June 1, 2004    Volume 11, No. 11-

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A Common Success Strategy Among Industrial Giants Is Keeping Manufacturing Secrets In A 'Black Box'

CERNOBBIO, Italy -- Samsung, the Korean electronics giant, has achieved rapid growth in recent years by embracing a strategy of in-house production and investment in manufacturing research and development. The company, with sales last year of $36.4 billion, up from $26 billion in 2001, focuses on keeping secret its "black box" manufacturing technologies and processes.

"If we got out of manufacturing, we lose," Ji Oh Song, executive vice president of Samsung Electronics, told the Intelligent Manufacturing Systems (IMS) Global Challenges in Manufacturing conference held here in May. Advanced manufacturing technologies "enable extreme productivity" and provide companies with a long-term competitive advantage, said Song. Co-locating research and development activities with manufacturing "is very important and leads to faster market domination."

Samsung has no intention of losing its manufacturing advantage through outsourcing. A strategy that focuses on perfecting manufacturing processes and integrating suppliers is leading to the "rebirth of the manufacturing giants" such as Toyota and Dell Computer, Song told the audience of almost 500 international executives and researchers. These companies have embraced business models that emphasize the importance of manufacturing. The manufacturing giants are proving to be dominant in each of their respective industries. "Nobody else can copy them," Song said.

Like Samsung, Toyota and Dell continue to increase profits and market share every year at the expense of competitors pursuing strategies that do not focus as heavily on developing their underlying manufacturing technologies.

Samsung views itself as a "manufacturing solutions provider" in all of its product lines, from home appliances, to flat panel displays, cell phones, MP3 players, digital camcorders, laser printers and semiconductors.

The companies that are dominating their industry segments rely on technologies that focus on digital convergence, customized production equipment and unique product technologies.

Song is in charge of Samsung's Mechantronics Center, which oversees the company's Institute of Intelligent Systems, teams of manufacturing equipment and robotic systems researchers, and a precision optics group. Samsung's primary business focus is on flexible automation and assembly, the efficient movement of material in its logistics operations, precision assembly and packaging, and machine intelligence-based inspection technologies.

Samsung's Strategy In Manufacturing: Speed And Minimum Capital Investment


  • Practice Strong Simulation -- Saves Vast Capital Investment Through Prediction By Simulation
  • Simulation Provides Optimal Level of Equipment and Factory Space and Optimization of Local and Global Material Flow
  • Use In-House Development Of Custom Equipment and IT Solutions For Innovative Products
  • Maximize Factory Efficiency -- Less Additional Investment
  • Continuous Innovation for Extreme Productivity

Research and Development:

  • Practice Strict CAE, CAD, CAM and CAT
  • Serious Management of Product Lifecycles
  • Diversify Technology Sources and Human Resources
  • Keep Core Technology In-house As Long As Possible
  • Design for Manufacturing


  • Maximize Each Tool For Efficiency
  • Find the Best Operational Conditions
  • Customize Equipment and Operation Software To Increase Yields
  • Integrate IT Solutions From ERP Level to Tool Control Level
  • Translate and Analyze Raw Data Into Explicit Knowledge
  • Customize and Modify Equipment, Hardware and Software In-house

IMS Celebrates Ten Years Of Success: A Breakout Event For A Global Manufacturing R&D Program

CERNOBBIO, Italy -- The Intelligent Manufacturing Systems (IMS) program will soon be completing its first 10 years of research and the general feeling among those involved is that it has been a success. Interest in the world's largest international collaborative manufacturing R&D program reached its zenith here on Lake Como in Italy in mid-May, when researchers, engineers, executives and administrators met to discuss trends in manufacturing, research results from projects and the future of IMS.

Organizers of the IMS International Forum were not anticipating a sold-out event. When planning first started, there were estimates that only 50 people would attend. But with more than 450 attendees, the forum was deliriously described by organizers as a "coming out party" for IMS. Others called it a "breakout event," a "home run" and a "slam dunk" for the global manufacturing R&D community.

