Pilot Production in
Key Enabling Technologies
Crossing the Valley of Death
and boosting the industrial
deployment of Key Enabling
Technologies in Europe
Internal Market
Industry,
Entrepreneurship
and SMEs
Pilot production in Key Enabling Technologies
2
Disclaimer
Imprint
Neither the European Commission nor any
person acting on behalf of the Commission is
responsible for the use which might be made of
the following information. The views expressed
are those of the authors and do not necessarily
reflect those of the European Commission.
Nothing in this brochure implies or expresses a
warranty of any kind. Results should be used
only as guidelines as part of an overall strategy.
This brochure has been prepared by the
Netherlands Organisation for Applied Scientific
Research TNO on behalf of the European
Commission, DG GROW—Directorate General for
Internal Market, Industry, Entrepreneurship and
SMEs. It is a publication under the service
contract "Multi-KETs Pilot Lines" (www.mkpl.eu).
The project started in 2012 and was completed
in 2015.
© European Communities, 2015. Reproduction is
authorised provided the source is acknowledged.
Project conducted by
In close cooperation with
Netherlands Organisation for Applied Scientific
Research TNO, Fraunhofer-Gesellschaft ISI,
Commissariat à l'énergie atomique et aux
énergies
alternatives
(CEA),
Cambridge
University Technical Services ltd., VTT, Fundación
TECNALIA Research & Innovation, Technology
Foundation Partners, JOANNEUM Research,
D’Appolonia S.p.A, Strauss & Partners, Spark
Legal Network and Consultancy ltd., Noblestreet
Acreo Swedish ICT AB (Norrköping, Sweden), Bio
Base Europe Pilot Plant (Ghent, Belgium),
Infineon IFAT (Villach, Austria), Sofradir (VeureyVoroize, France)
Acknowledgements
We are grateful for the support, fruitful discussions and contributions of the project steering
committee, consisting of Gavino Murgia (EC-DG GROW), Luuk Borg (EC-DG Connect), Heico Frima (ECDG RTD), Dr. Paul Mijlemans (Umicore), Prof. Mike Wale (Oclaro), Prof. Terry Wilkins (Leeds University),
Prof. Paolo Matteazzi (Nanofutures), Dr. Andreas Wild (ECSEL), Dr. Manfred Kircher (CLIB 2021),
Dr. José Carlos Caldeira (Manufuture, EFFRA).
We gratefully acknowledge the contributions of over 1,000 experts from industry, research and
policy who actively contributed in interviews, expert workshops and conferences and the online
survey.
Cover photo: ACREO
Pilot production in Key Enabling Technologies
3
Contents
FOREWORD
4
INTRODUCTION
5
THE MULTI-KETS PILOT LINES PROJECT: CONTENT AND OBJECTIVES
6
CASE: BIO BASE EUROPE PILOT PLANT
7
WHAT IS A PILOT LINE? WHAT IS PILOT PRODUCTION?
8
KETS-BASED PRODUCTS AND MULTI-KETS
10
ECONOMIC RISK, CORE TO THE VALLEY OF DEATH
12
BARRIER 1: FINDING FINANCIAL CAPITAL
14
BARRIER 2: TO MARKET OR NOT TO MARKET: THAT IS THE QUESTION
15
BARRIER 3: PILOT PRODUCTION NEEDS FERTILE SOIL
16
BARRIER 4: NO PILOT PRODUCTION WITHOUT HUMAN RESOURCES
17
THE POLICY CONTEXT
18
WHAT COUNTRIES DO
19
PILOT PRODUCTION REQUIRES A SHARED COMMITMENT
20
SHARED FACILITIES FOR PILOT PRODUCTION
22
FIVE POLICY STRATEGIES FOR CROSSING THE VALLEY OF DEATH
24
POLICY ACTIONS
25
4
Pilot production in Key Enabling Technologies
Foreword
We have come a long way since the Commission identified in 2009
six Key Enabling Technologies (KETs) crucial for the industrial
transformation of Europe and for triggering innovation in
processes, products and services. Today, we have much more
information on why and how KETs, together with digital
technologies, can become the strategic building blocks for new and
innovative industrial value chains: we are doing our best to make
this a reality.
Antti Peltomäki
Deputy DirectorGeneral
DG Internal Market,
Industry,
Entrepreneurship
and SMEs
European
Commission
The following brochure summarises the results
of a project looking into ways, in which public
authorities can best stimulate KETs pilot
production. This is of great importance since
the European Union (EU) programme for
research and innovation, Horizon 2020, has
dedicated more than EUR 6 billion to
innovation activities for KETs—a significant
investment, which, when properly invested, will
translate into more innovative KETs-based
products and services, leading to new market
opportunities for European enterprises and
enhanced manufacturing capacity. This is key
to spurring growth, creating jobs and delivering
smart solutions to such challenges as aging,
scarce natural resources, and sustainable
mobility.
Close-to-market
innovation
and
pilot
production in particular, is essential. As the
"scale-up" stage needed to cross the “Valley of
Death”, it allows enterprises to test and
demonstrate innovative solutions and gather
information about the performance and
behaviour of a future product and production
line.
This turns laboratory prototypes into products
ready for commercial production. Pilot
production is a vital link, which needs to
be supported otherwise promising innovations may fail to get off the ground.
The final report of the High Level Group on
KETs published in June 2015 calls for an EU
strategy to support pilot production, with key
roles for Member States and regions. KETs can
boost the economic performance of lagging
regions, enhance regional GDP, and mitigate
the competitive divide across regions in
Europe. KETs are equally crucial to maintaining
the industrial and technological leadership of
more advanced regions.
Under the European Structural and Investment
Funds (ESIF) in particular, around EUR 100 billion
is available over 2014-2020 for innovation,
including KETs pilot production, up to first
production, which should translate into concrete
regional investment projects. More cross-border
cooperation between public authorities should
also lead to more joint, coordinated investment
in pilot production.
Many technology infrastructures can already
deliver quality services to small and mediumsized enterprises (SMEs) for pilot production, but
most are located in only a few Member States.
