Rodel President and CEO Tony Khouri
-- Semiconductor International, 12/1/2000
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| Tony Khouri (Source: Rodel) |
Prior to joining Rodel, Khouri's experience included senior management assignments with Rohm and Haas in North America, as well as in England, Germany, France and Brazil, where he worked in the coatings, adhesives, paper, leather, textile, roofing, plastics and water treatment industries. His last post with Rohm and Haas was regional director for Latin America.
Khouri has an undergraduate degree in biology and chemistry from the American University of Beirut (Lebanon), an M.S. in chemical engineering from Ohio State University (Columbus) and an MBA from Widener University (Chester, Pa.).
SI: So far, this has been a good year for Rodel — you've partnered with a number of companies to advance the technology and opened a second office in Taiwan. Can you tell us about this and about what else might be coming?
Khouri: It has been a good year. So far, as of last September, we've hired 100 people, and recently we held an open house for our new Materials Integration Center, which is essentially a small fab in Phoenix. We're in the process of opening a Materials Development Center in Delaware, similar to the one in Phoenix, but focused on new materials development.
SI: Of the 100 new hires, how many were engineers?Khouri: We added 55 people to our technology effort. Most of the hires were technology and field engineers. We're growing very nicely and betting on our future without getting ahead of ourselves — it must be profitable growth.
SI: What's planned for those new facilities?Khouri: The material development center will produce new platforms for our current products — slurries, pads and many of the ancillaries around them. The Phoenix facility, which is a materials integration center, will ensure that all these materials — including those of our strategic partners — work well together. We want our customers to have the peace of mind of knowing that all the materials they buy from us, or which interact with our products, work together. We have the data to show them on equipment and conditions similar to theirs — real-world conditions.
SI: Now that you have these new facilities and hires, what are your short- and long-term plans and strategies?Khouri: In 1998 we were a custom pad manufacturing company. Customers would ask for all kinds of changes in the pads, and we'd custom produce whatever they wanted without really understanding much about how the product would be used. This resulted in unnecessary work and duplication — we had over 4000 parts! Considering how many equipment companies use our pads and slurry solutions, it shouldn't be nearly that much.
We then decided we no longer wanted to be a custom pad house, but an innovator of integrated materials because this is really what our customers wanted. We strengthened our pad manufacturing operation (which we intend to continue), developed major slurry competencies and entered into several strategic partnership agreements. We're working closer than ever with tool manufacturers and customers to ensure we really understand what the problems and the customers' needs are — this makes us more valuable to them, and hence assures our future. Something else became clear to us two years ago — Our supply-chain process was severely fractured. We were victims of our own past success and had grown too fast to be able to handle what customers wanted from us. We disappointed many of them. Since then, we've implemented a complete system overhaul. Now we have one of the best supply-chain systems, if not in the industry, certainly among other suppliers. Our on-time delivery for all customers at present is consistently over 98% globally. We implemented an ERP system, and very soon almost all our information will be in digital format.SI: Anything else you're planning to change in the company?
Khouri: One change that will take place, in an evolutionary fashion, is that we'll work much closer with Shipley, our sister company. Shipley has three divisions — one of them, Shipley Micro, sells complementary products to the same customers as does our CMP division. We expect to provide even more integrated solutions. Although our equity structure is somewhat different, we'll have considerably more critical mass to meet customer expectations.
SI: As a result of these changes, streamlining and hiring, do you find customers want you to provide them with more expertise than before?Khouri: Absolutely! That's why we've invested in the technology and extra engineers over the last couple of years. We're growing at an accelerated rate, particularly the CMP division. Compared to 1998, we grew 70% during 1999, and close to 50% this year.
SI: In view of all this, what do you view as your next growth areas?Khouri: There are two. One's based on what we' pad conditioners (Kinik), CMP slurry-free (3M) operation, colloidal slurries (Clariant), vibration solutions (Vistek), and yet another with Shipley for their copper deposition work, which will be offered through the Rodel channel.
Through all of these and others presently being negotiated, we expect to drive our growth in a big way. The second area is an entirely different area we're embarking upon with Shipley and Rohm and Haas — optoelectronics.SI: That's a non-semiconductor related area.
Khouri: Correct. Fiber optic's being laid to connect the Internet. However, every time there is a node — where information is separated to go from one place to another — this is still done with ICs and other electronic switching and routing components, not optically. By decade's end, to cope with traffic increases and bandwidth demands, everything must be optical. This'll be an important growth area for us.
SI: Certainly, there are opportunities everywhere; however, does it appear to you that it's getting more difficult to grow?Khouri: The extent to which industry growth will happen is uncertain. Different people believe different things. There are factors that influence both the supply and demand sides of the equation, which are very positive for growth.
On the demand side, what is different today from 1998, when we had a major downturn, is that we don't expect to have another Asian meltdown, and the industry is no longer PC-driven. There are all kinds of appliances now — PDAs, cell phones, TV boxes, gadgets, etc. — so many areas are now driving semiconductor demand. I believe that growth will continue. On the supply side, we have the change to 300 mm, with the major fabs indicating that, since the industry is moving to larger wafers, there's no reason to invest in older technology. With a fab being $1B plus, some will wait before making a major investment. So 300 mm is unlikely to happen and make a dent into the supply area before 2002, 2003. People aren't going to rush to invest in capacity like before, because they'll want the latest 300 mm technology. Another important trend is the foundry movement. There are no longer 50 people making fab-capacity decisions simultaneously because they're all short. Instead, with the major foundries taking over more of the production, there are fewer people making these capacity decisions. This means capacity will tend to increase in small incremental steps, and not in big jumps that create imbalances between supply and demand.SI: With all the changes you mentioned, our industry still seems to be subject to cycles. What do you think we could do to further ameliorate them?
