Tampere University of Technology

Creation of radical manufacturing technology innovations in and between firms.

CitationChaoji, P., & Martinsuo, M. (2016). Creation of radical manufacturing technology innovations in and betweenfirms.. Paper presented at International Annual European Operations Management Association Conference, .

Year2016

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Creation of radical manufacturing technology

innovations in and between firms

Pooja Chaoji (pooja.chaoji@tut.fi)

Tampere University of Technology, Department of Industrial Management

Miia Martinsuo

Tampere University of Technology, Department of Industrial Management

Abstract

Radical manufacturing technology innovations (RMTI) are often considered as a

technology adoption issue in manufacturing firms. Previous research does not cover the

manufacturing firms’ role and supplier relationships in creating RMTIs sufficiently.

This study pursues increased knowledge on the practices for creating RMTIs. The

qualitative study of 23 RMTI cases maps the dimensions of innovation novelty,

characterizes the manufacturing firms’ central role in creating the innovation, and

reveals differences in developing and implementing the innovation for modular

equipment versus novel, unique equipment. The manufacturing firm is portrayed as an

initiator and creator of RMTI, not just as an innovation adopter.

Keywords: radical innovation, manufacturing technology

Introduction

Background and goal

Novel production technology can become a source of competitive advantage through

enabling the offering of better quality or efficiency, or the creation of new product

designs and attributes. New equipment can help in solving persistent problems that

could not be solved earlier. While there is broad understanding of how firms can

improve their production systems incrementally (e.g. Klingenberg et al., 2013), there is

little discussion on firms radically innovating their production systems.

Previous research on radical manufacturing technology innovations (RMTI) focuses

on the adoption and integration of novel technology-based equipment (e.g. Khazanchi et

al., 2007; Dewar and Dutton, 1986; Gomez and Vargas, 2012; Sinha and Noble, 2008).

The attention has been limited to the selection and adoption of technologies developed

elsewhere, mainly by specialized equipment suppliers. Some research has taken a wider

perspective on the modes of operations technology innovation (e.g. Damanpour and

Wischnevsky, 2006; Stock and Tatikonda, 2008), but it has not focused on the context

of core manufacturing technology innovations. Therefore, the study on the emergence

and creation of RMTI has been insufficient.

This study aims to increase understanding on the practices and company

relationships of manufacturing firms in the emergence and creation of RMTIs. The main

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research question is: how do firms create a radical innovation in their manufacturing

technology. The study emphasizes the viewpoint of the firms using the technology in

their manufacturing processes, but includes also technology suppliers as both

perspectives are relevant in creating RMTIs. The empirical research is delimited to

topical and recent cases of RMTI and managers’ and experts’ experiences of them. This

implies that RMTIs are explored in their real-life context, using qualitative data.

Radical manufacturing technology innovations

Radical innovations in products and technologies have a high impact in terms of

offering completely new benefits, significant improvement in known benefits, or

significant reduction in costs (O’Connor et al. 2006, Maine et al. 2014). Radical

innovations involve distinct new knowledge or (re-)combination of existing knowledge,

whereas incremental innovations take minor steps and involve little novelty (Raymond

and St.Pierre 2010). ‘Radicalness’ may mean different things, depending on whether the

level of newness can be defined at the level of the firm (e.g. Damanpour and

Wischnevsky 2006), at the level of the industry (e.g. Sinha and Noble 2008) or at the

level of technology that is new-to-the-world (e.g. Chang et al. 2012). The focus in this

paper is on radical manufacturing technology innovation (RMTI) which deals with the

core production technology involved within the overall new production process.

RMTI may concern the equipment, processes or complex systems needed in

manufacturing. Examples of RMTIs include: new technology innovations in footwear

manufacture such as flow moulding, numerically controlled stitcher, computer pattern

generating systems (Dewar and Dutton 1986); new packaging technologies for cooked

and sterilized food (Ettlie et al. 1984); and various forms of automated manufacturing

technologies such as numerically controlled machines, robotics, computer aided design,

and flexible manufacturing (Gomez and Vargas 2012, Khazanchi et al. 2007). Many

studies have not focused on a specific RMTI, but use data from a population of

manufacturers and different RMTIs (e.g. Sinha and Noble 2008, Da Rosa Cardoso et al.

