Matsushita Hopes Silicon Valley Links Can Boost Its R&D

Matsushita Electric Industrial Co. Ltd, one of the world's leading consumer electronics manufacturers, is increasingly looking to California's Silicon Valley to provide it with the innovation it needs to develop the digital and networking technologies that will propel it into the next century. In October 1998, Matsushita announced the establishment of Panasonic Digital Concepts Center (PDCC) in Cupertino, California. This new center, Matsushita's seventh research and development entity in the United States, will act as both a venture fund and an incubation center for start-up businesses. It will make investments of up to $50 million that are designed to fuel the development of next-generation digital, networking, and Internet products and services, such as home networking, Internet applications, and e-commerce. Like other leading Japanese electronics manufacturers, Matsushita hopes to expand, develop, and enhance corporate innovation by establishing close relationships with dynamic venture companies in the U.S. through alliances and investments (see "NEC Organizing For Creativity, Nimbleness," RTM July-August, 1998, pp. 4-5). Matsushita's new center will develop strategic partnerships with the Silicon Valley community, including venture capitalists, and will also serve as a home base for various Matsushita organizations that seek to establish a presence in the Valley. "We are delighted to have this new opportunity to partner and invest in Silicon Valley," says Paul F. Liao, president of Panasonic Technologies, Inc, based in Princeton, New Jersey. "We expect PDCC to become an invaluable asset in our total North American effort." Matsushita "understands the basis and importance of venture companies," says Reiji Sano, managing director of Matsushita's R&D Group. He points out that the company, which is headquartered in Osaka, grew from a venture start-up in 1918 into the multinational organization it is today in one generation. "This company was started by three people: Konosuke Matsushita, his wife and brother-in-law," Sano observes. PDCC will make minority investments in many different companies, and additional funding will be made available for building alliances with Matsushita group companies. If these companies wish to create alliances through mergers or acquisitions with start-ups in which the center has investments, additional funding will be made available, Sano says. He acknowledges that Matsushita will face competition when it comes to investing and developing alliances with the start-up companies it targets in the Valley. But Matsushita's "attraction" is that it has the infrastructure to turn concepts into products and market them throughout the world, he says. Matsushita hopes that alliances with Silicon Valley companies will also enhance innovation at its research centers in Japan. The survival of leading U.S. venture companies often depends on their research into one type of technology. This creates a dynamism that can be "very stimulating" for our engineers here in Japan, Sano adds. Shift to Applied Research Matsushita, one of the top five multinationals in terms of annual R&D expenditure, has been steadily increasing its R&D budget since 1994 following a drop in the early 1990s. Last year, the company spent $3.64 billion on R&D. The company will not disclose how much it spends on development and applied research, but the proportion of R&D expenditure going toward these areas is increasing much more rapidly than the amount spent on basic research, according to senior company executives. In 1985, 54 percent of Matsushita's R&D staff were conducting what the company describes as basic research but by 1995 this had dropped to 25 percent. The majority of engineers and research staff employed by Matsushita now concentrate on applied research. "The first half of the twentieth century was based on science", Sano says. …