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| CSIRO | SOLVE | Issue 12 | Aug 07 | |
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COVER STORY
STEVE PAYNE
Head of Manufacturing Division, Department of Industry, Tourism and Resources
Australian Government invests big dollars in R&D
The Australian Government has committed more than $35 billion since 1996 to support business innovation and investment. As the May 2007 statement Global Integration: Changing Markets, New Opportunities says: “This assistance has helped transform industry. Exports, spending on research and development, and investment have reached record levels.” Steve Payne, head of the Department of Industry, Tourism and Resources’ Manufacturing Division, says the manufacturing sector invests $3.4 billion a year in R&D, more than three per cent of its value added, the highest proportion of any Australian industry sector.
He says a key component of this investment has been the car industry: “In the 10 years from 1995–96 to 2004–05, this industry raised R&D investment by 130 per cent to $720 million. It now accounts for 22 per cent of total manufacturing expenditure on R&D and 10 per cent of total business expenditure. “Medicinal and pharmaceutical product manufacturing has also enjoyed strong growth in R&D.” Mr Payne says the Australian Government offers various funding methods, in addition to tax concessions and grants, to help industry. “For example, the Government is encouraging the development of a vibrant venture-capital industry. Some $200 million will be invested by the Government in 10 new innovation investment funds over 10 years. “The Government is also implementing legislation for a new investment vehicle called Early Stage Venture Capital Limited Partnerships.” Mr Payne says nanotechnology offers exciting opportunities for manufacturing and materials fabrication. “It has been predicted by (the global consultancy firm) Lux Research that nanotechnology incorporated in global manufactured goods will increase from $30 billion in 2005 to $2600 billion in 2014 – about 15 per cent of total output. This will inevitably affect a wide cross-section of Australian manufacturing that will need to become increasingly aware of how it can use nanotechnology to increase competitiveness. So the Government provided matching funds through the Industry Cooperative Innovation Program for a scoping study by the Reinvention Network on some practical ways nanotechnology could be applied by advanced manufacturing firms.” He points to the Australian company CAP-XX as an example of how nanotechnology can be used. It develops and manufactures high-surface-area, electrical double-layer capacitors known as super-capacitors that incorporate nanotechnology. These capacitors have attributes for electronics applications superior to current technology and have drawn wide interest internationally. Mr Payne says the Australian Government is keen to see nanotechnology incorporated in the manufacturing sector. “Recently, $21.5 million was allocated to the National Nanotechnology Strategy. This funding will achieve several goals, including setting up a nanometrology capability within the National Measurement Institute, assessing health and safety regulations pertaining to nanotechnology and promoting the opportunities of nanotechnology to industry. “In addition, $36.2 million has been allocated to set up a Niche Manufacturing Flagship at CSIRO to provide specialised assistance in this sector.”
ANDREW BRAWLEY
Executive director, Peregrine Semiconductor Australia
The research dollar has fallen – but it’s still an impressive 25 per cent
Six years ago, Peregrine Semiconductor Australia, a leading supplier of high-speed mixed-signal integrated circuits for wireless and fibre-optic communications, was spending nearly 100 per cent of its turnover on R&D. Today, as the technology gets bedded down, that figure has fallen to about 25 per cent and executive director Andrew Brawley expects it to stabilise at about this level. “I think that’s sort of a number that we need to keep working with.” Mr Brawley says it is critical to maintain the company’s R&D focus because Peregrine actually owns a process technology, as distinct from designing applications on a process technology: “When you own a process technology, you have to keep developing it. You can’t afford to stand still.”
Much of the R&D work is done in-house. But Peregrine also involves other research institutions in its work. “There is some real intellectual talent we can tap into.” Today, Peregrine is involved with the Quantum computing project at the University of New South Wales, which is an Australia-wide collaborative project for a supercomputer using nanotechnology that is expected to take 15 to 20 years to commercialise. Mr Brawley says: “This project is specialising in working at the atomic level. In other words, we’re working with atoms that are about one nanometre in size. In addition, our product works at very low temperatures, which is a unique feature to have in a process.” With Peregrine’s R&D at the cutting edge globally, finding the skilled engineers to do the research is not easy. “When we can’t hire in Australia, which can be the case, we look overseas, mostly Singapore or Taiwan,” Mr Brawley says. “What you have to remember is that we’re ahead of the world with this particular technology and its capabilities. This is why it is so important we recruit the best people and then keep them. When we get people from overseas, no matter what their skills base, there’s usually a training period of up to a year here to make them familiar with the technology.” Mr Brawley says his company’s experience would be typical of companies in highly specialised areas.