2012) or suppliers (e.g. Rönnberg-Sjödin, 2013).

Existing research on RMTI suggests that the development and utilization of RMTI

occur in different organizations. Damanpour and Wischnevsky (2006) distinguish

between innovation generation and innovation adoption, and according to their research,

the processes of generating and adopting innovations are distinct phenomena that are

facilitated in different organizational conditions. Acquisition and utilization of new

machinery and equipment is one of the major modes of RMTI in firms (Reichstein and

Salter 2006, Hervas-Oliver et al. 2014, Khazanchi et al. 2007, Ettlie et al. 1984).

Organizations that generate the innovations and those that adopt them differ in their

capabilities, processes and culture and follow different paths. The phases of innovation

generation include: recognition of opportunity, research, design, commercial

development and marketing; whereas the innovation-by-adoption includes two main

phases: initiation and implementation. (Damanpour and Wischnevsky 2006)

Creating radical manufacturing technology innovations

Existing studies on the creation of RMTI highlight the importance of collaborative

relations and the technology supplier working with the manufacturing firm as an enabler

of success in RMTI. In particular, long-term relations between the manufacturer and the

supplier are emphasized in the success of creating new technology equipment

(Rönnberg-Sjödin, 2013, Dulluri and Raghavan, 2008, Terweisch et al. 2005). The

research also suggests that the innovation ideas generated by the supplier firm are

important in fostering the long term relationships (Baptista 2013). As studies have more

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often taken the technology supplier’s perspective (e.g. Rönnberg-Sjödin, 2013), the high

importance of long term business relations reflects the supplier business perspective in

these studies. Even in the supplier’s perspective, the process for RMTI creation (pre-

study, purchasing and development, assembly and installation, start-up, and production)

involves four stages that occur in the manufacturing firm (Rönnberg-Sjödin, 2013).

Hence, it is important to understand RMTI creation activities from the manufacturer’s

perspective.

When a manufacturing firm integrates new technology into its operations, it expects

the technology to perform well in its target application and in a timely and cost-effective

manner (Stock & Tatikonda 2008). This integration task involves multiple challenges

and requires significant capabilities from the adopting organization, dealing e.g. with

assessing the technology fit with the firm capabilities, interaction with the technology

supplier, and managing the technology integration process (Stock & Tatikonda 2008).

Earlier research has considered both the early phase and the implementation phase of

RMTI from the adopter’s perspective. The research focus of the early phases of

innovation has been on the technology adoption decision: what it is, how it is timed,

what are its antecedents and consequences (e.g. Akgun et al. 2014, Sinha & Noble 2008,

Chandrasekaran et al. 2014, Raymond & St. Pierre 2010, Gomez & Vargas 2012).

Studies on the implementation phase have covered the factors influencing the successful

implementation of new technology equipment, and achieving enhanced production

performance and the full potential of the new technology equipment (Swink & Nair

2007, Da Rosa Cardoso et al. 2012, Stock & Tatikonda 2008, Karlsson et al. 2010,

Khazanchi et al. 2007). These earlier studies, however, do not cover if and how the

adopting organization is involved during the creation phase of the RMTI.

Research method An inductive qualitative research strategy was used to tackle the exploratory research

task. We sought for exemplary cases of RMTI, and variety among different types and

perspectives of RMTI. Internet sources were used to seek examples of technology shifts

in manufacturing (e.g. applications of nano-technology, 3D printing), and production

development managers of selected technology-intensive firms were contacted to enquire

their examples of radical production technology shifts. Both approaches generated good

examples of RMTI, and the list of RMTI cases is reported in the Appendix. Firms of all

sizes and from diverse industries were included. Table 1 summarizes the empirical data.

Table 1 – Interview data collection.

Equipment supplier firms Manufacturing firms:

Equipment adopters/users

Nr. of firms 3 14

Range of firm sizes (in turnover MEUR)

smallest: 7; median 21; largest 2900

smallest 6; median 500; largest 31000

Nr. of RMTI case examples 6 18

Nr. of interviewees 4 19

Job positions of interviewees (examples)

Vice President (Business Unit); Business Director;

Sales Manager;

Production Director, Sr. Production Development Manager, Manufacturing

Manager Average duration of interviews (minutes)

60 min. per interview (total duration: 312 min.)

