Philip I. Roberts, President, Swagelok Semiconductor Services Co.

Philip I. Roberts (Source: Swagelok Semiconductor Services)

As president of the recently established Swagelok Semiconductor Services Co. (SSSC, Santa Clara, Calif.), Philip I. Roberts leads a staff of more than 600. Roberts has more than 20 years of international experience in semiconductor instruments and materials marketing and general management, most recently with Praxair MRC. He previously held positions with Veeco Instruments and Varian Associates, and joined Swagelok in March 2003. A native of the UK, he holds a B.S. in physics with metallurgy from the University of Liverpool. SSSC is a wholly owned subsidiary of Swagelok Co. (Cleveland), and was formed this year to provide fluid system solutions in the shape of stainless steel and plastic components, including valves, fittings and tubing, to the industry.

SI: Swagelok formed your subsidiary during what arguably is the industry's worst downturn. How difficult has it been to get everything going?

Roberts: Fortunately, the formation of the Swagelok Semiconductor Services Co. on January 1, 2003, didn't start from ground zero. Swagelok has been manufacturing and supplying to the semiconductor industry, well, since the beginning of the industry.

SI: As you say, Swagelok is well known. What was the spinoff's intent?

Roberts: The intent was that, although we've been a long-time industry supplier — well known and well established in the marketplace, and respected for our engineering skills — the company decided that, to move to the next level, it would have to create more of a focus and emphasis to demonstrate our commitment and role in the semiconductor industry. Some 600 people came with us from within the larger Swagelok organization when SSSC was formed.

SI: Knowing what the industry's situation was when SSSC was formed, would it be logical to assume that you were "lean and mean" from the very beginning?

Roberts: Yes. You must understand that Swagelok itself, since the heady boom days of 2000, had already managed staff reductions, primarily through attrition and shifting personnel. As you know, Swagelok has business in other areas — chemical, oil, gas, power, pharmaceuticals, etc. — so within the organization we were able to move people around. We've had to trim a bit like everyone else, but not through forced layoffs.

SI: The move seems logical. However, what made Swagelok spin off SSSC now, during a downturn?

Roberts: When is it a good time? When there's an upturn, there are too many things going on and you're focused on other areas, concerned about satisfying your customers' demands. The company takes a long view on the industry. There was a review of our involvement in it after the boom of 2000 and after internal discussions, as well as external ones with key customers. What evolved was that this was the time to ratchet up our service and support levels. One way to achieve this was to bring within the 3000-member company Swagelok some degree of finer focus toward the semiconductor marketplace. Last year, it was decided that a way of doing this was by creating a specific business unit, hence SSSC. As you said, times are difficult, but our thinking is that it's during a time like this that the industry would most appreciate enhanced services, such as greater access to product development and engineering resources within SSSC.

SI: You're somewhat in the position of George Washington who, when president, couldn't blame a previous administration for his problems. What were some of the challenges you encountered in starting off SSSC, and how did you meet them?

Roberts: (Laughing) I was fortunate that the company was formed in January and I joined it in March. By that time, the Swagelok management team had put together SSSC. By then, we had six manufacturing sites over in Cleveland that had been dedicated to semiconductor products. There was a management team that had been put in place that involved engineering and operations management, manufacturing, customer technical service, and the like. So, in one sense, we're self-contained as a business unit. So, for me, taking over was a pleasure. Swagelok's significant decision was to have the head of SSSC and our headquarters in Silicon Valley.

SI: Were there no challenges for you, then?

Roberts: There were two things I had to devote myself to, coming into the job. First was to work with our people within SSSC so that there was a better understanding of the culture of the semiconductor industry and the speed at which it works. The second thing was to communicate to the marketplace our long-term commitment to the industry. Our people have been very responsive to this, and we're in the process of setting up here in California — at a time when people are abandoning Silicon Valley — a headquarters and semiconductor engineering center. We're in the process of putting the equipment together and, at the beginning of the year, January 1, 2004, we'll open our facilities there.

SI: With everything that you now have coming into line, what are your expectations for 2004?

Roberts: Like everyone else, we read the trade magazines, listen to the forecasters and analysts and, of course, track the market ourselves. We believe that there will be some moderate growth during 2004 — primarily in the capital equipment market, which is a key area for us. We're already seeing a good amount of activity, particularly in Asia — in Taiwan and China — with new fab construction. As many others, we believe that the downturn has bottomed out. As the saying goes, we're "cautiously optimistic."

SI: What are your short- and long-term plans and strategies?

Roberts: Short term, obviously, is putting into place additional resources and capabilities that will allow us to move in conjunction with our customers to meet their needs. I think that the whole supply chain — the capital equipment and fab folks — is one where they're demanding extremely quickly turnarounds, whether in the area of quotations, product development and enhancements, or product delivery. Sometimes, these demands can be down to hours. The whole supply chain is telescoping down and, because of that, we've introduced lean initiatives. We've applied these to our manufacturing capabilities, and to our entire business process as well. We've really looked at how we've handled customer inquiries, whether quotations, technical support and service, how we handle and execute our orders. As a consequence, we've improved our responsiveness.

