'Raj' Rajagopal, BOC Edwards CEO

"Raj" Rajagopal joined The BOC Group in 1981 and has held several key positions at BOC Edwards, a business line dedicated almost exclusively to the semiconductor industry. He was appointed CEO of BOC Edwards in 1998 and became an executive director of The BOC Group in July 2000. Rajagopal is on the boards of directors of Osaka Sanso Kogyo, FSI International and several wholly owned subsidiaries of The BOC Group. Rajagopal has a Ph.D. in mechanical engineering from the University of Manchester Institute of Science and Technology. BOC Edwards is a manufacturer of gases, vacuum pumps, exhaust management systems and chemical delivery systems.

SI: This has been an exciting year so far for BOC. You're acquiring Smiths Group's vacuum and pressure system business, and you have a new global vice president for your compound semiconductor business. What's next?

Rajagopal: Like so many in the industry, we're using the downturn to look at where the industry is going, and positioning ourselves as best we can to ensure that we do well in supporting our customers through it. Four years ago, when we created BOC Edwards, we essentially put together the electronic gases and vacuum parts of BOC. At the time, we were the leading supplier of vacuum to the semiconductor industry — which we continue to be — and had a strong position in gases. This gave us a solid platform to build upon, and we reinforced this by adding complementary products and services. We bought the chemical management businesses from Systems Chemistry and FSI, the Kachina Component Management business and other smaller ones, and recently, the Smiths' vacuum business. This gives us a robust platform from which to provide the solutions that we believe our customers want. It also positions us for providing more complex, innovative, high-added-value subsystems and a more comprehensive range of materials and services.

We're fortunate in that half our business is in the capital equipment area and half in the operational materials and service area. We see an outsourcing trend in the industry, where people focus on what they do best and get suppliers to do other things. We can take advantage of this by providing a broad range of materials, equipment and services that collectively provide considerable customer value. We can support the equipment that is installed, take part in their CoO improvement programs, and feed that back into product improvement programs. We also expect to invest in new technologies and look at acquisitions where they fit.

SI: Certainly these aren't the best of times for our industry right now. Even before the traumatic events of Sept. 11 we had entered into one of our worst downturns, and the Western economies were on the edge of recession. Now, even leading industry forecasters hesitate to make projections about what we can expect over the next six to 12 months. What's your outlook?

	“Raj” Rajagopal (Source: BOC Edwards)

SI: Things being so uncertain, will you organize things differently for your short- and long-term plans and strategies, or do you believe it's best to keep to the course?

Rajagopal: Even before Sept. 11 we sensed uncertainty on the industry's part. We kept hearing that things might pick up during the third or fourth quarters, but at the time we hadn't seen any evidence of that. We did not get many optimistic assessments at the time from customers in any geographic region. And indeed, this has proven to be the case. We assumed that we'd be running at pretty low levels for some time and we haven't changed that view. Equally, we believe that when the industry does recover, it may do so strongly and that growth will continue — applications and products are broadening quite substantially. So we haven't changed our position since September — we continue to manage the short-term difficulties and, most importantly, we continue to invest toward a strong future.

SI: So is there anything you're planning to change, not necessarily because of recent events, but as part of a larger strategy?

Rajagopal: Over the years we've increased our range of products and services. In the future, we see ourselves supplying subsystems and very broad services to customers. We're continuously reinventing ourselves to meet what is, essentially, an ongoing goal. This will require some organizational changes, certainly changes in business emphasis, and potentially increased investments in certain aspects of business where we predict growth. So, yes, we will change, but it'll be in an evolutionary fashion along the lines of supplying subsystems and services, and supporting our "integrated solutions" approach.

SI: Do you then view the service, rather than the product, area as a more important growth arena?

Rajagopal: We see both areas growing, perhaps at different rates. We see the product side in continuous change. To fulfill our customers' needs to reduce costs per bit, we must change the paradigm and offer something new, different, and innovative that gives them lower costs while allowing us to run a profitable business. We're well-positioned to do this, because we already have a fair presence in the equipment side and, by adding one or two complementary areas, we can offer comprehensive subsystems. We already offer combined vacuum and exhaust systems. On the services side, we need to build a stronger infrastructure and offer new services, such as tool component management.

SI: Is growth getting more difficult?

Rajagopal: I don't think so. The industry is more challenging, driven as it is by its cycles. However, if you're well-positioned, have the right strategies, and can execute, then your opportunities are even better because the consolidation that is evident in the industry gives stronger companies more opportunities. We certainly see consolidation giving us opportunities to find ways of growing faster than ever before.

SI: Are you saying, then, that growth hasn't become more difficult, just different?

