I always find it fascinating to discover and correct some of the misconceptions I've been carrying along with me. For instance, how would you answer if somebody asked you to name the industry that accounts for the largest percentage of Scotland's annual exports? Let's see...lots of open countryside, grazing sheep and golf courses. OK, my first impression would've probably been scotch whisky -- and not necessarily because it's been my beverage of choice since the university days. Also, considering that cashmere originates from that area and that Scottish wool sweaters are world famous, I also might've guessed that it's clothing or textiles.

How about electronics? Where might it fall in the list? Well, let's look at a few numbers: Annual exports of scotch whisky for the past seven years have exceeded 2 billion pounds, which at this writing converts into roughly $2.8 billion. (As an aside, it's interesting that Spain has moved ahead of the US as the largest single export market, and I also find it fascinating that 90% of the scotch sold is blended, while only 10% consists of single malts). OK, back to the real subject. Contrast those numbers to the electronics industry: in 1998 overseas exports from Scotland in that industrial branch exceeded 11 billion pounds (well over $15 billion), representing 58% of all Scottish manufactured exports. Want to be further amazed? Consider a few more statistics: Scotland alone accounts for 15% of Europe's total semiconductor capacity and more than 50% of British capability in the sector. Further, the country produces 30% of the branded PCs in Europe, 50% of the notebook computers, 65% of the ATMs and nearly 80% of the workstations. This performance is simply astounding for a country of just 5 million inhabitants who account for approximately 8.5% of the total UK population.

Almost all of this design and manufacturing takes place in an area that the locals refer to as The Silicon Glen. Scotland is a small country that makes up roughly a third of the UK and that sits north of England on the British Isles. It is shaped roughly like an hourglass. At opposite ends of the neck, which takes roughly an hour to drive across in normal conditions, are the two major cities: Edinburgh on the east coast, and Glasgow on the west coast. More than 90% of the population falls in a broad band between the two cities, and that's the area that makes up The Silicon Glen.

Clearly the level of activity in this region is not to be ignored. For instance, today you can find semiconductor fabrication facilities owned and run by Motorola, National Semi, NEC, Raytheon, Semefab and Micronas. These six facilities employ 5500 workers, another 2700 are employed in the supply chain while roughly 300 academics provide R&D in microelectronics and related areas.

A company from that list, National Semiconductor, was one of the first ones to recognize the potential of Scotland as a place for business when it set up operations more than 30 years ago. Today its Greenock plant includes a 6" wafer fab and test facility along with a design center, and it focuses on analog and mixed-signal products. The company employs more than 600 people. During FY2000 the fab will manufacture more than 1.2 billion chips, which will account for roughly 25% of National Semi's revenues. The company is also proud of the fact that it is the first UK semiconductor manufacturer to achieve ISO140001 environmental standard, which according to Managing Director Gerry Edwards, "in Europe will become very important, just as ISO9001 was earlier." Its design center consists of 30 employees in three groups: standard analog products, information appliance engineering and portable power systems. Besides original NSC designs, this facility manufactures a few second-source products such as the LM1117 low-dropout voltage regulator.

Another long supporter of Scotland is NEC Semiconductors, based in Livingston. The company started assembly and test production in 1982 and then got its first fab line, for 6" wafers, running in 1987; it was followed in 1996 with a second fab line, this one running 8" wafers. Today the company is retooling the first fab for the larger wafer size, and in the near future it hopes to reach production levels of roughly 30,000 wafers per month, and perhaps eventually reaching as high as 40,000. Since NEC came to Scotland, the firm has invested more than 1 billion pounds ($1.4 billion) in the plant comments Managing Director Hideto Goto, who also declares that this facility constitutes the largest wafer fab in the UK. The facility employees 1525 people, of which only 27 are Japanese. The product mix is moving towards a split between DRAMs and digital logic, with the largest single product a 128M-bit DRAM. Of these wafers, none ship directly to customers; instead, 20-30% are back-end processed in Scotland, while the facility ships the bulk of its chips to sister NEC companies throughout the world for assembly and test.

An essential part of the chip-making process is the photomask, and here Scotland has every right to be proud: Glenroth-based Compugraphics International Ltd is Europe's only indigenous photomask manufacturer. Further, that firm is starting to make inroads into the US market as indicated by its acquisition of the Los Gatos, CA, photomask operation of Diamon Images and the purchase of reticle repair/recertification sites in Austin, TX, and San Jose, CA, from Apex Lithography Systems. Until recently a division of LaPort plc, Compugraphics (not to be confused with a like-named company in Wilmington, MA, that is now part of Agfa) is being acquired by the investment firm Kohlberg Kravis Roberts and Co.

Founded in 1967, the firm's Glenroth facility employs more than 100 people and provides all the tools and equipment needed to produce photomasks down to 0.13 micron. The centerpiece of the facility is an electron-beam pattern generator, the first commercial one of its type in Europe and only the fourth in the world boasts Managing Director Andre Hawryliw. He also states that the worldwide market for photomasks is roughly $2 billion annually and is expected to grow by double digits every year in the foreseeable future. CGI claims a 15% market share in Europe and only a 2% share in the USA, meaning there is plenty of opportunities for this firm to grow.

These companies illustrate the success that established firms enjoy operating from Scotland. However, they alone can't assimilate the many engineers coming from Scotland's universities, and they alone can't drive the rise in employment that will help employ the thousands of people entering the workforce. My next letter will outline the brain drain that Scotland has been facing; it will also look at initiatives the Scottish government is making to relieve these problems and later examine some encouraging early results from those efforts.

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