This is why it is crucial to facilitate panEuropean access to these services. To this end,
the Commission launched in September 2015 a
new web tool, which allows SMEs to find
technology services anywhere in Europe (for
each KET and each type of service provided).*
There are several projects either up and running
or in the pipeline, which aim to find the best
ways of getting technology infrastructures to
work together to help meet the needs of SMEs
across Europe.
We are fully aware that pilot production,
especially in KETs, requires large investments,
both initially and beyond the pilot stage, and we
are doing our utmost to stimulate such
investment. For example, the Commission
supports the preparation of "important projects
of common European interest" (IPCEIs), to
encourage pooling of resources between the EU,
Member States, regions and industry to help
invest in ambitious, innovative industrial
projects. Such projects could also benefit from
the European Fund for Strategic Investments,
and the Commission will ensure that regulatory
barriers to their successful implementation are
removed.
I hope that this brochure will help you
understand the importance of KETs pilot
production
and why it is crucial to help
businesses cross the Valley of Death, as well as
inspiring policymakers to effectively support
KETs-related pilot production. I hope you enjoy
reading it!
__________________
*https://ec.europa.eu/growth/toolsdatabases/ketsobservatory/kets-ti-inventory/map.
Photo: Collective Commons, Blue Fibre by Wysz.
Pilot production in Key Enabling Technologies
5
Introduction
Technology is crucial to maintaining or building industrial leadership. Most governments support research and
development (R&D) in key enabling and industrial technologies. In Europe, as in other world regions, the
translation of R&D results into new products and services is suboptimal, and so also are its impacts on growth,
jobs and societal benefits. This is mainly due to barriers preventing innovations from crossing the “Valley of
Death”. Close-to-market R&D such as pilot production and demonstration is found at the heart of the Valley of
Death, where both costs and risks are very high.
Key Enabling Technologies (KETs)...
“...are knowledge intensive and associated with high R&D intensity, rapid innovation
cycles, high capital expenditure and highly-skilled employment. They enable
process, goods and service innovation throughout the economy and are of systemic
relevance. They are multidisciplinary, cutting across many technology areas with a
trend towards convergence and integration. KETs can assist technology leaders in
other fields to capitalize on their research efforts” COM 512 final (2009).
The six KETs
Nanotechnologies (NT), Photonics (PHOT), Industrial Biotechnology (IB), Advanced Materials
(AM), Micro- and Nano-Electronics (MN-E), Advanced Manufacturing Technologies (AMT)
More and more governments give priority to
ensuring that technological inventions lead to
actual economic and societal benefits; however,
many inventions never reach the market and
thus the societal and economic impact of
scarce public resources is suboptimal.
The so-called Valley of Death needs to be
crossed, which corresponds to the research,
development and innovation (R&D&I) activities
required to transform a laboratory prototype into
a product ready for full-scale production and
commercialisation. The Valley of Death is characterized by both high costs and high risks.
B ased on the work of the High Level Group on
Key Enabling Technologies in 2010, the European
Commission shifted its attention to this issue of
close-to-market R&D&I. A focus on pilot production and demonstration was seen as essential to
enable Europe to keep its global leadership in
strategic industrial sectors. This emphasis on
support to pilot production is combined with the
observation by the European Commission in 2009
that six key enabling technologies have high
impact on industrial competitiveness and are
crucial to solving societal challenges such as
aging, scarce energy and natural resources, and
sustainable mobility.
“To come back to a
position where it
effectively competes,
Europe has to engage
massive political,
financial and industrial
efforts towards the
development of Key
Enabling Technologies
(KETs). This should
include a rebalancing
of public R&D&I
funding towards close
to market activities,
assessing the real
impact of public R&D
funding on the
European economy”
Final Report of the High
Level Group on KETs,
June 2015
6
Pilot production in Key Enabling Technologies
The Multi-KETs
Pilot Lines Project:
Content and Objectives
The overall objective of the Multi-KETs Pilot Lines project (mKPL) was to “establish a common understanding of
the concept of pilot lines deploying multiple Key Enabling Technologies, their role in strengthening the innovation
capacity of the European industry, and how these can be supported by EU policy”. The final report of the project
provides national, regional and policymakers in the European Union (EU) with an in-depth background and makes
recommendations to policymakers on how to support pilot production activities that combine at least two Key
Enabling Technologies ("multi-KETs").
Beginning in 2012, the first phase of the multiKETs Pilot Lines project (mKPL) focused on
existing policies in other countries to better
understand multi-KETs and pilot lines, plants
and pilot production activities. It included an
international analysis and benchmark on
policies and business approaches on multiKETs and pilot production initiatives. A survey
among almost 650 international experts was
also carried out, as well as several workshops.
In the second phase of the project a more in-depth
assessment was carried out by looking at four
organisations that were engaged in multi-KETs
pilot production activities. The findings were
translated into actions by better understanding
the barriers in the Valley of Death and
identifying the options of governments to
address these barriers. The results were
disseminated during workshops and a final
conference.
A vast participation of experts
During the project, interaction and learning with
experts from industry, research and policy was
considered crucial. Over 1,000 experts actively
contributed to the content of this report. Over
200 experts were interviewed and about 50
experts participated during four expert
workshops. Over 150 different experts joined
the discussions during two conferences. A
Steering
Committee
evaluated
the
(intermediary) results. Almost 650 experts
participated in an online survey. From the
consortium partners, over 40 experts were
directly involved in the research and during four
case studies, some 80 experts provided
information on concrete pilot production
activities.
The project objectives included
1. the creation of a shared view on
multi-KETs and pilot lines
2. an international assessment and
benchmark of 21 countries on multiKETs and pilot production policies
3. case studies on actual pilot lines
and plants and a demonstration to
the broader audience on multi-KETs
and, finally
4. a proposed policy roadmap to support the long term agenda on multiKETs and pilot production
Further background information can be found at
www.mkpl.eu/results.
