-2012

KET Latvian R&D potential

Logic

Nanotechnology High

Micro and nanoelectronics

High Process can be applied to electronics manufacture

Industrial biotechnology

High Organic synthesis institute

Photonics High Application to improve optical quality, life, durability and reduce manufacturing costs

Advanced materials

High Solid State Physics Institute, Naco process

Advanced manufacturing systems

High HIPMS process speed lends itself to integration with high volume manufacturing

Need a KETs roadmap for Latvia

Roadmaps link applications to technical challenges

HIPMS potential with NMP FP7 call NMP-3 2013.2.2 - Wide band gap semiconductor materials and structures for power electronics in

energy technologies

NMP. 2013.1.1-1 - Exploration, optimization and control of nano-catalytic processes for energy applications

NMP-2 2013.1.1. - Self-assembly of naturally re-occurring nanosystems

NMP 2013.1.2-1. - Nanotechnology-based sensors for environmental monitoring

NMP 2013.2.1-1. - Developing new next, fictionalizations and processing routes for carbon fibers

NMP 2013.2.2-4. - Materials solutions for durable energy collectors

FoF NMP 2013-2. - Innovative re-use of modular equipment based on integrated factory design

FoF.NMP 2013-5. - Innovative design of personalized product-services and of their production processes based on collaborative controls

FoF.NMP 2013-6. - Mini-factories for customized products using local flexible production

FoF.NMP 2013-7. - New hybrid production systems in advanced factory controls based on new human-robot cooperation interactive

FoF.NMP 2013-10. - Manufacturing processes for products made of composites or composite metallic materials

FoF.NMP 2013-11. - Manufacturing of highly miniaturized components

NMP 2013.4.0-1. - CNRS production technologies manufacturing graphene

NMP.2013.4.1-1 Development of new materials with a reduced critical metal content – coordinated call with Japan

GC.NMP.2013-1 Improved materials for innovative ageing resistant batteries

HIPMS can multiply FP7 impact

SIA “Kaija Consulting” // FOTONIKA-LV XIII kolokvijs 07-06-2012

Commercialization

Companies in Latvia Companies in Japan

IP for alternative materialsReplace lithium?? Substitute rare earth

metals

FP7 Project -NMP.2013.4.1-1

Latvian R&D Japanese

MoreR&D

Footer 34

Steps to develop clusters in Latvia based on HIPMS Secure HIPMS equipment for R&D

use Identify high potential FP7 projects Prepare winning FP7 proposals for

2013 Develop 2014-2020 technology

roadmap leading to multiple clusters by 2020

Implement Platform Technology Strategy

Recommendations1. Develop a platform technology roadmap for Latvia.

A. The roadmap process builds market awareness for R&D and for marketing / production awareness of the potential benefit of R&D.

B. The roadmap provides policymakers an overview of the market potential of R&D that is being undertaken.

2. Import technologists with great ideasA. Facilitate the return of Latvian researchers to Latvia interested in

launching research-based businesses in Latvia. B. Attract Russian, Ukrainian, Belarusian, Kazakh and other scientists

to join with Latvian entrepreneurs to develop research-based EU and global market oriented businesses in Latvia. Consider India, China other emerging markets.

3. InfrastructureA. Use EU funding for KETs to develop infrastructure and R&D

capabilities to support Latvian KETs with entrepreneurial development driving further R&D

Recommendations continued...4. Innovation culture / systems

A. Very strong industry-university cooperation – RIDEON ModelB. Constant circulation of people between industry and universityC. Innovation education starting from preschool through universityD. Support for new business formation by Commercialization Reactor,

Techno-Hub, incubators, technology parks, seed capital network

5. Platform Technology focusA. Public / private partnership process

Role for public investment to lead to IP Private investment to commercialize IP

B. Priority – nanotechnology as the driver of KETS Biomechanics / biomaterials cluster based on historical capabilities, technology and market

conditions. Latvia can be a center for advanced joint implants and related technologies – 25+ billion USD market

Advanced materials cluster – Naco Technologies, Sidrabe, GroGlass, others Wood chemistry , forest products cluster Synthetic biology cluster Herbal medicine cluster?

© 2012 “Kaija Consulting” SIA

Vidvuds BeldavsDirector – “Kaija Consulting” SIA

Phones: US - +1-812 -320-3161 / Latvia - +371-27862021

vidbeldavs@gmail.comSkype - vidbeldavs