VahéSarkissian, FEI President and CEO
-- Semiconductor International, 9/1/2000
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| Vahé Sarkissian (Source: FEI) |
SI: FEI has had a strong first quarter and an equally good second quarter, and seems to be doing quite well. Can you update us on the company?
Sarkissian: We are doing well — largely due to the work we've done over the last two years. Our expanding customer base and financial results reflect our successful growth and are gaining us increased recognition in the financial community.
SI: What happened two years ago?Sarkissian: Three major factors effected change in FEI. The first was bringing together three entities that were rich in technology and innovation - Philips Electron Optics, FEI and, more recently, Micrion. This combination of core technologies gave us a unique technology base and a strong talent pool. The second major change was the transformation of our products from general-purpose instruments to solution-driven systems based on the combination of the technologies we brought together. We increased our focus on the semiconductor and data storage markets, and offered new subsurface 3-D metrology and process diagnostics solutions. The third major change was to focus the company even more on customers and create a management system that enables our geographically dispersed organization to focus on customer deliverables in a collaborative work environment.
SI: With FEI headed in the direction you want, what are your short- and long-term plans and strategies?Sarkissian: We want to grow the company to a critical mass, which we believe in the near-term translates into a $500M company, and on a longer-term basis to a $1B company. Our principal strategy is to create a market identity for FEI through products that generate high value for our customers, based on our structural process management capabilities and our technologies.
SI: You obviously see your market as capable of supporting this growth.Sarkissian: Yes, there's a very strong need in the marketplace, which we believe we can fill. We're already on a growth path that'll carry us over $300M in revenue this year. We think we have sufficient organic growth potential to take us to the $500M range. Potential mergers and acquisitions can accelerate our reaching that level.
SI: Is there anything specific you plan to change?Sarkissian: The changes I described earlier are continuing. We'll continue to strengthen and expand our technology base and identify new growth opportunities, and continue to improve our infrastructure. We're in an important growth period. On one hand, we're continuing to improve our organizational discipline, and on the other we want to maintain our entrepreneurial agility. I call this agility with discipline. I believe we're putting into place the right mindset and organizational philosophy to achieve this. We've already made significant changes over the last two years that have produced the current results.
SI: How are you preparing for your expected growth?
Sarkissian: In three ways. Number one is what we're doing with our products; we'll continue to bring new applications. Two is what we're doing to position ourselves to provide better service; and three is continuing to advance our core technologies. In terms of products, we're offering more applications to enable our systems to be used in broader ways. We see many opportunities in 3-D metrology, defect analysis, and structural diagnostic and process control.
In terms of customer service, we're expanding our workforce and investing in a responsive infrastructure for 24/7 service. On the technology side, we have a close relationship with Philips Research and several key advanced technology programs with them. We also continue to invest heavily in advanced ion beam technology programs in Hillsboro, Oregon, and Peabody, Massachusetts.
SI: So how are you focusing for this?
Sarkissian: On the product side, our first area of focus is to make our systems increasingly easy to use. Then we must bring in the new generation of products — faster and cheaper. On the customer side, we've made significant progress with our field operations to establish the necessary relationships that enable us to determine what is required by customers, in order for us to meet their needs. This also means having the necessary service infrastructure at the customer location. On the technology front the focus is on the key beam technologies, systems engineering and software. We're outsourcing much of our other subsystem manufacturing.
SI: Are your customers, like those of other companies, requiring that you become more of a problem-solver than an equipment provider?Sarkissian: Definitely! When you're pioneering in a new area, a two-way relationship is always essential. The problems faced by the industry with the move to larger wafers, smaller dimensions and new materials cannot be considered only from the supply side of the equation. Interaction in real time is key. You must consider the problems customers are attempting to solve in an ongoing fashion, to better understand them and become more useful, and to provide the appropriate solutions. As an example, we've redesigned several of our applications to provide the capability to make measurements much more quickly while providing more information. We have been successful in this regard, and this has been the basis for our growth.
SI: What do you think differentiates you from your competitors?Sarkissian: It probably sounds corny and like something everybody says, but we have a unique core technology that we' nanometer-scale deposition, etching and metrology capabilities, all in a single system. That's a mouthful, and that's powerful.
SI: With processes becoming more complicated and more stringent demands being placed on tool-makers, R&D is getting more difficult and expensive. Do you think this is perhaps a cost your users should share with you?Sarkissian: That's a good question. The customer always pays for value received, and competitors vie for customers' business. This is the nature of business, and it will continue. Mainstream technologies require enormous resources. In the past, customers have helped independently or through consortia to identify and address these key areas. Increased communication and collaboration between major semiconductor companies and major equipment manufacturers have set the stage for the SIA Roadmap to be executed. This will proceed through up and down cycles with the scale of investment continuing to increase with the scale of the semiconductor industry.