Pilot production in Key Enabling Technologies
Case: Bio Base Europe
Pilot Plant
7
Joining forces to build state-of-the-art research and training facilities to speed up economic growth, innovation and
sustainable development, Flanders and the Netherlands have established Bio Base Europe. The Bio Base Europe Pilot
Plant (BBEPP), located in Gent, Belgium, was one of the mKPL demonstrators. BBEPP offers technological infrastructure
and expertise to customers that have a prototype of a bio-based product but not yet a clear idea of how to
commercially produce it. It helps identify the raw materials, assesses the optimal production process and even helps
find possible investors. Expensive equipment can be shared and BBEPP has highly skilled experts to help its customers
cross the Valley of Death. After its start in 2012, BBEPP has been involved in 12 public R&D projects and has helped
over 40 companies via private projects, of which 26% are start-ups, 45% are SMEs and 29% are large enterprises..
directly into BBEPP facilities, which enabled direct
testing. The first project tested fermentation of CO
to an alcohol, which took less than a year.
Industrial production at 200,000 liters is being
studied now. The second project involves testing
fermentation of CO2 to a short-chain fatty acid and
is currently at the lab stage.
Photo: BBEPP
A major multi-national company in the steel sector
did two scale-up projects with BBEPP to transform
its industrial effluent gases (CO, H2 and CO2) into
valuable chemicals through fermentation using
micro-organisms. One of the company sites is
located very close to BBEPP, so a pipeline passing
the BBEPP facilities could be used to facilitate this
process. A new pipe was connected to this pipeline
See http://www.euronews.com/2013/11/15/kets-transforming-innovation-into-competitive-product.
8
Pilot production in Key Enabling Technologies
What is a pilot line?
What is pilot production?
Initially, the definition of pilot production focused on pilot lines, which are the physical infrastructure and equipment
needed to produce small series of pre-commercial products. The project showed that pilot production is not only about
the equipment needed to develop new products (the pilot line), but also about activities such as market analysis and
engineering to optimise the production process. These other activities were found crucial to crossing the Valley of
Death. During pilot production, the internal organisation of the company is also adapted, as well as its relationships
with external partners along the value chain. All this is key to preparing for new business development.
The project confirmed that pilot production is at
the heart of crossing the Valley of Death. The international analysis of 21 countries showed that all
over the world attention is increasingly paid to
how governments can support pilot production.
In addition to finding investors for the large
investments needed for setting up the pilot line or
plant, integrating and aligning all the different pilot
production activities are key to eventually
achieving commercialisation and full-scale
production.
Pilot production is about scaling up an invention
from the laboratory into pre-commercial production. Although the development of a manufacturing-oriented pilot line remains at the core of pilot
production, crossing the Valley of Death through
pilot production requires much more. It is also
about engaging with customers to get their
feedback on the future product, identifying how the
organisation must be adjusted for this new
business, understanding better what the
characteristics of the market are, and
coordinating with suppliers and other partners in
the value chain. It is about tweaking the product
to a format that can be manufactured and sold.
Pilot production in Key Enabling Technologies
A holistic approach
Pilot lines are the technological equipment needed to produce commercial products,
like chips and electronic components. In industrial biotech and advanced materials,
they are often called “pilot plants”. Because of these differences in terminology and
given that the Valley of Death is not only about physical equipment, the term “pilot
production” is seen as more adequate. It is more neutral and holistic and includes all
the problems encountered during the scale-up of prototypes to low-rate precommercial manufacturing.
To define and demarcate
pilot production...
...the project showed that the most practical way is
to use a set of activities, including
•
•
R&D to validate both technology/component/
subsystem development in a laboratory
environment and “transferability” to the level
of pilot manufacturing
A pre-commercial pilot manufacturing
system operated by one or more industries
including external bodies like SMEs and
research organisations
•
•
•
•
•
The first small series of pre-commercial
products and prototypes for testing and
validation of the manufacturing process
(including cost efficiency) and by customers
Adjustment of product design based on
pre-commercial manufacturing
Creation of market relationships giving lead
customers access to new technologies, preparing for full commercialisation
Business development with investors
Preparation of internal and external organisations for full manufacturing, including
development of a value chain
9
10
Pilot production in Key Enabling Technologies
KETs-based products
and multi-KETs
The six Key Enabling Technologies identified by the European Commission in 2009 are deemed crucial for industrial
competitiveness and for solving the grand societal challenges addressed by the European Research and Innovation
programme, Horizon 2020. But KETs are only the first step in an evolutionary process from the development of a
technology to its integration into a final KETs-based product.
“Multi-KETs” means combining at least two KETs in a way that value is created above and beyond the mere
combination of the individual technologies. Multi-KETs R&D leads to new inspiring avenues of innovation and is already
a reality.
KETs are technologies and are just the first step
in the innovation process towards applications in
new products and services. The ultimate aim of
the KETs strategy is not the development of
KETs, nor even of KETs-based components, but
of KETs-based products that are marketable and
bring societal and economic benefits. An effective
policy strategy should therefore not be limited to
supporting technological development and pilot
production, but should also ensure that society
ultimately benefits from the results of
(multi-)KETs development.
International view on KETs
An important finding from the project is that the term “Key Enabling Technologies” is
not often used. But the notion that some specific technologies are fundamental drivers
for our economy and crucial to solving our societal challenges is well accepted. The six
KETs areas are often mentioned, but specific attention is also often given to
information and communications technologies (ICT) and software.
Pilot production in Key Enabling Technologies
One of the activities of the mKPL project was a
online survey. It was done in 2013 among 650
international experts from industry, research and
government, many of them involved in KETsrelated pilot production projects. The survey
showed that there were intrinsic linkages between
individual KETs. For example, the survey showed
that micro- and nano-electronics, photonics and
nano-technologies already overlap (in most cases
photonic projects also address micro- and nanoelectronics and nano-technology).
11
So, some individual KETs are already multiKETs. The most positive correlations were
observed for micro- and nano-electronics and
photonics, nanotechnologies and advanced
materials, and advanced materials and advanced
manufacturing. Correlations between the other
KETs were less significant.
The mKPL survey showed that
more than 55% of pilot
production projects address two
or more KETs, and about 30%
address three or more. MultiKET pilot production is a reality.
Electric cars are a perfect example of a product requiring
the integration and combination of several KETs
12
Pilot production in Key Enabling Technologies
Economic risk, core to
the Valley of Death
During pilot production, high investments are needed to generate information on the performance and behaviour of the
future products and production lines, and to get a better understanding of the market. This is necessary for estimating
the expected profits from new products (based on expected production costs and sales). In other words, high
investments must be made before uncertainties are reduced, which means the investment and the reduction of
uncertainty are out of sync, leading to high economic risks for private investors and enterprises.
