PRIVATE & CONFIDENTIAL 1 Global Trends, Innovation and Economic Competitiveness: The Need for A Cross-Border Advanced Manufacturing Strategy PRIVATE &

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PRIVATE & CONFIDENTIAL

Global Trends, Innovation and Economic Competitiveness:The Need for A Cross-Border Advanced Manufacturing Strategy


Richard Seline, PresidentNew Economy Strategies, Inc.

1250 24th Street, N.W., Suite 300Washington, D.C. 20037

Phone: 202-466-0566Fax: [email protected]

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National Environment for Innovation and Life Sciences in Mexico

• Overall national innovation landscape

• Overview of life sciences capacity for regions throughout Mexico

Overview of Regional Innovation Technology Clusters throughout Texas

• Capacity to link and leverage assets, institutions, and resources

• Advanced Manufacturing among 6 sectors analyzed

Background on New Economy Strategies

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‘The nation that fosters an infrastructure of linkages among and between firms, universities and government gains competitive advantage through quicker information diffusion and product deployment’

US Council on Competitiveness 1998

“We believe the United States’ economic and political standing are fundamentally bound up in our capacity as a society to innovate. We believe companies [and regions] that do not embrace innovation as a core business value will fall to global competition – and that innovation in universities and government is crucial to unleash America’s national innovative capacity.”

INNOVATE AMERICA, National Innovation Initiative

Council on Competitiveness, July 2004

Innovation Call-to-Action (1998 and 2005):U.S. Council on Competitiveness National Innovation Initiative

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5


6


Education

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Workforce

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Will the U.S. Remain Competitive?

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Employment in technology industries and activities continues to concentrate in Computer Technology, Biotechnology, R&D, and Engineering services.

Employment Cluster Analysis

-60

-40

-20

0

20

40

60

80

-5 -3 -1 1 3 5 7

Percent Change in Cluster Concentration (1994-2003)

% C

han

ge

in C

lust

er E

mp

loym

ent

(199

4-20

03)

Polymers & Chemicals

Computing Equiptment & Programming

TelecommunicationsTraditional Electronics

Instruments & Sensors

Engineering Services

R&D

Aerospace & Propulsion

Motor Vehicle Manufacturing

& Design

Biomedical &

Pharmaceutical

Size of Bubble: Current Employment in High-tech Industries

Energy

Engineerng Services

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Average Annual Income (US $) by Industry in 1994 vs. 2003

50,012

32,369 32,561 32,651

25,235 30,050

35,286 35,286 39,226

53,696

28,407

40,801 43,013 42,907

30,510 35,307

48,159 47,765

62,220

44,221

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Chemic

als

Compute

r and P

eriphera

l Equip

men

t

Telec

omm

unicat

ions

Elect

ronic

and o

ther

ele

ctric

al e

qu...

Elect

ronic

inst

rum

ents

Enginee

ring S

ervi

ces

Resear

ch and

Deve

lopm

ent S

ervice

s

Aerosp

ace P

roduct

s and P

arts

Moto

r Vehicl

es

Pharm

aceu

ticals

and M

edic

ines

1994 2003

Salaries are growing in every major high-tech industry. The most mature industries continue to command the highest salaries.

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The United States now produces fewer engineers than either Europe or Asia.

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A Sense of Urgency: Where Fear and Opportunity Meet

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Reality Check #1: “Current Distance Education Programme in IT”

• IIT Bombay

• MBT, Mumbai

• NCST, Mumbai

• MBT, Pune

• STES, Pune

• SGSITS, Indore

• VNIT, Nagpur

• MGM, Nanded

• Goa University

• Trivandrum

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Reality Check #2: Indian Institute of Technology Bombay

Engineering the Future

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Reality Check #3: Super Powers of Knowledge?

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INNOVATION………

“Purposeful response to change leading

to new partnerships, new structures, new

delivery systems, and new ways of doing

business” Peter Drucker

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Business Value Chain is Decoupled: Suggesting unique opportunities for a

broader set of Tennessee regions

The decoupling of traditional value chain activities leads to specialization of business activities…and new models

ResearchProduct

Development

Pre-Clinical Testing

Clinical Trials

Manufacturing & Marketing

CRO’sTool

Companies

Outsource testing services

Contract manufacturin

g

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…..Resulting in a New Regional Model Emerging

Then….

Manufacturing

Research

Development

Trials/Testing

Services

Self-contained regional clusters

US Region A

US Region E

The Border

Industry Consortia F

MX State D

Region C

Country G

Now….

