EU Commission Ad hoc Group « Innovation & Human Resources »

Role of Chemistry and Chemicals in innovation

October 1st 2007

Gernot KlotzExecutive Director for Research&Innovationgkl@cefic.be02/676.73.28

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Content

• Why is innovation crucial

• Demands for chemical solutions (examples)

• Drivers and critical factors

• Basic needs

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Humanity’s top ten problemsfor next 50 years

Energy

Water

Food

Environment

Poverty

Terrorism & War

Disease

Education

Democracy

Population

2003 6.5 billion2050 8-10 billion

Source: Prof. R.E. Smalley, “Our Energy Challenge”, Columbia University, NYC, 23 September 2003

The World Population

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Societal drivers

• Energy

• Information and Communication Technologies

• Health care

• Quality of life

• Transportation

• Citizen’s protection

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Source: Cefic *Sales based on local production (excluding pharmaceuticals) CSusin 19/04/23

Important sub sectors in the chemical industry

Total EU chemicals production* in 2005: € 455 bn

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Strong productivity gains

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EU Chemical Industry Energy Intensity*

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Added value per employee (thousand €)

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Chemicals and pharmaceuticals, the industries with highest value added per employee

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Content

• Why is innovation crucial

• Demands for chemical solutions (examples)

• Drivers and critical factors

• Basic needs

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Customer sectors of the chemical* industry

End users**30,3

Paper & printing products

4,5

Textile & clothing6.3

Agriculture6.4

Electrical goods3,9

Office machines0,7Industrial

machinery1,9

Metal products2,5

Services16,4

Rest of Manufacturing

6,1

Rest of Industry10,3

Construction5,4

Automotive5,3

% of chemical domestic consumption

Sources: Cefic & Eurostat Notes: Percentage shares are calculated by taking into account the re-allocation of domestic consumption to downstream customers of chemicals self consumption & consumption by rubber and plastic processing industries*Including pharmaceuticals** End users: Final Consumption = Final consumption in households + government consumption + non profit organisations

Innovation engine for downstream industries

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Japan26%

USA26%

other countries10%

Source: Fraunhofer-Institute (ISI), calculation based on EPPATENT and WOPATENT

EU 25:38%

Patent applications in chemistry*

* Chemicals excluding pharmaceuticals, 2005 CSusin 19/04/23

EU is leader in chemical innovation

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New Demands for Chemical Solutions through products and technologies

new systems for down stream users

innovative consumer products

active ingredients

new materials for societal requests (e.g. nanomaterials, renewabel resources, biobased materials)

mitigation and adaptation to climate change

improved technologies for production

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Chemical Industry and it`s products

Chemical

industryConsumer

Consumer

Consumer

Other sectors

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Industrial Biotechnology: Areas of Application and Chemicals Involved

In the field of industrial biotechnology, products or processes will be developed in the sectors of

• Basic chemicals (bio-plastics…)• Specialty & Fine chemicals (solvents, flavors, surfactants,

fragrances…)• Active pharmaceutical ingredients• Agriculture (bio pesticides, plant agriculture…)• Enzymes• Environment (bio cleaning, water treatment…)• Food (additives, complements…)• Paper and pulp• Textiles

• Bio-fuels (bio ethanol, bio diesel, bio gas)

Sources : Suschem report, EuropaBio - Biotechnology in Europe, 2006, comparative study, Biotechnology Industry Organization (US)

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• World sales of nanotechnologies - > € 40 bn in 2001 (European Commission)- Forecast to increase to € 700 bn in 2008 - Over the period 2010 - 2015:

• Sales of € 1,000 bn a year• and employment of nearly 2 mn people worldwide

• In 2010, an expected products market volume of € 500 bn

and of components market volume of € 50 bn(nano porous materials, formulations, nano composites,

thin films and coatings…)

Source : Suschem report.

Nanotechnology for the Developmentof New Materials

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Chemical Solutions to deal with Climate Change

> Climate Change will be one of the main global challenges of the next decades

Chemicals and chemical innovations offer important solutions to combine a stable climate with a high quality of lifestyle

Chemical products enable adaptation to changing climate

> Chemicals contribute to a reduction of CO2 emissions by• energy generation

• storage of energy

• usage of energy

• saving energy

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Energy generation:

materials for photovoltaic and thermoelectric energy generation

bio catalysis (renewable resources, coal)

Storage of energy:

materials for battery systems

hydrogen technologies Usage of energy:

fuel cells (mobility)

LEDs/OLEDs (light)

Energy saving: insulating materials (housing)

light materials for cars, planes, ...

Examples for chemical solutions to cope with Climate Change

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Bio-ethanol and bio diesel production worldwide have been stimulated by political measures

Growth of bio-ethanol production 2000 - 2005: US : + 19 % ; EU : + 25 % p.a.Growth of bio diesel production 2000 - 2005 : US (hl mn) : + 104 % ; EU : + 35 % p.a.