Khouri: Besides the capacity question we've already discussed, I believe that consolidation is another factor that's helping.
Clearly, the industry needs to consolidate further. There is a huge number of smaller companies — somewhat like us — trying to supply the industry. Since our customers are bigger than the supplier base, in terms of technology we cannot invest as much money as an Intel can — and that goes for everyone else. Although now with Shipley we're probably the leading suppliers of mission-critical materials, we're still relatively small compared to our customer base. So two things have to happen. First, a further consolidation of suppliers, and second, more joint development projects need to take place, so that both customers and suppliers invest together in new technology and help defray R&D costs. Strategic alliances are a form of consolidation, which do not require one side to pay astronomical prices to obtain another company's capabilities.SI: Some might argue that as the fabless model becomes increasingly widespread, fabs will become the technology gatekeepers. At times, they might decide not to invest resources in the next technology node until getting a good ROI on their present capital equipment. This might delay the introduction of new technology. How do you view this?
Khouri: I tend to agree with that assessment. I don't believe an industry can survive unless people do get their cost of capital or a lot of talent and money are going to move away.
SI: It might, however, stifle innovation.Khouri: Possibly slow it down. I believe that if people don't get their return on investments, regardless of where they're on the value chain, it fuels booms and busts. In the boom times everybody pushes like crazy, then you have a little recession and those who are not getting a return are unable to withstand it, and you end up in a worse situation than what you would otherwise. When all is said and done, technology is a business A year ago everyone thought it would grow and grow, and then the bubble burst. The old laws of profit and loss still seem to apply.
The industry is more productive than ever, so we have a major productivity gain, which means we probably can grow without inflation for a long time. But in the end you still must return money to the shareholders, and the shareholders won't indefinitely subsidize companies.SI: On the matter of consolidation, have there been any concerns over the fact that it appears it's no longer as easy as it used to be for small companies to make their mark? Small fish with new technologies find it very difficult to make their mark, or they are soon swallowed up by the bigger fish.
Khouri: It is indeed a concern. You need critical mass in this industry because it's grown to be very big, and it's more difficult to make an impact. This is exactly why we' to foster innovation without locking out those small, smart ideas. We'd like to make every inventor rich; that's our business model. We want to hear from anyone with an idea for a new product, material or technology in our field — we'll integrate it with current processes and get it to our customers.
SI: It'll be interesting to find out how many calls you get after this interview comes out.Khouri: (Smiling) We're getting more, now that our early partners have shared with our success.
SI: What are you planning to do differently from your competitors, and what should your customers expect from you in the near future?Khouri: Our customers have rewarded us with the leading marketshare in CMP consumables. I'd say that the basic difference between our competitors and us is our commitment to customers, which essentially promises that we'll deliver the solution that best suits them, regardless of whether it comes from us or someone else. We'll not push our solution if that isn't what the customer exactly needs. That's why we have partnerships with companies like Clariant, Shipley, 3M and others.
Within the next three years, we expect to offer a much larger number and variety of integrated solutions on materials. We'll have more alliances and pieces of the solution, and we'll be working much closer with equipment suppliers like Applied Materials, Lam, Novellus and others. Customers don't care where the solution comes from, only that it be provided. It's becoming impossible for any one company to develop the necessary technologies, equipment and materials all on their own.SI: As processes grow in complexity, it's more difficult to produce new products. A respectable amount of R&D must be done and you must add to this the R&D that customers demand their suppliers provide for them — while asking for lower prices. How do you meet these challenges?
Khouri: Our prices have not moved much even during the downturn. The reason is we would have been unable to survive. We discussed this with our customers and demonstrated that we couldn't reduce prices without going out of business. They understood this. We did help them reduce their cost of ownership big-time, though. As long as you have a solution that solves a problem and adds value, customers are willing to pay for it.
On the need to invest in order to come up with innovation, in 1998 we invested 4% or our sales in R&D. In 1999 it went to 9% — remember that at that time we were also experiencing considerable growth — and in 2000, we are investing almost 13% even though we continue growing. We intend to maintain it at this level. Part of our strength is our intellectual property, our patents. We will keep them coming.SI: What would you like to change in our industry?
Khouri: Talent. It's becoming increasingly difficult to find good people. Over the last two years we've been able to hire top-notch engineers from everywhere, even though everyone is fighting for them. The question is how long can this be sustained. To get the talent, companies will have to dish out more options, compensation, benefits — this could lead to inflation in the talent pool.
Another area I'd like to change is the diversity aspect. The industry is very good in getting international diversity. People with accents have no problems in joining this industry. However, women and minorities are much under-represented. Others, such as the chemical industry, seem to have done a better job than we have. This could also solve our talent problem.SI: What will Rodel look like five years from now?
Khouri: We'll be completely digital, no paper. We'll be completely connected to our customers — practically every project we have will be connected with a customer or group of customers for specific goals. Whenever customers have a need, they will be able to communicate instantaneously with Rodel and Shipley for a solution. •
— Alexander E. Braun
