ITAC Online - The Microelectronics Issue  - September 2010
In ITAliCs

Entrepreneurial Opportunities Enabled through Microsystems

This month's 16th annual Executive Forum on Microelectronics certainly lived up to its reputation as one of the premier gatherings of Canada's microelectronics and microsystems community – and what a better a way to kick it off than with the CMC/ITAC Banquet, "Celebrating Excellence."

What made this evening so special was the transition from the brightest up-and-comers in the Canadian industry to the true legends that have helped lead the industry to where it is today. The CMC Awards celebrate the bleeding edge of innovation coming out of our nation's universities – what an impressive group of innovators this represents. They also served as a tremendous segue into the ITAC/SMC Outstanding Services Awards, which celebrate the current microelectronics industry leaders and all they've done technically and non-technically, to advance the Canadian industry. Winners of these awards were the Dean of the Faculty of Engineering at the University of Waterloo, Adel Sedra, and retired professor and esteemed author, Kenneth Carless Smith.

The forum itself began with some insightful presentations that set the context for the day, including an overview and key trends in the microsystems marketplace, as well as a presentation by ITAC President and CEO, Bernard Courtois, on how this sector fits into Canada's Digital Economy Strategy.

Our afternoon sessions shifted the focus toward discussing and addressing the key challenges companies in this industry face. Appropriately, the day wrapped-up with a discussion around the opportunity to develop a world-leading Canadian microsystems ecosystem.

Thanks to all the day's presenters; the conference hit the mark in terms of what participants were expecting. The forum was described as intelligent, insightful, provocative, interactive, fun and everything in between. We would also like to thank our organizing committee and sponsors for helping to make this event possible.

One of the important things we'll take away from this forum is the participants' resounding enthusiasm for the idea that the dialogue around how to build a world-leading microelectronics ecosystem in Canada must continue, and ITAC looks forward to playing its role in moving this forward.

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When bigger isn't better

Xerxes Wania, President and CEO, Sidense Corp. Xerxes Wania, President and CEO, Sidense Corp.

In the microelectronics game, the smaller your product, the more places you can fit it, and ultimately, the more your customers can do with it.

Xerxes Wania is well aware of this and he's the President and CEO of a company that creates a product that proves it. Sidense Corp. develops industry-leading logic NVM (non-volatile memory) that helps system-on-a-chip designers achieve improved results in cost, density, reliability, security and power.

"The main value add of our one-time-programmable (OTP) product is a very small design – much smaller than with competitors' products," Xerxes said. "And as you know in the microelectronics world, being small is extremely useful, because it's less silicon area, lower power, lower cost, and you can put it in smaller places – smart phones and RFID tags, for instance, are huge businesses these days."

Sidense has developed a one-transistor memory cell, around which it builds products. Xerxes said it can be likened to an automobile's tire tread.

"Say you develop a really good tire tread, from which you can build different variations of tires – for trucks, tractors, cars, et cetera," he said. "The root technology is the same, but when it gets used in different ways you simply have to put some circuitry around it. If it's RFID, you use lower power because power is everything. If it's digital video, it is performance and security that you are dealing with. Our baseline, called 1T-Fuse, is common to all our products."

Sidense's products reach beyond Canadian borders, and are used in over 120 designs and applications worldwide – many of which, Xerxes said, the company's founders never imagined when they started the company. But despite all this, Xerxes' heart remains at home.

"I feel a definite personal fulfillment in growing the microelectronics business here in Canada," he said. "The more companies you have, the bigger the community, the better chances you have of making a successful company. Look at Silicon Valley in California. In lots of cases, many start-ups don't even have to think to sell outside or recruit from outside or anything – their core competency is within a 50-square-kilometre area where they can get everything they want, including customers. For the first two years, you may not even want to go outside those 50-square-kilometres, and that's the kind of environment I want to see grow here."

It's not surprising that he feels this way – Xerxes is, after all, an entrepreneur first and foremost. He has helped found and grow a number of semiconductor/IP companies and at the end of the day, just wants to see the industry in Canada do well.

"Canada is a pretty good place for start-ups. With SR&ED [Scientific Research and Experimental Development] and IRAP [Industrial Research Assistance Program] grants, we've seen some people have success; however, venture capital is just not there sometimes. If you have the right product and the right people, there's a way to raise money, but many of the people behind the success stories aren't investing back into the industry. We just don't have that momentum.

"The industry has grown, but it's grown at a much slower place than I would have liked," Xerxes said. "And 80 percent of the time, you're getting bought out by American companies, and that's your exit as a public or private company. Then when a bad economy strikes, the first thing a lot of those companies do is cut off satellite offices, so I'm always a little concerned about that. I'd love to see companies here buying companies outside of Canada."

