Peter Younger, MKS Instruments President, COO
-- Semiconductor International, 8/1/2001
Peter Younger, MKS Instruments President, COO
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| Peter Younger (Source: MKS Instruments) |
SI: This has been a good year for you — you've been named preferred supplier by some of your customers, formed alliances and made acquisitions. Can you tell us about this and what else might be coming?
Younger: Let's talk about the acquisitions and why we did them. Obviously, there is a trend in the industry toward consolidation, and we're growing by acquisitions. However, the critical point in our strategy is not just acquiring companies to become larger. It is to build a technology and product portfolio from which we can draw elements to create higher-value products that integrate the various technologies into a new product that is unique in the marketplace. Something that offers more functionality, preferably in a smaller package, at a lower total cost for the user.
This cost reduction may come as an actual price reduction because we were able to package the product into something smaller and discard some ancillary parts. However, we can also do some of the customer's engineering and/or manufacture to specifications. We can deliver a complex subsystem made up of many components as a single part number. The six acquisitions we have done over the last year have enhanced our ability to create these higher-value products.
SI: As you digest these acquisitions and different corporate cultures, what are your plans and strategies?
Younger: We began the integration process as much as two to three months before closing the deal. So by the time that everything became official, we'd already gone a long way with functional groups working peer-to-peer with each other to resolve integration issues and decide how things are going to operate. This gave everyone a chance to become acquainted, and helped the acquired companies understand how we do business, what our business philosophy and our culture are like.
SI: As a result of all this, are you planning to change anything in the workings of MKS?Younger: No. There really isn't much that I'd like to change fundamentally. This is an extremely well-run company — and I can say this because it preceded my coming into it two years ago. The foundations of very solid management have been in place here for a long time.
Our business philosophy is straightforward. I think that to be successful in business there are a few basic things you must get right. One of those is hiring the very best people. Also, you must develop reliable products that cost-effectively meet the users' requirements. Then you need operational excellence and must make focusing on the customer the company's religion. These are our operating principles, and the ones we try to instill into the companies that we have acquired if they don't already have them.
SI: What do you see as your next growth areas, and how are you planning for this?
Younger: This involves a combination of strategically planning what you'd like to do, and being opportunistic about what's available. The criteria we use to select acquisitions require us to determine how they would fit into our strategy. We're not looking to buy a company just to become bigger. It must fit our around-the-process-chamber strategy for instrumentation and subsystems that provide process capability and productivity enhancements to tools. It must fit with the other technologies, work with them, not just make us bigger.
SI: Is growth becoming more difficult than before?Younger: Not really. We have continued, over a number of years, to outgrow the rest of the industry — not only through the acquisitions but internally as well to increase marketshare. We do this in two ways. One is by being competitive and having good products, supporting them well and focusing on users' needs. The other is by creating new opportunities. By using our expanded technology portfolio, we can design products that don't exist in today's market. We create a demand for something that wasn't there before.
For example, last year we introduced a very simple flow verifier. This instrument allows in situ verification of a mass flow controller. This resulted from a study SEMATECH did of mass flow controller performance, which showed that, when mass flow controllers are taken out of a tool for suspected failure, 70% of the time those devices did not fail. Now, shutting the tool down, taking the controller off and replacing it with another is a very costly event — it costs the fab thousands of dollars per hour to take that tool out of production. So now this instrument, which sells for a few thousand dollars, can completely eliminate the need to do that unless there is an actual failure. Coupled to this 70% non-failure rate, it results in a huge productivity enhancement. I can envision one of these instruments on every gas cabinet on every tool in every fab, because it could pay for itself by preventing just one such event.
This was an instrument that didn't arise from a competitive situation. We created it because we saw a need, and it has given us a sales potential of several million dollars. But you have to be intelligent about it. In this case, it resulted from research and an understanding of how instruments get used in a fab, what are the deficiencies, and what needs these result in. Then you create a new product. This is a way of growing beyond just competitive battles.
SI: What makes you different from your competitors?
Younger: There is a very strong customer focus — nothing unique, a lot of companies have it — but with us it drives everything, such as product development. We're dedicated to increasing their productivity, and have the breadth of technologies with which to do it in our component and subsystem space, which is broader than anyone else's.
For example, we provide microwave strip modules to photoresist strip companies, and we also introduced a vapor-on-demand module that delivers high-purity water vapor that's also used in the strip process. We're now integrating these two products into a single package — this is an example of integrating across different technologies and creating a product that fits into a smaller space and brings more functionality and reduces costs.
SI: So what should your customers expect from you in two years?
Younger: New products developed from our broader technology base. A few months ago we had all of the acquired companies at a technical conference to exchange ideas. At that time we identified a number of opportunities that we'll be productizing over this time period, with a higher level of integration than before.
