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IFISE Project Third Meeting Pavia, 15th February
2001
Computer hardware, semiconductor devices and
electronic components. The Italian case
Patrizia Gattoni UNIVERSITÀ di PAVIA
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OUTLINE
DATA SOURCE AND METHODOLOGY GEOGRAPHIC AREAS
ACTIVE IN THE SECTOR CATANIA AREA START UPS and
case study MILANO AREA START UPS and case
study POTENTIAL ENTREPRENEURS
(CATANIA AND MILANO) PRELIMINARY
CONCLUSIONS
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DATA SOURCE AND METHODOLOGY
RD MANAGERS OF MULTINATIONAL COMPANIES OF THE
SECTOR (15) NATIONAL INSTITUTE OF STATISTICS AND
EUROPEAN PATENT OFFICE DATA (MAPS) UNI
PROFESSORS, INSITUTIONS OFFICIALS, EXPERIENCED
RESEARCHERS AND MANAGERS (13 in Catania 6 in
Milano) START UP MANAGERS (9 in Catania 2 in
Milano) POTENTIAL ENTREPRENEURS (19 in Catania
13 in Milano)
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MAIN COMPANIES AND THEIR RESEARCH CENTRES
COMPANY RD SITES TYPE OF RESEARCH STMICROELEC
TRONICS 3,000 2 Milano area semiconductor
physics and devices 1 Catania
ALCATEL 1,000 2 Milano area optical fibre
and optical communication devices BULL
900 2 Milano area general purpose systems,
software 1 Avellino (new generation
mainframe, system integration projects,
billing systems) TELECOMITALIA LABS 850 mainly
in Torino mobile internet, multimedia
systems, broadband networks, voice
technology ERICSSON 800 1 Milano area, 1 Roma
wireless broadband access, high capacity 1
Bologna, 1 Salerno radio, WCDMA (wideband code
division multiple access)

SIEMENS 800 1 Milano area second and third
generation mobile networks INFOSTRADA
110 Milano area interactive video and streaming,
communication protocols, ADSL technology
and last mile PIRELLI
100 Milano optical fibres and material,
nanotechnologies for optical transmission
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Inventors in computer hardware, semiconductor
devices and electronic components per Local
Labour System
Patent applications in computer hardware,
semiconductor devices and electronic components
per Local Labour System
Nunber of patents
Nunber of inventors
1 -
0.2 - 1.73 1.73 - 5 5 - 11.17 11.17 - 20.25 20.25
- 49.81 49.81 - 227.88
1 -2 3 -5 6 - 10 11 - 18 19 - 37 38 - 186
Total inventors in computer hardware,
semiconductor devices and electronic components
(years 1995-2000) 655
Total patent applications in computer hardware,
semiconductor devices and electronic components
(years 1995-2000) 644
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CATANIA AREA
TERRITORY POLICIES AFFECTING HIGH-TECH
INDUSTRIES LOCAL INTITUTIONS THE ROLE OF
STMICROELECTRONICS WEAKNESSES OF THE EMERGING
TECHNOLOGY POLE ENTREPRENEURIAL MENTALITY
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CATANIA
TERRITORY LOW COST OF QUALIFIED LABOUR FORCE

around 25,000 Euro the cost of an
engineer HIGH LEVEL OF UNEMPLOYMENT (22 in the
South) LOW MOBILITY (no many large companies in
the sector apart from ST) HIGH RISK AVERSION
( entrepreneurial mentality) HIGH QUALITY OF
LIFE
Revitalisation
of the historical centre

Relevant reduction of criminality

Low cost of
living experienced managers and engineers of
Catania origin are willing to come back
RACKET

typically related to
commercial activities, high-tech activities seem
to have no problems
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CATANIA
POLICIES affecting high-tech industries EU LEVEL
OBJECTIVE 1 AREA

(fiscal benefit for employment,
advantages in the selection for different support
programs...) NATIONAL LEVEL STARTECH -
SVILUPPO ITALIA - public VC L297/99 - academic
spin-off L44/86, L95/95 - juvenile
entrepreneurship L46/82 - research and
innovation L488/92 - for depressed
areas MUNICIPALITY LEVEL FREE LAND TO
MULTINATIONAL FIRMS FOR THEIR PLANTS,
PRESELECTION OF PROJECTS AND ASSISTANCE IN
PRESENTING BUSINESS PLANS FOR PUBLIC SUPPORT FOR
NEW ENTREPRENEURSHIP there is a plan of the
municipality to create a BIOTECH pole in Catania
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CATANIA
LOCAL INSTITUTIONS TECHNOLOGY TRANSFER
INSTITUTIONS CONSORZIO CATANIA RICERCHE
consortium of different research agencies aiming
at the development of applied research and at the
co-ordination of technology transfer. Mainly
addressed to SMEs through the INNOVATION RELAY
CENTRE AGENCIES FOR THE DEVELOPMENT OF
ENTREPRENEURSHIP BIC SICILIA Business Innovation
Centre with incubator mainly addressed to
traditional sectors. INVESTI A CATANIA a
municipality initiative aimed at supporting
potential entrepreneurs by providing guidelines
for the preparation of the business plan and
assistance in the application to public support
for young entrepreneurs. RESEARCH
INSTITUTIONS SUPERLAB (Laboratory of Surfaces
and Interfaces) linked to the Department of
Chemical Sciences of the university is located in
STM premises. CNR-IMETEM research centre on
methodology and technology for microelectronics.
It is located in STM premises. UNIVERSITY of
CATANIA Departments of Electronic Engineering and
Physics.
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CATANIA

