By Genevieve Oger
Small Times Correspondent

GRENOBLE, France, Jan. 10, 2002 — Standing on the third floor of the construction site that is soon to become the biggest MEMS factory in the world, Jean Michel Karam, president and chief executive of MEMSCAP, still can’t get over it.

“Seven months ago, this was a corn field,” he said, pointing at the fields below. “We actually had to buy the corn from the farmer before we could start construction.”

The speed at which the 59,000-square-foot facility on the outskirts of Grenoble has come


MEMSCAP’S new $53 million facility near Grenoble,
France, is to run 24 hours a day, seven days a
week, with three eight-hour shifts daily. The
company’s goal is to become one of the world’s
premier MEMS suppliers. That means producing
4,000 silicon wafers per month once things get
rolling, and 2.4 million optical switches a year.
out of the ground is emblematic of the way Karam has been running the company — no holds barred. When Karam launched MEMSCAP in 1998, sales reached $488,000 the first year, generating a modest profit. Total sales for 2001 are expected to top $9.3 million. This represents a 19-fold increase over the first year of operations. The company has operation centers in the United States, Germany and Egypt.

“Unlike many of the other entrepreneurs around here who like to go step by step when they are building up their company, Karam doesn’t hesitate; he plunges head first,” said Constant Axelrad, strategic program manager for Grenoble’s Minatec Micro and Nanotechnology Innovation Center.

Like its name implies, MEMSCAP focuses on MEMS technology — microelectromechanical systems, which integrate mechanical elements, sensors and actuators on a silicon chip. They can be found in applications ranging from blood pressure monitoring instruments, car suspensions to telecommunications equipment.

MEMSCAP’s product line includes MEMS components for optical networks and wireless communication equipment and MEMS design software tools. Its unique product concerns optical switches used in telecommunications infrastructure. Normally, when data or voice signals needs to go from point A to point B, they go through an electric optical switch. “The signal containing the information arrives in optical form, is translated into electric and then converted back into optical,” Karam said. “The switch is slow, leads to network congestion and costs around $1,000.”

MEMSCAP’s patented optical switch uses a mirror to reflect the light, making conversion into an electric signal unnecessary. The teeny mirror doing the work is around 100 microns long, 100 microns wide and three microns thick. Located in the heart of the optical switch, it pulls back or jumps forward to direct the optical signal in the desired route. The switch sells for around $300 and has been on the market since the end of 2001. First clients include ADC Telecom.

In building the new facility, Karam concentrated on moving MEMS production away from the cottage industry model. “We absolutely have to treat MEMS production with the same level of industrialization we see in the semiconductor industry,” he said. “Here we will be using automated machines; instead of having a hundred guys working in the clean rooms we will have 10 working during a shift.”

The $53 million facility is to run 24 hours a day, seven days a week, with three eight-hour shifts daily. MEMSCAP’s goal is to become one of the world’s premier MEMS suppliers. That means producing 4,000 silicon wafers per month once things get rolling. The other process, the one involving optical switches, is to produce 2.4 million individual switches a year.

To make all this possible, MEMSCAP listed on the Nouveau Marche, France’s high tech exchange, in March 2001. Despite the poor business climate, MEMSCAP raised $89.8 million, though it did have to lower its initial valuation by 30 percent. Since then, shares have performed poorly, falling from $6.5 at the initial listing, to $2.7 today.

Analysts point out this lackluster stock performance is in line with the rest of the industry. “Yes the stock has suffered, but its losses are similar to competitors like JDS Uniphase, New Focus and Highwave,” said Bernard Malhamé, European telecom analyst at SG Securities in Paris. “So MEMSCAP is hardly alone in this regard.”

Observers note that the company still needs to prove it can deliver the goods in the new facility, so this year will be crucial. “Successful operation of the new fab is going to be the real test for MEMSCAP,” said Rob Turner of KBIC, a microsystems consultancy company. “It will all depend on the volume of production the new fab will achieve.”

If all goes according to schedule, the new machines are to be brought into the new location in early February. Tests and trial production are to be conducted from February 15 onward. Client production should be rolling out by April. That is, if everything goes according to plan. The MEMSCAP factory is the second biggest construction site in the area, monopolizing more than 100 building workers and specialized technicians. Delays on such large jobs are common. Karam says he has insured himself against them by inserting expensive penalties for lateness in the contracts.

But the more dangerous threat to the company’s development is perhaps the investment cycles of equipment makers. With the dramatic setbacks experienced in the telecom and optic sectors in 2001, companies like Alcatel, Lucent and Nortel are not in the mood for making large infrastructure investments that would use some of the new products MEMSCAP proposes.

The company is looking at things in the long term, however, and seeing things in Technicolor. It is to purchase the large wheat field adjacent to the building site, leading to the highway. “The field goes right up to those trees — it’s 24,000 square meters large,” he said, amid the noise of the construction crew. “We’ll need the room because we aim to control 25 to 30 percent of the world market for MEMS in 2005.”


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