The Smartest Places on Earth

by Antoine van Agtmael

  In 2005, open innovation at the campus reached a whole new level with the establishment of the Holst Centre,31 a joint initiative with financial support from the Belgian and Dutch governments between Imec, a company based in nearby Leuven, Belgium,32 and TNO, a Dutch public institute for applied research, with financial support from the Belgian and Dutch governments. The purpose of the Holst Centre is to provide a brainsharing link between the university’s knowledge base and the companies’ need for expertise, with a focus on two fields: wireless sensor technologies and flexible electronics. The Holst Centre employs 180 people, including thirty-five PhD students and forty researchers in residence. The corporate partners contribute more than half of the program’s annual budget of €40 million, and they will take on greater financial responsibility as governmental involvement phases out.

  Like Albany’s NanoTech Complex, the Holst Centre provides a neutral meeting ground for companies, researchers, and leading international scientists. The knowledge gained is shared among the participants, although sometimes a single entity will sign an agreement to take exclusive rights to a specific idea or innovation. More and more companies want to participate in these programs because it is hard to match the Holst Centre’s research capabilities in corporate production facilities. The Holst Centre brings a wide range of diverse entities together to collaborate, innovate, and develop knowledge that can lead to fresh new technologies and products.33

  The changes at Philips that led to the creation of the High Tech Campus and the Holst Centre did not just happen, of course. The transformation of the NatLab34 was led by Gerard Kleisterlee, who became CEO of Philips in 2001 and introduced a new way of thinking and a new focus for the company to address the big global social challenges, such as aging, hunger, health, and safety. He knew, however, that Philips could not solve these issues on its own. The problems demanded integrated solutions that would involve multiple disciplines.

  Open innovation became the mantra at Philips, and redirecting the work of the NatLab was an essential first step in promoting brainsharing. For the first time, Philips invited competitors into the research facility to participate in joint research programs. Start-ups, which might well be competitors one day, were also given access to Philips’ research facilities and its international network of brainpower. Philips proved that its belief in open innovation was not just for show by investing half a billion euros in the project.

  Gradually, others in the region began to embrace the Philips mantra. In 2002, Amandus Lundqvist, the former head of IBM Netherlands, was appointed chair of the Technical University of Eindhoven. He was an advocate of Kleisterlee’s approach to open, collaborative innovation and wholeheartedly supported joint initiatives between the university and the High Tech Campus. He also strengthened ties with the Technical University in Aachen, Germany, and with high-tech institutions in Leuven, Belgium. In 2003, a new mayor was elected in Eindhoven, Alexander Sakkers, and he, too, proved to be an effective advocate for open innovation. He reached out to local authorities, leaders in the business community, and centers of knowledge to promote the “rough diamond” that was the High Tech Campus.

  With Philips, the Technical University, and the city itself all preaching the same gospel of open innovation, the power of brainsharing began to attract important new players into the fold, and a key one was ASML.35

  ASML has been a presence in the region since the early 1980s, when it was spun off from Philips to produce photolithography equipment, which, as we’ve discussed, is essential to the manufacture of chips. ASML has surpassed its Japanese rivals Canon and Nikon and is now the leader in this market.

  As the quest for smaller chips and lower-cost manufacturing intensified, ASML realized that it could not supply the vast financial resources required to develop the next generation of chip-making machines. That’s when it began to look to its suppliers to help fund the research. Martin van den Brink, a member of ASML’s board, made public statements about the importance of finding new ways for established companies and suppliers to work together. “This new form of collaboration is a process in which suppliers are accountable for part of the research,” he said in an interview.36

  The brainsharing between manufacturers and suppliers got an unexpected boost in the economic crisis that followed the bursting of the dot-com bubble in 2000. The big Asian manufacturers of chip-production equipment cut back on their research budgets. ASML, however, boldly defied this trend and increased its research expenditure. Although it looked like a risky bet at the time, the research led to the creation of new equipment that could produce larger silicon wafers (jumping from 200 millimeters to 300 millimeters in diameter), which we have seen is a key factor in chip making and was an important technical breakthrough.

  Today, ASML continues to innovate and is working on further improvements to its machines in order to produce even more powerful and efficient chips at acceptable cost. To do so means creating the 450-millimeter silicon wafers and developing the extreme ultraviolet lithography technology.

  These technical innovations are so complex and expensive that ASML needed to collaborate with partners that could contribute resources and expertise beyond those available in the supplier network. ASML turned to the world’s largest chip makers (and the company’s three largest clients)—Intel, Samsung, and TSMC—for financial support. The three companies committed to an investment of €1.4 billion over a five-year period and, in return, took a 23 percent ownership stake in ASML, with limited voting rights.

  Even with this massive influx of capital, ASML still faced a daunting challenge: finding enough talent to support the endeavor. The company estimated it would need 1,200 expert technicians, and there simply were not that many available in the Netherlands or, indeed, in Europe. ASML went on a global talent hunt, recruiting employees from as far away as KAIST, South Korea’s technical university.

