Common Tragedies

Thoughts on Environmental Economics

Recharging the SEMATECH concept?

Posted by Evan Herrnstadt on December 18, 2008

Thom comments on Rich’s post about the new battery consortium:

Furthermore, the comparison to Sematech isn’t terribly exciting. A super-quick Google Scholar search reveals things like “Sematech induced members to cut their overall R&D spending on the order of $300 million per year” (Irwin & Klenow, 1996) and others. Lets hope that isn’t the result the battery people are seeking (getting someone else to pay for R&D they would otherwise do).

I agree to a large extent.  For those who are unfamiliar with SEMATECH, the story begins in the heady year of 1986.  I was 2 years old, the Bangles were on the verge of releasing “Walk Like an Egyptian”, and Duchess Sarah Ferguson married a Prince which paved the way for future stardom as a Weight Watchers spokeswoman.   SEMATECH was an effort by U.S. semiconductor manufacturers to regain their competitiveness in the face of growing Asian dominance.  It was initially funded in equal parts by the constituent firms and the Defence Advanced Research Projects Agency (DARPA).  The basic idea behind a consortium is that since some discoveries will spread across the industry anyway, a joint investment can spread the costs across firms while still obtaining the final result.  In addition, collaboration can reduce redundant innovation; in principle, innovation increases, costs fall, or both.

However, there are always pitfalls in such a collective action case.  How do you determine a firm’s contribution to the consortium, in both funds and manpower?  Is there to be a centralized facility, or will personnel exchange among labs?  What prevents freeriding?  In the end, SEMATECH lost its DARPA funding and restructured, but not before its focus had significantly shifted.  Because so much of the most crucial R&D was proving intensely proprietary, the primary function of SEMATECH evolved toward encouraging R&D by semiconductor manufacturing equipment firms.  Thus, the proprietary R&D could remain in-house, while the consortium members benefited roughly equally from the advances they funded.  Of course, the phrase “in principle” comes to mind again.  Because SEMATECH’s facilities were centralized, it was crucial for firms to send engineers and technicians in to aid technology transfer.  Thus, large, vertically integrated firms benefited disproportionately while smaller companies were stretched thin trying to send even a few experts out to pick up the innovations.

So how does this lesson apply to batteries?  From an ungated Reuters story (check it out if you couldn’t get the WSJ one):

The alliance, which includes battery industry giants such as 3M Co and Johnson Controls-Saft, intends to secure $1 billion to $2 billion in U.S. government funding over the next five years to build a manufacturing facility with an “open foundry” for the participants to pursue the goal of perfecting lithium-ion batteries for cars.

To me, this sounds like a consortium-run sandbox for trying out new techniques for lithium-ion battery production.  Will the firms be able to effectively separate improving the efficiency of battery manufacturing from proprietary technological advances?  I’m not sure, since it seems to me that some of the most profitable innovations will be process-based until a totally new battery paradigm arises.  So I’m pretty skeptical myself, though I don’t really know enough about battery technology to make a good assertion.  Anti-climactic, I know, but I hope you all enjoyed my story about the good old days.

Interestingly, USCAR is an existing auto industry umbrella organization of consortia that used to work on batteries but shifted a lot of money and energy to hydrogen.  You might be surprised about the lack of wisdom in that decision until you look at the membership: Chyrsler, GM, Ford.  Maybe we should also have a consortium to research fuel-efficient private jets.

5 Responses to “Recharging the SEMATECH concept?”

  1. odograph said

    The weird thing about those days was how scared everyone was of the Fifth generation computer project started in Japan (1982). They were swinging for the fences, and AI.

    This of course was shortly after the fuel crisis, the Japanese car invasion, the death of the American consumer electronics industry … enough to make many worried that when the Japanese pointed at the fence, Ruth-style, they could hit it.

    I remember the MCC (Microelectronics and Computer Technolology Corporation) as the main response. It was a big deal for the US to engage in that much industrial policy, but the fear drove it.

    In another 5-10 years the 5-gen project had collapsed and the US PC industry had prospered (without industrial policy). The MCC died after a time.

    (Maybe SEMATECH was smaller and more pragmatic than those two.)

  2. odograph said

    (FWIW, I think research areas need “enough” money, but after they are saturated more is a waste. It’s analogous to the Mythical Man Month. I suspect batteries, with the hundreds of millions they’ve gotten from DOE and DOD, and computer/cellphone companies, are saturated. Progress is probably pretty close to optimal pace)

  3. Been Around said

    I think you should have more than 22 years under your belt to provide your readers with any history lessons.

    I thought I was pretty smart at 22, but I was mistaken in many respects. 20 years later, I am still learning from experience — much more so than from a book or a professor — and you will be, too — much more than you could ever acknowledge or appreciate at 22.

  4. Evan,
    I’m disappointed you did not do a little more research on USCAR and batteries.
    (a) The United States Advanced Battery Consortium (USABC) continues to be a part of USCAR (the United States Council for Automotive Research)
    (b) NiMH batteries used in all of today’s HEV’s ( including foreign OEM’s vehicles) are a result of technology developed by USABC in the ’90’s
    (c) Funding of USABC advanced battery research has been maintained, and in fact, has increased in recent years in order to pursue new technology for the evolving PHEV batteries ( which require different chemistries and operating characteristics than HEV batteries). The USABC 2008FY funding , which includes in-kind and cost sharing by the many partners (DOE,OEM’s, suppliers, national labs, universities, etc.) exceeded $40 million .
    (d) A great deal of progress has been made by USABC on LiIon batteries which has created all the interest of late.The problem is, there are no LiIon battery manufacturers in the U.S.(Most are in Asia because that is where consumer electronics are mostly manufactured these days and because China highly subsidizes the battery industry – they recognize its importance to their economy and have helped develop the industry).
    (e)The mission of USABC has been focused on research. Now that the auto industry is about to undergo a transformation to a new architecture that will use advanced batteries on a large number of vehicles, the question is : “where are the batteries?”.

    USCAR is not involved in the new effort to address the manufacturing challenge (since our mission is focused on R&D and not production). However, it appears to be a well thought out means to compete with Asia and create a US based manufacturing enterprise. This new technology is absolutely necessary to guarantee environmentally responsible and sustainable personal transportation for the future in the U.S., a goal to which Chrysler, Ford and General Motors are highly committed in both their research dollars and collaborative R&D efforts.
    Don Walkowicz
    Executive director

  5. Evan Herrnstadt said

    Don, thanks for your comments.

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