Director, National Institute of Standards and Technology
Optoelectronics Industry Development Association
October 2, 1998
- Good morning and thanks for inviting me to speak today.
- We at NIST and the Department of Commerce admire and appreciate what the Optoelectronics Industry Development Association is working to accomplish. I am certain that other federal technology agencies and laboratories would agree. We are not only grateful for OIDA's leadership but we are impressed with what has been accomplished in seven short years.
- I think we are gathering at a fortuitous time for OIDA, the optoelectronics industry, and for NIST. The winds of change are in the air and they are blowing in the right direction. And partnerships between and among government, industry and universities are key.
- Congressman Ehlers discussed the new draft national science policy study with you earlier today. This study is being used to help focus Congress and policy makers on this most important policy area where tough decisions must be made.
- I appreciate Representative Ehlers' invitation to comment about the draft study, and I encourage you to do that, too. I would like to see the study be more explicit about the appropriateness of the federal government's role in infrastructural technologies -- including measurement- and standards-related research that supports both science and industry. I also would like to see the study allow some room for the government to co-fund high-risk civilian technology research and development undertaken to benefit the economy. The report recognizes the growing "valley of death" between basic research and actual technology development, and the kind of infrastructural and high-risk work of the sort that NIST does in close cooperation with the optoelectronics industry helps to fill that gap.
- The new House science study takes note of the importance of cooperation and partnerships, and I particularly like the report's overview statement on basic principles in partnering:
"First, participants should have common goals and complementary skills, and should understand and accept the others' priorities. Second, the partnership must be based on a shared interest in the research that will be performed and provide each participant with meaningful results. Finally, participants must set explicit outcome goals and procedures before the collaboration begins."
The report adds that "trust and communication between partners is critical to success and must be cultivated."
- I couldn't agree more, and I hope that updates to the report go even further to recognize partnerships which extend beyond personnel exchanges, including roadmapping and cofunded research.
- I am going to talk about cooperation -- that's what you asked me to do, after all -- and I am going to use NIST as an example of some of the advantages of partnering. And I firmly believe that for nearly a century, NIST has approached cooperation in exactly the way the new science study recommends.
NIST: The Big Picture
- NIST is dedicated to helping American industry become more competitive in the world marketplace. Our programs are planned and carried out in cooperation with industry.
- Through our Laboratories, we provide leadership and technical support in the development of a strong industrial infrastructure in metrology.
- Through our Advanced Technology Program, we cofund with industry R&D to support technological innovation.
- Through our Manufacturing Extension Partnership we work with small and medium sized companies to help them to improve their manufacturing capabilities.
- And through our Baldrige National Quality Program we recognize companies that attain high quality and serve as a model for others. Corning Telecommunications Products Division and Motorola are both past winners of the Baldrige Award.
The Optoelectronics Sector: Impact and Opportunities
- In our programs and planning, we recognize the importance of the optoelectronics industry as a key enabling technology. Optoelectronic components represent a sizeable market in themselves -- I am told that it ranges from $30 billion to $50 billion per year depending on what definition is selected.
- But the real power of the optoelectronics industry is in the high technology markets that these components make possible. That's something which I know has escaped most of the general public and policy makers.
- They might know that modern telecommunications and the Internet would not be possible without optical fiber, but they probably don't know that lasers are involved. Nor do they realize that compact disc entertainment systems and CD-ROM drives on computers would not be possible without the $2 laser that reads the data. I will have more to say about that in a few minutes.
- We at NIST recognize that now-familiar products based on optoelectronic components are just the beginning. The recent report from the National Research Council called "Harnessing Light for the 21st Century" -- which you just heard about -- talks about some of the advances we can expect.
- But we also know that, as an industry, you have some concerns. We know that U.S. companies have only 20 to 25% of the world market in optoelectronic components. And we know that is particularly frustrating to you, because many of the most significant technological advances in the field have occurred here.
- There are only a few examples of high volume manufacturing of optoelectronic components in the United States. Moreover, we realize how much optoelectronics technology itself is being pushed and transformed, and how that affects R&D agendas.
R&D Trends: Beneath the Numbers
- My colleagues and I at NIST have been spending a fair amount of time taking a fresh look at what is really happening when it comes to research and development across the board, not just in optoelectronics. We have been examining what we are and are not doing, and we have been thinking about the prospects for change. Looking beneath the simple numbers about R&D trends is revealing.
- I want to share some fairly straightforward facts and thoughts about our overall situation, and then I want to speak more specifically about NIST's work in optoelectronics, what we have done for you lately, and what we plan to do -- cooperating with you -- in the future.
