Creo considers shifting emphasis of its R&D investment to Canada

TheMarker, Ora Coren 31.8.2004 | 12:22

Creo, manufacturers of image technology and developers of new technology, are considering the continuation of R&D projects from Israel in other world centers, most of all Canada  Creo Israel CEO Michael Rolant said yesterday. He noted that Canada provides funding of 20% of R&D costs to companies, while in Israel the funding budget is meager, few companies benefit from it and criteria for receiving aid are obscure.

Rolant added that international Creo had already moved a large R&D operation from Israel over two years ago as a result of the combination of intifada and relatively low government support in comparison to Canada. The volume of sales from the project taken abroad is estimated at $65 million annually. In Canada 40 new employees were hired to work on the project in addition to the crew which left Israel for Canada to lead it.

Likewise, this year Creo international moved another project worth several million dollars to Canada, after failing to receive the support of the Chief Scientist of Israel, while the Canadian government is funding 20% of its scope.

Creo Israel will carry out R&D of $40 million in Israel in 2004, and the Chief Scientist has approved it government funding of only $400,000; the royalties which the company will pay to the Chief Scientist this year will total $4 million, said Rolant. After recruiting 70 to 80 new employees in 2004, the company has frozen hiring on a similar scale which had been planned for before the end of the year. The company employs a staff about 1000 in Israel.

Rolant noted that if the Chief Scientists budget is not increased, the company will be forced to reduce the share which its Israeli center plays in its business as a whole. The companys worldwide sales currently stand at around $600 million, half of those sales from development in Israel. Forecasts for 2007 are sales of $1 billion, and unless there is a change in the level of government support, Israels share will fall to 30% of those sales, he said.

At Creo we hold discussions on a quarterly basis regarding where to start R&D projects. We have two main centers  in Israel and Vancouver, in each of which 40% of our R&D takes place, and additional centers in the U.S. and Europe, Rolant added. Our intention is to draw R&D to Israel, and at the moment no activity is being shifted to Canada, but the cuts in grants by the Chief Scientist are not helping, he concluded.

Creo invests aggressively in R&D by comparison with competitors like Fuji and Kodak, and the pressure on the company to reduce its expenses on R&D is intense. The company has invested $150 million in Israel over the last three to four years in R&D. If that investment had been made in Vancouver we would have received $30 million, he said.

Rolant surmised that the cuts in the budget of the Chief Scientist emanated from the rivalry between Finance Minister Benjamin Netanyahu and Minister of Trade, Industry and Labor Ehud Olmert. Either the right honorable gentlemen will be called to order and see the Chief Scientist and Investment Center as a means to grow investment, or perhaps the Chief Scientist will transfer to the Finance Ministry and there, if the Finance Minister knows that he will reap the benefits, the budget will increase, said Rolant.