TONY QUICK
Director and general manager, GKN Aerospace Engineering Services
GKN is a long way from its customers, but R&D keeps it competitive
The Port Melbourne-based GKN Aerospace Engineering Services, which provides design engineering for aerospace companies, faces an all-too-common handicap for local manufacturers: its nearest customer is in Los Angeles. This has not stopped GKN growing, but it does mean the company’s performance has had to be extremely competitive. GKN’s director and general manager Tony Quick makes the obvious, but not easily achieved, point: “We’ve got to continue being better than everybody else. Australia doesn’t have a natural market for aerospace design. Our customers are in Western Europe and North America, so we’ve got to overcome that physical separation by being better at what we do and turning the geographic disadvantage into a source of competitive advantage.”
It is easier said than done, especially today, as the company also finds itself increasingly up against the emergence of India’s low-cost competition. For this reason, investment in R&D is crucial: “We’ve got to be technically better, we’ve got to continue to improve what we offer our clients, because we’re either at a cost disadvantage, compared with India, or a geographical disadvantage, compared with our competitors in the US or western Europe.” The biggest project on GKN’s books is the Joint Strike Fighter (JSF) for the US Government. Mr Quick says it is a big project for the company: “We’ve just completed one million hours of design on the JSF, and we’ve designed about 3000 parts, which is about nine per cent of the aircraft. And we’ve done all of this from Port Melbourne.” He says R&D is particularly important in the engineering process, to facilitate this the company accesses cooperative research institutions, including CSIRO and universities, to help develop engineering excellence. “We are in the engineering services business, and our R&D is in the process of engineering, not the product. We leave it to the product companies to do the R&D in that area. But we of course have to be aware of what’s happening in product R&D so that we can design around it. However, our competitive position comes from being better engineers, rather than being better at engineering a product. “The R&D breakthroughs in engineering really weren’t in the JSF aircraft itself. Where there have been breakthroughs is in the area of automation of the design process, and these have been used by Northrop and Lockheed. The result of this approach is that we are selling the results of our R&D to two of the world’s largest aerospace manufacturers.”
BRUCE GREY
Managing director, Bishop Technology Group
Surviving the car industry requires Bishop Technology to remain ahead of the R&D game
A quick look at Australian Government figures quickly confirms that the Australian car industry is a front-runner when it comes to R&D spending. It has more than doubled in the past 10 years, with the industry now spending about $750 million a year on research. Some companies in this industry have come late to R&D, but not the Bishop Technology Group, a specialist in steering technology that is today found in about 24 per cent of all cars made worldwide. Managing director Bruce Grey says the company’s investment in technology has never been an afterthought: “We were founded more than 40 years ago, and over that time we have developed a significant portfolio of intellectual property. We now own 350 patents or patent applications, primarily in automotive steering.” On the University of Melbourne’s R&D scorecard, Bishop has regularly been in the top 10 companies, Mr Grey says. “As a percentage of sales, it varies from year to year, but overall we would spend about 15 per cent of revenue on R&D. When you consider the national average is below 10 per cent, then it gives you a good idea of how much we invest in this part of the business and how important it is to our earnings.”
Mr Grey says the Bishop approach to R&D is project based: “At any one time we will have a number of projects in the pipeline.” On the issue of the application of nanotechnology to the car industry, he feels it is still in its infancy. “It’s probably about five or so years before it will have any discernible impact. “The reason is quite simple: in our industry, safety is everything. Every effort has to go into ensuring the safe operation of any component. “We have to start from basics in writing code or software to ensure the final product is rugged and reliable – because your life depends on it. “This means a longer timeframe for product development that utilises new technology or materials. “If your laptop takes forever to fire up, or suddenly randomly shuts down, your life is not affected – except for utter frustration. But we cannot work like this in the global motor industry.” But that does not mean Mr Grey is sitting on his hands. “We are looking at nanotechnology; we’re looking to see where there may be opportunities for us in the future – and we never stop considering where there may be intellectual property opportunities.”
PETER BURN
Associate director (public policy), Australian Industry Group
Business is spending more on R&D – and that is a fact
While coming off a low base, the amount of money that Australian manufacturers invest in R&D is steadily climbing, and Dr Peter Burn, associate director (public policy) for the Australian Industry Group (AIG), sees no reason for this trend to be interrupted. He says there has been a “phenomenal increase” in business spending on R&D in recent years: “While there is room for further increases, R&D expenditure is now at a much more acceptable level.”
