Direct and Spillover Effects of ATP-Funded Photonics Technologies

Nevertheless, employees have increased from roughly 25 at the time of the 1994 proposal, to35 in 1996, 58 in 1997, 89 in 1998, 100 in 1999, 150 in 2000, and then falling to 50 after2002 following a series of cutbacks.Given various other income sources, including multiple other federal contracts, and thesubsequent $100 million in venture capital invested, it is impossible to allocate the fraction ofthis employment ramp-up exclusively to the $1.75 million ATP award. However, since theother contracts were largely product-driven (e.g., specific NASA or Pentagon applications),not manufacturing processes or materials reliability, the ATP award was the most criticalearly enabler for mass commercialization. Second, it also was critical for attracting theventure capital, which significantly increased Displaytech’s scale and likelihood ofcommercial success.How to value this? Based on our analysis of Displaytech and the technology sector downturnin 2000, we believe that Displaytech would not exist today without the ATP. The technologydevelopment might have continued through an acquisition by another display or liquidcrystal firm, but Displaytech and the existing jobs would have disappeared. Attributing all ofthe value of Displaytech today to ATP is extreme, but provides a useful upper-boundassumption for estimating value created, which can then be scaled according to anyalternative assumed fraction attributable to ATP.Figure 6 shows Displaytech’s actual employment trend over time, and also a non-ATPcounterfactual estimated employment trend based on a two-year delay in commercialization,which is the lead time that Displaytech believes it gained from ATP funding. After 2000, ouralternative estimated employment falls to zero under the assumption that without theaccelerated ramp-up, Displaytech would have been a victim of the technology-sectordownturn. The difference between the white and shaded bars represents an upper-boundestimate of the direct employment effect from ATP.It is an upper bound, but probably not too much of an overestimate if we look only withinthe microdisplay sector. If Displaytech did not exist, a significant fraction of the increaseshown in Figure 6 for employment in U.S.-based high-technology jobs would not exist either.Foreign firms, because they dominate microdisplay markets, would likely have made up thebulk of sales now displaced by Displaytech. U.S.-based Kopin in particular, as an existingJVC camcorder supplier, and perhaps Three-Five Systems, would likely pick up some of thebusiness in their existing product lines. Because of the contract manufacturing alliance withMiyota, Displaytech’s main manufacturing employment is overseas, so few U.S.manufacturing jobs would be lost. However, the management, engineering, and research jobs,the majority of U.S. employment at Displaytech, would likely be lost altogether from U.S.microdisplay sector employment. Kopin’s and Three-Five Systems’ R&D and engineeringactivities would not expand much, but their sales of existing microdisplays would. In ourinterviews with management at Three-Five Systems, for example, they estimated that,without Displaytech, their microdisplay sales, currently small to begin with, might expandonly about 5 percent. On the other hand, the manufacturing output at the two likely wouldexpand by several million dollars per year if Displaytech did not exist. These jobs would be26 DIRECT AND SPILLOVER EFFECTS OF ATP-FUNDED PHOTONICS TECHNOLOGIES