60 min. per interview (total duration: 1005 min.)

Semi-structured interviews were used for primary data collection, supported with

other relevant public data such as company websites. Senior professionals in production

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development and production and technology directors were contacted to organize the

interviews. Occasionally, two cases of RMTI were described during the same interview.

Whenever possible, other personnel closely associated with the RMTI in a firm were

also interviewed. Only one interview involved two interviewees, and one case is

common between the supplier and manufacturing firm set of interviews described in

Table 1. The total number of interviews is 23, covering 23 examples (‘cases’) of RMTI.

The interviews focused on the drivers and process for the RMTI, and challenges in

its realization. The timing, duration and different phases in the process, role played by

individuals and other influences were discussed for every RMTI. The interviews were

recorded and fully transcribed.

The data were content-analyzed through an inductive approach, looking at both the

specific case and its contextual setting. First, the interview data were read through, to

derive analysis categories based on the data. Second, Atlas.ti, a qualitative data analysis

software was used for the analysis, and the data were coded in terms of innovation

novelty, type of RMTI, roles and activities in initiating and creating the RMTI, and

activities in developing and implementing the RMTI. Patterns in process experiences

with RMTI were closely analyzed (Aguinis and Vandenberg, 2014), especially to follow

the role of the manufacturer in creating RMTI. Third, selected comparisons were made,

and illustrative quotes and contents were selected, to highlight the key findings.

Results

Differences in RMTI

RMTI can vary in their degree of novelty to the supplier and manufacturing firms, and

can also vary in the degree of novelty of the technology involved in the new equipment.

Table 2 summarizes these characteristics of RMTI among the studied RMTI examples,

and indicates the overall level of novelty. The RMTI cases involve a novel technology

brought into use in the core production process, described in the Appendix. A majority

of the studied RMTI cases have occurred in the past 15 years, reflecting recent

experiences of RMTI, and majority of them have medium to high level of novelty.

Table 2 - Types of RMTI cases in terms of novelty.

New to the manufactu

rer New to the

supplier

Novel technology/ application

Custom engineering using known technology

Novelty level

assigned Nr. of cases in sample

x x x high 11

x x x medium 7

x low 5

The interviews revealed three types of new equipment or production systems (e.g.

automation systems) as part of RMTI: standard equipment (where equipment is like a

product to the supplier), modular-standard equipment (may involve some engineering

effort but technology components are established and familiar to supplier), and novel

equipment (such that no previous similar equipment was known to exist to supplier and

manufacturer). Accordingly, three different roles were identified for equipment

suppliers involved in RMTI: equipment sellers, tool builders, and technology providers.

As the interviewees had different experiences in the type of RMTI, they also differed

in their motivations for RMTI. The findings show that the inclination for RMTI was the

highest in technology provider-type suppliers that engaged proactively in process R&D

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of a specific technology or in a specific industry. As the vice president of one such

supplier firm explained: “Of course the tools is a kind of side product of many things

but the main, additional value that we are bringing to the customer is of course the

knowhow of the processes that is put into the tools, finally.” For example, the supplier

firm in cases 1, 3 and 4 conducts process technology R&D related to thin film coating

technology/ nanotechnology, the supplier firm in case 9 conducts process technology

R&D related to paper and pulp manufacture, and the supplier firm in case 23 conducts

process technology R&D related to semiconductor manufacture.

The tool builder-type suppliers are very flexible in their equipment offerings, and are

willing to adapt their own ‘products’ to meet the customer’s specific needs. According

to one interviewee in a supplier firm, “when we were very flexible, and we said that,

that is not so much a standard product, that we can always make a change, that's many

times in the companies … we are too flexible maybe, if customers ask we are starting to

change the product we have already.” They regard themselves as special purpose

equipment suppliers and have high motivation for design and development of new

industrial equipment based on commercially available technology components. Supplier

firm in cases 5, 11, 18, 20 and 21 are examples of such suppliers.

The equipment seller type firms develop their own equipment ‘products’ and their

variants or modular options. There is little or no change made in their equipment during

every subsequent sale, although they engage in product development and process

technology R&D for continuous improvement of their equipment. Supplier firms in

cases 8, 12, 13, 16 and 17 are examples of equipment sellers.