Specialized, networked regions:

Global Hubs & Nodes

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Benchmarking Innovation

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Successful nations, states, and regions working within and across academia, government, and industry, transfers knowledge and expertise while ensuring effective implementation of initiatives that require close collaboration and coordination among these parties.

EXC

ELLE

NC

E Academia

Industry Government

A Tennessee Innovation Strategy

IMPACT

INN

OVA

TION

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“It is not the strongest of species that survive, nor the most intelligent, but the ones most

responsive to change.”

Charles Darwin

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The Innovation Imperative

Innovation is the most important factor in determining the success of any nation in the 21st century. It will:

drive economic growth;

create high value jobs;

improve the quality of life of all citizens

help meet social challenges (healthcare, energy, security)

The ability to innovate is a great competitive advantage and is at the heart of Mexico’s transformation from a maquiladora economy to a knowledge economy

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National Landscape – Government Infrastructure

Ministries involved in the development of life science policy in Mexico

SAGARPA (Secretaria de Agricultura, Ganaderia, Desarrollo Rural, Pesca y Alimentacion - Ministry of Agriculture, Cattle-raising, Rural Development, Fishing, and Foodstuff)

SEMARNAT (Secretaria de Medio Ambiente y Recursos Naturales - Ministry of the Environment and Natural Resources)

SSA (Secretaria de Salud - Ministry of Health)

SHCP (Secretaria de Hacienda y Credito Publico - Ministry of Finance)

SE (Secretaria de Economia - Ministry of Economy)

SEP (Secretaria de Educacion Public - Ministry of Education)

Programs for life sciences development

CONACyT (Consejo Nacional de Ciencia y Tecnologia - National Council for Science and Technology)

FUNSALUD (Fundación Mexicana para la Salud - Mexican Health Foundation)

Federal agencies have been working together since October 1999 to address issues of bio-safety and genetically modified organisms

Source: STAT-USA, 2003; Industry Canada, 2003

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National Landscape – Intellectual PropertyMexico created an intellectual property institute in 1993 to protect innovation, however

over 90% of the patents granted in Mexico are owned by foreign countries

The Mexican Institute of Industrial Property (Instituto Mexicano de la Propiedad Industrial or IMPI) was created in 1993 as a decentralized agency of the federal government.

Source: Presentation by Torres & De Hoyos Koloffon, Monterrey, 2005

Sample Activities Statistics (10 Years)

Patent protection (20 years) 51,953

Utility model protection (10 years) 1,105

Industrial designs protection (15 years) 10,212

Trademarks 388,145 (for 2004 will issue 48,000)

As of 2000, IMPI granted patent protection to biotechnology related inventions as follows: Country Number of Patents % Share

United States 388 50

Japan 86 11

Germany 66 9

Switzerland 55 7

Mexico 37 5

Netherlands 23 3

France 22 3

Others 99 13

Total 776 100

Source: STAT-USA, 2003; Industry Canada, 2003

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American Patents in IMPI

Patents issued by IMPI:– Procter & Gamble Company 285– Kimberly Clark

105– Pfizer Inc. 68– E.I. Du Pont de NEmourse and Co. 59– Motorola Inc. 48– Exxon Chemical Patents 20– Westinghouse Air Brake Co. 26– Minnesota Mining Co. 45

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IMPI International

• First place in Latin America, Africa and some countries in Asia;

• 11th place worldwide (regarding patent and trademark applications)

• Cooperation Activities and Sharing Information: US PTO, Japan, Russia, EPO, China, Korea, Germany, Austrialia, Spain, France, etc.

• International Activities (related to IPRs): APEC, WIPO, PCT, WTO, TRIPS, FTAA

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Basic research collaborations among key institutions• The universities and the research institutions have strong collaborations with institutions in the United

States. Many collaborations are with institutions in San Diego, Phoenix-Tempe, Albuquerque, El Paso, San Antonio, Houston, Texas; but collaborations occur all over the United States as well as in Canada and Spain.

Health Services collaborations are becoming the fastest scenarios• Health services collaborations are also strong with the border states between Mexico and the US

• Nuevo Leon recently created Council on Specialized Medical Services with representation from 40 hospitals in the state. The council is expected to improve collaborations locally, which in turn will attract international collaborations focused primarily on the US as well as Latin America.

Networks of Mexican nationals• Graduate training in Mexico requires 1 semester abroad which provides researchers with the opportunity

to work in collaboration with foreign institutions.

• As many as 25% of graduates are recruited to work outside of Mexico (usually in the US) and they have become a significant asset for networking with foreign institutions.

International Collaborations

Take Away PointsMany research and technology collaborations already exist between Mexico and the United States, in part due to the close proximity of border states, and the networks of Mexican nationals at US institutions are an untapped opportunity for further strengthening.

