When one thinks of the semiconductor business which often comes to mind are the companies that design and manufacture of microchips used in personal computers and other electronic devices.
But much of the industry means companies like San Jose-based Novellus Systems, which sells equipment that helps microchips. These chips, also known as integrated circuits are made through the construction of transistors on silicon wafers, and adding layers of cables and other structures. Novellus deposition ‘insulation products and materials used to create conductive wiring, and to clean the surfaces of the chips between manufacturing steps.
Despite the recession hammered the chip equipment sector, your business is starting to warm up. After suffering four consecutive quarterly losses, Novellus, founded in 1984, has just published its second consecutive profitable quarter. For the three months ended March 27, net income amounted to approximately $ 41,000,000 on sales of $ 276 million.
Richard Hill, who has been CEO Novellus’ since 1993 and chairman since 1996, recently sat down with the Mercury News to talk about your company and some of the changes you are experiencing. The interview has been edited for length and clarity.
Q How would you describe Novellus products?
One way He always referred to it is that we are very, spray-painting company of high technology. We spray very, very thin layers of film used in the process of making
an integrated circuit. Now, besides that, we are a mining company of high technology. We strip organic material from the wafer. If you let it be a contaminant and has good adhesion properties and good thermal properties. Therefore, it would destroy chip performance.
Q You also have a smaller company that serves a wide range of clients, as I understand it.
Another piece of our business, apart from the semiconductor company, is the industrial business. In that, what we do is provide very high quality finishes. We have a pretty good business with respect to the automotive, aerospace, the windmill industry. By reducing friction and energy savings, these precision surfaces provide much value to emerging markets.
Q Given the highly cyclical semiconductor industry, the difficulty is making plans to weather economic ups and downs?
A semiconductor business or any business highly capital intensive by nature going to be cyclical. When customers buy products, it becomes a period of time when you have to wait until capacity is exhausted. The question is, how to keep growing the business, even during the recession? The answer is, you take your experience and apply it to multiple industries that are experiencing a slowdown, at the same time.
Q How safe do you feel about the state of your industry?
A I’m so excited with the growth of semiconductors today and have been since the mid-90s. I see the industry being influenced by three main causes. Number one, the bandwidth requirements they are becoming so high due to emerging technologies – 3G, 4G – which have this accumulation of large infrastructure spending. Also, you have governments trying to strengthen their systems of information technology in order to be able to protect citizens. And to have a very good recovery, you must have the consumer. Everyone is saying, “Look, the U.S. consumer is not spending.” The Chinese consumer is. They are not spending as much, but there are three times more of them. I think those three things make this recovery we are seeing sustainable. It is a real opportunity.
Q Like many companies has cut its workforce to reduce costs. In late 2009, had 2544 employees, compared with 3048 last year. Do you expect to do any hiring in the near future?
A. There are technological challenges; there are new opportunities to innovate, which will continue to require horsepower and engineering knowledge. So let’s add in those areas. I think what you will not see is a massive growth in manufacturing capacity in the United States more.In fact, you will find that we are likely to add more rapidly outside the United States, even in high-tech jobs.
That’s because to succeed in this business you have to be global and must take advantage of the best and brightest no matter where you are in the world
Q You have significant operations in Vietnam and India, but not much in China, partly due to concerns about having their intellectual property stolen there. Now you say that it is considering increasing its presence in China. Why?
IP protection has been one of the greatest obstacles. But that is beginning to play its output. I think the Chinese government is realizing whether to keep their intellectual property they have to protect the intellectual property of other peoples.