  Traditional Supply Chains Transform into Value Chains

  As ASML expanded its activities in chip-making equipment and as Philips shifted its focus from manufacturing to research and marketing, it became clear that this approach to open innovation and collaborative research would require a different kind of network of support and suppliers. Gradually, the Eindhoven supply chain transformed into a value chain. What’s the difference? In a traditional industrial supply chain, the manufacturer designs a product, writes specifications for that product’s components, and works with suppliers to produce the components to spec, on time and on budget. In a value chain, however, suppliers also act as research-and-development partners. They get involved much earlier in the process, contribute their knowledge to product design, and collaborate in developing the best methods of manufacture. In other words, suppliers become collaborators who add value throughout the process.

  Hans Duisters has witnessed and helped foment this evolution. Duisters is a serial entrepreneur, technician, innovator, communicator, and man with a mission: to help build a closely knit network of highly competitive enterprises that reinvent the word innovation. “It is my dream to build, together with other entrepreneurs and scientists, a high-tech sector in Eindhoven that is able to deliver the best high-end equipment for precision engineering in the world,” he told us.37

  Duisters has made remarkable progress toward that goal. In 1996, he founded his first company, Sioux,38 a multidisciplinary firm that now brings together technical software, mechatronics, electronics design, and industrial mathematics to manage supply chains. But when he founded Sioux, the company focused on manufacturing components for two major clients: Philips, which had continued to manufacture scanners and medical devices in Eindhoven, and ASML, a producer of high-precision industrial machinery used in the fabrication of silicon wafers. At first, Sioux received the specs, submitted a bid, and conducted the work under clients’ direction.

  “Gradually a new relationship emerged,” Duisters said, “in which we would do some of the R&D ourselves.” One of the first such collaborations began when Rob Fastenau, a director at
FEI, a maker of electronic microscopes, approached Duisters with an idea. FEI had developed a small microscope in collaboration with Philips but had not gone to market with it, largely because it was aimed at a low-end market and FEI did not want to confuse its position in its primary high-end market of professional researchers. NTS, an Eindhoven-based mechatronics company, and Sioux formed a collaboration with FEI and a group of companies in the region to further develop the microscope and eventually produce and market it. They refined the small microscope, manufactured it, and created another entity, Phenom-World—owned jointly by FEI, Sioux, and NTS—to market and sell the product,39 which they have done successfully since 2006.

  Sioux began to be seen as an innovator and was approached to develop other products. One involved applying technology from one field, photocopiers, to another, 3D printers. Inkjet photocopiers operate using a technology that puts down as many as fifteen layers of ink to create an image. Canon Océ, a maker of copiers, wondered if the technology could be adapted to print the inner and outer layers for a printed circuit board (PCB) for a computer or a chip for a smartphone, replacing the thirty-step analog process that was then the standard. Canon Océ proposed the possibility of developing this new type of 3D printer but suggested that before plunging into development, the company wanted to test the waters. Sioux talked with a number of potential users of such a machine and they all expressed interest and commitment. One of them even proposed that it could handle the marketing of new product when the time came.

  With a reasonable certainty that there was a market for a 3D chip printer, Sioux developed prototypes40 and spent five years of intensive evaluation and testing and refinement, with financial support from the Brabantse Ontwikkelings Maatschappij (BOM),41 the public-private partnership that promotes new economic initiatives in this southern province of the Netherlands. In the printing process, every miniscule drop of material counts, and the researchers of Canon Océ were able to develop an incredibly reliable print head, with a failure rate of one-in-a-billion droplets. As good as that may sound, the machine delivers up to 50 million drops per second, which means an error could occur every twenty seconds, an unacceptable failure rate in chip manufacture. This problem was solved with the use of a software program called Predict that identifies errors and fixes them before they can cause an imperfection on the PCB. When the business case was ready, Sioux and Océ Technologies created a partnership with the BOM under the name MuTracx, and, in early 2014, the first machines were shipped under the brand name Lunaris.

  Sioux and other suppliers proved they could not only manufacture components, they could also successfully bring complete new products to market. This changed the game still further, and the concept of a “supplier” continued to evolve. Companies and research entities, large and small, were all members of an ecosystem where sharing brainpower was the only way to bear the costs of technology development and to meet the complex challenges of high-tech manufacture.

  In Duisters’ view, companies like ASML, Philips Healthcare, FEI, DAF, and Canon Océ that are successful in world markets will increasingly focus on the beginning (R&D, prototype, and proof of concept) and end (product sale and marketing) stages of the production chain. Established, highly focused manufacturers will make “first-tier” components, as the German lens manufacturer Zeiss does for ASML. But the intermediary stages of product development and industrialization—involving design, fabrication of prototypes, structuring production, and integrating all the different production phases—will be handled by other companies, like Sioux. “In that way,” says Duisters, “the supply chain evolves into a value chain.”

  Creating Community: Associations and Foundations

  As suppliers played an increasingly important role in the Eindhoven brainbelt, they came to a similar conclusion reached by small and medium-sized companies in other regions such as Dresden: they needed a new type of association to constantly improve their brainsharing and also represent the companies’ interests. Hans Duisters, along with several others, founded Brainport Industries,42 whose purpose is to support members, the great majority of whom are based in the Eindhoven region, in the fields of people, technology, and market strategy. One of Brainport Industries’ top priorities was improving the relationships between its members and the Technical University of Eindhoven, which it accomplished by holding joint meetings and regular conferences on key technological topics.