Besides the role of supplier firms described above, all the case examples of RMTI in

the sample involve an adopter or buyer or user organization. In most cases, this

organization was a manufacturing firm, while in few cases its role was filled in by

research organization such as university or research institute. We refer to the buyer

organization as the manufacturing firm and the equipment supplier organization as the

supplier firm in the following discussion.

Manufacturing firms’ role in initiating and creating RMTI

The interviews showed that the manufacturing firms have a critical role in the initiation

of RMTI. In a majority of the case examples, the RMTI was initiated at the

manufacturing firm (see Table 3). In these cases, the manufacturer contacted the

supplier firm, and during the early planning phase also compared the supplier with some

alternatives, both other suppliers and other technology solutions. During the early

phases of initiating and creating RMTI and selecting the supplier, the manufacturing

firm has already had an impact on how the new RMTI turns out. The results may turn

out to be different if another supplier is selected.

Table 3 - Who finds who: Manufacturers in a lead role in the initiation of RMTI.

Nr. of cases RMTI cases

Manufacturer finds the supplier

16 2, 5, 6, 8, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22

Supplier finds the manufacturer

4 1, 3, 4, 9

Unclear (who found whom

first)

3 7, 10, 23

Manufacturers involved in cases 6, 7, 8, 14, 15, 18 have active process R&D

departments, and the supplier search followed at a later stage after the firm had studied

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and modelled the RMTI idea. As the VP of Production Mills in cases 14 and 15

explains: “… we realized that actually if everything goes as we have modelled, we are

getting the good results also here in this side. Then we take the equipment suppliers to

our negotiations, ask what kind of experiences they have, what they know in this

technology, and are they ready to supply us this kind of technology and so on.”

According to the interviews, manufacturers saw their own role as important in the

creation of RMTI, even if the supplier firm had initiated the contact. For example, in

case 1, the supplier firm had made significant process R&D efforts in the early initiation

stages, and the manufacturer was involved more after the proof-of-concept for the new

barrier-coating technology was complete. In this case, the production director of the

manufacturer perceived their firm in role of the innovator in this way: “….for the

nanotechnology, we were the pilot, for the company who made the equipment….we were

the first company who started to test it. And we were, brave enough to or crazy enough

to take it here and start to test it.” The main motivation for the manufacturer for

engaging in this RMTI was that their current problem could not be solved adequately

using their existing equipment and technologies.

Interviewees among the supplier firms also saw the crucial role of the manufacturers

in initiating and creating the RMTI, for example in terms of financing and thereby

taking risk in creating RMTIs. For example, in Case 1, the VP of the supplier firm

regarded the positive interest of the manufacturer’s CEO in the RMTI as a turning point

in the case. In his words, “….when it approached her (CEO of manufacturer) desk, then

everything changed quite quickly. Then there was a push for us to go as fast as we can.

…Once we came into the commercial part of discussions we realized that there is an

opportunity that may fly.” An almost similar supplier perspective was noticed in case 9

as well, by the vice president of production in supplier firm: “when making a prototype

like this, we always need a customer for that prototype. So finding the customer and,

that way convincing the customer and, getting that, things, ready, takes time”.

The supplier business success and survival depends on the positive experience and

satisfaction for the manufacturer from the purchased equipment. This results in a need

for greater commitment and interest on the part of the manufacturers for the initiation of

RMTI. As the business director of supplier firm in cases 20, 21 explained, “… we are

independent company, we have to make a success in every case.” In many cases with

high level of novelty in the RMTI cases (e.g. 5, 15, 18), the manufacturer had to take

risks due to no previous experience with the supplier firm, and support them by

financing to learn about the new technology and allow for less smooth experience

during installation.

Development and implementation of RMTI

Based on mapping the phases in developing and implementing the RMTI in each case,

common phases were consequently modelled. The importance, emphasis and length of

different phases varied across the cases. A key categorizing factor was whether the

RMTI involved A) a standard or modular equipment or B) highly novel, unique tailor-

made equipment. We will refer to them as A-type and B-type RMTI. The process

phases identified through the interviews on A-type and B-type RMTIs are summarized

in Figure 1.

