Aug. 14, 2002 — Six months ago, Standard MEMS Inc. was voted one of five companies considered “most promising” by attendees at San Francisco’s Semiconductor Venture Fair.
Now it is down to 25 employees from its height of 270. One fab is closed and another is idle. Even its Web site’s home page is offline.
What happened?
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“There’s no question about it, the company shot too far too soon,” said Glenn Fricano, the company’s vice president of engineering and fab operations manager, who added that anticipation of a burgeoning telecom sector was part of the problem. “It gave an impression of boundless dollars and tremendous markets.”
“That,” he said, “was unrealistic.”
Phil Butler, former executive vice president of sales and marketing, concurred. “Too much, too early without enough clear vision of what was actually happening in the market,” he said. As a result, he said, the company spent its cash “before the big opportunities hit, which is still years off.”
Other industry developments apparently didn’t help, either. Marlene Bourne, senior MEMS analyst for Instat/MDR, said a trio of pressures have simultaneously converged on the fab sector the past several years: the telecom meltdown, the tendency among startups to develop in-house fabs and the entry of traditional semiconductor foundries into the MEMS market. As a result, she said, “there’s tremendous overcapacity.”
“Fabs were starting to get hungry,” said Gene Burk, Standard MEMS’ former director of sales and marketing. “Fabs in Taiwan were overbuilt. A lot was going overseas.”
Finally, according to Fricano, Standard MEMS’ largest customer, a supplier of integrated pressure sensors for the automotive industry, had a downturn in its business about three months ago. Fricano declined to name the customer.
Standard MEMS tried to weather the storm by dramatically scaling back. The company “reduced staff tremendously while we’re rebuilding,” Fricano said. Burk said his paychecks stopped arriving in May.
But what the company is rebuilding is decidedly different than the original plan. Headquartered in Burlington, Mass., Standard MEMS was supposed to be the first vertically integrated, high-volume MEMS fab, offering services for a broad range of MEMS products from concept to fruition. It began life as New Jersey startup Inertia Optical Applications Inc. and became Standard MEMS Inc. in June 1999, when it bought a fabrication facility in Hauppauge, N.Y., from Standard Microsystems Corp.
A period of rapid growth ensued, which included the purchase of a fab in Milpitas, Calif., a high-profile venture with Philips, a National Institute of Science and Technology grant with Zyvex Corp., the acquisition of fiber optics sensor developer Blue Road Research and the launch of a microphotonics technology center and end product design center.
Now, its Milpitas fab is closed while its Hauppauge fab is operational but idle.
Rather than focus on high-volume customers, Fricano said, the “customers that are left are low volume, high margin products.” Out with the likes of Lexmark. In with “small range, $500,000 to $1 million per year, customers.” For example, Fricano said Standard MEMS is still doing work for Nanogen Inc., a San Diego provider of DNA chips and chip readers.
Nick Ortyl, Standard MEMS’ president and chief executive, who communicated by e-mail that he would be unavailable for comment by publication time, sent a news release stating that Standard MEMS will be ready to ship a new type of high-throughput and secondary screening device by November. The device is designed to stimulate cells to test their response to pharmaceuticals.
“We are not afraid to support new revolutionary products,” Ortyl was quoted in the release as saying. “We have the manufacturing capability to bring these products to market swiftly, and the internal drive and expertise to make it all happen.”
But will the company survive its current restructuring? Fricano said the company will divest assets to raise capital, which “should be sufficient to reorganize outside of bankruptcy.” Some equipment from the Milpitas fab has already been sold and the fab itself is for sale.
Outsiders agree. “Standard MEMS could continue to exist,” said Butler, “(It) could sell off the Milpitas fab and become a little $5 million to $10 million company. Companies do that. They fold back onto themselves.”
Whatever the fate of Standard MEMS, the industry remains challenged by overcapacity. Joe Giachino, associate director of the Wireless Integrated Microsystems (WIMS) engineering research center at the University of Michigan, said that overcapacity will increasingly put pressure on fabs to further understand and control their processes.
“As there is overcapacity, the competition becomes more and more aggressive and fierce,” he said. “Understanding and controlling the process is getting more and more important.” In short, the fabs most likely to make it in this environment will be the ones that streamline and standardize their processes to minimize costs and maximize efficiency.
“They’re going to have to bid tighter and tighter,” Giachino said.