William Elder, Genus Chairman and CEO

William Elder was born in Glasgow, Scotland, and earned a bachelor's degree in industrial engineering from Paisley Technical College in 1968. He joined Fairchild Semiconductor as a manufacturing engineer in January 1970. He served in various senior management positions over the next decade, culminating in a transfer to set up and manage Fairchild's consumer products facility in Hong Kong. In 1979, he joined Kasper Instruments, a division of Eaton Corp., as vice president, operations. Later named division president, he oversaw Kasper's growth to $25M in revenue. Elder founded Genus Inc. (Sunnyvale, Calif.) in 1981, and the company went public in 1988. He was president, CEO and director from November 1981 to April 1990, and as chairman of the board and CEO from April 1990 until October 1996. Remaining as chairman, Elder reclaimed the CEO position in April 1998. Under his guidance, Genus pioneered three manufacturing technologies: tungsten thin films, high-energy ion implantation and atomic layer deposition (ALD) technology.

SI: Like the rest of the industry, Genus reflects what's been going on over the last year or so: You've had layoffs, your 4FQ results are lower than in 2000. How do things stand now and what do you expect for 2002?

Elder: Naturally, 2001 was a disappointing year for the industry. However, some positives did occur. Contrary to most other companies, Genus revenues grew 20%. We also led the commercialization of ALD with several successes in semiconductor and non-semiconductor processes. This acceptance really is a major breakthrough and will propel us in 2002 and beyond. On the other hand, implementation of the newly imposed accounting standard SAB101 did have an effect on how companies determine their revenue. Revenue is now based on customer acceptance. So, overall, for us 2001 was a good year because we grew in revenue and increased the number of customers to seven by year's end, and expect to add to that as we move into this year.

SI: Looking back to everything that went on last year, is there anything you would have done differently?

William Elder (Source: Genus)

SI: Now that there are signs we're over the worst of it, what are your short- and long-term plans and strategies?

Elder: Even during last year, while we were cutting back, taking pay cuts and having shutdown days, we maintained a focus on R&D. I believed then, and even more so today, that you invest during downturns to be prepared for the upturns. We've been focusing on our ALD technology and that marketplace, and have brought in ALD on a production-proven platform. All of our efforts last year went to ensure that we had a true, production-worthy, high-k dielectric thin-film process. This approach has allowed us to take a leadership position in ALD.

SI: You've obviously committed to ALD. What's your perspective on that market?

Elder: We've identified four basic developing segments — capacitors for DRAM, gate stack for logic, BEOL (back-end-of-line) interconnect for all advanced semiconductor products, and non-semiconductor applications. The most recent data from VLSI Research indicates that ALD will be a $1B-plus market by 2006. If we dissect this, we see capacitors for DRAM getting designed in at 0.13 and 0.12 µm levels — and that is now. We also see the data storage segment of the industry needing ALD technology now. So we've put our focus on really driving those two market segments to manufacturing.

SI: What has been the extent of your investment in ALD?

Elder: We were working on it back in 1997. When I returned to the company in 1998 as CEO, that's when I saw the real opportunity. Overall, our investment in it has been over $20M, mostly in R&D and internal capability. Last year, during the downturn, we made a tremendous investment in our applications lab. We may have the world's largest application lab for ALD technology. We have multiple platforms and modules running several different films. We can deposit in excess of five high-k dielectrics as well as several metal barrier films. We made a tremendous infrastructure investment, to be ready for the upturn. Now, we can turn around samples in less than two weeks after the customer has provided us with a wafer and we go through the demo process.

SI: Obviously you consider this a major growth area and have been planning for it well. Will this change anything?

Elder: It has been our focus for the last four years. When I returned in 1998, we did a major restructuring of the company. We sold our high-energy implanter business to Varian, and that allowed us to focus on tungsten silicide CVD and, just as importantly, what we saw as the emerging technology — ALD. So since then, we've been on the path that we are on today, and are recognized as the leader. We plan to continue moving the technology as rapidly as possible to be the dominant production manufacturers.

SI: Based on the investment — both human and economic — do you find that growth is not as easy as before?

Elder: Growth has always been challenging for small companies, particularly in this industry. You've got to spend a dollar before you need it. By that I mean that you must establish your infrastructure globally for customer support and invest in manufacturing before customers come. Last year we established a manufacturing capability for $250M in annual revenues — five times what we did during that same period. It's here that the challenge comes for the smaller companies — making those investments before you need them. But if you don't, when you bring in a Tier One customer, you find that, although he may love your technology, he's reluctant to do business with you. This is why we have increased our customers and now count among them four of the top five global DRAM players, the major data storage companies in the world — Fortune 500 companies that we've been dealing with worldwide. We've penetrated Japan as well as Taiwan, we've always been strong in Korea and are in Europe. Over the last four years we've put in the global infrastructure required to be successful.

SI: How do you see the movement toward a fabless world?

Elder: It'll doubtless continue. Our focus, of course, is on the foundries used by those working with the fabless model. As long as we can get our process technology into the foundries, then we'll be in good shape.

SI: Are there other aspects that you're focusing on?

Elder: Certainly — technology partnerships. We also see that as a major, continuing trend; working with a customer to offset and offlay some of the capacity investments. We can see several customers emerging from just a single one. This is also a considerable help with the R&D effort.

SI: How do you view the increasing number of consolidations taking place?

Elder: I expect the trend to continue and for Genus to be a part of it. It's the normal evolution of a growing industry, and we've certainly become a major one.

SI: So you'll consider acquisitions?

Elder: You must embrace consolidation on both ends — on the acquisition as well as on the being acquired side. We continuously consider these aspects and how we can improve shareholder value and continue working in the markets that we serve. This is just a part of the industry's evolution.

SI: What are some of the industry trends we ought to be paying closer attention to?

Elder: This last downturn has had a tremendous impact upon the entire supply chain. We must pay more attention to the supply chain, because in many cases we're dealing with small companies — much smaller than Genus. And when we get through these rapid growth cycles and then go into rapid depletion cycles, the smaller you are the worse it is. The challenge for the industry is to minimize the peaks and the troughs, and consider the complete supply chain and not just a series of suppliers.

SI: What can be done to minimize these cycles? Do you believe that, industrywide, our forecasting methods are inadequate?

Elder: There is no question that they are. This is the seventh or eighth downturn I've experienced over some 30 years. Every three years we nose down into a downturn that seems to get deeper and last longer. As an industry, we must do a better job of understanding upturns as much as downturns.

SI: What should we be preparing for now?

Elder: The transition into 300 mm wafers and the consolidation of large capital investment in wafer fabs will further constrict the equipment industry. This is because there'll be fewer customers and fewer suppliers. From a company standpoint, you must have very compelling technology to get designed into manufacturing in a very short period of time. The window to do that is getting smaller, making it harder for the smaller companies that innovate, only to have the larger companies come in later to enjoy the growth. And the growth is coming — we're all experiencing increases in RFQs and customer activity.