The process phases in A-type RMTI were: Initiation, Pre-Study, Construction of

equipment, Installation & trial runs, Ramp up & learning to use, and Maintenance

(routine use) & further adaptation. Interviewees in A-type RMTI cases emphasized the

pre-study phase that involved planning, modelling alternative choices for suppliers and

technologies, and calculations leading to an optimum supplier selection. It also included

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making test-pieces at the supplier facility and preparation/re-design of product

components of the manufacturing firm in the case examples involving robotization. Pre-

study took a long time, relative to the other process phases. Technology and supplier

choices could be modelled during the pre-study phase, there was less uncertainty about

the technology from the start (it seemed feasible even if there were no standard

equipment ready for purchase) and, in the interviewees’ experience, often the phases

following the investment decision seemed straightforward. Investment decision making

followed the pre-study calculations and its timing was influenced by business strategy,

business environment (e.g. recessions) and investment decision makers’ involvement in

the early stages. Ramp up & learning to use was a relatively long phase, after which the

manufacturing firm was capable of independently maintaining and adapting the new

equipment according to routine production needs. Cases 2, 8, 10, 16 and 17 are

examples of such a development process.

Figure 1 – Process Phases in RMTI

In B-type RMTI, the process phases differed clearly from A-type, and in

interviewees’ experience, activities related to testing, validating and learning were key

activities during the early creation phases. The B-type RMTI were often initiated during

process technology research projects within a firm (e.g. case 14) or within a research

network (e.g. cases 1, 7). There was greater uncertainty involved in them, and hence

concept validation was perceived as a turning point making the new RMTI concepts

seem more feasible. Methods for concept validation in the cases included creation of a

proof-of-concept (laboratory scale demonstration) and/or prototype (working-scale

demonstration made with cheaper materials and methods) (e.g. cases 1, 4, 7, 8, 9, 13,

14), detailed presentation for proposed equipment (case 6) and seeing a similar concept

at work elsewhere (case 15). The concept validation further created interest for a pre-

study on commercial, economic and construction issues at the manufacturing firm.

Investment decision was a critical milestone which did not always follow concept

validation immediately, and was extended over a period when a suitable supplier was

first found, the supplier gained confidence of the manufacturing firm, customers were

taken on board and economic decision making criteria were fulfilled. Following the

investment decision and contract, the supplier firm started detailed design and planning

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of the actual equipment. During this phase, medium to high level of involvement of

manufacturing firm was observed in more cases than complete passiveness. In the

subsequent phases, testing was in a large role and had a critical importance – testing of

equipment at the supplier firm, customer acceptance test at the manufacturing firm upon

delivery and installation - and the equipment was further tested when introduced into

regular production. Unexpected technical errors emerged during testing, and sometimes

organizational issues, training issues, and resource pressures caused unexpected delays.

Discussion and conclusion

This research explored how manufacturing firms create a radical innovation in their

manufacturing technology. The broad sample of different RMTI cases offered a rich

picture of the manufacturing firms’ roles, activities and phases in creating RMTIs,

thereby contributing to earlier studies focusing on a limited view on RMTI (e.g.

Khazanchi et al. 2007, Dewar and Dutton 1985). Three types of RMTI cases were

revealed, based on the innovation novelty for the manufacturing firm and supplier firm.

The role of both the manufacturing firm and the supplier firm was seen as important

in creating the RMTI, and our findings support previous research emphasizing the

collaborative effort during RMTI creation. In particular, the findings highlight the role

of the manufacturing firm during the initiation and creation phases.

The development and implementation of RMTI cases was found to differ based on

whether they involved standard/ modular equipment or highly novel/ unique tailor-made

equipment. The existing process models match better with the RMTI cases involving

standard or modular equipment, which was like a ‘product’ for the supplier firm (A-type

RMTI). In line with the findings of Rönnberg‐Sjödin (2013), the importance of the pre-

study phase was emphasized at the manufacturing firm, when alternative technologies,

solutions and also alternative suppliers are modeled, leading to calculations for

supporting the selection of the best solution. Furthermore, interviewees highlighted

testing and manufacture of test pieces using the new proposed technology at the supplier

facilities. Our findings lend support for the high importance and collaborative effort

involved during trial runs in production, and the longer period of learning (Rönnberg‐Sjödin 2013).

The existing research does not capture the long early period of concept development

and concept testing which were seen as important in cases where highly novel/ unique

tailor-made equipment were involved in RMTI (B-type RMTI). In these cases, our

results also point out the ‘investment decision’ as a phase, requiring considerable time

and pre-study effort to assess the feasibility of the investment.

