The 2006 MEMS industry report card
Evaluating the sector for its efforts at developing standards, building clusters, rolling out products and more
By Roger Grace
We are now half a century into MEMS research, design, and development. Why has it taken so long for the technology to realize its potential and for the markets to mature? What can be done to support commercialization efforts? What lessons have been learned?
This report, which includes the ninth annual MEMS industry report card, is intended to provide some insight into these questions by addressing the barriers to the commercialization of MEMS and microsystems and the progress made to overcome them. The changes in some of the grades and their rationales will be addressed here, and recommendations for improvement will be presented.
The methodology used to develop the grades and the rationale was to employ a “Delphi” market research technique where a select number of MEMS and microsystems industry experts representing the Americas, Europe and Asia were personally interviewed for their opinions.
The interviews represented the broad MEMS and microsystems industry and included people from infrastructure (testing, foundries, capital equipment, consultants and software providers); manufacturers of MEMS and microsystems components; and end users of MEMS and microsystems products. In this fashion, a representative but not statistically significant sample was used. The period of interest for the 2006 grades spanned July 2005 to June 2006.
R&D (Grade=A-): Spending on MEMS R&D had been robust even before 1998 with DARPA making major investments early in the game. Private funding also historically supported R&D activity. However, funding for MEMS and microsystems has been shifting over to nanotechnology.
The U.S. Small Business Innovative Research (SBIR) program has been very supportive of MEMS and microsystems companies, especially in their Phase 2 and Phase 3 programs where commercialization is the primary objective.
The European Community has been funding microsystems through its Framework programs 1 through 4. Framework 5 will be funded shortly. And the EC-funded EPoSS program has had a focus on the integration of microsystems-based smart systems for aerospace, automotive, telecom, medical technology and logistics/RFID sectors.
The year 2006 saw a slight upturn in the high-tech economy and in corporate R&D budgets (including personnel) but not enough to affect the grade, which maintained its A- value from prior years.
Marketing (Grade=C+)/Market Research (Grade=B-): Marketing grades have moved slowly from the 1998 C- value to C+.
MEMS and microsystems companies have, by and large, been created by technically-oriented people motivated by the “build it and they shall come” mantra. Historically, not much formal market research has been conducted to determine customer needs and price points. This lack of marketing, market research, and marketing expertise still exists, especially compared to the semiconductor industry.
For MEMS and microsystems to be truly successful, a major effort must be undertaken by solution providers to understand customers’ needs and wants, to provide unique solutions, and to provide adequate resources to promote each company’s market position and brand, as well as to differentiate its products.
The best way for this to be accomplished is through rigorous market research programs. Faster, better, cheaper is the mantra of the semiconductor industry in direct response to customers’ needs. MEMS and microsystems producers need to adopt a similar customer-centric attitude.
Established Infrastructure (Grade=A-): This category has improved significantly since its 1998 grade of C+, and has re-mained in the A to A- region since 2001.
In early days, most MEMS processing, packaging, and test equipment were “hand-me-downs” from the semiconductor industry. Most MEMS and microsystems fabs today use 6-inch wafers for high-volume production; many still use 4-inch wafers. A handful use 8-inch.
For MEMS and microsystems fabrication, in-house process engineers typically made modifications to existing semiconductor process design driven tools. Today things have dramatically improved with many companies - for example, EV Group, Jenoptik, STS, and Suss MicroTec - providing custom MEMS and microsystems equipment.
In addition, MEMS and microsystems design automation tools are available from a number of suppliers, such as Coventor, IntelliSense and MEMSCAP. As with the semiconductor industry, most new MEMS companies are fabless and work with a supplier base of more than 60 worldwide MEMS and microsystems foundries. However, our research shows that MEMS and microsystems capacity remains approximately 40 percent to 50 percent in excess of current needs.
Industry Association (Grade=B): In 1998, no associations existed to promote the MEMS industry and its commercialization. Today the Micro and Nanotechnology Commercialization Education Foundation (MANCEF) and MEMS Industry Group (MIG) are growing non-profits supporting the industry.