• THE ROLE OF ST MICROELECTRONICS
• STM is the 6th largest semiconductor company in
  the world. It offers over 3,000 main types of
  products to more than 1,500 customers. The group
  totals 42,000 employees, 12 advanced RD units,
  33 design and application centres, 19
  manufacturing sites and 74 sales offices in 27
  countries.
• ST group was formed in 1987 as a result of the
  merger between SGS Microelettronica of Italy and
  Thomson Semiconducteurs of France.
• The Catania site used to be an assembling site
  for the Italian company which had its
  headquarters in Agrate Brianza (Milano area). At
  the time of the merger it was undergoing a deep
  crisis. After the merging Catania site went
  through a relevant restructuring and drastically
  changed its mission. Now of 4,000 employees 1,000
  are involved in the RD.
• IMPACT ON THE TERRITORY
• Development of previously existing firms
  (MERIDIONALE IMPIANTI)
• SPIN OFF
• SAT, HITEC, ION BEAM, TECNOSMEDIA
• SPIN IN
• 23 multinational companies suppliers of ST
  positioned in the Catania area
• in some cases suppliers plants are directly
  connected to ST
• NOKIA and MAGNETI MARELLI decided the location
  of a plant in the Catania area
• IBM opened a research centre few months ago

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CATANIA

• WEAKNESSES OF THE EMERGING CATANIA TECHNOLOGY
  POLE
• HIGHLY DEPENDENT ON STMicroelectronics
• FEW OTHER ENTREPRENEURIAL ACTIVITIES ARE HIGH
  TECH
• LACK OF VENTURE CAPITAL FUNDS
• LACK OF ADVANCED SERVICES

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CATANIA
ENTREPRENEURIAL MENTALITY Historically open to
commerce, Catania has a different mentality from
the rest of the island. However SOCIAL
ESTEEM careers in politics, public institutions
and university are more highly considered than
entrepreneurial activities RISK AVERSION young
people definitively prefer a job in a large
company than starting their own activity. Case
of post graduate students in physics, who
abandoned the plan of a service enterprise
offering advanced archaeological analysis, for
which they could obtain public funding, and have
been hired by ST Microelectronics Some complain
a lack of long term thinking and of co-operative
mentality of the business community
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START UPS
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START UPS

• Case study CITIES ON LINE
• The founder is a 34 year old engineer, graduated
  in Torino- Politecnico, who earned his MBA in the
  USA.
• He started the activity in 1995 as Internet
  provider, with own and family funds
• Until 1999 CoL had 30-40 employees, in 2000 it
  increased its size up to 130 employees and has
  now 7 gateways in Italy
• Now, apart from Internet provision and VOIP
  system, it offers free web sites to firms
  (revenues are made by getting a margin on firms
  sales made through the web site).
• Their most important project is the cabling of
  the whole Sicily and its connection to Malta and
  Milano, in order to create a transmission
  cross-connection for Mediterranean countries
  substituting for the current system through the
  UK. (Alcatel, Sielte and Metroweb)
• CoL obtained public funds for creating a new call
  centre in Ragusa (Sicily)
• No VC funds involved
• Problems encountered
• personnel management (fast growth),
• being the 7th customer of Telecom, CoL suffers
  from the competition of the bigger companies
  which also rent Telecoms lines moreover there
  is no Service Level Agreement and the service of
  Telecom is not a good one

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START UPS
FINANCING The starting of an entrepreneurial
activity is highly dependent on PERSONAL
FINANCIAL RESOURCES. It is therefore necessary to
start with activities requiring low initial
investments (e.g. supply of technical assistance
or distribution of large companies
products). PUBLIC SUPPORT has not been useful
for starting an enterprise due to the uncertainty
and delay in receiving answer to the application
and subsequently the money. These aspects are
especially penalising for high-tech activities
for which timing is crucial.
At the time of tangentopoli public
support generated a bad reputation effect, which
made it more difficult to obtain loans from
banks.

