Jim Dauwalter, Entegris CEO

Jim Dauwalter (Source: Entegris)

Jim Dauwalter became CEO of Entegris (Chaska, Minn.) in January, having previously served as the company's president and COO. His responsibilities include overall planning, staffing and operational results for the organization, which has revenues approaching $350M. During his 27 years with the company, Dauwalter has held executive line and staff positions. He played a pivotal role in directing the growth of the company from 40 to approximately 1,800 employees, increasing sales and expanding the company's operations to 16 worldwide manufacturing facilities. Dauwalter, who earned a bachelor's degree in business management from Bemidji State University (Bemidji, Minn.) in 1973, serves on the board of directors of Entegris, Metron Technology B.V. and the Community Bank of Chaska.

SI: Entegris appears to have hit the ground running in the new millennium. You're going to buy Nisso Engineering's component product line, have opened a new microelectronics regional service center in Oregon, named a new president for the microelectronics group and hit a record revenue level in your last quarter. What's next?

Dauwalter: Like the industry, you have to keep movin' and shakin', and that's what we're doing. If you're going to stay on top of technology's edge and continue as the market leader that we've worked so hard to become, those are the things you must do. We were fortunate to have a talent like Michael Wright within the company, whom we could name president of the microelectronics group. It's enabled us to fill the position without losing any momentum on the programs we have established.

SI: Will the Nisso purchase require any restructuring?

Dauwalter: No. Part of the Nisso deal is designed for us to leverage existing capabilities. For quite some time, we've had our own sales, marketing and distribution channel in Japan — called SVJ. That will be the office responsible for sales activity for those products in Japan. Another aspect of our deal with Nisso is that they will continue manufacturing those products for a short time, until we've completed the technology transfer and the right facilities are in place. It's important not to upset the momentum Nisso has created. Our goal is to provide them with the best products and service during and after the transition period.

SI: How long will the technology transfer take?

Dauwalter: Under the terms of our agreement, we have one year.

SI: With all these new factors, what are your short- and long-term plans and strategies?

Dauwalter: Short-term, we're going to stay focused on the things that Entegris has always done well. I believe it's very important that we flawlessly execute whatever we do. We want to maintain our focus on delivering good products, increasing market share and solving our customers' problems — what Entegris has been built on. We believe in managing by the values of integrity, success and relationships. We want to reinforce these values not only with our employees, but also with our suppliers and customers — and now that we're a public company, with our shareholders as well.

SI: Will you be making any changes?

Dauwalter: We've become public in an industry that seems to be looking for a fewer number of suppliers and larger companies to deal with, which have the momentum to weather industry cycles. We'll be looking for company acquisitions that add value to our business. We mentioned Nisso — it wasn't that long ago that we acquired Mace, a fluid components manufacturer. We'll continue on the lookout for companies that complement what we do or fill gaps in our product offering.

SI: So, any acquisitions on the horizon?

Dauwalter: (Smiling) There's always something on the plate. You've got to remember that once you determine you want to acquire something, it doesn't always mean that it's acquirable. Many target companies out there still have expectations from March 2000 market values. The fact is that the stock market has made quite an adjustment, and there has to be a reality check regarding expectations that some of these players have about how much they might be worth.

SI: What are your next growth areas, and how are you planning for them?

Dauwalter: Over the last five years we've invested over $180M in facilities and infrastructure around the world. This is one of the reasons why we're enjoying our present success. The industry has been talking about 300 mm for quite some time, and we've had our 300 mm product available for about the last year-and-a-half. It's crucial to continue coming out with new products. It's interesting to note that, historically, we've introduced 500 new or derivative products a year. We intend to continue this because our industry reinvents itself every couple of years, and we must follow suit.

SI: Is it getting more difficult to grow?

Dauwalter: With the current slowdown, growth will be more difficult for calendar year 2001. The industry experienced significant growth during 2000 — Entegris alone grew 42%. We think that — particularly for manufacturing companies — you've got to digest that growth before moving ahead. So once in a while it's good to have a slight breather that allows you to pause and look back on your investments and processes, and ensure that you have the right things in place, and that you are using them to their maximum capabilities.

SI: Does this mean that you view the industry downturns as breathing space to take stock and start up the growth process again?

Dauwalter: (Laughing) Let's define our terms first! We must be careful about how we use the term "downturn." What we had a couple of years ago was a catastrophe. I prefer "slowdown." We'd love it if every year we experienced 15% growth; however, yes, a slowdown does give you the opportunity to make sure you have the right resources in the right places, and you are using them to maximum efficiency.

SI: What should we do as an industry to ameliorate the impact of these cycles?

Dauwalter: The cycles are driven by a number of factors. Often it's the hurry-up-and-spend-and-get-it-built-and-now-wait-for-everyone-else-to-catch-up syndrome. Sometimes, however, other things have an effect on these cycles — we are affected by the outside world. For example, Asia's economic downturn in the 1997-98 period had a big impact on us. Today, the U.S. economy has a greater effect on industry revenues — we hear disappointing news from Dell and Apple and a host of other companies that are dependent on microelectronic components, and these things affect us. As ICs become more prevalent in life, the worldwide economy becomes more of a factor in our industry. When we were growing and there wasn't that kind of volume, and we weren't prevalent everywhere, we were less subject to those conditions. Also, the industry sometimes loads itself down with great expectations related to growth — then if it falls short of the huge projected growth, it gets put in the penalty box. We need to get a little bit smarter regarding our industry growth expectations.