All in all, Xerxes said the current story of the microelectronics industry in Canada is a happy one – one filled with potential.

"It's a very profitable business, especially in the IP market, in the sense that it looks and feels like a software business, where your gross margins are extremely high, and so are your net margins, and what you have to do is come out with a product that solves a pain in the market. In the IP business you don't have inventory issues. You have a bunch of computers, lots of patents, very smart people, good investors who believe in you, and a small lab. We think that's a very good model that we'll continue to work with."

Small labs, maybe. Small products, definitely. But there's no denying that the microelectronics industry is changing the world – and contributing to the Canadian economy – in a very big way.

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Home-growing an industry, for the long-term

Howard Pakosh, President and CEO, ChipStart Howard Pakosh, President and CEO, ChipStart

Howard Pakosh is what some might call a serial entrepreneur. With over 25 years in the microelectronics industry, he has been responsible for three start-ups – including the one he currently leads as President and CEO, ChipStart.

ChipStart began as a consulting company in 1998, and has since evolved through many stages into an IP developer. While his businesses have seen nothing but growth, Howard said the story isn't all positive in the Canadian microelectronics industry.

First and foremost, despite the significant gross sales Canadian microelectronics businesses experience, net growth tends to be near zero, Howard said. As a result, the finance community (including venture capitalists and angels) are rarely interested in investing in microelectronics companies.

"The finance community is turned off semiconductors because of the lack of return," Howard said. "There's no doubting it's an interesting and intriguing market sector, but we're not capitalizing on return on investment, because every time you want to build something new, all the capital costs to build all the needed infrastructure go through the roof. You never get to a point where it's profitable.

"Expectations need to be adjusted," he said. "Investors can't expect to get a ten-time return and run – you have to be in it for the long haul. Giving $10 million and expecting $100 million in two-to-three years is not the way the finance community should be thinking, but they need to satisfy their shareholders. Like an old boss once told me: nothing changes until something changes."

For many companies seeking financial backing, the situation then becomes a choice between doing without the funding and selling off a significant portion of the company itself. That's a problem, Howard said.

"I can see why companies sell out for business reasons – there are good reasons to do it," he said. "But there is no reinvestment back into the Canadian industry. Compare today to 10 or 20 years ago, and I think we've taken a lot of steps backwards."

To avoid encountering similar dilemmas in their business, Howard and his team have evolved their company from what one author coined an "IP aggregator" to an IP developer. This way, they move from marketing and selling IP, to actually developing an IP product – and should it ever come time to sell anything off, they can sell the product, rather than a chunk of the company.

This transition was not a simple one-step process, however. It took first creating a global sales channel, which provided their IP developer and engineering partners value by connecting them to an international market. Then, they set out to create an eco-system of IP vendors based on three business units: architectural IP, digital/soft IP, and analog/hard IP. The third step was to bring all of these elements together to create a pre-validated, pre-verified IP sub-system to a customer. This IP sub-system has become the keystone ChipStart product – their "secret sauce" as Howard puts it.

For Howard, the question moving forward is, "how can we implement these IP sub-systems into products, and then label these products as our own?" Finding an answer to this question will be the fourth step in the company's long-term plan.

While Howard is confident that this business model will lead to future success for ChipStart, he said there are lessons to be learned from the collapse of Nortel several years ago.

"If you look at how the industry got to where it was eight or nine years ago, as the number of semiconductor companies and the amount of semiconductor output in dollars were peaking, all of it was homegrown for most part," Howard said. "And as long as the Nortel tree was standing, it had major branches. But once that tree was chopped down, there was nothing – it might have had seeds, but no one is watering the seeds. No one wanted to fund them."

What is it going to take to get the industry back to where it was?

"It will take foreign interest to take advantage of our talent base, or homegrown investment," Howard said. "And I don't know if anyone has the will to do that today."

For Howard, the focus will remain on building ChipStart IP sub-systems here in Canada, and through that contributing to the semiconductor industry at home. With over 300 years of industry experience among the company's 12 members, Howard said his team is in a position to truly appreciate the bigger picture: that the true goal in good business is to provide long-term support to the customer.

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A Business Model for Success

Gord Currie, Executive Partner, Currie Advisory Group Gord Currie, Executive Partner, Currie Advisory Group

For any business, success comes by the proper allocation of revenue into two key areas – profits for stakeholders, and investments back into the company's growth and development.