Source : EurObserv’Er 2006

Bioethanol and biodiesel productions

-

5.000.000

10.000.000

15.000.000

20.000.000

2000 2001 2002 2003 2004 2005 2006 2008

Tons

US bioethanol EU bioethanol EU biodiesel

Biomass from Renewable Resources: Bio-ethanol and Bio Diesel Production 2000 - 2008

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Final productDeviceComponent Material

Chemistry goes into electronics Electronics moves backwards

Chemical solutions in consumer products– system integration

Inks

Substrates

Dispersions

Additives

TransparentConductors

Printed Circuits

TFTs

Antenna

OLED-Display

Alarm-Sensors

RFID-tags

Price Tag

Example: TV Flat screens

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Touchscreens

Polymerfilm (e.g. PET)

ITO (Indium-Zinnoxide) SilverPolymer

Polymere adhesive

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Content

• Why is innovation crucial

• Demands for chemical solutions (examples)

• Drivers and critical factors

• Basic needs

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Responding to market competition

• Innovation must respond to the competitive pulse of the market

• In the global market:• Over time if a company or region is systematically slow - it will fail• Over time if a company or region is systematically higher cost - it

will fail

• Initiatives to promote innovation must beat to the pulse of the market

• Policy makers must balance political drivers with the market realities

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What sort of innovation is needed for Chemical companies in Europe?

Area of Innovation Description Yes,

exists today

% of total

Very or some importance

for future

% of total

Business Model How you to be competitive 64 86

Networks & Alliances How you join forces with other companies for mutual benefits 83 100

Enabling processes How you support company’s core processes and workers 58 86

Core processes How you create & add value to your offerings 75 71

Product performance How you design your core offerings 75 86

Product systems How you link and/or provide a platform for multiple products 42 57

Services How you provide value to customers and consumers beyond and around your products

64 86

Channel How you get offerings to the market 50 62

Brand How you communicate your offerings 25 57

Customer experience How you customers feel when they interact with your company and its offerings

36 67

You were asked which of the following 10 areas of innovation exist today & what are needed for the future .

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Chemical Industry and it`s products

Chemical

industryConsumer

Consumer

Consumer

Other sectors

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Final productDeviceComponent Material

Chemistry goes into electronics Electronics moves backwards

System integration is a key success factor for the chemical industry in Europe

Inks

Substrates

Dispersions

Additives

TransparentConductors

Printed Circuits

TFTs

Antenna

OLED-Display

Alarm-Sensors

RFID-tags

Price Tag

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“EU challenge” - Research is one element of innovation, but…

Research Development Marketing Marketing-success = Competitiveness

•FP7

•Science-industry research interface

•Education

•Funding

•Regulations

•IPR

Consumer confidence??

Customer confidence??

Intensity of innovation debate in EU

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“Mont Blanc Syndrome” for innovation

Research Development Marketing Competitiveness

•Ideas

•Patents

•Regulations

•Uncertainty of markets

•Start up capital

•Investor confidence

•IPR

•Liability

•Dialogue, understanding in value chain

•Standards

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Import Share LCC’s (2004)

0%

20%

40%

60%

80%

90%

FurnitureCars/Car seats

RefrigeratorSemiconductor

Shaver

TV, Video, Radio

Computer Parts

Toys

TextilesLeather

Years

Migration of Industries is no new

phenomenon but the speed has increasedduring the last

5 years

EU value chain base: Migration to low-cost and growing countries

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Only a few ideas are successful

Innovation process

3000 ideas

300 refined

125 projects

9 significant projects 4

developments1 product

Impact of innovation framework

on business

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“Innovation is a shy beast”System optimisation instead of discussion in silos

Innovation Vision and Strategy

Innovation culture

Innovation organisation

Innovative process

and tools

Innovative Partnerships

Outside factors

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Content

• Why is innovation crucial

• Demands for chemical solutions (examples)

• Drivers and critical factors

• Basic needs

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Need for reality check

Lisbon/Barcelona objectives2005 (EU-27) 2010 (EU-

27)

• Research investments 1,7% 3,0%(% GDP)

• R&D investments € 162 billion € 309 billion

• Researchers (FTE) 1.24 Mio 2.35 Mio

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Lots of good will, but where is direction and cohesion?

EIT

Lead Markets

SET-Plan

ERA

Action Plans on Sustainable Consumption and Production and on

Sustainable Industrial Policy

Competitiveness Poles (France)

Poles of Excellence (Belgium)

Centres for Science,

Technology & Innovation (Finland)

High-tech strategy

(Germany)Innovation Action Plan

(Denmark)

Center for open Innovation (N

L)

Regional Innovation Poles

(Greece)

Action Plan for

Innovation in

Enterprises (Italy)

Strategy for sustainable

urban development

6th environment action plan

environment & health action

plan

KTN (UK)

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Harmonisation of political and innovation timelines needed

• Company• Competitor• Standards, benchmark**• Downstream user*• Supply chain*• Consumer**• Technology**• Brand

* susceptible to direct impact of short term, trend oriented policy

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A Must for Europe !

Innovation

today target

technologies& products Technologies

& products

confidence

confidence

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Chemical Industry and it`s products

Chemical

industryConsumer

Consumer

Consumer

Other sectors

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Some key areas for HLG

• Competitiveness based on technologies and products

• Additional focus on development and placing on markets; research is only start

• Develop messages and communication from HLG to improve public and investor confidence

• Optimised and integrated EU system approach for innovation (no blockage by “vertical discussions”)

• Shorter timelines for putting on the market innovative technologies & products

• Improve coherency of programmes of EU Commission and member states

• Position chemical industry as enabler/solution provider for societal demandsCSusin 19/04/23