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By Jeff Karoub
Small Times Staff Writer

July 27, 2001 — JDS Uniphase Corp.’s steep earnings drop announced Thursday has led the optical network maker to write down by $40 billion the value of companies it has bought in the past two years. But the biggest reported loss in business history is still not enough to shake the company’s stake in small technology, analysts said.

“They have been buying up companies, left and right, and the market tanks. But from a MEMS standpoint, I really don’t see much impact,” said Marlene Bourne, senior MEMS analyst for Cahners In-Stat Group.

JDS, based in San Jose, Calif., and Ottawa, lost $7.9 billion during its fiscal fourth quarter that ended June 30, and $50.6 billion for the entire year.

The company, which has designed and built optical MEMS devices since it bought Cronos Integrated Microsystems Inc. last year, said it would cut 7,000 workers in addition to the 9,000 already laid off this year, and aims to reduce annual operating costs by $700 million, more than double its earlier estimate.

JDS is by no means alone in its monetary misery. The news is the latest in a string of announcements by companies, including those with small tech operations, to post big losses and announce cuts and layoffs.

They include Corning Inc., Nortel Networks, Lucent Technologies and Lucent’s Agere Systems. Agere this week said it lost $1.11 billion in its most recent quarter and is expected to be saddled with $2.5 billion in debt from its parent company when it is spun off into a separate company in about six months.

But like those larger companies, Bourne said, JDS’ financial interest in small tech is indeed small.

JDS bought Cronos for $750 million, compared with the billions it spent for several other companies, she said.

Bourne, who bought stock in JDS five years ago, said the woes experienced by JDS and other companies have come from those high-cost acquisitions, which were overvalued. Companies stopped spending because their customers stopped buying, but not before many suppliers got caught with enormous levels of inventory.

“All of this is now shaking out,” she said. “They don’t really have a choice.”

But MEMS, she said, has largely been protected, not only because the operations are small, but because such technology is expected to help restore profits once the market rebounds and the products are ready for market.

“MEMS, right now, is very well insulated from the broader market activities — even those in low-level productions. It’s a next-generation technology, and telecom is very much dependent on next-generation technology to burst and grow.”

Ken Gabriel, co-founder of the MEMS Industry Group, agreed with Bourne. But he said that protected status doesn’t mean that some of the stand-alone small-tech companies will be lone wolves for much longer.

“There will be consolidation in the MEMS optical switching start-up arena,” said Gabriel, whose group serves as a trade association for MEMS manufacturers, integrators and suppliers.

“You’ll find it happening, especially those that came out essentially during what (Federal Reserve chief) Alan Greenspan called the ‘irrational exuberance’ (period).”

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CONTACT THE AUTHOR:
Jeff Karoub at [email protected] or call 734-528-6291.

By Jeff Karoub
Small Times Staff Writer

July 13, 2001 — Corning Inc., which announced this week that it would cut 1,000 jobs and close three plants, joins the list of those jolted by the economic slowdown. But the world’s largest fiber-optic cable maker is following another trend, too: Protecting small tech workers and funding from the cuts.

Small tech programs are being spared at companies nationwide, analysts say, because this research will be a key part of future products. And the field is young enough that most companies have relatively small portions of their budgets dedicated to MEMS, microsystems and nanotechnology work.

“For now, there has been no impact on MEMS,” said Paul Rogoski, a Corning spokesman. “We are committed to the technology and we’re going to pursue it for sure.”

The cooling economy has resulted in announcements during the past six months that more than 770,000 jobs would be cut by U.S. companies. That’s 27 percent higher than reported layoffs in all of 2000, by one tracking firm’s estimate.

Consumer products from MEMS research and development should be ready to hit the market by early 2002 — about the time the U.S. economy is expected to recover, one analyst said.

“MEMS is really well-positioned,” said Marlene Bourne, a MEMS analyst for Cahners In-Stat Group.

“In a way, it’s good timing. Obviously if the market had emerged last year and most companies were in production (on MEMS devices), they’d be doomed.”

“There’s nothing to buy yet, so in that way they have protected status. When market turnaround does occur, that’s when the majority of MEMS companies will be in small-volume production.”

In the meantime, however, they are surrounded by profit warnings and layoffs — by their parent companies, or, in the case of MEMS start-ups, their biggest customers.

Overall, job-cut announcements by U.S. companies rose 56 percent in June, to nearly 125,000. That’s up from 80,140 in May, bringing the six-month total to more than 770,000, according to Challenger, Gray & Christmas, a Chicago-based outplacement firm that tracks job-cut news daily.

