10:1 return on federal infrastructure investment in photonics?
Blair Patacairk, Ottawa Centre of Research and Innovation
Responding to the credit crisis and resulting global recession, national governments around the world are furiously pumping cement-truck loads of money into infrastructure projects. Some of these economic stimulus initiatives will work, and some will fail; few will offer a specific return on investment (ROI).
Roads, bridges, buildings and last-generation manufacturing jobs are important – and easy to justify in a political context. Yet building a next generation of successful “cement not included” innovation companies will generate long-term jobs, exports and tax bases, and ultimately pay the tab on the short-term stimulus spending.
The Canadian photonics industry, employing an estimated 20,000 people in 400 companies, currently offers an innovation infrastructure ROI example that shows a nearly $10 return for every dollar invested. This is based on a $52 million federal government investment in the National Research Council Canadian Photonics Fabrication Centre (NRC-CPFC).
KMPG LLP estimates in a recently released report, Impact Analysis of the Canadian Photonics Fabrication Centre, that the NRC-CPFC, a unique resource created in 2002, will generate $500 million in economic benefits over the next five years.
Canada’s photonics industry generates close to $4.5 billion annually, with approximately 85 percent from exports, including 50 percent to the US. The industry has its roots in the telecommunications sector, but with active diversification in the past decade, only 20 percent of today’s companies now address telecom, with the rest creating exciting new applications in defense and security, health and medical, consumer electronics, remote sensing and measurement, green energy and manufacturing. (For more on photonics in Canada, see “Northern Lights” on page 80 of the September 2009 issue of Photonics Spectra.)
In keeping with the government’s sustained commitment to building a stronger economy through science and technology, the NRC-CPFC presents an excellent case study for what happens when you combine public and private funds to assist Canadian companies in commercializing their research and development.
NRC-CPFC is a world-leading photonics prototyping and training facility that provides commercial-grade fabrication services dedicated to the creation of photonic device prototypes. It supports the growth of the Canadian photonics sector by offering clients and partners cutting-edge photonics fabrication services, and simulation, design, fabrication, testing and prototyping services that help move innovative photonic devices to market.
Its role is to work with startup companies across the nation and photonics industry clients worldwide to explore new technological possibilities, and then to help demonstrate their technology and raise capital. The facility, containing a 40,000-sq-ft industrial-grade semiconductor foundry, is a commercialization partnership between the federally funded National Research Council (NRC) Canada and the province of Ontario, which has contributed $10 million in additional funding. It is located on NRC’s Ottawa campus.
After working with NRC-CPFC, OneChip Photonics, an Ottawa-based company with products aimed at the integrated fiber-to-the-home (FTTH) transceiver market, closed a second round of venture capital financing last March, raising a total of $19.5 million from Canadian and US investors.
“OneChip is well positioned to help system providers and carriers deploy FTTH more cost-effectively than ever before, and to meet consumer and business demand for high-bandwidth voice, data and video services,” said Jim Hjartarson, OneChip’s CEO, after his company announced its venture capital deal earlier this year. “OneChip is one of only a few companies with new core intellectual property and advanced technology in the optical transceiver business that can sustain a competitive advantage over other optical component providers, which rely on conventional technology and assembly processes.”
OneChip believes that its approach and technology will strengthen the business case for broader deployment of FTTH worldwide, enabling the company to claim a significant share of the FTTx (fiber-to-the-x) optical transceiver market – one that market analyst and consulting firm Ovum Ltd. of London estimates will grow from $419 million by the end of 2009 to $456 million by the end of 2013.
Infrastructure projects such as NRC-CPFC substantially reduce startup and product development costs, de-risk technology for entrepreneurs and encourage investment by the venture capital community. With more of this type of enlightened stimulus spending, we can park a few cement trucks and build more 21st-century jobs and companies that boost long-term prosperity.
Meet the author
Blair Patacairk is senior investment consultant for Ottawa Centre of Research and Innovation; e-mail: email@example.com.