- First, too many pundits are paying too much attention to the gross numbers about R&D in the United States. It's true that total R&D is moving up again as the economy has regained its strength. But if you look at the details, at the content and conduct of R&D, the picture takes on a decidedly dimmer image. No one could reasonably argue that the amount of technology isn't important. It is. But too often we overlook:
- the types of technology, which are either home grown or acquired, along with
- the productivity, or efficiency, of the R&D that produces new technologies.
- An increasing number of products in the marketplace are actually systems, raising the complexity of R&D and reducing individual companies' ability to conduct all of the needed R&D.
- More and more, those systems that meet final demand are information-based, with optoelectronics subsystems playing a role that is front and center to the action.
- More and more product innovations require multidisciplinary R&D, which significantly increases the scope of the R&D capabilities required. And they require development times well beyond those acceptable to most companies.
- The result? More technologies are requiring greater risk and longer R&D cycle times. And that is in direct conflict with the pressures of the marketplace, where investors and managers insist on lower risk and shorter cycle times. The National Association of Manufacturers reports that 83 percent of all manufacturing firms require a payback of under three years -- under three years!
- More and more radical and breakthrough product innovation is needed for long-term profitability and employment growth. One survey found that 45 percent of respondents allocate more of their R&D to product line extensions than to new product development.
- So we see a drastic reduction in the larger, more fundamental R&D operations, the Bell Labs, the GE corporate labs, that could be rationalized and afforded. These labs have changed, and others like them have disappeared. With their departure we have undercut a critical part of our science and technology base that supports our long-term needs. This trend becomes ever more critical as the larger firms, the OEMs, now increasingly rely on their suppliers to conduct the necessary R&D.
- We also see that the multidisciplinary nature of R&D and new technologies poses a real challenge to our university research community. Individual universities with broad-based, multi- disciplinary capabilities in optoelectronics are few and far between.
- So at a time when centralized corporate-managed long-term R&D is being cut and policy makers are looking more and more to universities to assume the role of basic R&D performer, they just aren't as well equipped as they need to be to deal with the interdisciplinary challenges. It may be that one of the few places left for true multidisciplinary work are the government- funded laboratories, and they are under plenty of budget and mission-related pressures.
- These trends carry significant policy implications. They require a more integrated innovation delivery system, and that means government-industry-university cooperation.
- I want to make one more point about the changing nature of R&D that has special importance to the optoelectronics sector. It is our high-tech service industries that have really made major changes. They have grown at a much faster rate than the economy as a whole and they have made huge investments in information technologies. They exhibit a trade surplus and are a growing proportion of our overall trade. And they have increased R&D spending significantly, even though they began with a very small base.
- The rapid growth of service-sector R&D spending and its different character from manufacturing R&D are creating major new requirements for technical infrastructure support, something that you -- and we -- care about a lot.
- Here's a number that shocked me: the rate of return on investment in IT capital by the service sector is almost 200 percent, compared with just 11 percent for non-IT capital. That tells us that we are woefully under-investing in the IT area, despite our $200 billion-plus annual expenditures on IT equipment in recent years.
- Each of these changes in R&D, its complexity, its interdisciplinary nature, the drop off in corporate centralized R&D operations, the dramatic growth in service sector R&D and the reliance on information technologies is shaping the way we at NIST are looking at our own mission and customer demands. And that takes me back to the optoelectronics sector, your needs, and the way we are trying to meet those needs.
NIST and the Optoelectronics Industry: Accomplishments
- We at NIST have been pleased to be able to work with your association and your industry in addressing your concerns from the standpoint of technology development, measurements, quality and standards. We have a long history of support for the optoelectronics industry. Cooperation has been the key.
- Since the 1960s we have been developing measurement technology for lasers. We calibrate laser power meters and detectors for many of your member companies, allowing you to comply with laser safety regulations and International Organization for Standardization (ISO) quality requirements.
- Since the 1970s we have been developing measurement technology for optical fiber communications and assisting with the development of measurement standards. Our artifact standards -- Standard Reference Materials -- are used to control dimensions in the manufacture of optical fibers and to calibrate much of the instrumentation used in the field. We provide wavelength standards to assist in the development of the most advanced wavelength division multiplexed (WDM) communication systems, chromatic and polarization dispersion standards that relate to the capacity of a fiber, and dimensional standards that relate to the connection of fibers. Soon we will have Standard Reference Materials for integrated optic components, optical data storage, and semiconductor lasers and LEDs, among others.