In the microelectronics industry, this adage applies, but perhaps on a larger scale than in other industries, simply because of how much high-tech companies tend to spend on research and development (R&D).

Gord Currie has spent over three decades managing financials for companies in different industries – the last five of those as Chief Financial Officer (CFO) of the Canadian microelectronics powerhouse, Gennum Corporation. He is now retired from CFO work and is Executive Partner with the Currie Advisory Group.

He advises that companies have to learn to plan differently depending on where they are in their lifecycle. Start-ups, for instance, encounter two key pitfalls in their financial planning, Gord said: "They either underestimate the time it takes to get a product to market, or they underestimate what it's going to cost them to acquire the appropriate engineering talent and resources to complete the project. If they don't build a solid business plan at the onset, or if they don't understand their plan completely, the likelihood of failure goes way up."

At other moments in a company's lifecycle – when revenues are starting to come in, or when the company is experiencing good profits – the focus shifts to how much ought to be spent on R&D versus how much needs to be reserved for stakeholders. Solving this dilemma, Gord said, is all about balance and discipline.

"While a solid business plan is always the first step, the second step is ensuring you have tight R&D development processes in place," Gord said. "Part of that is being sure that the business case for R&D development is reviewed on a regular basis, and if market conditions deteriorate or prove to be worse than expectation, you stop or modify the project. If you have strong disciplined processes in place around your R&D expenditures, you're going to significantly increase the probability of success on a good project, or minimize the damage on a bad project."

Part of a good plan also includes knowing your competitors, Gord said.

"If the market is dominated by you and one other company, for example, and they're spending twice as much on R&D – assuming they're equally as productive R&D dollars, and your competitor understands the customers' needs – over the long term you're likely to lose market share," he said. "Of course a situation like that could cause a need to significantly accelerate the R&D spend; in this case, corporate communications are critical because investors must understand the need to increase the spend in that space in order to achieve longer term success."

Good companies manage their plans to an agreed set of financial objectives, or what some refer to as a business model. How the objectives in the model get set comes back to managing the balance between achieving a desired level of investment and profit, a mix of discipline and balance.

"Once a bit of success comes in, in terms of revenue, and a company is sustaining themselves financially, then the question becomes, "What is the appropriate business model to determine how to reward our stakeholders while creating profitable growth?" Whether private or public, your investor base is expecting a return on their money. But with R&D focused companies, there's no shortage of good ideas for the next project," he said. "I've never met an engineer who wasn't coming to the CEO for more money. Every planning process I was ever in, the R&D guys would come in with the wish list. There might be a number of projects we'd be carrying over from the prior year, but there would also be a significant number of dollars requested for brand new projects – and in some cases, moving into new markets that at that point, carried a much higher degree of risk."

"At the beginning of the year, a company should create worst-case, most likely-case, and best-case scenarios or forecasts in terms for how they think the next year could go. This includes various estimates of revenue and gross margin percentage that will drive how many gross margin dollars available to work with. The next step involves expense forecasts, and since selling and administration expenses are often relatively flat, the issue becomes how to manage the R&D line.

"If you look at Gennum's public documents, we talked a lot about generating minimum operating returns at 20 percent of revenue – so that meant after all those sales and expenses, we'd still have 20 cents on every sales dollar for our shareholders. That was a key requirement in our business model and helped determine how much the engineering guys had to spend. This is particularly critical when a company has a strategic need for more R&D spend due to existing gaps in its product portfolio. Over a longer period, one would hope to leverage the same technology into other markets creating more financial leverage in the model for shareholders."

In so many areas of life, one achieves success by establishing a solid plan, then having the discipline to follow through on it. If Gord's track record says anything, it's that companies need people at their financial reigns who understand this, and who are capable of living by it – just as he has.

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ITAC News

New Report Advances the Public Policy Discourse on Innovation

A new report by the Coalition of Action on Innovation, which is co-chaired by the Honourable John Manley, President and CEO of the Canadian Council of Chief Executive Officers and Paul Lucas, President and CEO of GlaxoSmithKline, and comprised of several members of the ITAC community including Past-Chair and Zarlink Chairman Adam Chowaniec and Greg Aasen, co-founder of PMC Sierra, has released an important new report that makes ten recommendations on measures to improve Canada's capacity for innovation.

The report offers sound suggestions for, among other things, reforming tax credits for research and development, improving access to venture capital, accelerating the adoption of productivity enhancing technology across the whole economy and improving Canada's intellectual property regime.