In addition, Nexus was created in the early 1990s by the European Commission and has been extremely valuable in developing the commercialization activity in Europe.
The semiconductor industry owes a great deal of its success to the SEMI and SEMATECH organizations and their efforts to organize, inform, and standardize the semiconductor industry. The MEMS and microsystems industry needs to similarly embrace organizations whose role is to help facilitate the commercialization of the technology.
The 2006 MEMS and microsystems industry report card (N/A = not applicable for that year)
Standards (Grade=C+): This grade fell from a B- in 2005. SEMI has been the major proponent of helping facilitate standards for MEMS and the last three years have seen increased interest by the MEMS and microsystems industry to support standards. This is evident by the initiation of the first MEMS and microsystems process standards recently issued and the many meetings over the past five years of the SEMI MEMS Standards Committee.
The good news is that the first SEMI MEMS standard, “Guide for Standard Fluidic I/O Design, Fabrication, and Assembly in Microscale Fluidic Systems” was available on July 1, 2005. The bad news is that it is one of just three MEMS-related standards whereas more than 700 semiconductor standards have been issued to date. For MEMS and microsystems to accelerate its commercialization timetable, it will be necessary for it to create and adopt many process, packaging, and testing standards.
Profitability (Grade=C+), Creation of Wealth (Grade=C-), and Venture Capital Attraction (Grade=C+): The downturn in worldwide economic conditions severely punished most high technology companies in the 2001 to 2003 timeframe, including companies with MEMS and microsystems programs.
The technology takes a long time to mature and there are few opportunities for investors to get a return on their investments. That tide is slowly turning with the funding of a new crop of startups. Meanwhile, those that survived the shakeout of 2001 to 2003 have gone on to receive second and third rounds of financial backing.
VCs tend to want to fund companies that have the ability to grow into very large companies quickly. This opportunity typically does not exist in the MEMS and microsystems industry. Nevertheless, we expect that some of the new startups could be candidates for IPOs since they are targeting high volume consumer markets.
Mergers and acquisitions have had periods of significant activity. The early wealth created in the MEMS and microsystems industry by a small number of entrepreneurs was through acquisition by large optical telecom companies. Due to the demise of this industry, these MEMS and microsystems companies also were adversely affected, sold, or written off by their previous owners. In summary, these grades continue to pull the overall commercialization report card grade down.
Industry Roadmap (Grade=B-): This grade fell from B in the 2005 report card. Two MEMS and microsystems industry roadmaps currently exist. The MANCEF International Commercialization Roadmap, which was published in February 2003, is a classical technology-driven roadmap, addressing many of the issues in this article, including standards and infrastructure. The early work on this publication was funded by SEMI. A September 2004 update to this document included chapters on patents and RF MEMS.
The Nexus roadmap, which was formally introduced to the market in September 2003, is a product-market roadmap created to a large degree from inputs of the numerous Nexus user-supplier clubs. Together, these roadmaps provide readers with a wealth of information to aid in the commercialization of MEMS. However, a large number of the respondents either have never heard of the reports, consider them out-of-date, or feel they do not adequately address their informational needs.
Technology Cluster Development (Grade=B-): This subject was added in 2003 to reflect the ever-increasing value that regional and federal governments place on micro and nanotechnology as a viable business. The grade was reduced from B in 2005.
Feedback differed significantly by location. European respondents gave the subject higher grades than their U.S. counterparts. In our opinion this is due to the higher level of participation of the many European Community governments believing strongly in the financial support of their national technology initiatives. No fewer than 35 MEMS, microsystems and nano clusters have been formed since the first one in Dortmund, Germany in 1986. To date, thousands of highly trained and high paying jobs and scores of companies owe their existence to their creation.
Roger Grace is president of consultancy Roger Grace Associates in Naples, Fla. (www.rgrace.com). He is the past president and co-founder of MANCEF, the Micro and Nanotechnology Commercialization Education Foundation.