- As the needs of your industry have grown and our work expanded, we established a division -- the Optoelectronics Division -- explicitly to provide measurement technology, standards, and traceability for the industry. This division works with other divisions of NIST that perform work of direct importance to the optoelectronics industry. We are committed to supporting the optoelectronics industry to the extent that our resources permit.
- From the earliest days of your Association, you have invited us to participate in your activities, to learn about your needs and share insights. We have watched with admiration as you have studied the problems and opportunities through many topical workshops. And gradually you have drawn our attention to just a few, very high priority, areas for investment: compound semiconductor manufacturing; packaging, modeling and simulation; and metrology.
- Last year, your leaders came to NIST to encourage us to address the first three of these needs through a focused ATP competition. The story was compelling, and affirmed vigorously by many individual companies and local industry groups. We decided to go forward with the competition, which we called Photonics Manufacturing, and there was a tremendous response from the industry. We had 98 pre-proposals and 60 full proposals. Out of those, 16 were selected as semifinalists.
- I know that Phil Perconti from the ATP office had planned to be up here next to describe our final selections, but the timing turned out to be just a bit too tight, so I offer apologies on behalf of Phil and ATP.
- But we do plan to announce the results next week. I can tip you off by telling you that 10 proposals have been selected for funding. That is a very healthy result; the photonics manufacturing competition ties one other ATP competition for the most awards this year. This sector clearly was able to demonstrate the promise of high-risk research and the need for ATP co- funding.
- This year, your leaders returned to NIST to tell me about the industry's needs for even greater investment in metrology and standards. Again the story was compelling. Industry executives have spoken clearly about the successful industry-NIST partnership in developing measurement technology and standards for optical fiber.
- They believe it played an important role in helping them establish the international competitive position they enjoy today. And they believe we now have a good model for working on other tasks the optoelectronics industry has identified as high priority.
- International standards is another area that we should discuss. It concerns me and I know it concerns you.
- In my relatively short term as director of NIST, I have made one of the agency's goals to become a more forceful player in the arena of international standards development. I see the problem as three-fold.
- First, other countries -- notably in Europe -- have been quick to recognize the importance of standards and realize they can create a competitive advantage in world markets by strongly influencing the content of international standards. We need to shore up our representation -- and influence -- in international standards-writing bodies, such as ISO and the International Electrotechnical Commission (IEC).
- Secondly, our domestic standards-development system is fragmented and, in some cases, ineffective. We need to work more effectively to resolve our differences with one another to achieve a unified U.S. approach in the setting of international standards. That might need to include federal support for ANSI on broad-based standards efforts and international representation.
- Third, we need to consider combining those first two strategies and joining with other countries to help re-engineer ISO and IEC so that they better accommodate U.S. technology and standards.
- The optoelectronics industry has had its successes and failures in the standards-setting arena. Your leadership has told me about the fragmentation in the standardization activities within the industry. I understand there are at least 20 organizations that are developing standards independently and, sometimes, duplicatively. And yet there are other areas where standardization lags.
- The success in standardization for optical fiber that I mentioned earlier happened under the umbrella of one of your sister associations, the Telecommunications Industry Association. To the extent that you can work more closely with other associations in the field, and with standards groups, your voice is strengthened and the fragmentation diminished.
NIST and the Optoelectronics Sector: Cooperation and An Action Agenda
- "Working together" is the message I would like you to take away today. NIST is prepared to accept your challenges and to work even closer and more effectively with the optoelectronics industry. I see three ways to strengthen our partnership:
- We will strengthen our metrology research programs in optoelectronics to better serve you;
- We will improve our presence as your advocate in the international standards arena; and
- We will work with you through the Advanced Technology Program to provide support for high-risk technologies.
- Let me be more specific.
- First, our labs. We are planning to expand our research in optoelectronic metrology by making it more of a NIST-wide effort. Throughout NIST, there are many scientists who are familiar with optoelectronics and who use optoelectronic technologies in other fields--chemistry and materials science, for example. We believe these people can help address the problems you face.
- We intend to follow a model we have used successfully in support of the semiconductor industry.
- We have an office dedicated to finding the resources necessary to meet the high priority needs of the semiconductor industry, as identified in the Semiconductor Industry Association (SIA) Roadmap, and then managing a NIST-wide program in response. It's called the Office of Microelectronics Programs. It is working well and we are getting excellent feedback from the industry.