Firms often estimate the uncertainty on the
outcomes of a pilot production process such that
the required investment will not be recovered.
Multi-KETs pilot production activities are complex
and the assessment of the related economic,
technological and financial risks highly uncertain.
Results from the project suggest that the costs
associated to the innovation process increase
dramatically at the pilot production stage (an
increase by a factor of five compared to earlier
research stages is not unusual). Uncertainties
about outcomes decrease later in the innovation
process, after pilot production. Therefore, at the
stage of pilot production, expected profits are very
much out of sync with required investments. This
often leads companies to decide not to invest
in pilot production. The sum of all these
individual decisions creates the Valley of
Death.
Pilot production in Key Enabling Technologies
Formulating recommendations for policy actions
means assessing the barriers that policy can
address. So, what are the obstacles that hinder
pilot production within the multi-KETs domain?
First, the huge investments needed—ranging from
EUR 100,000 to over EUR 100 million but typically
around EUR 10 million—to cover infrastructure and
equipment, as well as R&D&I and market-related
activities. The sheer size of investments can be a
large barrier to pilot production. Setting up an
actual production line/plant can take place only
after the piloting phase, requiring up to billions of
euro of investments.
Second, the probability that the investment will
lead to a profit is hard to assess. It depends not
only on the amounts invested, but also on the
expected turnover and production costs. What will
be the production yield for this new product? What
are customer requirements and the actual market
size? Are there many competitors?
As a result, assessing the expected return on
investment of pilot production projects is often
not straightforward, and therefore, the economic
and financial risks of pilot production are usually
perceived as very high by private investors and
companies.
This figure illustrates the
investments needed for
pilot production. In general,
the highest investments are
needed for projects
involving micro- and nanoelectronics.
The investment needs for
SME initiatives are
substantially lower than the
average. But 40% to 60%
of all initiatives require
investments well above
EUR 1 million.
The high economic risk of pilot production can be
related to four main barriers, which are crucial
for policy to address:
•
•
Access to finance: The cost of pilot
lines/plants is high, and external investment is
often needed. There is relatively limited capital
available and private investors are reluctant to
invest due to economic risk. Single investors
often cannot individually bear the high risk.
Limited market articulation: To lower
economic risks, it is crucial to reduce the
uncertainty about demand. Having a customer
that explicitly places an order will boost pilot
production.
•
•
Quality of the industrial ecosystem: Pilot
production requires cooperation in the
industrial value chain. Suppliers of input
materials as well as suppliers of equipment
need to synchronize their activities—along with
complementary producers and end-users.
These relationships are difficult to create.
Available human capital: Core to successful
pilot production activities are, for example, the
technical, managerial, organisational, and
marketing skills of personnel. These skills are
not always available.
13
“In project financing,
economic risks are the
risks that the project's
output will not be saleable
at a price that will cover
the project's operating
and maintenance costs
and its debt service
requirements”
Nasdaq
Pilot production in Key Enabling Technologies
14
Barrier 1: Finding
financial capital
The vast investments needed to set-up a pilot line/plant and engage in pilot production are difficult to secure, especially
for capital-intensive multi-KETs projects. Funding sources thus need to be combined, including both public and private
funding. But this “patchwork of funding sources” is complex, and private investors are reluctant to engage in these risky
projects, especially those run by SMEs.
usually well supported by public funding, but public
resources are often too scarce for costly pilot
production activities. The illustration below shows
the focus of private funding (blue) and European
Commission funding (red) in relation to the
innovation process. In the earlier stages of the
process, large amounts of private capital are less
available and public support is crucial. This also
includes pilot production.
Source: mKPL survey.
The issue of Access to finance finds its origin
in the high investments needed to build a pilot
line/plant plus the related research, development,
marketing and operational activities. As shown in
the graph above, this investment is mainly made
from equity, but public funding and external
private investment are also often needed to
cover the high amounts required. The availability
of private investment for early research and
development is limited, and it increases as the
uncertainty of the outcome is reduced and return
on investment becomes clearer. This usually
happens after pilot production. Earlier research
and development is
Overall, the availability of financial support
for pilot production is limited compared to
demand. Some governments still consider that
financing pilot production and market-oriented
activities is the private sector’s responsibility. In
addition, the strings attached to public funding can
be troublesome, while the window of opportunity for
this type of investment is usually small.
To ensure that public money invested in early R&D
is not wasted and leads to economic and societal
benefits through the commercialisation and
production of KETs-based innovations, a more
systematic alignment and synchronisation of
the public and private funding sources available for pilot production are necessary. If not,
pilot production will remain the weak link in
the innovation chain.
Pilot production in Key Enabling Technologies
Barrier 2: To market or
not to market:
that is the question
15
There is broad consensus that robust anticipation of market needs and demand is crucial to crossing the Valley of
Death. However, there is a deadlock at the pilot production stage. Customers wait for a product they can test (not a lab
prototype but a pre-commercial product very similar to the final one) before committing to any future orders, while
manufacturers (and their investors) are reluctant to invest in pilot production before they get orders from lead
customers. So coordination of the market is crucial, as is timing and the availability of market information.
Market expertise, analysis and development
remains the primary responsibility of companies,
but helping companies establish market demand
can be policy support that is as effective as
directly supporting pilot production. The core
reason is that customers are reluctant to
commit to future orders when a testable product
is not present. Also, the manufacturer will often
only get funding (from private investors) when the
first informal orders are in. This creates a
deadlock, which is directly connected to the
problem that market information is often not
readily available, especially for SMEs. And
everything is made even more complicated by the
small window of opportunity, which is the
consequence of the rapid evolution of markets and
the necessarily short time to market to get a firstmover advantage. Establishing bilateral and
international cooperation with downstream
partners and customers is especially difficult and
barely supported by policy.
16
Pilot production in Key Enabling Technologies
Barrier 3:
Pilot production needs
fertile soil
Pilot production needs a high-quality innovation network. This offers the “fertile soil” in which inventions can grow into
successful businesses. Finding partners, establishing trust and creating a long-term, agile innovation ecosystem is difficult
and requires public funding. Not only customers, but also other partners in the value chain, such as equipment suppliers,
need to get involved in pilot production activities. Only then can R&D results be optimally maximised.