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Limited history of commercialization in Mexico

There are very few local growth firms but significant global companies• GE Medical is the leading example of a large life sciences company located in the

Monterrey region. The company manufactures medical imaging equipment. This company is increasingly feeling pressure to lower production costs in order to compete with emerging regions such as China.

Increased recognition Mexico needs to build local capacity and attract international community

• The state governments have recognized the need to build capacity in the technology-sciences and have launched several initiatives to promote collaboration, industry attraction and commercialization

Commercialization & Industry Base

Take Away PointsCommercialization and a local industry base is still emerging, however there is strong support from the federal, states and within certain communities for the development of innovation sectors.

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Mexico City is home to the majority of federal research institutions and funding bodies• The National Institutes of Health are concentrated in the Mexico City region (D.F. and Morelos) attracting

significant research funding from federal resources• CINVESTAV, an independent academic research and post-graduate training institute, has two research

centers in Mexico City with several others across the country• Federal funding agencies, government departments, and other non-governmental organizations are all

located in Mexico City

Strong research universities also have a presence in both Mexico City and Cueranavaca• There are 5 major universities in the Mexico City region, 3 of which have strong research programs in

the life sciences. They include: Instituto Nacional Politecnico (INP), Universidad Autonoma Metropolitana (UAM), and Universidad Nacional Autonoma de Mexico (UNAM)

• UNAM hosts the majority of sciences research infrastructure

Timely access to required equipment is a challenge for most institutions• Despite significant infrastructure assets, access to new equipment and materials is often delayed due to

lengthy negotiations for dispersements granted from funding agencies and long wait times for imported goods through customs

Local Infrastructure

Take Away PointsInfrastructure in the regions supports a core national strength in basic sciences research, however there does not seem to be any immediate plan to expand this infrastructure base through the acquisition of key equipment and underlying information technologies (broadband)

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65

43

2

1

11

12

16

15

14

9

8

713

21

1720

1918

10

25

24

23

22

27

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Cluster Key:

Greater Dallas/Ft. Worth

Greater Austin

Greater Houston

Greater San Antonio

Greater Lubbock

Greater Brownsville

Academic Research Institutions

Selected Life Sciences Economic Development Resources in Texas i # on Map Organization Location in TX

1 AeA Carrollton 2 Bastrop Economic Development Corporation Bastrop 3 Bay Area Houston Economic Partnership Houston 4 BCM Technologies, Inc. Houston 5 BioHouston Houston 6 BioMedical Development Corporation San Antonio 7 Collin County Commissioners Court McKinney 8 Greater Austin Chamber of Commerce Austin 9 Greater Dallas Chamber Dallas 10 Greater Houston Partnership Houston 11 Harlingen Area Chamber of Commerce Harlingen 12 Mansfield Economic Development Corporation Mansfield 13 Market Lubbock, Inc. Lubbock 14 Pearland Economic Development Corporation Pearland 15 Rockwall Economic Development Corporation Rockwall 16 San Antonio Austin Life Science Association (SALSA) San Antonio 17 SATAI Network San Antonio 18 STARTech Medical Ventures Richardson 19 Tech Fort Worth Fort Worth 20 TEKSA Innovations San Antonio 21 Temple Economic Development Corp. Temple 22 Texas Economic Development Council Austin 23 Texas Research Park Foundation San Antonio 24 The Health Industry Council of the Dallas-Fort Worth Region Irving 25 The Institute for Advanced Interdisciplinary Research Houston 26 The Research Valley Partnership Bryan 27 Tyler Economic Development Council, Inc. Tyler

i THBI

Where are the assets, the infrastructure and the eco-system best

organized for success in Advanced

Manufacturing?

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What Industries Make Up the Texas Advanced Manufacturing and Technologies Cluster?

Advanced Manufacturing &

Technologies

Robotics, RFID

and Similar Tools

Polymers,

Advanced

Materials, and New

PlasticsSoftware Development and

Packaging

Computer Hardware

and Compone

nts

Electronics for Other

Commercial

Purposes

Related Service Firms

Logistics and

Distribution

Complementary Firms

R&D Firms and

Universities

Automotive and Related Transportati

on

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US and Texas Employment Patterns in ManufacturingMANUFACTURING 1,084,490 1,188,520 104,030Durable Goods Manufacturing 663,250 735,480 72,230

24 Lumber & Wood Products 48,300 53,480 5,180241 Logging 2,480 2,720 240242 Sawmills & Planing Mills 5,010 4,970 -40243 Millwork, Plywood, & Structural Members 23,240 26,320 3,080244 Wood Containers 3,960 4,740 780245 Wood Buildings & Mobile Homes 8,200 8,770 570249 Miscellaneous Wood Products 5,410 5,960 55025 Furniture & Fixtures 21,050 24,630 3,580

