Tech
Tough
by Bridget
McCrea
Ouch! SDI ’s sales plunged in 2002 ...by two-thirds,
if you must know.
Time
is money at Agere Systems Inc., and money is all about
having the cleanest “fabrication” to make the firm’s
micro-electronic
products. “The purer and cleaner that gate
oxide, the better the parts perform and the more reliable
they
are,” says Damon DeBusk, Agere’s senior manager.
A spin-off of Lucent Technologies’ microelectronics division,
Allentown, PA-based Agere
needed several days to perform
those key diagnostic tests.
Today, with the help of equipment
from Tampa-based Semiconductor Diagnostics Inc.
(SDI), the process time has been shaved down to
minutes.
A manufacturer
of advanced metrology
equipment for monitoring of factors that affect
gate oxide integrity and thus semiconductor
yield, SDI manufactures equipment that’s used
by companies like Texas Instruments, Hewlett
Packard and Hitachi. For Agere, SDI has
installed several different machines, including
one at an Orlando-based location.
Attracting customers like these during tech-nology’s
bull-market days is what quadrupled
SDI’s sales several years running. And keeping
these same customers has permitted SDI to even
have a story written about it today. SDI is in rare
company – it’s a survivor of the tech bubble that
burst upon the fate of thousands of small, rapidly
growing firms.
SDI,
you see, has experienced a two-thirds
drop in revenues in just one year. So this is hardly
a “growth strategy” story. Call
it raw survival.
SDI’s sales plummeted to
$6.2 million in 2002 from $19
million in 2001, a drop that
would give any firm pause.
Nonetheless, that’s in line with
the rest of the information technology
industry, which suffered
its largest decline ever in 2002,
according to Framingham,
Mass.-based researcher IDC. “Overall, the IT
industry has contracted by roughly 3 percent
over the past two years,” says John Gantz, IDC’s
chief
research officer. “This is in sharp contrast to the
average
annual growth rate of 12 percent enjoyed by the industry
over the past 20 years.”
The
latest downturn – which SDI began to feel in late 2001
– was particularly devastating for the firm, which
was forced to downsize for the first time. “By maintaining
a lean organization, we have never previously had a layoff,”
says Christopher Banas, SDI’s general manager. “No
amount of planning could have prevented the need for a staffing
reduction, the first of which took place at the end of 2001
with the elimination of seven positions.” Hoping for
a short down cycle but not getting its wish, SDI was forced
to lay off another nine employees in late 2002.
Those
reductions translated into a 35-
percent cut in staffing, Banas says, and
“represent a huge loss” on a business
and a personal level. Most of the 16
positions were in the production area.
“When production drops from building
30 systems a year to eight, you don’t
require all of those production workers,”
says Banas. “The majority of our
knowledge, however, has remained
with the company.”
The
first round of layoffs came about after a lack of business
resulted in “no work” for SDI’s production
floor, Banas says. “It was instrumental in allowing
us to finish 2002 with a profit, even though it was actually
very close to just breaking even,” he adds. The second
round of layoffs was reaction to continued stagnation within
the semiconductor market.
“These
were done with an eye on sur-vival and not profitability,”
says Banas. The staffing cuts of 35 percent resulted in
annual payroll savings of $500,000. Thankfully, Banas says,
sales decreases haven’t meant lost customers for SDI,
whose $155,000 to $1.5-million systems are considered capital
equipment and not consumable items. He says the sales reduction
is more a direct reflection of the health of the semiconductor
industry. “Since most wafer and device facilities are
running at 40 to 60 percent of capacity, there’s no
need to bring new facilities online,” he explains.
A long-time
Bank of Tampa customer,
SDI got its first line of credit from the
bank at a time when no other local bank
would take a chance on the firm.
Through the downturn, he says SDI has
remained in close contact with the bank,
which is still behind the company.
“We’re not in debt and prefer to operate
that way,” says Banas, “but as you can
imagine, money is tight right now.”
Those
Were the Years
Founded in Boston in 1988 by Jacek Lagowski, company president,
and Lubek Jastrzebski, CEO, SDI got its start as a “garage
shop” that was financed by the personal resources of
its co-founders. Banas says the pair’s goal was April
2003 to provide a solution to the effects of
contamination of silicon wafers on semiconductor yields.
Two
years into their entrepreneurial
venture, Lagowski and Jastrzebski were
offered appointments as professors in
the Electrical Engineering Department
of the University of South Florida and
positions with the institution’s Center
for Microelectronics Research (CMR).
They accepted and brought their company
with them, setting up shop in the
University Technology Center, where
SDI has been ever since.
The
close bond with USF proved
fruitful both for the pair and the institution,
says Banas. “The affiliation with
CMR provided the university with an
enhanced core of expertise in the application
of advanced technology in the
semiconductor industry,” he explains,
“and the company with another avenue
for continued research.”
Even
with that USF connection, getting a great new technological
concept out of the lab and onto shop floors was no easy
task. Banas, who joined the company in 1991 when it had
four employees, vividly recalls working around the clock
on R&D, manufacturing, testing, sales, service, marketing
and whatever else it took to “get the product out the
door.”
“We
were running back and forth between local machine shops
and vendors, doing testing and then hopping on a plane to
go to Japan to do an installation,” says Banas. At
the time, he says, every year was a banner year and “sales
of $750,000 were a lot of money.” SDI’s growth
rate between 1991 and 1995 averaged 301 percent, with sales
increasing as word spread about its innovative new diagnostic
tools. To stoke that growth, the company opened an office
in Vancouver, WA, to support its West Coast sales, and added
a full-time employee in Taiwan to support Asian
sales.
By 2001,
SDI had $19 million in sales
and the world in the palm of its hand,
thanks to a three-pronged focus on customer
needs, maintaining a lean organization and seeking out talented
employees. “These three strategies are
all directly linked,” says Banas. “We’re
truly partners with our customers for
the life of the tool.”
Another
key success driver for SDI is
its habit of letting customers drive its
technology, and not the other way
around. “We learned the lesson early on
that it is better to build a tool that a customer
wants rather than one you think
he needs,” says Banas.
Internally,
SDI has differentiated itself
by steering clear of multiple management
layers and encouraging input
from all of its employees. Take the
SDI assembly technician who several
years ago came up with the idea to
combine two small controllers into
one unit. “His idea was instrumental
in reducing assembly time and saving
space within the tool,” says Banas.
By cultivating a companywide
“buy-in” philosophy, SDI has almost
no employee turnover. “In the 12
years I’ve been here, only two employees<
have left,” says Banas. “One went to
teach at a university and the other was
a software engineer who has since>
returned.”
Waiting
for a Sign
Banas wants to believe industry ana-lysts’
predictions of a 5 to 12 percent
increase in the semiconductor market
over the next few months, but says he’ll
have to see proof first. “I would like to
say we have big plans, but the plain
truth is we’re planning on surviving,” he
says, adding that the company is working
on several new types of measurement
capabilities that it feels will be
“well received” when the time comes.
What has Banas worried is the lack of
a clear sign of recovery in the semiconductor
market.
“Unfortunately,”
says Banas, “there
are no big drivers of expansion or
recovery on the horizon.