- Now, we are planning to organize an Office of Optoelectronics Programs. It will need industry guidance, analogous to the SIA Roadmap. In that regard, I was delighted to learn you have already developed a detailed statement of priority needs. I gather that you heard a report on that yesterday. NIST staff were pleased to participate in the workshop that led to that report and look forward to continuing the dialog.
- I have asked Gordon Day, who is the Chief of the Optoelectronics Division in our Boulder Laboratories, to plan and develop the Office. Many of you already know him, since he has participated in many of your activities from the earliest days of the Association. He was on your agenda here yesterday.
- Gordon has formed a NIST-wide advisory board to guide the Office and he is working on funding issues. More importantly, he has already found ways to get new research started on a couple of your highest priority needs. But there is much work to be done to make the Office a reality. I know I can speak for him in thanking you for past support and asking for your continued cooperation.
- A second area of expanded cooperation on our action agenda involves standards. We are prepared to try to strengthen our presence as your advocate in the international standards arena. I was particularly interested to read the comments about standards in the NRC report I mentioned earlier.
- It said: "Government agencies and the optics community should recognize the importance of optics standards, especially their significance in international trade. The U.S. government should participate actively in the setting of such standards. NIST should be given the funding necessary to take the lead in this area."
- In fact, we just held a "summit" on the international standards issue in Washington, D.C. last week. Our goal at NIST is to work with the private sector to develop a reasonable plan for an effective national standards strategy, the sort of strategy I mentioned earlier. I think we got off to a good start at the summit. There was strong agreement on the need for a strategy and even some commitment to get to work on the tough -- and too often, provincial -- details.
- NIST pledged to work together with standards developers, conformity assessment bodies, industry leaders, and government representatives to solve the competing issues of revenue recovery, intellectual property, and good U.S. technical input to international standards. And we tentatively decided to hold a follow up summit with ANSI on conformity assessment issues.
- Our third action agenda item involves higher-risk research. Our Advanced Technology Program will continue to monitor the needs of the optoelectronics industry, and respond as it can. As you know, the ATP program has been controversial with some members of Congress virtually since its inception. We have never been funded to the extent the Clinton Administration would like and, consequently, the program has not grown as rapidly as we wished or hoped for.
- This year there has been some movement on the Hill to eliminate the focused program areas. If this were to happen, your industry could be directly impacted. Funds awarded in the current focused competition are safe and will be distributed over the next several fiscal years. But there would be no opportunity for future focused competitions. Every award would be made in one or more general competitions each year.
- The good news is that both the Senate and the House have voted to fund the ATP -- and that hasn't always been the case. We have often had to rely on the White House's insistence for ATP funding.
- With our fiscal year 1999 funding still up in the air, it is anyone's guess how we will come out.
Communicating, Communicating, Communicating
- I began by citing the new congressional National Science Policy study, and that's the way I will end. Along with an emphasis on partnering, the report also placed high priority on improved communications between scientists and engineers and the public. The report declares that the gap between scientists and journalists is wide and possibly getting wider, and it suggests some ways to close that gap. But the report also calls for scientists and engineers to deal more directly with the public, speaking about their work.
- NIST's goal of aiding U.S. industry in becoming more competitive in the international marketing arena can be more achieved more readily if you help to educate policy makers, the news media, and the public about the importance of research and development, especially in optoelectronics-related areas.
- I encourage you as members of OIDA and as representatives of your companies and businesses to make your views known, including to Congress. Comment on the new congressional science study. Share the vision for your industry -- a vision that includes an expanding share of world markets and increasing productivity and job growth at home.
- Arpad Bergh and OIDA should be congratulated for spending as much time educating policy makers as you do. I can tell you that it does make a difference when the private sector speaks.
- And don't overlook the media. I realize optoelectronics won't often make the front page, but the media can help tell your story. I've noted the attention that optoelectronics is beginning to receive in the popular press -- for example, an article in Newsweek a few months ago calling the next millennium the "Age of Light."
- Look to the national business publications such as the Wall Street Journal, Business Week, and Fortune; get to know the reporters who cover your industry or who cover high technology developments. Don't be reticent about sharing with them your accomplishments as a company or as an industry. Become familiar with the business editors of your hometown newspapers -- and don't overlook television, including the cable business channels like CNBC and the Financial News Network.
- The world is changing at a rapid pace. New alliances and strategic partnerships are needed to keep ahead of the curve. Change must be seen as an opportunity and not as a problem.
- OIDA is a young organization but it has achieved an early record of success in pulling an often disparate industry together to face change and carve a vision for the future. Government in general--and NIST in particular--would like to work with you and be part of your vision for the future. We will both benefit.
- Thank you.