Public
support to newly constituted firms requires the
company structure not to be changed for a certain
number of years. This limits the role of
VC. PRIVATE BANKS pay too much attention to the
guarantees and very little to the project which
needs funding (in the past banks did not ask
information about the project at all). VENTURE
CAPITAL is scarcely known and the access is
difficult. One
case of public VC - IRITECH
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MILANO AREA LOW UNEMPLOYMENT (6.6 in 1998), HIGH
SELF-EMPLOYMENT

24 of the people employed in
the province of Milano (1.5m people) are
self-employed. On average around 2,500 new
businesses are established in the Province of
Milano only in the manufacture sector every
year. The SMEs system in Milano area is
characterised by a widespread INNOVATION
CAPACITY. Lombardia region has its own measures
for the support of innovation through a series of
regional laws that help finance SMEs in
innovative activity (L35/96). There is a strong
risk capital provision TECHNOLOGICAL AND
SCIENTIFIC POTENTIAL 7 UNIVERSITIES

24 NATIONAL RESEARCH CENTRES

4 INCUBATORS


8 TECHNOLOGY TRANSFER
CENTRES the sectors of excellence in the public
research are electronic engineering, computer
sciences, robotics and meccatronics
biotechnology and new materials. Almost a
quarter of the Italian business enterprise
research is carried out in Milano (Lombardia 34
of Italy)
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MILANO

• Case study T.R.E. TELERILEVAMENTO EUROPA
• The founders are a university professor, a
  university researcher and Politecnico di Milano,
  which is controlling the company (55). The
  initial capital has been 10,000 Euro.
  TRE is the first case of
  academic spin-off from Politecnico di Milano. It
  was founded in February 2000 and it is located in
  Politecnico incubator.
• In the first year of activity it reached 1m Euro
  of sales.
• It utilises a patent owned by Politecnico and
  offers advanced services using a new method of
  land monitoring from satellite data.
• Most of their clients are found through contacts
  taken during the development of the patent and
  their scientific publications.
• TRE tried to obtain public funds through the
  regional law for innovative activities (L35/96),
  but being addressed to SMEs their project was not
  accepted (TRE is controlled by Politecnico). They
  are now preparing the application to the national
  law for academic spin-off (L297/99).
• TRE has been contacted by VC funds, but prefers
  letting the company grow slowly for the moment.
  Very good knowledge of the market is the crucial
  feature asked to a VC investor.
• Problems encountered
• financial constraints make the company grow very
  slowly, more money would have helped solving more
  quickly some problems getting data from more
  than one satellite, hire somebody to work full
  time on the activity.
• Being the first case of spin-off from Politecnico
  they encountered problems of slow
  decision-making. Standard steps to follow are
  useful. There is need of rules.