The latest report, released July 5, found the telecommunications industry led other business sectors, with 27,446 cuts in June, bringing its six-month total to 130,442. The computer industry reported 74,723 job cuts during the same period, while electronics reported 59,181.

Agere Systems, an Allentown, Pa.-based maker of MEMS-based optical switches, announced last month it would lay off 4,000 people, or 25 percent of its workforce. That followed an announced cut of 2,000 additional workers in April.

A spokesman for the company, formerly the Microelectronics Group of Lucent Technologies, said Thursday it’s too early to tell where the cuts will be, but the company recently launched two MEMS-enabled systems, a high-voltage, multichannel amplifier chip, and an optical switching component. Both should be commercially available later this year.

“Those two announcements show we consider MEMS to be an important technology going forward,” said Carl Blesch of Agere.

JDS Uniphase Corp., based in San Jose, Calif., said last month it plans more layoffs, following the announced 8,000 job cuts earlier this year. Company officials could not be reached for comment, but it recently bought Cronos Integrated Microsystems Inc., which designs and builds optical MEMS devices.

Corning’s Rogoski said MEMS has not been affected by its layoffs, but he said all positions are under review. For competitive reasons, he would not reveal the number of MEMS jobs the New York-based company has.

“The market has not really fully matured in (MEMS), so when you’re not making and selling a lot of product, you’re not impacted when people stop buying,” he said.

“It’s certainly a well-grounded technology that we’re very interested in and pursuing, but they don’t run the kind of numbers … like amplifiers, couplers and photonic components.”

Corning’s experience helps to understand why small tech has been spared, according to Bourne. While it would be nice to think that MEMS has withstood market forces because of its potential to change the world, it has more to do with the status of the nascent industry.

“MEMS as a whole has been commercialized for 10 years — it’s not affected by the same peaks and valleys as the semiconductor industry,” she said. “It’s still primarily a research-driven industry, so it’s not being affected by the greater market movement.”

Further, most MEMS research and development tends to fall within the walls of small, start-up concerns, she said. When it is done at corporations, it tends to get swallowed up in multibillion-dollar budgets.

“It’s a drop in the bucket,” Bourne said. “You would think that would make it iffy, but companies need to keep their fingers on next-generation technologies.

“It would be ridiculous for them (to cut MEMS). The market is not so bad that they need to slash future research, at least at this point.”

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CONTACT THE AUTHOR:
Jeff Karoub at [email protected] or call 734-994-1106.

By Candace Stuart
Small Times Senior Writer

July 11, 2001 — One of the nation’s leading authorities on MEMS and microsystems announced Wednesday that he will trade in his post at a federal laboratory on Aug. 6 to help build the small tech industry in the Southwest.

David Williams, director of the Microsystems Science, Technology and Components division at Sandia National

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Williams
Laboratories, will become vice president and chief executive of the Southwest Office for Ardesta LLC. Ardesta’s goal is to accelerate the microsystems industry by providing financial and administrative support to emerging companies. Small Times is owned by Ardesta, which is based in Ann Arbor, Mich.

Williams’ charge is to open Ardesta’s second office in Albuquerque, N.M., to further develop the potential of both small technology and the region. Williams is expected to launch several new projects soon after his arrival at Ardesta, according to Rick Snyder, Ardesta’s chief executive. Snyder declined to provide details.

“My goal is to make the strategic alliance between Sandia and Ardesta come alive,” Williams said.

Snyder said Williams offers a combination of expertise and enthusiasm. “He’s the highest and best person you could get,” he said. “A lot of it is more than someone’s position and title. David is a top quality person and a technical resource.”

Anita Caress, Williams’ assistant at Sandia, also will work at the Albuquerque site.

Williams said his knowledge of the technology, the community and Sandia make him a good candidate for launching small tech initiatives. “I have worked with industries and I know what it takes to run disruptive technologies.”

Ardesta selected Albuquerque for its second hub because of its proximity to Sandia and Los Alamos National Laboratory, both leading small tech research institutions, as well as the corporate presence of Intel Corp. and Motorola Inc. The labs and companies have created a work force with small tech expertise and infrastructure with the potential for spin-offs and economic growth.

“There’s been a tremendous investment in the Southwest,” Snyder said. “Intel has two or more fabs in Albuquerque and multiple fabs in Phoenix. That’s a huge resource. And add to the national labs on top of that.”

