Germany’s ‘Silicon Saxony’: Success A Product of Education Policies

In Eastern Germany, Dresden emerging as an economic powerhouse in the fields of electronics and semiconductor manufacturing.

In the 1990’s, thanks to creative state policies, incubator space and direct subsidies designed to promote high tech startups, Dresden has developed a dynamic cluster of high tech companies that has earned the region the nickname “Silicon Saxony”.

At the core of Dresden’s transformation has been its rich supply of highly trained engineers and scientists: Saxony’s four universities and five technical colleges are at the heart of the state’s research and education infrastructure. Dresden University of Technology is the biggest of the four universities in the state with about 25,000 students.

Saxony has a system of technical colleges that were engineering schools in the former German Democratic Republic (GDR). A unique feature to R&D in eastern Germany is its independent state-supported research companies that originated from research divisions of the former “kombinate”.

Saxony has 42 of these R&D companies of which about half are clustered in the Dresden area. In 1999, the Dresden “TechnologieZentrum” provided incubator space for over 80 new companies. The combination of Dresden’s human capital (the region was the center of the GDR’s mincroelectronic sector) with the state’s aggressive programs to nurture technology in the region is beginning to pay big dividends.

These factors helped to persuade electronics giant Siemens in 1993 and Advanced Micro Devices (AMD) in 1996 to build large microchip production plants in Dresden against substantial international competition.

Massive government subsidies for new companies, of course, have been another big plus. The German government provided a quarter of AMD’s start-up costs for building a $1.9 billion chip plant in Dresden.

But the investment is paying off. The facility today employs 1,700 people of which 77% come from Saxony. The California-based chipmaker is America’s number-two chipmaker and represents 22% of the world market share in semiconductors. AMD’s popular Ahtlon chip is made in Dresden.

“Yes, there were subsidies,” says company spokesman Jens Drews. “But the main reason we settled on Dresden was human resources.” Plans are on the drawing board to double the size of AMD’s Dresden facility with an additional $3 – 4 billion capital investment.

In order to secure long-term development of the high tech industry in the region, the state’s technology policy also encouraged the formation of small equipment suppliers and service firms in order to create linkages and synergies between the big companies such as AMD and the local small companies.

One example of the spin-off effect created by the presence of the two large chip makers is the Dresden firm DAS (Dunnschicht Anlagen Systeme) GmbH. The company invented an innovative process for the environmentally safe disposal of poisonous wastes associated with semiconductor manufacturing.

The unique feature of the DAS process is that it can treat many types of toxic gases with high efficiency and low cost with both burning and scrubbing technologies combined into one machine.

DAS was founded by Dr. Horst Reichardt who, at the time of reunification, was an unemployed Dresden engineer. The company, which serves the Dresden chip market and has recently expanded its operations into Asia and the United States, counts such companies as IBM, Lucent Technologies and Infineon as customers.

Another success story is a company called ZMD, a descendent of the oldest chip company in Germany.

Company CEO Thilo von Selchow, who is currently serving as chairman of an 80-member association of high tech companies called Silicon Saxony e.V., says the region may soon surpass Grenoble, France and become the largest semiconductor center in Europe.

Saxony Governor Kurt Biedenkopf, an economics professor from West Germany who made a political comeback in the east after running afoul of Germany’s then Chancellor Helmut Kohl in the 1980’s, is credited, along with his Economics Minister, Dr. Kajo Schommer, with fathering Saxony’s successes in rebuilding the region’s economy.

Following his theory that “Capital in the 21st Century will follow knowledge”, Mr. Biedenkopf has given highest priority to higher learning in the state, despite many other competing social needs.

Judging from the many success stories in Silicon Saxony, Biedenckopf’s long range policy appears to be showing results.—