The quality of the innovation network is crucial
to pilot production; the development of the
production system is complicated and requires
cooperation along the value chain. This is
especially true within the multi-KETs domain, as
projects are more complex and can usually not be
set up by one partner alone. It is, however, often
difficult for companies to find partners and
establish trust. In addition, engaging research and
technology organisations and universities in these
networks is becoming more difficult, as many
national governments are reducing their funding
for these organisations. Another important point is
involving private investors and educational institutes,
which are less common but none-the-less crucial for
multi-KETs pilot production. A last point is that initiating
and maintaining a long-term dynamic ecosystem is
difficult and needs support. Overall, there are many
policy interventions available to enhance the quality of
the innovation ecosystem, at European, national and
regional levels, but cooperation and alignment among
these interventions is limited and many are “project
based” and lack the longer-term and more continuous
approach that enhancing the quality of the ecosystems
requires.
This figure shows which partners EU firms regard as most
important for their pilot production activities. The customer
is seen as a crucial partner, but research and technology
organisations, equipment suppliers and universities are also
important in the innovation ecosystem.
Source: 2013 mKPL survey.
Infineon as a mKPL Demonstrator
Infineon Technologies is a global leader in semiconductors and power chips, continuously
innovating to maintain its leading position. Infineon Austria performs manufacturing, R&D and
business activities and is a globally leading competence centre for power semiconductors. It set
up a pilot line to develop a new manufacturing system for power semiconductors based on larger
wafers (300mm), the first complete 300mm power semiconductor processing line in the world.
Public funding is used to enhance networking. The pilot production initiative by Infineon was
supported by the ENIAC* programme, to involve more than 20 partners in the activities, including
SME suppliers, high-tech research institutes and leading European universities, which allowed
parallel developments and the bundling of necessary competencies. This did not only reduce
technological risks, but financial risks were also shared, and even market risk was positively
affected. The Infineon pilot production initiative was selected as one of the mKPL demonstrators.
http://www.mkpl.eu/demonstrators/infineon
* ENIAC was the tripartite joint undertaking. It brought together the European Commission and Member States with
industry and academia in nano-electronics.
Pilot production in Key Enabling Technologies
Barrier 4: No pilot
production without
human resources
17
There can be no pilot production without experts, especially within the complex domain of (multi-)KETs. The skills
necessary are often multi-disciplinary, including non-technological disciplines. However, the availability of people with
suitable skills is limited. Policies for innovation and education & training are often not connected and the availability of
highly skilled personnel is also hindered by differences between the worlds of pilot production and earlier R&D, as well
as between universities versus industry.
Human resources are needed both for research
and for operating the pilot lines/plants, and it is
important to remember the multi-disciplinary
character of the skills and expertise needed. This
includes not only technology, but also soft skills in
organisation, marketing and entrepreneurship
(especially for SMEs and start-ups). The availability
of personnel trained in technological skills is under
pressure, which is even more problematic because
of the rapid development of technologies in
multi-KETs. High mobility of personnel and lifelong learning are two issues to be addressed,
as well as the limited focus of educational
institutions towards industrial and operational
skills. Cooperation between educational
institutions and industry within multi-KETs pilot
production projects should especially be
supported.
18
Pilot production in Key Enabling Technologies
The policy context
While KETs are definitely on the radar of many governments around the world, pilot production has only recently
attracted the interest of governments. This trend is seen globally, but only a limited number of countries already have
systematic support in place for pilot production, despite demonstrated market failures. Without adequate support,
there is a risk that innovative solutions to societal challenges will not be deployed and technological developments will
be sub-optimally used for job creation and economic growth. Public R&D expenditures will not be used efficiently and
Europe will lose opportunities to maintain or (re)gain industrial leadership in strategic sectors.
“Private sector industry,
universities, and the
government need to come
together to spark a
renaissance in American
manufacturing and help
our manufacturers develop
the cutting-edge tools they
need to compete with
anyone in the world. With
these key investments, we
can ensure that the United
States remains a nation
that ‘invents it here and
manufactures it here’ and
creates high-quality,
good paying jobs for
American workers.”
Obama, 2011
In the United States (US), attention to pilot
production and advanced manufacturing is
increasing. The Obama administration has
given priority to the further development of US
capacity for innovation in advanced manufacturing. After the 2011 report on advanced
manufacturing* from the President's Council of
Advisors on Science and Technology, Obama
announced in early 2012 the creation of a
national network for manufacturing innovation,
where research and industry would join forces
in 15 institutes focused on manufacturing
innovation. These institutes concentrate on
creating cooperation and offering technological
infrastructure and expertise. In early 2013, the
first institute had already been set up and
Obama had extended the programme to 45
others. Today, five institutes are operational
and more are planned. In total, over USD 1
billion has been allocated to these institutes.
The economic risks related to pilot production as
well as the investments needed are often too high
for private investors and companies, especially
SMEs and start-ups. Without public support, the
Valley of Death is unlikely to be crossed, and
innovative technological solutions to societal
challenges such as climate change, aging and
environmental pollution will not reach the market.
Eventually, society will not benefit from the vast
public investments in research and development,
nor will the innovation ecosystem and downstream
industries benefit from the opportunities presented
by new innovative KETs-based components, thus
missing the chance to strengthen the EU's industrial
base.
___________
*www.whitehouse.gov/sites/default/files/microsites/ostp/
PCAST/amp20_report_final.pdf.
Pilot production in Key Enabling Technologies
What countries do
19
Business and policy practices concerning pilot production activities in (multi-)KETs were assessed in 21 countries.
Business practices are primarily market oriented. The focus is on finance, skills, intellectual property rights and time to
market. Limited attention is given to the building of the ecosystem. Policy practices show an emerging focus on pilot
production, with a wide variety of instruments. Often special attention is given to SMEs. But a systematic approach
towards supporting pilot production within the broader innovation policy is almost always missing.
