Despite the city’s enviable record for innovation, value is often gained elsewhere, writes IAN RITCHIE
When I visited the Japanese research headquarters of Panasonic a few years ago in Osaka, I noted the roundel at the front of the building which featured statues commemorating a dozen famous scientist and engineers. The group included Newton and Einstein, but there was a key scientist missing – James Clerk Maxwell. When I mentioned this to Panasonic executives they were puzzled; they had never heard of him.
Given that Clerk Maxwell was responsible for the unification of electromagnetism and light into a single phenomenon, this was strange as it was the key discovery that underpinned almost every product sold under the Panasonic brand.
Maxwell recognised that magnetism and radio waves and visible light were all part of the same system. He even went on to measure the speed of such waves – the ‘speed of light’. Among many other innovations he went on to investigate colour vision and, in 1862, he created the world’s first colour photographs.
Albert Einstein had three portraits on his wall to remind him of the greats that had most inspired him – Newton, Faraday, and Maxwell. Maxwell, said Einstein, was “the man who changed everything”. And yet, Edinburgh born and educated Maxwell is the one leading transformative physicist that few have heard of
Is Maxwell typical of Edinburgh’s contribution to innovation? It certainly feels that way sometimes, as the Scottish capital has been responsible for many key technology breakthroughs built on the back of Maxwell’s discoveries of electromagnetism.
Wolfson Microelectronics was spun out from the University of Edinburgh in 1984 and by 1996 became a fabless semiconductor company, specialising in audio analogue/digital chips.
These small low-power devices went on to become the dominant devices in audio products, including in digital audio systems and most of the world’s smartphones. The company, led by David Milne, was floated on the London Stock Exchange in 2003. And in 2014 was acquired by its rival, US-based Cirrus Logic for $291m
After developing the world’s first single-chip CMOS video camera in a team led by Peter Denver, VLSI Vision Ltd was spun out from Edinburgh University in 1989 and in 1995 became the first Scottish spin-out company to list on the London Stock Exchange, changing its name to Vision Group.
The company successfully commercialised this technology, and it became the standard camera chip in most small imaging devices, including security cameras, videoconferencing systems, and smartphones. Vision Group was sold to STMicroelectronics in 1999 for less than $40m.
So, the technology of the ears, voice and eyes of all the smartphones in the world today were invented at the University of Edinburgh.
There was another burst of Edinburgh-based tech innovation early in the 21st century with the creation of Scotland’s two technology ‘unicorns’: Skyscanner and Fanduel. (A ‘unicorn’ being a private company worth over $1bn).
Skycanner became one of Scotland’s few unicorns
Skyscanner was launched in 2003 and grew its flight comparison product aggressively, going on to raise £128 million in a 2016 funding round which valued the business at $1.6 billion. Later that same year, Skyscanner was acquired by the Chinese travel company Ctrip for a reported $1.75 billion.
The other unicorn, Fanduel, started of life in 2006 as a prediction site but restructured as an online sports gaming company in 2009, inventing a whole new category of online entertainment. In 2015 it raised $330m, valuing the company at $1.2bn.
It moved its headquarters to New York, in recognition that all its business was US-based, but the research and development team remained in Edinburgh, in an office next door to Skyscanner. The company was merged with a US subsidiary of Irish/British gaming company Flutter in 2018 and was recently valued at $31bn.
Most people have no idea that these companies were from Edinburgh.
And then there is the massive Scottish presence in the computer games industry.
Down behind the Scottish Parliament at Holyrood, is Rockstar North, the developer of the Grand Theft Auto (GTA) games franchise with total sales so far of over 435 million units.
The last release, Grand Theft Auto V holds the record for the biggest global video game launch ever, earning $800 million on its first day and $1bn in its first three days, rising to $10bn in total. A new version of GTA is scheduled for 2026 and will undoubtedly outsell every other entertainment product next year.
Grand Theft Auto has been a worldwide success
Grand Theft Auto V sold over 215m copies which makes it comfortably the biggest action-adventure game in the world by total sales. GTA games are based on US urban environments so very few people know it is from Edinburgh.
So the Scottish capital is pretty good at innovation, but is all this innovation contributing significant wealth to our economy?
Well, Cirrus Logic is based in Austin Texas, and STmicro in Geneva. Ctrip is based in Shanghai and TakeTwo, the parent of Rockstar, is based in New York. Fanduel was acquired by British/Irish betting group Flutter in a deal that eliminated the founders and early investors from any return; it is now listed in New York.
None of the profits generated by these world-class companies comes to Scotland.
Clearly Scotland can start innovative businesses, but ‘scaling up’ these businesses to be world leading corporations is beyond us.
Edinburgh University continues to innovate in deep technology. Currently, Professor Themis Prodromakis at the University is developing neuromorphic AI hardware that takes inspiration from the human brain.
His goal is to use Memristor technology to create hardware that can sense, learn, and reason with extreme power efficiency, making artificial intelligence (AI) massively less energy intensive. If this technology can be successfully commercialised it will dramatically transform the economics of AI systems, hugely reducing the power required to provide their services.
Big tech has invested $155bn in AI this year, it’s the biggest technology development in the world today, a huge proportion of which is in building huge data centres and in ensuring the massive power supplies that they need to work. If Prodromakis can deliver his revolutionary technology, it could change the whole economics of AI.
It could change the world as we know it.
Will it get support and be able to raise the appropriate investment required to grow? Could it remain a Scottish business, or will the value be realised elsewhere?
Our track record is not encouraging.
Ian Ritchie, a tech company creator and investor, will be writing a regular column for Daily Business
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