Gary Tonjes, president of Albuquerque Development Inc., said having Williams at the helm of a small tech office would be a boost for the industry and city. “David is widely respected, not only in this community but internationally,” Tonjes said. “David is a visionary. He will continue to work to further the industry.”

In a 2000 study, the Milken Institute named the Southwest region as one of the top seven regions likely to emerge as microsystems industry leaders. The study based the prediction on the area’s existing leadership in MEMS and microsystems combined with its low production costs, high quality of life quotient and support for entrepreneurial efforts.

Williams predicted the alliance will have a profound effect locally and nationally. “It will cause the industry to be stimulated here and create thousands of jobs,” he said.

But equally important will be the impact that Sandia’s technology will have on the industry, Williams said. The alliance allows Ardesta’s companies and others to make products based on Sandia’s technology. As a national defense lab, Sandia emphasizes the highest quality, he said.

“The real gain will be the first products that hit will be more manufacturable and reliable,” he said, adding that manufacturing and quality problems often plague emerging technologies, dragging down the entire industry.

Williams has led Sandia’s microsystems program since 1999. He manages a $114 million annual budget and oversees a staff of 500 scientists and engineers plus two fabrication facilities. Researchers at the Microelectronics Development Laboratory (MDL) and the Compound Semiconductor Research Laboratory (CSRL) are known for designing some of the world’s most advanced microsystems, MEMS and photonic devices.

Their MEMS and microsystems prototypes include microrobots, microbatteries and sensors that can detect hazardous materials, combustible gases and other dangerous materials.

Williams is a strong advocate of commercializing MEMS and microsystems technologies, arguing that they should be tested in the marketplace before being incorporated into national defense programs. He has transferred several technologies developed at Sandia through licensing royalty and equity agreements.

He supported the development of an entrepreneurial program that allows researchers to take unpaid leave to try to market their inventions. Williams himself will be on the program while working for Ardesta. While still in its infancy, the program has created one successful spin-off: MEMX, a company developing MEMS-based optical switches. Ardesta signed an agreement last April with Sandia to establish a design and training facility, and microsystems fabrication facility in Albuquerque. The deal also granted Ardesta nonexclusive licensing rights to make and sell products using a technology developed at Sandia. The technology, dubbed SUMMiT for Sandia Ultraplanar Multilevel MEMS Technology, uses a five-level polysilicon surface micromachining MEMS system to produce complex devices.

Williams joined Sandia in 1976 as a member of its technical staff. He worked for the U.S. Bureau of Alcohol, Tobacco and Firearms between 1978 and 1981, when he returned to Sandia. He has held top positions in several Sandia divisions before assuming his present post.

He earned a Ph.D. in physics from Cornell University in 1976 and an undergraduate degree from the University of California, Irvine, in 1972.

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CONTACT THE AUTHOR:
Candace Stuart at [email protected] or call 734-994-1106, ext. 235.

By Tom Henderson
Small Times Senior Writer

July 2, 2001 — Haley Joel Osment plays a child robot in search of his humanity in the weekend’s futuristic hit movie, “A.I. Artificial Intelligence.”

Toy designer Chris Myers didn’t have Steven Spielberg’s movie in mind when he said toys are on the

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The LEGO MINDSTORMS Exploration Mars
expansion set is one in a series of robotic devices
powered by small tech. It combines LEGO pieces
with sensors and sensor-related accessories.
verge of a revolution powered by small tech. But as he describes his vision of the industry, things seem to be heading Haley’s way.

Myers sees:

  • A doll that can tell who is picking it up by analyzing the pressure applied by individual fingers and react accordingly. If it’s 2-year-old Susie, it coos back with baby talk. If it’s the 9-year-old, it might say, “So, did you go to school today, Billy?”

  • Toys that automatically know if they are being played with inside or outside and pattern their behavior accordingly. Things you throw could go slower and travel shorter distances inside, for example, to lessen the chances of breaking Mom’s lamp.

  • Frisbees or other flying toys you can program to do barrel loops and wild aerobatics in midflight before they continue on to their target.

“Sensors will be the first to be widely used, because right now that’s where there’s been the most applied research,” says Myers. “You’ll pick up a toy and it’ll know who’s using it, and the environment it’s in. We’ll have toys for kids that will seem alive.

“They’ll be smart. They’ll react to you. The toy can judge who’s holding it, if it’s outside or not. It’ll say, ‘Hey, we’re outside, let’s play this.’ ”

Says Jennifer Soloway, marketing director for Wild Planet Toys Inc. of San Francisco, “There will be things they do that we can’t even conceive of today, and at a cheaper price point.”