"It's an indication of the growing importance of manufacturing R&D," said one IMS official.

IMS was created in the late 1980s in response to an overture from the Japanese to U.S. industry for a $1 billion collaborative manufacturing R&D program. Officials at the Commerce Department during the first Bush administration interceded, claiming that the Japanese were interested in "cherry picking" advanced U.S. manufacturing technologies. The U.S. officials then worked with Japan to broaden the scope of the program to include Europe, Korea and Australia. They also established a unique intellectual property regime contained within the IMS charter.

But the United States government has never provided funding for research under the IMS umbrella, instead allocating only a small amount ($250,000 per year) for administrative oversight. This has been a bone of contention for most regions involved in IMS, especially Europe, which has devoted significant resources to IMS projects. Fifty-one percent of participating organizations in IMS come from Europe; 25 percent from Asia and only 12 percent from the United States.

"We've had a very good experience with our companies and researchers gaining much advantage in collaboration from across the world," said Rosalie Zobel, director of the Information Society Technologies research program at the European Commission. "It's the world's only global R&D framework that exists and works. It has standard intellectual property rights that are accepted by everyone. There are no problems with collaboration across the world in very large projects. We hope IMS will continue to develop with more countries."

The European Union's R&D managers believe the time is ripe for boosting manufacturing research programs because of their "strategic importance," said Zobel.

IMS involves researchers and companies from throughout the world, providing them with insights into new ideas, technologies, processes and markets. During the three-day conference, hundreds of researchers presented their findings on all the current -- and common -- issues facing manufacturers worldwide. Many of these researchers spoke about how they conducted their research and then were hired by the companies involved in their projects. IMS is seen as a way to train the next generation of manufacturing personnel on the latest technologies and trends, said those in attendance.

The Europeans hope to double the Europeans Commission's R&D budget and want industry to substantially increase its spending on research. "We would prefer to see more participation from North America" in IMS, said Zobel. "For Europeans, it's great to have win-win projects with people in North America along with the rest of the world."

Those involved in the administration of IMS are beginning to undertake negotiations for continuing the program into its second phase, which would start in May of 2005. The Koreans and Japanese have committed to their involvement, but the Europeans must proceed through a formal process to gain approval. China has been approached for inclusion, but has not responded to any of the overtures.

The United States has not yet made a commitment to its involvement in a second, 10-year phase of IMS. "The jury is still out right now as to whether or not the Department of Commerce, which funds the program, is going to make a commitment," said Kevin Lewis, managing director of the IMS Interregional Secretariat and the program's top official. "Technically they can still make it."

The United States government has never provided funding for IMS research, although U.S. companies, universities and research institutes have participated in some of the most robust IMS projects. U.S. government decisionmakers -- undersecretary of Technology at the Commerce Department Phil Bond and Manufacturing Engineering Lab director at NIST Dale Hall -- were invited to the IMS conference in Italy, but did not attend.

"The problem is two-fold," says Sujeet Chand, chief technology officer at Rockwell Automation and head of the U.S. IMS Delegation. "The problem is awareness that such a global infrastructure exists and what they can leverage it for. The second is funding, which comes up all the time because IMS is a framework for pre-competitive R&D. For companies to do pre-competitive R&D, you need discretionary funding. It's not product development. If discretionary funding is not available from companies, it's not going to happen."

A $5 million commitment from the United States government would be a blessing, said the handful of Americans attending the event, because it would help support the involvement of researchers from universities and non-profit organizations. But the United States has other priorities.

Conference organizers say there are plenty of opportunities for collaborative R&D in common areas of interest, particularly in sustainable or environmentally sound manufacturing, manufacturing manpower development, nanotechnology fabrication and standards, and literally dozens of other fields.

"Never before has there been a greater need for collaborative research, dissemination to industry and building a global experience," said Bob Herbert, chief executive of the Australian Industry Group.

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