SI: Better prediction?

Dauwalter: This certainly isn't something we as an industry have done well.

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

Dauwalter: We have several new products coming up, like the 300 mm FOUP, where we were the first to market. We're also working on introducing 150 and 200 mm horizontal wafer shippers to handle the ultrathin wafers, which are approximately 180 µ m thick. They have very unique problems, and we solve the problems that the industry faces on how to protect and transport its inventory. This is also why we believe we're different from our competitors. We try to work closely with our customers and industry standards to better understand what the next issue is that we're all going to face.

SI: Manufacturers expect vendors to come up with increasingly more sophisticated processes, usually at less cost. How do you view, from your perspective, the R&D area — has the time come for end users to shoulder some of these costs? Can any one company bear the enormous costs of moving to 300 mm, copper and all the rest?

Dauwalter: Actually, the industry has reversed its position on that. If we go back to when the industry went to 150 mm, Intel funded a tremendous part of that effort, and IBM stepped up to the plate when we went to 200 mm. When 300 mm emerged, the industry pretty much told vendors, "This one's on your nickel." It's been very expensive for us. In addition, the industry also expects a standard whereby different companies come out with a similar product. So it's a matter of putting up your ante, developing the product and, when everyone's done, they'll choose the best offering, not only with regard to design but also with service and support programs offered — and may the best man win. Or perhaps they want two companies to win, so ultimately the slice of the pie becomes even thinner.

So now not only do we have to independently bear the investment, but the order may be divided amongst multiple suppliers as well. This is very difficult, very expensive and very high-risk. It's also why you really need to have good technology, skilled people and a solid infrastructure to have a chance of being successful when you launch these products.

SI: Generally, manufacturers no longer appear to have the engineering infrastructure that they used to have, preferring instead to concentrate on what they like to refer to as their "core competencies." Now the trend is to get the vendor to provide that missing expertise. How do you see this in view of the fact that you are now essentially expected to run two R&D operations — yours and theirs?

Dauwalter: It's the sign of an industry that is finally beginning to mature. It affords an opportunity for differentiation among companies. If you have the infrastructure, technology and resources in place, it offers a great opportunity. The downside is that it makes it harder for smaller companies to stay in the industry and offer these kinds of services.

SI: What are your thoughts on the feeding frenzy of consolidations that is taking place?

Dauwalter: Obviously a trend. It's one of the reasons why we went public last year. We recognized that you either consolidate or get consolidated. Our attitude is that we want to consolidate, and now we have the currency necessary to become a consolidator — we're prepared to continue growing. Of course, this doesn't guarantee that some day we might not be swallowed by a bigger fish.

SI: What about the view that there used to be a number of smaller companies that had unique technology and managed to survive. These days, when any small company like that gets on the radar screen, it gets eaten by a larger company. Is this trend harmful to competition, or to the technology's development?

Dauwalter: There's the potential for that. However, if you look at other industries such as the snowmobile industry, 25 years ago there were some dozens of different manufacturers. Today there are three or four — these are the strongest organizations, the ones with the technology infrastructure in place. In the end, consumers benefit because they get the best product. The same thing happened in the auto industry. You may lose a little bit of creativity, but the companies that remain are able to acquire and apply new technology faster and more efficiently than a smaller company could.

SI: What is your perspective on the move toward fabless — does it put too much power in the foundries' hands?

Dauwalter: For an older technology that's in place and needs someone to execute it, it probably serves a good function. For advancing technology, for coming up with proprietary products, for doing some of the things you have always done well — all of those competencies probably must remain within the companies that started them. I can't envision them turning everything over to foundries. In any case, because of the nature of our company — foundries use and need Entegris' services, so we're probably more insulated than most.

SI: Any industry trends we ought to be paying more attention to?

Dauwalter: Technology's rate of speed, whether Moore's Law will continue playing out as it's done to date. As it relates to our products, reuse and recyclability of materials is important. Another issue that will become increasingly important for Entegris is the capability of taking ownership of our products for several years — or the product's life — in the fab. We've done that for some of our customers — Fujitsu is a good example. In their fab, we've taken ownership and responsibility for cleaning the product, inspecting it and ensuring that it performs flawlessly. The future for suppliers doesn't only hinge on providing technology, but on service and support as well.

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

Dauwalter: I'd like to see stability. I'd like to see our big customers align themselves with what actually takes place, when they talk about what their expectations are regarding their suppliers and where we as an industry need to go. Too often we end up misaligned. Technology is what drives us all, but it's also what makes it so expensive to play in this game. If you don't like change, this isn't the industry for you.

SI: What will Entegris look like in 2006?

Dauwalter: We'll continue to be a leader in materials integrity management. Our commitment to developing new technologies, providing solutions for our customers and taking advantage of opportunities for growth won't change. We're a global company leveraging its resources worldwide; we have qualified and trained people who get the job done wherever they are located; and our team effort is driven by innovation and creativity, with the goal of meeting and anticipating our customers' needs.

SI: Any advice to your peers?

Dauwalter: Integrity is one of the best attributes you can possess. Be known as someone who does what he says he's going to do.

— Alexander E. Braun