And therein is the rub. The MEMS-based sensors and actuators that will power those capabilities are available today. But they are still too expensive, say toy executives, to allow most toy companies to hit their price target. In Wild Planet’s case, that range is $10 to $25.

Some toy designers think it might be five years or more before the technology is cheap enough to be widely available. Myers, one of four designers at Wild Planet, says it will happen much sooner than that — as soon as two.

Wild Planet makes high-tech toys, but not yet small tech toys. Four toys it will bring to market in the fall are in its spy line — Spy Vision Scope, a head-mounted telescope that, with a touch of a button, flips into place for spying; Spy Door Alarm, a remote-controlled gizmo that fits over a child’s doorknob and alerts him or her to intruders; Spy Listener, sunglasses with a mini-eavesdropping device that picks up sounds from 30 feet away; and Spy Night Scope, binoculars by day that become night-vision goggles by night.

All four retail between $14 and $20.

Myers says he scouts out high-tech innovations for possible applications to his toy line. “I try to bring new technology into the company through research into other fields.”

As for sensors, actuators and other small tech innovations he’s come across, he says, “I’m always amazed at what I see. But, basically we’re waiting. The technology has to fit our cost range. Cost is number one.”

“I’m amazed at the things I make today and see on the market. Things I saw as science fiction as a kid are possible today. And it’s going to get more and more incredible.”

Myers says he remembers being amazed by a hand-held Mattel toy in the mid-1970s. It purported to be a racetrack, though in reality it was just a crude LED display on a tiny screen. “To play with that today, it seems so funny. I show it to kids and they say, ‘What’s this?’ It doesn’t look like a racecar. It doesn’t look like a track.’

“Today, look at LEGO MINDSTORMS. A research scientist would have killed for that technology 20 years ago.”

MINDSTORMS are a series of robotic devices powered by small tech. It combines LEGO pieces with sensors and sensor-related accessories.

COST IS BIGGEST HURDLE

Frank Ostrander is the engineering manager for the New York office of Techno Mind Ltd., a Hong Kong-headquartered firm that does original design, engineering and manufacturing for other toy retailers around the world. Its factory in China employs 3,000.

Techno Mind did design work for Amazing Amy, the Playmates Toys doll that was the smash hit of 1999. Using an eight-bit microcontroller and toy foods embedded with different value resistors, Amy could tell its holder, for example, that it didn’t want a piece of pizza when it was touched to her lips.

Making the leap from resistors to sensors and actuators is getting closer, says Ostrander. “But the toy industry has very strong price constraints. To make it into the toy industry, the price has to come down. The chip or enabling technology has to come down to $2.”

That it will, he has no doubt. He says small tech features in the next generation of toys will include the full range of sensors — pressure, resistance, magnetic, temperature, motion, tilt and acceleration — in addition to handwriting and speech recognition.

But for now, the interest in small tech, he says, “is an interest on behalf of the toy inventors.” The interest by the manufacturers still lags.

“We haven’t had much involvement in tiny sensors and actuators, yet, though I am sure that we will,” he says.

Skyline Toys of Palo Alto, Calif., is a toy-invention studio that has licensed more than 100 toys to such manufacturers as Fisher-Price, Hasbro, Tiger Electronics and Mattel.

Among its toys are NASCAR racers, Fib Finder, a hand-held miniature lie detector, Aerobic Football and the WWF Talking Doorbell.

Adam Skaates is a Skyline designer who did MEMS work while he was a mechanical engineering student at the University of Colorado. He says Skyline prides itself on getting high-tech into its toys. “It gives us an advantage to put technology into our toys.

“This is kind of a weird industry. Even the big guys don’t dedicate a lot of resources to research and development. They rely on inventors to bring them technology.”

He, too, says that the current cost of MEMS devices is too high to allow toys to hit the price target of $9.95 to $19.95 that he says most companies aim for.

“But having said that, I still think there’s a future for MEMS in toys,” he said.

Skaates said he has built prototype toys using MEMS accelerometers, but when the companies went from prototype to manufacturing, they replaced the accelerometers with cruder, less effective, but cheaper, mechanical devices, such as rolling metal balls that hit an electrical contact or spring.

“It’s unsophisticated, but cheap,” he says.

He says he invented one “Harry Potter” toy that used an Analog Devices accelerometer. “The toy maker said ‘That’s cool,’ but then figured out a cheaper way to do it. When sensors get down to $1 or $2, they’ll use them. Accelerometers are close to that now.”

