Canada: prospering despite the downturn

17 Jun 2002

Six months ago, a group of experts from the UK's optics industry visited Canada to find out how the UK could learn from its thriving North American cousin. Jacqueline Hewett reports on the group's recently-published findings.

While the global telecoms industry enters a recession, Canada's photonics industry is thriving. A team from the UK Consortium of Photonics and Optics (UKCPO) spent a week in Canada to find out why and how the UK and Europe can emulate this success.

The team found that Canada's success has been no accident: the industry has strong links with government; sustained long-term investment into research and development has been provided by the goverment; it identified the need for automation early; it encourages and supports the formation of photonic clusters; and its start-up companies benefit from a unique intellectual property licencing arrangement.

For example, start-ups in the area of fiber Bragg gratings (FBGs) have been actively encouraged by the Canadian government by ensuring that the up-front cost of the licence to manufacture FBG technology is significantly lower in Canada than in the rest of the world. Ian Murgatroyd, business development manager of UK FBG start-up Indigo Photonics said: "The cost of licencing the FBG technology in the UK is 10 times more expensive in than Canada. Canadian companies have used this lower entry cost to start exploiting FBG technology earlier than other countries."

The handling of the IP for FBGs has led to a world-class region of expertise in this technology and it is significantly harder to maintain a successful FBG business outside Canada. The UKCPO report recommends that the UK government should consider adopting the strategic measures taken by the Canadian government in licensing IP at special rates to support indigenous companies.

Shifting industry

It also recommended that the UK government be aware of the shifting demand in the telecoms industry to a "high volume and low cost" position and follow Canada's lead in implementing methods of automation.

Whilst large companies such as JDS Uniphase (JDSU) and Nortel were still actively recruiting research and development personnel, a significant number of hand-assembly employees were made redundant last year. As the optical communication industry undergoes a change from long-haul networks to metropolitan city networks, the team observed a definite need to push photonics technology closer to the end user. This was being achieved in Canada by focusing on automation and packaging components into standardised units.

Geoff Hogan the UKCPO representative responsible for organising the mission said: "The requirement now is for integrated sub-systems and plug-and-play modules that can be delivered in volume at a competitive price. This message came through loud and clear and a variation on this theme was observed at all the places we visited."

Hogan also believes that the rapport between government and industry is impressive. Strong links have been fostered by "bridge organisations" that manage the so-called photonics clusters. These clusters represent a critical mass of high-technology companies and institutes sufficient to be competitive at a global level.

David Jack, international technology promoter for the UK's Department of Trade and Industry commented that: "The Canadian government has invested heavily in research and development over the past 20 years. This long-term investment has been used to establish a critical mass of research institutes." The report recommended that the UK government note this long-term view and the scale of research that has resulted.

Active cluster networking

Three photonics clusters were visited during the mission: Ottawa, Quebec City and Montreal, with the cluster in Ottawa being the most advanced. In the case of Ottawa, Photonics Research Ontario (PRO) and the Ottawa Center for Research and Innovation (OCRI) manage the cluster and act as the bridge organisations. PRO acts as a quasi-government organisation responsible for the distribution of research funding in photonics across Ontario whilst OCRI promotes networking in the cluster.

This was seen as critical to the success of the cluster. "A good rule of thumb is that all individuals should be within one hours drive of each other," explained Hogan. "In the case of the Ottawa cluster, this enables regular technology executive breakfasts to be held by the cluster management." Hogan described the atmosphere at one such breakfast as having a "tangible buzz". These meetings provided an ideal networking opportunity and were well attended, by both representatives from large companies and small-to-medium enterprises (SMEs).

Canada has an impressive number of SMEs in the field of photonics. The entrepreneurial attitude was widespread, even in large companies, with many SMEs having a family tree directly traceable to Nortel or JDSU. Spinning off a division of an independent company was seen as a valuable strategy. Many organisations offered generous soft-start arrangements to staff wishing to consider forming a new company.

Highly-motivated people

The positive and encouraging attitude to start-ups was also seen in federal research institutes that provide a number of incubator facilities to kick-start a company. Local measures to encourage investment in start-ups such as tax credits, made available by both federal and provincial government, provided further incentives. Venture capitalist funding (VC) was also available, particularly in Ottawa. In 2000, the Ottawa area received USD 815 million in VC investment.

"The British government has to understand where the industry is going - high output and low cost - and what is happening in the context of restructuring to take on a more efficient mode of manufacture. The government should also note the stronger links with industry that exist in Canada and the value obtained from good cluster management. We observed this from PRO and OCRI where a few highly-motivated people make things happen," said Hogan.

"As we head towards a global recession, Canada looks as though it has a good infrastructure to fall back on and is in a strong position to address short term problems," concluded Hogan.

A full copy of the report is available by e-mailing Laura Pearson, UKCPO Secretariat.