251 Household Furniture 7,410 8,520 1,110252 Office Furniture 1,730 2,090 360253 Public Building & Related Furniture 3,760 4,200 440254 Partitions & Fixtures 4,340 5,300 960259 Miscellaneous Furniture & Fixtures 3,820 4,520 70032 Stone, Clay, & Glass 46,460 49,420 2,960

321 Flat Glass 1,030 920 -110322 Glass & Glassware, Pressed or Blown 3,420 3,360 -60323 Products of Purchased Glass 1,720 1,820 100324 Cement, Hydraulic 1,560 1,490 -70325 Structural Clay Products 4,670 5,000 330326 Pottery & Related Products 3,060 3,610 550327 Concrete, Gypsum, & Plaster Products 23,590 25,670 2,080328 Cut Stone & Stone Products 1,710 1,760 50329 Miscellaneous Nonmetallic Mineral Products 5,710 5,780 7033 Primary Metal Industries 31,530 32,970 1,440

331 Blast Furnace & Basic Steel Products 8,380 8,420 40332 Iron & Steel Foundries 7,540 7,920 380333 Primary Nonferrous Metals 3,560 3,400 -160334 Secondary Nonferrous Metals 660 760 100335 Nonferrous Rolling & Drawing 8,070 8,610 540336 Nonferrous Foundries (castings) 2,040 2,210 170339 Miscellaneous Primary Metal Products 1,280 1,660 38034 Fabricated Metal Products 106,280 122,250 15,970

341 Metal Cans & Shipping Containers 2,160 1,720 -440342 Cutlery, Handtools, & Hardware 3,060 3,560 500343 Plumbing & Heating, Ex Electrical 2,410 2,770 360344 Fabricated Structural Metal Products 57,080 66,830 9,750345 Screw Machine Products, Bolts, & Nuts 2,740 3,280 540346 Metal Forgings & Stampings 5,810 6,460 650347 Metal Services, NEC. 7,540 8,510 970348 Ordnance & Accessories, NEC 3,690 3,790 100349 Miscellaneous Fabricated Metal Products 21,790 25,320 3,53035 Industrial Machinery & Equipment 139,010 156,500 17,490

351 Engines & Turbines 1,710 1,940 230352 Farm & Garden Machinery 2,460 2,710 250353 Construction & Related Machinery 36,330 41,090 4,760354 Metalworking Machinery 5,900 7,010 1,110355 Special Industry Machinery 6,600 6,990 390356 General Industrial Machinery 11,040 12,710 1,670357 Computer & Office Equipment 35,760 39,690 3,930358 Refrigeration & Service Machinery 19,150 21,960 2,810359 Industrial Machinery, NEC 20,070 22,420 2,35036 Electronic & Other Electrical Equipment 135,840 149,860 14,020

361 Electric Distribution Equipment 4,160 4,460 300362 Electrical Industrial Apparatus 4,660 5,160 500363 Household Appliances 3,820 4,610 790364 Electric Lighting & Wiring Equipment 6,530 7,590 1,060365 Household Audio & Video Equipment 1,860 2,220 360366 Communications Equipment 33,340 36,290 2,950367 Electronic Components & Accessories 75,150 82,580 7,430369 Miscellaneous Electrical Equipment & Supplies 6,320 6,950 630

The most significant challenge for the Advanced Manufacturing Cluster is

definition: Robotics, Polymers, Electronics, Software, Other…..what are THE most critical technologies that improve the

process for design, model, engineer and otherwise craft new products in the 21st

Century?

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1993-2003 Unclassified R&D Funding to Texasby Tech Sector (Total $25.27 Billion)

10142.04

6491.59

5196.32

1739.40

429.43

336.82

320.35

224.82

123.91

101.21

83.32

53.90

23.90

0 2,000 4,000 6,000 8,000 10,000 12,000

Aerospace

Life Sciences & Biotech

Defense

Other S&T

Energy

Agricultural Science

Other Research

Advanced Computing

Environmental Technologies

Advanced Materials

Advanced Manufacturing

Transportation

Telecommunications

Tec

h S

ecto

r

$Millions

What is the impact of this spending on new products, jobs and innovation in along and across the borders?