Dr Burn says the empirical evidence supports AIG’s contention that manufacturers make substantial investments in R&D. “We continue to catch up to the OECD averages in R&D spending,” he says. “The recent Productivity Commission report Public Support for Science and Innovation concluded that if you look at our economy’s structure, if you look at the industries where we have significant business activity, if you look at the size of these businesses, and if you look at the relative wages we pay scientists, then business expenditure on R&D is around the OECD average.” Dr Burn suggests one reason there is a perceived lack of investment in R&D is the way business ranks research. “Business knows that R&D is critical, but it isn’t the only issue,” he says. “So when executives are asked to rank issues in order of importance, R&D is rarely number one. When people jump up and down about this it’s neglecting the fact that businesses have labour issues, import competition and an Australian dollar hovering around US$0.84 to contend with.” Dr Burn also notes that it is not just the amount of dollars and cents being invested in R&D that has changed. He says many businesses are far more strategic now in how they approach R&D. “They may collaborate with CSIRO or universities, they may outsource into the growing private-sector presence in this area, or they might join with others in a cooperative research centre. Many businesses also find themselves moving into an R&D space doing work for others. “Whatever strategy they adopt, it’s an explicit acknowledgment by business that R&D is a vital component in remaining competitive.”
MICHAEL TURNER
Managing director, SVP Industries
SVP has no option – investing in R&D is critical to its survival
For Michael Turner, managing director of the injection moulding and plastic-extrusion company SVP Industries, R&D is not an option – it plays a central role in ensuring the
“In the plastics industry, products can quickly reach their sunset phase; you need to continually research and develop new products to take you into the future,” Mr Turner says. “When we develop products we’ve only got about two or three years before they are copied by overseas companies. So to keep a jump ahead and maintain our technological edge, we can never take our foot off the R&D pedal.” In terms of hard cash, this means SVP, which is based at George Town at the mouth of Tasmania’s Tamar River, has spent 11.5 per cent of turnover on R&D in the past three years. “We look to gain from R&D by either researching in partnership with outside organisations, such as CSIRO, Cooperative Research Centres and universities, or alternatively we can buy the licence for patented products that are in our area of manufacturing expertise.” Mr Turner says the latter strategy is quite simple: “If we can find a product out there that we can pick up at the right price, then that can give us a 12- to 18-month jump-start over our competitors. But if you start from scratch at the R&D stage, then as a rule of thumb you need to allow two to three years to bring a product to market.” Mr Turner stresses the importance of R&D momentum being sustained. “You take a product to the commercial stage. But even before that product is on the market, you’re working on the next one. For me, it’s analogous to being in a war. We have to keep coming up with new types of ammunition to maintain a superiority.” It is an R&D approach that has worked well for SVP. Mr Turner says the company is continually looking for products that can find a market nationally and overseas. “We’ve been very successful in New Zealand and in the South Pacific. We’ve identified opportunities in the US, we’ve got a good distribution network in Japan, we’re setting up one in Korea and we’re looking at South Africa.”
Dr Fred Bradner
3M technical director
At 3M, manufacturing is closely linked to R&D
R&D is the impetus that defines much of 3M’s manufacturing. And once a manufacturing operation is in place – for a specific product line, for example – this can spawn further R&D activities. In this way, 3M’s manufacturing capability is “intimately” linked to R&D, says technical director Dr Fred Bradner. And in regards to nanotechnology at 3M, Dr Bradner says: “It has an impact on manufacturing by requiring the capability to manufacture at the submicron and the nanoscale.”
For 3M, a key turning point in nanotechnology was the development of analytical tools in the mid-1980s that enabled the characterisation of nanoscale materials. “Without this analytical capability, both R&D and manufacturing technology would not have progressed at the pace they have,” Dr Bradner says. “Since then, 3M has been engaged in the large-scale production of a number of products requiring unique nanoscale manufacturing capabilities. One example is the manufacture of multilayer optical films for reflective polariser and light-management films in LCD displays. “These films typically consist of several hundred alternating layers of two, nanometre-thick polymers having different refractive indices. The ability to manufacture these extraordinary optical films at the high volume necessary for demanding LCD-display applications represents an unparalleled manufacturing challenge. “Unprecedented manufacturing requirements include detailed understanding of polymer material inputs, novel die design and extrusion control, ultra-clean and one-of-a-kind online measurement, and detection systems capable of nanometre-scale defect detection.” Dr Bradner notes that it is one thing to render an idea practical in the laboratory, but having the ability to mass-produce requires very close interaction between product development and process development. One without the other serves little purpose in an innovation-driven enterprise. He says that for the past 20 years 3M has benefited from using nanotechnologies in products across its industrial, health care, electronic and display businesses. “Nanotechnology has found its way into products such as advanced abrasives, high-performance ceramic fibres for high-voltage power transmission, light-management films for LCD displays, special optical coatings, fibre optic gratings, dental restoratives and adhesives. “Looking forward, we see promising opportunities including drug delivery, solid-state lighting, biomedical sensors, advanced batteries and hydrogen fuel cells, and electronic devices. While some of these are the consequence of ‘big manufacturing’ in scale and investment, others are less so. “Identifying niche areas suited to Australian-scale opportunities that are highly value-added is the key. We see this emerging nanotechnology industry occupying a similar position to the current pharmaceutical sector in the future. It’s something we need to become good at.”For further information contact: |
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