Economy tied to innovation: AMD CEO Jerry Sanders says innovators are being discouraged - Semiconductors

Electronic News, Nov 4, 2002 by Rob Spiegel

CHICAGO -- "When true innovation suffers, so does the economy," said Jerry Sanders, chairman and CEO of Advanced Micro Devices (AMD), during his keynote speech last week at the National Electronic Distributors Association (NEDA) Executive Conference. "When innovation is occurring and consumers win, so will business."

Sanders warned that the elements that encourage innovation are lacking in the current market. One of the impediments, he said, is the current lack of a robust capital market.

"True innovation is in jeopardy today because easy access to capital is in short supply," Sanders said. "With the weakening of the capital market, business becomes about preservation, which creates a status quo that benefits the entrenched."

Sanders sees the dearth in capital as a worldwide economic problem. "The funding by a few for a few is threatening innovation here and abroad." He noted that when governments step in to assist companies with capital, it compounds the problem. "Companies are not very responsive when the government protects them. Japan is an example."

He also noted the climate of executive criminality has suppressed innovation by increasing aversion to the risk-taking that is necessary for innovation. "We're ashamed of the criminals involved, but innocents should not be punished," Sanders said. "While I appreciate the idea of holding executives responsible, limited liability is an incentive to innovate. Who's going to risk the corporation if they are personally responsible?"

Sanders believes China has become an economic threat because it is more open than Japan and thus doesn't share Japan's protectionism, which ultimately stifled Japan's growth. In China he sees a country with potential for innovation. "We have to out-innovate them. If we do, they'll never catch up. We have to keep creating growth with new ideas."

He also noted danger in the trend of less investment in research and development, both at companies and at universities. "The number of labs is shrinking," Sanders said. "This industry needs to keep in mind that R&D is critical to its success."

Looking at the reasons for the economic success during the 1990s, Sanders pointed to the PC standardization provided by IBM and Microsoft. "Standardization attracts new participants. Microsoft played a clear role in producing the computer industry." As for Microsoft's troubles with antitrust laws, Sanders questioned whether the court was focused on protecting the consumer or other companies. "Microsoft was judged to use its system to stifle competition, but who should the solution protect? Antitrust laws should protect consumers, not institutions," he said.