The other part relates to how new and smaller equipment companies can come about to offer augmented solutions to some of the SIA Roadmap problems such as metrology. No single measurement will give you the answer. Multiple ways of measuring need to be done to develop and control these increasingly complex processes. Also, new processes need to be developed for new materials. Both leading semiconductor and equipment companies need to stimulate and nurture new innovation for in situ metrology, cluster metrology and on-line metrology. The smaller and intermediate-sized companies need more external funding to accelerate their time to market and product completion. They also need a close relationship with customers and a means of demonstrating their results. This is the chasm many of these companies cannot cross. Customers can help greatly in this regard.SI: From this, it may be deduced that you may sometimes wish your customers were a little more detailed about what they want and what they want it for.
Sarkissian: Yes. Most customers eventually give you the information you need. The problem is it's to their advantage to have something unique or different from what their competitors offer. This is a primary driving factor for all customers. In the end, the way things work out is that a leading company will work with a leading equipment supplier to create something new that will give them an edge over competitors. Later, others will benefit from this. I don't see this kind of hopscotch development changing any time soon. This is why when these progressions become too difficult and expensive, consortia develop.
SI: It's nice to be on the upward swing of the semiconductor cycle; but people already are talking about the next downturn. What should we, as an industry, do to try to minimize these cycles?Sarkissian: It seems one of the global environment's characteristics is increasingly faster change. Our industry is subject to business cycles led by demand, which reflects back in the food chain — and the farther back you are in the food chain, the more vulnerable you are. The infrastructure demand and consumer demand, whether it's driven by the Internet, communications, consumer products — whatever — drives the need for chips, which in turn drives the requirements for new technology and capacity. This drives the equipment industry, and eventually results in overcapacity and another downturn. This can be ameliorated, but I don't believe it will change. The situation is not as bad as it used to be because there aren't as many small companies as there were before; equipment companies today have become large enough to have sufficient reserves to pull through these cycles.
I should add that in our case, where we offer process diagnostic and time to market solutions, we are somewhat less affected by the cycle because our customers need our equipment to increase their capacity utilization through improved yields and to bring their new products to market faster. We demonstrated this in 1998 when, at the height of the industry downturn, we grew 7%.SI: Which industry trends should we be paying more attention to?
Sarkissian: There are two that concern me. One is excessive consolidation. What this does is limit the choices on the part of semiconductor manufacturers, leaving no room for the little guys who may have great technology. They don't get the investment capital that enables them to go forward.
The other is the granularity of the investment required. It takes a huge capital investment to set up a new fab for the new generation of technology. This forces the industry to be risk-averse, which, although understandable, does not enable new innovations to be absorbed.SI: What should be done about it?
Sarkissian: I'd like to see semiconductor companies give a little more attention to upcoming technologies and nurture them along. Some of this is happening already, but not enough.
SI: Which is the other trend?Sarkissian: Standards requirements. As industry standards emerge for clusters and measurements, etc., we should have the equivalent of network standards that will allow any equipment manufacturer to contribute to the line by being able to plug into it. It does not matter if these are de facto standards — they must be adopted industrywide, like the Internet.
SI: What would you like to see changed in our industry?Sarkissian: I'd like to see the execution of the SIA Roadmap done in a way that would attract smaller companies with good technologies, to have them participate. This would give them the opportunity to share their advanced capabilities in a way that might allow the Roadmap to be accelerated. It shouldn't be limited to just a few large players.
SI: Do you find the Roadmap too conservative?Sarkissian: No but I believe its execution will require continued innovation, and I would like to see more money go into metrology. It's like driving a car without headlights. You can go fast, but you may crash.
SI: Do you think the industry understands the value of metrology to process control and yield?Sarkissian: The people in the trenches do, because they're always under the gun to find out why something has gone wrong. But I don't believe it's gotten the attention it deserves. Defects and critical dimensions are taking a whole new meaning in the new complex processes.
SI: Any acquisitions on the horizon?Sarkissian: We're always looking for ways to augment our technology portfolio, but nothing I care to report on at this time.
SI: Looking ahead to three years from now, what do you think we should be preparing for?Sarkissian: As an industry, we shouldn't panic about a possible downturn. It will come, and it will rise again. The financial hype during the upturn must be moderated the same as in the downturn. Too often, hype is confused with real value, and hot air exaggerates real value.
SI: What will FEI look like five years from now?Sarkissian: We'll be a $1B-plus company, respected as a leader in our field, and highly connected in the industry. We'll be a major driver in problem-solving within the SIA Roadmap.
SI: Any advice for your peers?Sarkissian: (Smiling) Let's talk more. •
— Alexander E. Braun