  Rob van Gijzel, mayor of Eindhoven and chairman of Brainport Eindhoven Foundation.

  Credit: Hollandse Hoogte

  Eindhoven is an example of a brainbelt that has its act together and is flourishing enough to take on a role beyond its own region in related industries. That is why the Brainport Eindhoven Foundation was established in 2004, chaired by Eindhoven’s mayor, Rob van Gijzel. Its dual purpose is to help outsiders navigate the Eindhoven brainbelt and to create working relationships with other like-minded centers of innovation and European funders.

  Van Gijzel told us about the two roles he now plays, as city mayor and as chair of the foundation. When in Eindhoven, van Gijzel behaves like an entrepreneur, working to coordinate brainsharing among twenty-one neighboring cities, high-tech companies, and universities, which are all foundation members. When he travels outside the region, he acts as an ambassador for the area. As a former member of parliament, van Gijzel knows his way around the country’s political center, the Hague. He also frequently travels to Brussels to advocate for Eindhoven and the surrounding region and, when necessary, open doors to facilitate EU funding for innovation.

  Although we now think of sharing brainpower as a regional activity, and indeed a phenomenon mostly seen in developed economies, its future must be global and extend to innovation activities of all kinds.

  Hans Duisters, founder of Sioux, foresees that technology companies based in Silicon Valley, Israel, Singapore, and elsewhere will come to Eindhoven to explore whether a high-end precision product they are developing can actually be manufactured and how they might refine their designs for optimal manufacture.

  Duisters, while well aware of the trials the region has been through and the threats it still faces, is proud of what has been accomplished here and is optimistic about Eindhoven’s future. When we asked Duisters what drove him in his work, he pointed to the bronze figure of Anton Philips, founder of Philips Electronics, standing outside the train station. “I would be very honored if they build me a statue one day.”

  Chapter Three

  MAKING A NEW MOVIE OF AN OLD STORY

  Dramatic Scenarios of New Materials Development

  It didn’t take long for us to come to expect the ubiquitous coffee shops and wine bars, repurposed warehouse spaces, futuristic labs, and robotized fabs that we encountered in the brainbelts we visited. But one of our most striking experiences took place in Akron, Ohio, on that first foray into the American rustbelt.

  There, in a trendy restaurant in the renovated downtown area, we sat down with Luis Proenza, president of the University of Akron (he retired soon after our interview in 2014 and became president emeritus). He was not alone. He had invited several of his senior advisers and colleagues to join the dinner conversation, and the cultural makeup of the group blew another antiquated rustbelt image out of our heads. We had, without even thinking about it, expected to meet with a group of Ohio’s born-and-bred, but our dinner hosts came from Mexico, Greece, and India, as well as the United States. We had assumed we would have a casual conversation and, truth be told, believed we were beginning to be experts on this emerging brainbelt trend. Ha. Proenza’s team was meticulously prepared, armed with documents and data, and knew all about the brainbelt areas we had visited or were planning to study. Needless to say, we learned a good deal during the course of that dinner.

  Luis Proenza, president emeritus of the University of Akron.

  Credit: Beijing Forum, 2009

  It was in Akron that we really got a sense for the emotional underpinnings and social drivers of the awakening of a slee
ping beauty. Proenza talked about how Akron had gone from glory to ghost town and back to glory again. The Akron area had once been an American industrial powerhouse, with a strategic location between New York City and Chicago that made it a key link in the supply chain for Detroit’s car industry and a critically important transportation hub for many American-made goods. Akron was home to global tire giants Firestone, Goodyear, and Bridgestone and was also a major railroad hub for transporting the region’s grains, a significant percentage of which was stored in the silos (physical, not organizational) of the Quaker Oats company.

  An employee working in one of Akron’s tire-manufacturing plants, 1945.

  Credit: Getty Images/Keystone-France

  Like the other brainbelts we have described, everything changed for this part of Ohio in the latter half of the twentieth century. At that time, the major tire companies had been so dominant for so long they had become insular, siloed, and inward focused. They barely heeded the growing competition from abroad and did little to reduce costs through automation. By the time they woke up to the threat, it was too late. Much of the supply chain had moved overseas, particularly to Mexico and China. As the turn of the millennium approached, Akron was hurting badly. The tire plants had been abandoned. The Quaker Oats silos had lost their original function. The freight trains didn’t stop there any more.

  For some years, Akron struggled along. There was capital available for development, Proenza told us, but there wasn’t much drive to do anything with it. “Hardly anybody was willing to take risks,” he said, “beaten down as they were by memories of failure.”1 However, just as we saw in Dresden, there were still plenty of smart, skilled people in the Akron and Youngstown area, and many of them were willing to take risks, if largely out of necessity. They began to start their own companies, usually based on the technical skills they had developed in their years in the rubber and steel industries.