Countries assessed
Austria
Germany
Belgium
United Kingdom
Brazil
Ireland
China
Italy
EC
Japan
Finland
Netherlands
France
Poland
Portugal
Slovenia
South Korea
Spain
Sweden
Switzerland
USA
As regards policy practices around the world, an
emerging focus on support to pilot production was
observed during the project, for example with the
UK Catapult programme* and the US National
Network for Manufacturing Innovation.** The
twelfth Chinese five-year plan and the French
strategy "La Nouvelle France Industrielle"*** also
include a clear emphasis on industrialisation within
innovation policy. However, many national
innovation policies are constrained by tight public
finances.
With regard to the policy instruments, direct
funding is used in almost all countries, but with
limited focus on pilot production. This is also the
case for tax instruments and public loans, Shared
facilities, offering pilot lines and expertise to
multiple customers, are often seen regionally.
Research and technology organisations, in
particular, are instrumental in supporting pilot
production but are often focused on earlier R&D
stages (such as the development of laboratory
prototypes).
Most policies do not cover activities related to
market articulation (except in a few cases, such as
the iMIND programme§§ in B elgium). A more
systematic
approach
towards
innovation,
supporting all the links in the innovation chain, is
rarely seen. The Irish Technology Transfer Office§§§
is the only example of a systematic national
approach to technology transfer in Europe.
__________
* www.catapult.org.uk.
**http://manufacturing.gov/nnmi.html,
***www.economie.gouv.fr/nouvelle-france-industrielle
§
www.whitehouse.gov/economy/business/startupamerica
§§
www.iminds.be/,
§§§
www.knowledgetransferireland.com/About_KTI
During the project,
in the countries
assessed, many
policy interventions
that are used to
support pilot production
were identified.
The most frequent are
listed here.
20
Pilot production in Key Enabling Technologies
Pilot production requires
a shared commitment
Pilot production requires a shared commitment from all stakeholders. It is close-to-market R&D and mainly industry
driven. But pilot production sometimes needs to "get back" to earlier R&D stages and even to fundamental research, so
involving research institutions remains necessary. Large enterprises as well as SMEs and start-ups engage in pilot
production. Different types of pilot production activities and users require different kinds of policy support.
Pilot production activities are close to market,
typically focusing on technology readiness levels
(TRLs) 5 to 7. Pilot production thus needs to be
industry-driven (activities conducted by and/or
with companies). B ut it is important to note that
pilot production is a highly dynamic process, with
feedback loops and multi-technological developments. Sometimes it requires activities at lower
TRLs (3 to 4) and even some complementary fundamental research. Research partners, such as
research and technology organisations and universities therefore need to be involved..
Pilot There is a consensus that pilot production can
cover TRLs 3 to 8, the core activities being at TRLs
5 to 7production, can involve large companies as
well as SMEs, and even start-ups. The needs of the
industrial partners and the characteristics of pilot
production activities will therefore vary, with
respect to capital needs and access to finance,
multi-disciplinarity, networking and governance.
Effective cooperation with universities and
research and technology organisations is often a
recipe for success.
The approach involving technology readiness levels is often used to communicate the readiness of a single technology.
However, multi-KETs pilot production involves several technologies that might still need to be researched, even
in the pilot production stage. This is especially true of manufacturing technologies.
What are the roles and needs of
the different partners involved in
pilot production?
Large companies can be drivers for innovation. But government support is needed to
ensure their commitment to establishing a
dynamic ecosystem. Large companies tend to
lead more in pilot production and to be fully
engaged and committed to taking a prototype to
mass production. B ecause of their broader
available expertise and strong position in the
innovation network, they usually lead a consortium
of partners. But they cannot do it alone. They need
to engage with public authorities, regional clusters
and other companies in the value chain. Building
mutually beneficial relationships and contributing
to a strong “local” community for business will
have a multiplier effect on European growth.
Strong regional ecosystems can be extended along
the value chain, as well as geographically to other
regions. This requires more open participation of
large companies in pilot production activities,
supporting the development of ecosystems and
clusters as well. This approach must be balanced,
ensuring firm competitiveness while allowing more
open strategic partnerships and boosting
ecosystems.
In general, SMEs need more support than
large enterprises because of their limited
human and financial capital. There are three
Pilot production in Key Enabling Technologies
Sofradir as a mKPL Demonstrator
Around 2004, the French research and technology organisation CEA LETI started
exploratory research on mercury-cadmium-tellurium p/n technology MCT p/n) exclusively
funded by government. But even at these very early stages, the Sofradir company (a
spin-off from CEA-LETI and today a leading manufacturer of advanced infrared detectors
for defence, space, and industrial applications) was occasionally involved in the research
activities. Four years later, in 2008, the first activities on the new technology started
within Sofradir itself and, just a year later, the first demonstration was possible in a
laboratory environment. The real technology-transfer phase started in 2010 with the aim
of reaching a production capacity beyond 100 pieces a year.
In 2011, Sofradir set up a pilot line to develop a new manufacturing process for infrared
detectors using the new MCT p/n technology developed jointly by CEA-LETI and Sofradir,
which led to a real improvement in performance. This example shows the importance of
the collaboration between industry and research. For a mid-sized, high-tech company like
Sofradir innovation is crucial to competitiveness and the collaboration with CEA-LETI is
key—for anticipating future market needs as well. This collaboration is formalised by a
joint research centre in which 100 highly skilled personnel from both organisations are
participating, creating a pipeline for innovation and a validating mechanism for practical
application. Both product development and manufacturability are addressed. This
approach has enabled the company to grow from some 100 researchers in 1986 to over
750 staff worldwide today.
types of SME involvement in pilot production,
requiring three different kinds of policy support.
First, SMEs can participate in pilot production
within networks dominated by large enterprises, where policies should focus on supporting
their network participation. Second, some SMEs
can work independently and lead the innovation
process, which requires a broader supporting
approach, including access to capital, intellectual
property rights, and activities related to market
assessment and development. Third, start-up
companies might need pilot production to take
off and scale up, requiring incubation support,
from connections with research and technical
organisations/universities to access to shared
facilities to connections with industry experts and
venture capitalists.
Universities are an important part of the
ecosystem, initiating new inventions, delivering fundamental knowledge and training
personnel. Although the relevance of universities
to pilot production is not obvious, they do have an
important role to play by providing high-tech
research and development infrastructures, as well
as training of personnel.