Rajagopal: Precisely.

SI: What are you planning to do differently from your competitors?

Rajagopal: Because roughly half our business is on the capital equipment side and the other half across fab operations and maintenance, it gives us a unique insight into the semiconductor business. We get perspectives on process and equipment technology drivers from the capital equipment side, as well as perspectives on process improvement from the fab operations side, all of which complement each other. This allows us to see different ways of doing things. Over the years, we've been consistent in building our capabilities in the business — a strong customer focus, technology and operations, and a very extensive global services and support structure. This is quite a combination to build upon.

SI: What should your customers expect over the next two years?

Rajagopal: Primarily to do everything we can to help them meet their goals. For example, with some customers it is important to be able to quickly ramp up, and we can help with quick installs, as well as supporting those installations. Others might be considering, for example, expansion into China, and as part of The BOC Group we already have strong capabilities there. In terms of services, we're positioned to help with, for instance, total gas and chemicals management, component management and remote e-diagnostics.

SI: Are you satisfied with the level of communication between you and your customers?

Rajagopal: (Smiling) You can always communicate more. In our industry, which changes so quickly and sometimes radically, it's difficult for anybody to communicate fully and effectively. Any opportunity to improve communication is of paramount importance. And it's not always a one-way matter: Although there are times when our customers don't communicate with us as well as they might, there are others when we're equally guilty of the same. There are ways to improve this — fuller specifications are a good start, transparency of information too. True, often there is proprietary information involved, which is not always forthcoming, and then the whole supply chain suffers as a consequence. When this is discussed clearly and regularly with customers, the level of exchange almost always improves.

SI: Certainly, if customers expect you to take over certain aspects of their operation, they must be more forthcoming.

Rajagopal: Correct. Clearly, there will always be matters of confidentiality they must be careful about, requiring them to be more trusting. However, if we can demonstrate the ability to safeguard those confidences and be there when we're needed, they'll be more likely to share information next time. Once a customer recognizes that you're going to be there over the ups and downs, trust grows. This is why sustaining these long relationships — globally — is so important. Whenever a customer changes a vendor, this process must start all over again.

SI: How do you view the very active consolidation process that our industry is going through?

Rajagopal: The industry has rapid growth and decline periods, so consolidations aren't that unusual. Inevitably, the industry tends to do things at speed, so when it does something wrong it also does it quickly. There are many short-lived windows of opportunity that you often have to respond to very fast. Personally I'd prefer a cycle, both for consolidations and for the industry itself, that's a little less frenetic and a little easier, since that would add more value during growth and decline periods. There would be less trauma all around.

SI: We've touched upon the industry's cycles. Is there anything you think should be done to soften their impact?

Rajagopal: In the mid-1990s, some believed that the cycles might ameliorate or become a thing of the past, as dependence on the PC diminished and chip applications diversified. The reverse has turned out to be true, plus these cycles can also be linked to outside economic events, such as the Asian crisis and, more recently, the huge growth in some high-tech companies that eventually led to falls in demand. I find it difficult to see any way around this. Hopefully, when the industry matures a bit more, we'll manage better. I believe the next upturn could well be sharp and violent, rather than gentle.

SI: Do you see any industry trends that we ought to be paying attention to?

Rajagopal: I think that, at this stage of the cycle, device prices and capacity utilization are overwhelmingly driving thinking in the industry. This affects things such as technology introduction, smaller linewidths and associated technologies. It drives where technology is going — obviously it is driving consolidation, with smaller companies being unable to cope with the pressures. It is going to be difficult to achieve the goals the industry seeks with existing product lines and technologies. The need is for more radical solutions in terms of equipment, service and outsourcing. The industry will need suppliers strong enough to follow these cycles who also have the necessary range of products and services.

SI: What would you like to change in our industry?

Rajagopal: Certainly the cyclicality, which causes us all a lot of pain. I'd like to see the cycles moderate a bit. It plays havoc with productivity and markets. We'll always have them, and we need them to stimulate technology and growth, but sometimes too much stimulation isn't good for you.

SI: What will BOC Edwards look like in five years?

Rajagopal: I believe that, over the next five years, the industry will grow strongly, and the trend of customers wanting stronger global suppliers and additional outsourcing services will continue. We see ourselves investing very heavily in response to this trend and evolving the business from supplying vacuum pumps and gases — as it did four years ago — to one supplying subsystems and total material and service offerings to our customers. We've been successful so far, and see no reason why this shouldn't continue. We will grow faster than the market. Our sales last year were over $1B and we hope to grow this substantially.

SI: Any advice to your peers?

Rajagopal: Let's work closer on common problems and issues.