Innovation in organizations literature has divided RMTI generation and adoption

between the supplier and manufacturing firms (Damanpour and Wischnevsky, 2006). It

is implied in this literature that the adoption phase in a manufacturing firm follows the

generation phase in a supplier firm. The decision to invest in RMTI is considered as part

of the early stages of the adoption process, and manufacturing firm is perceived to have

less or no role in RMTI creation phases. Our findings contradict such sequencing and

supplier-manufacturer-separation as the manufacturers’ adoption decision preceded or

intersected every generation effort in the supplier firms. The initiation (process R&D)

and concept validation phases were separated from the design and development phase of

equipment, by a decision and contracting phase. The creation of industry-scale

prototype and further validation of the innovation idea was not feasible without the

financing and commitment of the manufacturer. The findings show that the decision to

adopt an RMTI takes place much before the creation process is compete. Then, the

sequence is not creation adoption, but rather creation initiation adoption-decision

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creation-implementation adoption-implementation. This also highlights the role of

the manufacturing firm in creating RMTIs successfully. The more refined role of

manufacturing firms in RMTI creation offers new pathways for further research.

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Appendix. Summary of RMTI cases analyzed

No. Example of RMTI (Unit of analysis) Involved shift in production technology (0 x; xy) Novelty

Time of occurrence

1 Anti-tarnish coating equipment for silver jewelry

Chemical bath ALD coating technology

High 2000-2009

2 3D printing of wax castings for jewelry manufacture

Pressure injection of wax in rubber dies 3D printed wax mould

Medium 1997-2012

3 Industrial particle coater based on nano-technology

CVD, PVD coatings ALD coating technology

High 2006 - 2010

4 Continuous deposition process based on thin-film technology

0 new process enabling industrial application of thin-film coatings in continuous production

High

5 Automatic testing machine for use in flexible production of smart watches

Manual testing rigid automated testing equipment flexible equipment

High 2000-2005-2014

6 Automated furnace for heat treatment of metal products

Manual and smaller automated and large furnace process line

Medium 2000-2010

7 New process for lignin extraction as side stream in wood pulp manufacture

0 new process and equipment technology

High 1990 - 2015

8 Implementation of new assembly process for electronic device manufacture

Old new assembly technology Low

9 New concept for heating web in paper manufacture

New heat roll construction, referred to as calendaring roll technology

High 2010-2015

10 Implementation of automated sheet stacking process in transformer core manufacture

Manual stacking of sheets in core automated stacking

Low 2008-2013

11 Automation of large engine head assembly

Manual operations automation of process steps (e.g. testing) and robotization

Medium 2007-2010

12 Cheaper cutting tool for slots on circumference of motor plates

high volume equipment available only create a low volume tool with innovation in blade technology (wire cutting)

High

13 Automation of spot welding process for round plates in motor

Manual welding automated, robotized welding; holding tool redesign (big impact)

Medium 2006-2014

14 New pulping technology Old pulping process using traditional catalyst chemicals modified equipment and process for using new catalyst

High

15 New gasification plant for wood bark 0 new process equipment to enable use of wood bark as gaseous fuel

High 2013-2014

16 Automation of production plant Manual transfers robotized Low 1995 - 2009

17 Automation of production plant Plasma cutting laser cutting with automation; manual welding robotized welding

Low 2001-2014

18 New technology in manufacture of silicon wafer

Interviewee considered names of technologies as confidential

High 2013-2016

19 Implementation of 3D laser technology sheet metal cutting equipment

Old cutting equipment 3D laser equipment

Low 2000

20 Special purpose equipment: joining machine for large pipe flanges

Old equipment redesign to include higher load bearing capacity, larger pipe size and advanced controls

Medium 2010 - 2012

21 Special purpose equipment: insulation machine for generator coils

Manual insulation winding semi-automatic equipment

Medium 1996 – 2002 - 2006

22 Special purpose equipment: Inductive-heating based semi-automatic joining machine for generator coils

Manual gas soldering equipment semi-automated induction heating equipment.

Medium 2007-2009

23 Dry etching technology equipment for electronics component manufacture

Wet etching technology dry etching technology

High 2005 - 2011