Read the full report here: www.actiononinnovation.ca

Access the list of coalition members here: http://www.itac.ca/uploads/pdf/CoalitionForActionOnInnovation-ListOfMembers.pdf


Government of Canada Launches National Cyber Security Strategy

Minister of Public Safety, the Honourable Vic Toews, and Minister of Natural Resources, the Honourable Christian Paradis, have officially launched the national Cyber Security Strategy for Canada. The strategy was mentioned in the 2010 Speech from the Throne as an important Government priority. It will enhance protection from cyber threats for Canadian citizens, industries and governments from coast to coast to coast.

To access Canada’s Cyber Security Strategy in full, visit: www.publicsafety.gc.ca/prg/em/cbr/ccss-scc-eng.aspx.

For more information on how to protect yourself online, visit: www.publicsafety.gc.ca/cyber.


ITAC Hosts Industry Roundtable with Minister Rob Moore in Conjunction with 2010 NBIF

Earlier this month in Saint John, New Brunswick, ITAC hosted an industry roundtable with Minister of State, Small Business and Tourism, Rob Moore, as well as a number of the province’s leaders in ICT.

The roundtable aimed to facilitate a discussion between the NB ICT industry and Canada’s federal government of how small- to mid-sized businesses based outside of Ontario can best do business with the federal government.  Senior executives from several technology companies based in Saint John, Fredericton, Moncton and Halifax attended, as well as a number of ITAC representatives including past ITAC Chair, Tom Turchet of IBM, Morgan Elliott of Research in Motion (RIM), and ITAC President/CEO, Bernard Courtois.

ITAC hosted the roundtable in conjunction with the 2010 New Brunswick Innovation Forum, a technology and innovation conference put on by the National Research Council’s Institute for Information Technology in Fredericton, NB (http://innovation2010.nrc-cnrc.gc.ca/welcome_e.html).

Access Industry Canada’s official media release here: http://www.ic.gc.ca/eic/site/ic1.nsf/eng/05931.html


Federal Government Announces R&D Review Committee

Earlier this month, the Minister of State (Science and Technology), Gary Goodyear, and the Minister of Veteran Affairs and Minister of State Agriculture (Quebec), Jean-Pierre Blackburn, launched an independent expert panel to solicit the advice of Canadians and business leaders on how the federal government can cultivate its support of business research and development. The review will help provide recommendations on how the government can bolster Canadian businesses, create jobs and bring new ideas into the market place for the benefit of all Canadians.

The Research and Development Review Expert Panel is composed of six eminent Canadians chosen for their experience in business, academia and government as well as their knowledge of R&D and innovation practices and policies. The panel's chair, Thomas Jenkins, is Executive Chairman and Chief Strategy Officer of Open Text. The other panel members are Dr. Bev Dahlby of the University of Alberta, Dr. Arvind Gupta of the University of British Columbia, Mrs. Monique F. Leroux of the Desjardins Group, Dr. David Naylor of the University of Toronto and Mrs. Nobina Robinson of Polytechnics Canada.

Access the government press release here: http://www.ic.gc.ca/eic/site/ic1.nsf/eng/05946.html


Christine Alford on Taking Risks, Developing a Personal Style and the Power of Now

There aren't very many Canadian women leading a team responsible for an $8 billion global business, but Christine Alford has entered that small group. Just a few days after being appointed Chief Operating Officer, Consulting Services for IBM, she was the featured speaker at the second ITAC/CWC Speakers' Series showcasing outstanding female leaders in information and communications technology. In conversation with interviewer Adriana Zibiri (Senior manager, IBM Software Group) and a capacity crowd in the auditorium at IBM Canada's Markham headquarters, Christine candidly shared her experiences and views on personal leadership. She encouraged her audience to view career risks as opportunities, demonstrating that the job changes she made in her career were some of the most successful risks that she took. Christine's career started out "non-traditional" and pretty much stayed that way. She studied for a career in marine biology but a few summer jobs counting fish eggs and a minor in computer science diverted her to her first job with IBM as a software developer. After 12 years of that she was offered a chance to become an industrial engineering manager and then CIO of IBM Canada and finally an executive in services.

"I wasn't an expert in any of these roles," she noted. "But I learned that in any new job a key to success is your ability to deliver in the first 30 days."

To see the full video of this lively discussion and to learn why this series is rapidly becoming one of our most popular, visit www.itac.ca.

The next ITAC CWC Speakers Series event will take place on December 2. Our speaker will be Patti-Ann Marzucco, Vice-President, Original Equipment Manufacturers, Microsoft Canada.