Over $400 million in R&D funding for

Advanced Computing, Materials and Manufacturing

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Texas Patent Counts by Category 1990-2003% Growth

# Patents 1990-96Category 1990-2003 % Patents 1997-2003

Computer Hardware 7317 10.0 213Computer Software 5888 8.0 306Telecommunications 6181 8.4 185Semiconductors & Electronics 6883 9.4 88Oil Exploration/Refining/Borehole Construction 7305 10.0 18Medical Equipment/Medical Electronics 3033 4.1 65Industrial Machinery/Processes - Other 3385 4.6 13Miscellaneous Manufacturing 3038 4.2 43Electrical Components/Batteries/Lighting 2646 3.6 82Plastics, Polymers & Rubber 3292 4.5 -4Organic Chemistry (minus polymers) 2313 3.2 3Inorganic Chemistry 2040 2.8 27Other Chemistry/Chemical Processes 1812 2.5 29Other Individually Owned Patents 1752 2.4 32Office Equipment & Cameras 1504 2.1 68Pharmaceuticals 1345 1.8 114Agriculture 1212 1.7 29Measuring and Testing - Other 1147 1.6 25Biotechnology 858 1.2 149Measuring and Testing - Semiconductors/Electronics/Telecom 766 1.0 137Textiles & Apparel 928 1.3 30Motor Vehicles and Parts 912 1.2 19Wood & Paper 765 1.0 48Other Transport 685 0.9 46Oil Drilling/Pipeline Coupling 721 1.0 20Heating, Ventilation, Refrigeration 636 0.9 36Food & Tobacco 572 0.8 27Industrial Machinery/Processes - Semi and Eltr Industry 447 0.6 144Power Generation & Distribution 493 0.7 72Industrial Machinery/Processes - Oil and Chem Industry 572 0.8 -21Aerospace 331 0.5 57Navigation/GPS 71 0.1 138Measuring and Testing for Oil Industry 103 0.1 -64All Other Patents 2247 3.1 25Total 73200 100.0 70

Growth in these categories represents a wide array of

opportunities for commercialization and

growth

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Top Out-of-State Assignees with Texas Invented Patents in Advanced Manufacturing

# Patents Assignee AssigneeCity AssigneeState AssigneeCtry1347 Advanced Micro Devices, Inc. Sunnyvale CA US522 Motorola Inc Schaumburg IL US273 IBM Armonk NY US177 3M St. Paul MN US106 Delphi Technologies, Inc. Troy MI US98 Micron Technology Inc. Boise ID US93 Lucent Technologies Inc Murray Hill NJ US93 Raytheon Company Lexington MA US56 VLSI Technology Inc. San Jose CA US53 Corning Cable Systems LLC Hickory NC US47 Applied Materials Inc. Santa Clara CA US47 Sony Corporation Park Ridge NJ US47 Lockheed Martin Corporation Bethesda MD US42 Dow Chemical Company Midland MI US37 Honeywell International Inc Morristown NJ US32 Siecor Corporation Hickory NC US30 Koninklijke Philips Electronics N.V. Eindhoven NL27 Cisco Technology, Inc. San Jose CA US27 FMC Technologies, Inc. Chicago IL US24 Cypress Semiconductor Corp. San Jose CA US23 Marconi Communications Inc. Cleveland OH US23 Tessera, Inc. San Jose CA US21 Tokyo Electron Limited Tokyo JP20 Litton Systems, Inc Woodland Hills CA US20 NASA Washington DC US

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Workforce Innovation Ecosystem: a continuum of

anticipatory tacticsCreate an Workforce Innovation Ecosystem with value and opportunity for Industryand for Strategic Alliances, Partners and Academy Sponsors.

High SchoolsHigh Schools

4 yr/ Post4 yr/ PostBaccBacc

CCs/CCs/TechsTechs

IndustryIndustryWIBSWIBS

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Unique Aspects of NES and SHI Team

Identifying & Measuring Assets and Skills

Cross-Border

Innovation

Capital

Human

Resources

Science &

Innovation Infra

stru

cture

Converge, Consolidate, Collaborate

1 Knowledge of Critical Sciences

3 Economic Value Generation

6 Infrastructure and Facilities Driving Design, Manufacturing

7 Market analysis and access

5 Expertise in capital sourcing

Infrastructure, Human Resources, Capital, and Science & Innovation: Inventorying of technology and science assets, in addition to global benchmarking, will allow Texas regions to

determine which strategic assets can be translated into key directions for growth of the Statewide cluster

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5

3

71

2 6

4 Competitive strengths assessment

2 Global Perspective

End Results for Cross-Border Development and Growth

Documents

PRIVATE & CONFIDENTIAL 1 Global Trends, Innovation and Economic Competitiveness: The Need for A Cross-Border Advanced Manufacturing Strategy PRIVATE &