Science 2.0: Globalized Innovation in Electronics
Dan Hutcheson, CEO, VLSI Research
October 21, 2008 @ 5:30 pm -7:30 pm, LBJ Library, Brown Room, 10th Floor
In a talk at the Robert S. Strauss Center, Dan Hutcheson, CEO of VLSI Research, Inc., argued that there are four, not three, “factors of production” in the high-tech semiconductor industry: land, labor, capital and innovation. It is innovation that leads to increased product differentiation, and it is product differentiation, Mr. Hutcheson emphasized, that will be key to the future success of the global semiconductor industry.
An economist by training, Mr. Hutcheson spoke about new development paths for the semiconductor industry. He posited that traditional financially-oriented performance metrics like Return on Invested Capital (ROIC) can lead firms down a problematic path. Why? Because a focus on metrics like ROIC motivates companies to cut costs or “take capital” out of the business. This encourages high-tech, semiconductor companies to sacrifice critical investments in innovation. In place of a focus on ROIC, Mr. Hutcheson called for semiconductor firms to focus on ROnR, or Return on ‘n’ years of Research. He went on to discuss how companies should invest in research, staying away from “basic research,” which is a task better suited to universities, and focusing on only those research expenditures with direct potential for new product development.
During the question and answer session, Mr. Hutcheson talked about the recent trend of decreasing chip designer productivity, yet another sign that value creation within the industry is suffering. With respect to the future of manufacturing in the G7 nations, Hutcheson argued that it would be difficult for firms pursuing manufacturing activities in these nations to achieve cost leadership. Therefore, he stressed that firms should pursue manufacturing activities in the G7 nations only if the activities themselves enabled product differentiation in the marketplace.
Dan Hutcheson, of VLSI Research, Inc., is a recognized authority and well-known visionary for the semiconductor industry. He advises companies in strategic and tactical marketing, business management and manufacturing trends, productivity and strategy. Mr. Hutcheson developed the industry’s first cost-of-ownership model and the first factory cost-optimization model in the 1980s.
This presentation is part of the Strauss Center’s Technology, Innovation and Global Security Speaker Series, which brings world-renowned experts to campus to discuss how to sustain innovation and better utilize modern technology to benefit an increasingly global economic and social system.
The Strauss Center is nonpartisan and takes no institutional position on any issue. All statements of fact and all expressions of opinion at Center events are the sole responsibility of the speaker.
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