SI: Have your customer base's requirements changed from what they were before the downturn?

Roberts: The continuous pressure on lowering costs certainly hasn't changed. Whilst we're cognizant of that, we believe we're also in a position to continue working on providing the products and services they need. We're also seeing an increasing requirement for customized designs. Every equipment manufacturer — even if they're in the same area of CVD or PVD — have their own particular nuances. This is an area where we're enhancing our services. Here in California, our engineering center will be an enhancement to our current engineering strength, which primarily resides in Cleveland. We intend to bring this strength much closer to the decision makers in the equipment field and the integrators who supply the equipment field — the OEMs. These engineering resources will work more readily with the design engineers to come up with solutions for specific issues. We'll have a laboratory where we'll be able to do testing of such products and give results in days.

SI: Does it seem to you that, after the massive layoffs prompted by the downturn, your customers now expect you to supply some of the expertise that they used to have in-house?

Roberts: That is correct. There has been a shift in the marketplace in that direction, and we're looking to provide that expertise and capabilities to our marketplace.

SI: How do you see the move to, and the market in, China?

Roberts: I believe that China will continue its growth as a chip manufacturing center — this is obvious from the number of fabs that are going up there. Many of those, of course, are being fueled and funded by Taiwanese companies. We have a presence in every geographic segment, including China. We work through our independent Swagelok sales and service centers. One of our major focus areas is the equipment side, and so we have the support and technical facilities there. We're continuously evaluating our presence and our support within those areas to see whether we need to add to our capabilities.

SI: You mentioned that the fundamental plans were already in place when you took over the company. Is there anything that you are planning to change?

Roberts: The fundamentals and core engineering and manufacturing competencies of the organization are well settled. They will remain as they are, forming the company's bedrock. I expect that we'll have more of an interaction, in our market-driven activities, with key market players in the engineering arena. For this, some changes in our processes will have to be implemented to speed up our responsiveness to the market, particularly in the new product area.

SI: Obviously, SSSC's creation was prompted by the need to respond to competition. What are you planning to do differently from your competitors; what will distinguish SSSC from the rest?

Roberts: Our focus is on customers and marketplace requirements, and on how to improve our service and support for them. We're looking to bring out the best products possible in the shortest time. For example, we're currently working with leaders in the area of ALD, and I believe that our engineering strength is coming through in all of this, particularly now that we have the necessary technical staff in Silicon Valley, close to the people who are doing this development work.

SI: How are you planning for your next growth areas?

Roberts: Swagelok as a company has learned a few lessons from the explosive marketplace growth that took place during the year 2000. It is fair to say that, during that time, every supplier servicing this marketplace struggled to keep up. Then everything crashed. So one of the things that we've done at Swagelok and SSSC is take a hard look at our capacity planning, at our resources.

There is a difficulty in prophesizing what is going to happen in the marketplace — forecasting has become extremely difficult. Therefore, we're trying to take the view of what we believe is reasonable now and over the next three years, and plan for what happens if this suddenly doubles. We're comfortable that we have the resources and capacities in place — both manpower and equipment — to handle a significant upturn in the marketplace.

SI: Is growth getting more difficult?

Roberts: We're seeing a certain degree of maturity in the marketplace, and when one of your main interests is the equipment companies, then certainly one can see that demand is flattening out. The organic growth itself will be moderate, I think. There's already considerable equipment out there producing chips. A forecast has already indicated that a larger volume of chips will be produced during this current year than there were in 2000. So the demand for chips is there, and the electronic content is rising. However, the demand for equipment has flattened out and won't necessarily be overly exciting. This is because there is more productivity coming out of those tools and also, with 300 mm tools coming online, they're producing 2.25× more chips than a 200 mm wafer. So, aside from organic growth, we're really looking to grow through two mechanisms: 1) through the introduction of more products and broadening our range to meet market and customer needs; 2) by offering in more services so that the market continues to prefer our solutions to those of the competition.

SI: Is the industry becoming commoditized?

Roberts: Possibly, to a certain extent. However, so much technology and engineering are involved in putting out products — whether you're an OEM or a device manufacturer — that complete commoditization as you see in other markets is unlikely.

SI: If you could, what aspect of our industry would you change?

Roberts: The forecasting. We need better forecasting capabilities. We certainly need a better understanding of consumer market trends, since it is that market which drives electronic content. I do sympathize, however, with the folks who do the forecasting. You cannot always know what's going to drive the next boom cycle until it's here.

SI: Any advice for your peers?

Roberts: Hope is not a strategy; one must be a realist in terms of what is truly taking place. John Chambers of Cisco put it best. He said, "Deal with the world the way it is, not the way you wish it were."