SI: How much do you devote to R&D?Younger: (Smiling) Obviously, that varies with where we are on the industry cycle. We've maintained our R&D spending through the present downturn. Typically it's been 8% of sales and currently is considerably higher than that.
SI: Users no longer seem to have the level of in-house expertise that they enjoyed before, and now expect their vendors to supply it. How do you view this trend?Younger: It's a great opportunity. We're capitalizing on it as our OEM customers focus on being systems integrators and developing platforms. Now they turn more and more to us to provide process engines and process modules, which has helped us accelerate our move from a component to a subsystem supplier. Our acquisitions fit this outsourcing trend.
SI: Are you satisfied with the vendor/user level of communication?Younger: You can always improve on communication. However, I believe that the burden is on the supplier — he has to be out there, and we are. We have not just sales, but marketing and technical staff interfacing with our users, so we understand what they are trying to do. Naturally, there are always proprietary elements in what they do, and they are reticent to share with us all the details. However, by having an ongoing technical dialogue, it is possible to understand — and even anticipate — their requirements and needs.
SI: Will the move to smaller dimensions and the coming of copper and other materials, requiring smaller process windows, be a plus for MKS?Younger: Very much so! When you factor in all of that and throw in 300 mm, you have a higher-value product in the process chamber, a higher-value wafer, and need tighter process control. That's where we come in.
SI: Some have said the move toward the fabless model might help reduce the industry's cyclicality. How do you see that?Younger: I believe that's true. When the industry booms, everyone scrambles to build up production capacity because they do not want to be left by the wayside. Consolidation of more semiconductor manufacturing capacity into foundries will reduce excess capacity buildup.
SI: Right now we seem to be on the bottom of the sine wave of the industry's cyclicality. Any ideas about what we could do to dampen these ups and downs a bit?Younger: We must communicate better on the business side, manage inventory and cycle time more efficiently. We must communicate better on the changes that take place in the technology, we must understand end-user demand better — sometimes the customer will drive demand higher than necessary to get weaker suppliers to deliver. Communication will help customers have more confidence in their suppliers. Part of all this is simple supply chain management. If we could have shorter cycles, we could ramp up and down quicker, and that would help. However, we're never going to completely rid ourselves of these cycles, because the volatility is driven by the rapid changes in our technology. We do not want to change this, because if that technical volatility disappears, we no longer will be the kind of growth industry we've been for all these many years.
SI: Does this mean you believe the torrid atmosphere of consolidations we have been going through is a good thing?Younger: (Laughing) Well, it has been good for us! I believe that it's a natural thing. End users demand world-class support around the world, so you have to invest in a global infrastructure and develop products for those markets — sometimes that requires that you manufacture and service locally. Often, to get that capability you must acquire other companies, which tends to drive the consolidation frenzy — it's a way of remaining viable and giving the customer what he needs, and it's something smaller, newer companies cannot afford to do.
SI: If you could, what would you change in our industry?Younger: Flexibility. More and more, we're in the cost-driven phase of this industry — this certainly does not disregard technology, which, of course, is critical. However, the fact is cost is becoming an increasingly important factor. We have product and cost roadmaps for all our lines, and we continue to drive new products and new technologies we can build into them that will drive down costs. If we're able to replace a $20 circuit with a $2 chip, that is a huge savings. There's pressure on the customer side to reduce costs. They'd like to see us reduce our prices by 10% or more a year, and we can meet those demands. But to do it and still remain viable as a supplier we mustn't lower our prices on products engineered years ago that have a fairly rigid cost structure, but instead develop new products that are better and cost less. This requires flexibility on both our side and theirs.
SI: If you look ahead to two years from now, what do you think we should be preparing for?Younger: With the introduction of the new materials, we should be in the process of preparing to deliver the products that will work delivering those materials. Our materials delivery and analysis business is focusing on these new non-gaseous-based materials for CVD processes, for example. We'll see more and more of these, as well as in the process control arena.
I think that the whole issue of monitoring the performance of every component on the process tool — possibly not in two years, but not too much after — will be crucial. The big issue for fabs is still overall equipment efficiency, which even now isn't very good, and that has to change. With 300 mm everything must be automated, which means more metrology, more tracking, more fault detection and analysis, e-diagnostics and preventive maintenance — getting to the problems before having to take the tool down.
SI: What will MKS look like in five years?
Younger: I believe that by then we will be a $1B company. We'll continue to expand our product offering that surrounds the process chamber, and our mix will be shifted more toward integrated products. From a business philosophy viewpoint, I don't think we'll change much.
SI: Any advice to your peers?Younger: Focus on the customer.
— Alexander E. Braun