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POTENTIAL ENTREPRENEURS
GENERAL DATA CHARACTERISTICS OF THE WOULD BE
ENTREPRENEURIAL VENTURE FINANCING AND VENTURE
CAPITAL INCUBATORS PERCEIVED DIFFICULTIES
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POTENTIAL ENTREPRENEURS
GENERAL DATA (32 cases) AGE from 26 to 51 SEX
all interviewees are MALE PLACE OF WORK 29/32
RD IN HIGH TECH MULTINATIONAL COMPANY
3/32 RESEARCH CENTRES OR
UNIVERSITY EDUCATION 2/32 SECONDARY SCHOOL
DIPLOMA 26/32 UNIVERSITY DEGREE IN SCIENTIFIC
FACULTIES 4/32 PhD EXPERIENCE IN THE SECTOR
most of them are senior engineers, project and
design managers and responsible of research
groups. 17 have worked on more than 10
patents. PREVIOUS ENTREPRENEURIAL
EXPERIENCE 2/32 (non high-tech fields)
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POTENTIAL ENTREPRENEURS
CHARACTERISTICS OF THE WOULD BE ENTREPRENEURIAL
VENTURE SERVICE OR PRODUCT no predominance of
one type of enterprise, slightly more oriented to
services in Catania and to products in Milano.
For 27/32 the intended market is made up of
firms.
9 cases
proposed DESIGN HOUSE or INDIPENDENT RESEARCH
UNITS COMPETITIVE ADVANTAGE Technical
knowledge, knowledge of the sector and personal
contacts (Both groups) The existence of a
cohesive team is a competitive advantage
indicated by the group of Milano only
(3/13). LOCATION it is important for 16/19
interviewees in Catania and 7/13 interviewees
in Milano the most frequently indicated factors
in determining the importance of the location are
the presence of QUALIFIED MANPOWER and PROXIMITY
TO CLIENTS. In the Catania group emerges also as
important the presence of ADEQUATE
INFRASTRUCTURES. BUSINESS PLAN 3/32 made a
business plan (only 1 in Catania)
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POTENTIAL ENTREPRENEURS
COSTS AND TIME TO MARKET
9 design houses time 6m - 3a 600,000 - 1m ?
(3 cases dont know)
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POTENTIAL ENTREPRENEURS
FINANCING SOURCES OF FUNDS CATANIA MILANO PUB
LIC FUNDING FAMILY AND FRIENDS STRATEGIC
PARTNER BANKS VENTURE CAPITAL is taken into
consideration by 3/19 interviewees in Catania
and 2/13 in Milano PERSONAL CONTRIBUTION OWN
TIME AND WORK NATIONAL AND REGIONAL SUPPORT TO
RESEARCH ACTIVITY are known by 13/19 interviewees
in Catania and 5/13 in Milano FIFTH FRAMEWORK
PROGRAM is known by 10/19 interviewees in Catania
and 5/13 in Milano
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POTENTIAL ENTREPRENEURS
FINANCING Not very wide knowledge of VENTURE
CAPITAL FUNDS, slightly better in the Milano
area CATANIA 32 knows about it, only 1 contact
taken the expected difficulties are bureaucracy
and loss of control MILANO 38 knows about it,
only 1 contact taken the expected problems are
related to disclosing information and loss of
control Relevant difference in the two
areas in the knowledge of LAWS SUPPORTING
ENTREPRENEURSHIP CATANIA 84 know the laws, 3
asked for detailed information (2 applied for
other projects) MILANO 46 know the laws,
only 1 asked for detailed information
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POTENTIAL ENTREPRENEURS
INCUBATORS very little knowledge of PRIVATE
INCUBATORS CATANIA 16 knows about them, NO
contacts taken, NO comments MILANO 15 knows
about them, NO contacts taken, the expected
problems are related to disclosing
information wide difference in the knowledge of
PUBLIC INCUBATORS in Catania and Milano CATANIA
74 knows about them, 1 contact taken, the
expected problems are related to disclosing
information, and bureaucracy MILANO 8 knows
about them, NO contacts taken the expected
problems are related to disclosing information
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POTENTIAL ENTREPRENEURS
PERCEIVED DIFFICULTIES
7
19
1
4
2
3
0
5
4
4
2
7
4
15
5
11
1
3
3
3
12
6
0
0
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POTENTIAL ENTREPRENEURS
PERCEIVED DISADVANTAGES AND ADVANTAGES OF
BECOMING ENTREPRENEUR LEAVING AN ASSURED JOB is
perceived more strongly as a disadvantage by the
Catania potential entrepreneurs (2.84) and it is
followed by the TOO HARSH LEGAL CONSEQUECES IN
CASE OF BANKRUPTCY (2.67). This disadvantage has
the highest index in the Milano group (3.5). It
should be mentioned that 9/32 of the interviewees
do not know the legal consequences of a
bankruptcy. In the Catania group of interviewees
the POSSIBILITY OF HIGHER REWARD shows the
highest index (4.11) as an advantage of becoming
entrepreneur.
PROFESSIONAL FULFILMENT is an advantage more
highly valued by the Milan potential
entrepreneurs (4.62 index for Milano, 2.63 index
for Catania). Only 11 of the 32 interviewees
really intend to start an activity.
(7/13 in Milano, 4/19
in Catania) It is not only the crisis of the
sector which affects the decision not to start
the activity. In many cases researchers assert to
prefer their job rather than playing the role of
entrepreneur.
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• PRELIMINARY CONCLUSIONS
• Milano is certainly the most important area
  active in the electronic sector.
• Catania has good potentialities as a nucleus of
  activities, but as a technology pole still shows
  relevant weaknesses.
• The only cluster of potential activity type
  consists of design houses.
• Several actions are taken by public institutions
  for the development of Catania area and support
  schemes for entrepreneurship are known and taken
  into consideration by potential entrepreneurs.
• Risk aversion is stronger in Catania than Milano,
  because of the difficulty of finding a new job in
  case of failure of the entrepreneurial project.
  Moreover researchers seem to prefer their actual
  job than playing the role of entrepreneur.

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• Public incubators are known in Catania, unknown
  in Milano.
• Private VC funds and private incubators are
  unknown in Catania and Milano.
• Fund raising is the most difficult problem to
  start an entrepreneurial activity. Public
  intervention on this aspect is expected by most
  interviewees.
• Main sources of funds are public funds and
  strategic partner (STM) in Catania, family and
  friends, and banks in Milano.
• The need of public intervention for the weak
  reality of Catania VS competition of public
  support against private VC funds