Pour encourager les autres: Microelectronics expands in France

Citation

(2006), "Pour encourager les autres: Microelectronics expands in France", Microelectronics International, Vol. 23 No. 2. https://doi.org/10.1108/mi.2006.21823bab.011

Pour encourager les autres: Microelectronics expands in France

Pour encourager les autres: Microelectronics expands in France

Keywords: Electronics industry, Microelectronics

In August of last year, Cambridge Silicon Radio (CSR), a leading UK designer and manufacturer of single- chip wireless devices, announced the opening of a new hardware design centre in Sophia Antipolis, France. At the opening, Stéphane Boudaud, Head of the CSR design group, described the company's rapid growth and need to remain competitive as key drivers of the expansion, so why did they choose France?

France's reputation for microelectronics has been growing in recent years, following a period of substantial investment and government initiatives to support the industry. International companies such as IBM, Texas Instruments, Freescale, Icera and Infineon Technologies have all established semi-conductors operations in France, providing the foundation for the industry's presence, and a backbone for small- and medium-sized businesses (SMEs).

France's pitch for international business is simple; the country offers highly-skilled engineers, a world-class knowledge base, financial incentives and a commitment to encourage innovation. In 2004, the industry grew 7.6 percent in France, with more than 300 companies and 70,000 people working in the field of electronic components alone, and an ambitious policy to develop regional clusters will inevitably see that number continue to increase.

France's microelectronics industry is predominantly based in five regions: Grenoble (nano and microelectronics), Toulouse (systems architecture), Sophia- Antipolis and the south east of France(secured telecommunications system), Britanny (telecoms equipment and Paris (electronics, photonics and nano-structures). This development is no coincidence. Originally inspired by the success of Grenoble's and Sophia- Antipolis microelectronics industry, the government actively sought to create specific regions in France for certain industries under a policy called “competitive clusters”.

In 2005, the government allocated 1.5 billion to support the competitive clusters over 3 years, and individual companies are able to claim up to 100,000 in a 36- month period. Those situated in designated clusters are eligible for a number of benefits, which are designed to support the cost of R&D activities and reduce tax burden, including a complete rebate on corporate tax for a company's first three profitable years, and a reduction of 50 percent for the following 2 years.

The nature of the financial incentives offered to attract microelectronics companies to France vary according to the size and nature of the project, but the largest and most widely available is the Research Tax Credit (RTC).

The most attractive R&D tax regime in Europe, the RTC offers deductions from corporate tax rates for companies that invest in research. It was originally introduced in 1983, although it has been updated a number of times since and most recently, in 2004, the total fund was almost doubled to nearly e1 billion.

This RTC is fixed at a maximum of 8 million per year per company, and comprises of two parts: a volume-based component amounting to 10 percent of annual R&D spend, and another component amounting to 40 percent of the rise in R&D expenditure over preceding years. If the credit is actually higher than the company's annual corporation tax, or if the company makes a loss, the remainder can be held and then deducted from taxes over the following three years, or reimbursed in cash.

The Young Innovative Company status (or JEI, as it is referred in France) is another tax incentive, specifically designed to support SMEs in their early years and to boost private sector investment in R&D. The 1,000+ companies with the JEI status at present are eligible for a series of tax rebates including exemptions on corporate taxes, local taxes and social charges associated with the employment of highly qualified personnel.

The vast majority of companies that have taken advantage of public grants in France have, at some point, come into contact with ANVAR, France's agency for innovative industries, which merged in May 2005 with BDPME to form the OSEO Group.

The OSEO group offer a number of financial plans, of which two are particularly noteworthy: an interest- free advance, refundable if the project succeeds, and share subscription warrants to raise equity funds. The agency's overall funding for SMEs has recently been doubled by the European Investment Bank (EIB) to 80 million.

In addition to the development of “competitive clusters” and the financial incentives, the French government has also sought to increase the knowledge base by attracting talent, encouraging research institutions and support of partnerships at a local and an international level. As a result, projects such as Crolles II, the world's largest research complex, are made possible in France. The collaborative project between STMicroelectronics, Philips and Freescale will develop specific technologies at the forefront of semiconductor R&D devoted to next generation CMOS technology.

Invest in France Agency, the Government agency that specialises in helping international companies set-up in France, is keen to inform prospective investors about these schemes and provide them with operational assistance in their developments. Sylvie Giret, a microelectronics specialist at Invest in France Agency in London suggests that although cost is a prime consideration, companies setting up in France are primarily attracted by the skills and experience in the regions, as well as the quality of the high education system.

“France is not going to compete with China, India or Eastern Europe on cost,” says Giret “but we have some of the world's leading research organisations, a culture of innovation and productivity, and unique financial incentives which mean we are more competitive for the highly-skilled industries. Cost is easy to quantify, value is not.”

E-mail: emi.papalamprou@uk.ogilvypr.com