Their fundamental and applied research feeds into
the first steps of the innovation chain, which creates
new inventions—and possibly start-ups (in particular
via spin-off companies) that should be supported
with incubator services provided by universities.
Scale-up production is often faced with
fundamental technological problems where
universities can also help.
Research and technology organisations offer
technological infrastructure and applied
expertise to reduce costs and increase the
effectiveness of pilot production. Traditionally
positioned between research and industry, research
and technology organisations translate science and
technology into innovative products and processes
at the prototype level. B ut they also play an
important role in creating and maintaining the
innovation ecosystem. They provide technological
infrastructure for pilot production and can also offer
expertise, incubator services and training of highly
skilled experts. However, more emphasis needs to
be given to their incubator services, shared facilities
and training of experts for the industry..
21
22
Pilot production in Key Enabling Technologies
Shared facilities for
pilot production
The cost of pilot production can be reduced by using shared facilities, which provide technology, infrastructures and
equipment, and highly skilled personnel. Often crucial to SMEs, shared facilities also benefit larger companies. They can
be run by public entities (such as research and technology organisations and universities) as well as private entities.
Shared facilities are about sharing expertise and equipment to reduce costs and have access to specific know-how. In
all cases, their long-term sustainability is a challenge and will require long-term public support.
Shared facilities for pilot production combine
advanced equipment with trained personnel who
have the necessary expertise for undertaking
testing, validation and demonstration of
manufacturing at a scale that is meaningful to
potential customers. They can also deliver preproduction series and other
services like support in finding investors. They are
“shared” in the sense that they serve multiple
users (as opposed to a facility owned by a
company and reserved for its use). In wellestablished industries and for mature technologies,
late-stage product development and pilot
production can more easily be done within a
company. So, shared facilities are best positioned
in the context of emerging technologies or
industries with common characteristics where a
structured manufacturing capability is not yet
widely available. Shared facilities are usually
created as a result of public financing aimed at
stimulating the development of SMEs and/or
emerging industries. The governance structure of
shared facilities is generally non-profit, but
revenues come in part from fees paid by the users
(contract-based manufacturing
development
services). The mission of a shared facility is to
provide pre-competitive assistance in pilot
production to the broader community of a targeted
industry sector.
A multi-business model approach
To increase the sustainability and effectiveness of a shared facility, not only should
they provide equipment, operating personnel and researchers to develop the production
line, but also services like commercial micro-production, testing/validation of products,
training of personnel and incubator services. Last but not least, they can play a crucial
role in enhancing the innovation ecosystem.
Pilot production in Key Enabling Technologies
Often started at a regional level to support
economic development (with public funding),
shared facilities need to find new customers
at the national or international level. This can
be a challenge because of the lack of awareness
of their services beyond regional and national
borders, or due to some "market saturation" in
Europe when several regions have funded similar
facilities without a coordinated approach.
To address this, the European Commission
recently launched a tool for locating
technology
infrastructures
for
KETs
anywhere in Europe.*
23
Most of the time, public funding covers the
initial set up of the facility, but not subsequent needs for renovation and upgrading
(which are typically needed after three to five
years). As fees paid by users rarely cover costs, the
shared facility can become unsustainable, and the
initial public investment will eventually be lost.
___________
*See https://ec.europa.eu/growth/toolsdatabases/ketsobservatory/kets-ti-inventory/map.
Accessing know-how and
reducing costs are the main
reasons for EU firms using
shared facilities for their
pilot production activities.
Source: mKPL survey.
Acreo PEA as a mKPL Demonstrator
Acreo is a Swedish independent non-profit research institute within the area of ICT
(Information and Communication Technology). ACREO conducts applied research within
the fields of Broadband Technology, Fiber Optics, and Nanoelectronics. Together with
the Linköping University, ACREO launched a Printed Electronics Arena (PEA) initiative
aimed at speeding up the market introduction of Printed Electronics and Organic
Bioelectronics. A key resource of PEA is the Pilot Production Facility, called "PEAManufacturing". It aims at creating the conditions for the commercialisation and
exploitation of the R&D in printed electronics and organic bioelectronics conducted at
Linköping University and Acreo AB since 1998. PEA-Manufacturing provides enterprises
and start-ups with a facility where they can learn how to manufacture printed
electronics and organic bioelectronics, test the technology in their own products and
start pilot production. Companies can either choose to work independently in a
laboratory or in cooperation with the scientists and operators working in the test
environment. Expertise is available in areas such as graphic design, physics, chemistry,
machine operation and project management. PEA also acts as start-up facilitator for
the region and offers training and micro-production to make the start-up viable.
Equipment, highly skilled experts and connections to the (regional) research and
business ecosystem are all considered crucial, and PEA is financed not only by the
Linköping university and VINNOVA, but also by the cities of Norrköping and
Katrineholm (and of course by the regional industry).
24
Pilot production in Key Enabling Technologies
Five policy strategies
for crossing the
Valley of Death
There are five policy strategies for crossing the Valley of Death through pilot production. They focus on addressing the
issue of economic risk and the four underlying barriers and are deemed crucial to enhancing Europe's capacity to
support pilot production for innovations based on multi-KETs.
❶ Enhance the coordination and alignment of
innovation policies between regional, national
and European levels and along the innovation
chain. Pilot production is one crucial step in a
broader innovation chain towards full uptake of
technologies. Pilot production feeds on and into
other innovation steps, such as R&D. The
efficiency and effectiveness of pilot production
policies are therefore highly influenced by policy
strategies that support these other steps.
❷ Make it easier to combine funding, be it
funding from different public instruments (such
as regional, national, EU) or public and private
financing (to leverage private investment). The
sheer size of the investments needed for pilot
production can often not be provided by a single
source, whether public intervention or a single
private investor. A combination of public and
private funding is needed, and public policy
should give priority to combining sources and
creating leverage for private investors.
❸ Enhance the innovation ecosystems in
which pilot production is carried out. Support
to an isolated pilot production project would
not have optimal benefits. It should be part
of longer-term ecosystem development, with
a long-term innovation strategy. Special
attention must also be given to the
downstream markets, and customers,
particularly lead customers, should be part of
the innovation ecosystem.