ITAC and YTA Strike Strategic Partnership for 2010/2011

The Information Technology Association of Canada (ITAC) and the York Technology Alliance (YTA) have formed a strategic partnership in order to work together to serve and represent the ICT industry in the Greater Toronto Area – Canada’s largest technology cluster.

Read more about the partnership here: http://itac.ca/site/media_details/1731/


Other News and Events

2010 British Columbia Extended Producer Responsibility Workshop

In partnership with the B.C. Ministry of Environment, the North American Centre for Leadership in EPR at the Recycling Council of British Columbia presents the 2010 EPR Workshop, November 2-3, at the Four Seasons Hotel in Vancouver, B.C.

B.C. supported the CCME's Canada-wide Action Plan for EPR in October 2009. Contained in this plan is a list of products targeted by Canadian jurisdictions, including;

  • Packaging and printed materials

  • Electronics and electrical products

  • Mercury-containing products (including lamps)

  • Household hazardous and special wastes

  • Automotive products

  • Construction and demolition materials

  • Furniture, textiles and carpet

  • Appliances (including ozone-depleting substances)

While many of these product categories are already regulated in BC, the Ministry of Environment Service Plan 2010/11 - 2012/13 commits to adding 2 new products every 3 years to B.C.'s Recycling Regulation, as well as a commitment to the CCME Canada Wide Action Plan Phases, listed above.

In 2010, British Columbia will consider developing new programs for the remaining products from the Phase one of the Action Plan, such as adding packaging or expanding the programs for household hazardous waste and automotive products.

If you are a producer of any products listed above, you don't want to miss day one. This is your chance to learn more about B.C. results based Recycling Regulation (enacted in 2004) and to better understand your compliance options.

Find more information here: http://rcbc.bc.ca/events/epr-workshop


Privacy & Information Security Congress 2010

November 15 - 16th, 2010
The Westin
Ottawa, ON, Canada

Reboot Communications is delighted to announce that we will be hosting the first Privacy and Information Security Congress in Ottawa in the fall of 2010. Building on the international reputation of the Privacy and Data Security conference we produce in Victoria each year, this conference will allow us to bring our subject matter expertise to eastern Canada. This event will provide an outstanding forum for delegates and sponsors with an interest in cutting edge policy, programs, research and technologies aimed at the protection of privacy and security.

For more information, visit: http://www.rebootconference.com/ottawaPS2010/index.php


ITAC Welcomes “Disney Institute” to Vancouver on November 30, 2010

ITAC is proud to partner with Kwantlen Polytechnic University School of Business and the Surrey Board of Trade to bring “Disney’s Approach to Quality Service” program, presented by the world renowned “Disney Institute,” to the Vancouver area on November 30, 2010.

A unique one-day event, “Disney’s Approach to Quality Service” will challenge you to look at your business – no matter what size – in an entirely new light. Showcasing the powerful strategies and business models that are the cornerstones of the Disney organization’s long-term success, you will learn how to apply innovative Disney strategies to your own organization for immediate results. Take advantage of this incredible opportunity and register today.

IMPORTANT: Please use promotional code “ITACMNE” to receive $50 off/ guest when registering. Additional group discounts are available.

To LEARN MORE and REGISTER, please visit: www.KeysVancouver.com

No prerequisite training required.


CIX 2010

The Canadian Innovation Exchange (CIX) is on the hunt for Canada’s Hottest Innovative Companies in Information and Communication Technology, Clean Technology, and Digital Media.

Being recognized as one of Canada’s Hottest Innovative Companies is a tremendous accolade and will enable you to:

  • Showcase your innovative company in front of industry experts at CIX

  • Meet with potential partners, customers, investors and your peers in facilitated meeting exchanges

  • Achieve broad media recognition as one of Canada’s Hottest Innovative Companies

  • Gain insight into the market as industry experts, visionaries and trailblazers share their knowledge and experience

There is no cost to enter Canada's Hottest Innovative Company. Submit your companies profile today – deadline is October 1, 2010.

Join Canada's innovation community at the Canadian Innovation Exchange, December 7, MaRS, Toronto Ontario. Register with your exclusive ITAC Registration Rate. Offer expires November 5, 2010.

www.canadianinnovationexchange.com


Social Media for Government Conference – Toronto – January 31, 2011 to February 3, 2011

Social Media for Government Training:

“How To Engage Your Employees And Citizens By Using The Latest Web 2.0 Technologies To Drive Communication Results”

January 31 – February 3, 2011 – Toronto, ON

Access the conference agenda here: http://www.aliconferences.com/conf/social_media_govt_canada0211/index.htm

Mention “ITAC” to receive a special $200 discount!