❹ Support shared facilities for pilot production (open or semi-open technology infrastructures where companies can access the
necessary services and equipment). These
are crucial to SMEs and start-ups and this is,
more generally, an important policy
mechanism for reducing the barriers during
pilot production. Shared facilities reduce
costs by sharing equipment and can offer
important expertise and specific services
often not available in a single company. They
can also play an important role in improving
the ecosystem.
❺ Enhance the availability of human capital to support pilot production and overall
valorisation of research. The development of
the specific multi-disciplinary skills and
expertise needed to operate pilot production
will support new business developments.
Pilot production in Key Enabling Technologies
Policy actions
25
To cross the Valley of Death in Europe, different government levels (EU, national, regional) need to align their policies
and funding instruments. This is about combining efforts and pooling resources, as well as creating a smooth financing
chain for innovators (the "relay race" approach). This is not only necessary to gather the vast investments needed, but
also to increase the overall effectiveness of policies and funding instruments. Cooperation between the European
Commission, Member States and regions is deemed crucial for a successful strategy to support pilot production in
Europe.
Europe
The EU programmes regarded as most important for pilot production are Horizon 2020, the European Regional Development
Fund and the European Fund for Strategic Investment, as well as
the financial support provided by the European Investment Bank.
❶ Coordination and alignment
• Set up a European task force on innovation to enhance the coordination and alignment of
regional, national and European innovation policies with a specific focus on pilot production.
• Align administrative procedures of the different European funding instruments for close-tomarket innovation/pilot production and facilitate their combination (simultaneous or sequential).
❷ Combining funding
• Include funding for market assessments for pilot production projects under EU programmes for
research and innovation.
• Develop risk-assessment tools for investors in pilot production.
• Support bilateral supplier/customer pilot production projects to articulate markets (B2B)
❸ Support shared facilities
• Set up small funding schemes to support building consortia along the value chain to develop
large Horizon 2020 proposals, or use more two-stage evaluation procedures.
• Support long-term strategic networks for pilot production.
• Further reduce the time to grant in EU programmes for close-to-market research and
innovation, particularly for pilot production, because of the short window of opportunity—under
Horizon 2020, for example. Further simplify administrative procedures and ensure that
necessary changes can be implemented more quickly (to react to actual market and industrial
needs).
❹ Enhance the ecosystem
• Support feasibility studies for new shared facilities to better assess needs.
• Support establishing and maintaining shared facilities and assist them in adopting the multibusiness model approach, using a combination of the Structural Funds and Horizon 2020.
• Create an EU coordination mechanism for shared facilities to avoid scattering of resources
(leading to non-sustainable shared facilities in the mid-term) and improve the use of existing
shared facilities.
❺ Improve the availability of human capital
• Raise awareness among policymakers (EU, national, regional) about the importance of pilot
production.
• Use Marie-Sklodowska-Curie to allow researchers to participate in pilot production activities.
• Make it easier for SMEs to engage in pilot production across borders, and expand brokerage
activities to help SMEs find research, technology and business partners abroad for their pilot
production projects.
Pilot production in Key Enabling Technologies
26
National
Policies on training and education and support to national research
infrastructure are deemed most important. Overall, national
governments still have a low awareness of pilot production,
although they pay more and more attention to (multi-)KETs
❶ Coordination and alignment
• Develop a national action plan for pilot production, consistently integrating policies on innovation
and education.
• Raise the awareness of policymakers in regard to pilot production and provide them with sufficient
information and training.
❷ Combining funding
• Enhance national funding of research and technology infrastructures (research and technology
organisations) to allow them to undertake more pilot production activities.
• Participate more in international innovation programmes, with tripartite funding (EU, national,
industry) so as to reach a critical mass of investment into large-scale pilot production initiatives.
• Co-finance “angel” funds for SME pilot production projects.
❸ Support shared facilities
• Support incubator programs complementing pilot production activities, but embed them in national
and regional innovation ecosystems.
• Stimulate research and technology organisations to take a stronger role as coordinators of
innovation ecosystems for pilot production, including incubator services and shared facilities.
• Introduce small funding schemes to support consortia building along the value chain.
❹ Enhance the ecosystem
• Create innovation vouchers for SMEs to use shared facilities.
• Do not treat the support of shared facilities as one-off projects, but provide long-term support.
❺ Improve the availability of human capital
• Stimulate technology transfer through research and technology organisations and also enhance
their role in training and education.
• Stimulate education on production in universities to ensure their multi-disciplinary mindset and
readiness to commercialise research.
Regional
Connected to economic development, pilot production has strong
regional roots. Regional governments and agencies play a crucial
role in initiating innovation ecosystems oriented to pilot production.
❶ Coordination and alignment
• Create regional public/private investment funds, but connect them to national and European
innovation policies.
❷ Combining funding
• Further align concrete regional innovation initiatives on pilot production with national and
European opportunities like Horizon 2020 and the structural funds.
• Create public/private partnerships in funding for pilot production, including the use of the European
Investment Bank and set-up of new venture capital funds.
❸ Support shared facilities
• Use regional incubators as innovation hubs to enhance the quality of the regional innovation
ecosystem for pilot production.
❹ Enhance the ecosystem
• Increase the support for existing shared facilities and engage in the creation of new ones.
• Encourage downstream regional SMEs to engage in multi-KETs pilot production activities together
with large producers of KETs components
❺ Improve the availability of human capital
• Actively connect regional educational institutions to regional shared facilities.
• Enhance the use of the opportunities provided by the EU structural funds to connect training and
educational activities to innovation initiatives in the region.
Pilot production in Key Enabling Technologies
Title: Pilot Production in Key Enabling Technologies
Linguistic version:
EN
Contact information:
For further information and to request copies of this report, please contact:
European Commission
DG Internal Market, Industry, Entrepreneurship and SMEs
Unit F3 - Key Enabling Technologies, Digital Manufacturing and
Interoperability
Avenue d'Auderghem 45
B-1040 Brussels
E-mail: [email protected]
Further background information can be found at
www.mkpl.eu/results
27
ET-01-15-748-EN-N
ISBN 978-92-79-52140-9
doi 10.2873/944439