THE FUTURE IS INTERACTIVE

John Sosoka is co-founder and chief technology officer at Neurosmith 2000, a Long Beach, Calif., company that builds interactive learning toys for children as young as 1 year old.

A former computer programmer with expertise in computer-aided modeling and machining, Sosoka says he has been an avid follower of MEMS and nanotechnology as it has evolved over the years.

About a year ago, he hired a doctoral student to do an overview on MEMS and sensor technologies and how they might apply to upcoming product lines. The conclusion was that cost was still too high. “It’s not that far away. Maybe a few years,” he says.

“We’ve got a new product we’re getting ready to release, a big, spongy block that can tell its orientation. It does it with a caged ball like a tilt sensor in a pinball machine. We would have loved to be able to get something that gave us a lot more resolution, but we just couldn’t afford the sensing.”

Sosoka says there are many ways sensors can — and will — be used in toys geared toward the very young. The toys could interact differently with different kids in the family, they could be much more smart and engaging and they could also impart information to parents.

For example, is a toy being used a lot? And which kids in the family are using it? MEMS devices could store that information and download it to parents later.

Or they could give feedback on where a young child was in the house or the yard.

Neurosmith sells a toy called MusicBlocks. Each block has a segment of a melody. Each side of the block renders the melody a different way — one side might be singing, another a violin, another a piano, for example. Kids use the blocks not just to build shapes, but to build sounds and songs.

Sosoka says that someday he’d like to incorporate accelerometers and temperature, pressure and humidity sensors into the blocks to create many more permutations of sound, to “create a much different musical experience. You can do lots of different stuff.

“At the point in time when my son or daughter is buying toys for my grandchildren, the toys will seem much more animate. And not in the Furby sense. They will react to you in such sensible ways. These toys will have a subtle understanding of what is happening around them.

“They won’t be so inane. It won’t be like it is now where you put a doll down and it keeps fussing, or you walk in a room and it starts making sounds.

“I’m open to using all kinds of sensors,” says Sosoka. “My goal is to have my products react in the kind of way dogs and cats do. To have them have a sense of what is going on around them.”

Related story: Robot dogs and LEGOS that think

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CONTACT THE AUTHOR:
Tom Henderson at [email protected] or call 734-994-1106, ext. 233.

June 29, 2001 – Golden, CO – CoorsTek has laid off 960 employees this year, including 333 in Colorado. Most recently, the company cut 91 jobs at its Grand Junction office, said spokeswoman Terry Terens.

The maker of semiconductor equipment announced massive cuts in April but didn’t reveal the effect on its local workforce until this week. About half of the total workforce reductions occurred during the first quarter and the other half during the past three months.

CoorsTek, a spinoff of Coors Brewing Co., makes components used in computer chips. It also makes equipment for other high-tech industries.

Downturns in the telecommunications, electronics and semiconductor industries led to the layoffs, Terens said. She added that the company is looking at other cost-cutting measures, which will be announced during CoorsTek’s earnings call July 25.

CoorsTek currently employs 3,300 worldwide, including 1,500 in Colorado.

Susan Crossley, a senior analyst for Wells Fargo Van Kasper, said the job cuts were necessary because of the current conditions.

She said the downturn in the semiconductor industry is shaping up to be the worst in its history. As a result, almost all chipmakers, including industry giant Intel Corp. and LSI Logic Corp., have gone through similar workforce reductions.

CoorsTek also said it expects to have second-quarter revenue of $102 to $104 million, which is lower than analyst estimates. Crossley had projected revenue of $108 million.

“There’s nothing going on here that’s out of line with the market, in terms of the revenue decline,” Crossley said. “For the long haul, this is a well-run company. But the market is ugly right now.”

CoorsTek also said gross margins — the money a company makes from a product after production costs are subtracted — were expected to be 16% compared with an earlier forecast of 18%. The expected drop was attributed to the company’s shift toward the semiconductor assembly business and severance costs related to workforce reductions.

MICRODEVICE COULD HELP FIGHT DISEASE

Researchers at the U.S. Department of Energy’s Oak Ridge National Laboratories have developed a micro-instrument that could aid in the detection and diagnosis of diseases, according to e4engineering.com, a UK-based Web site for engineers.

The device, which detects genetic mutations by identifying mismatches in DNA strands, is based on micro-machined silicon cantilevers one-tenth the width of a human hair, the report said.

It works by absorbing DNA molecules from a patient’s sample and binding on a micro-cantilever treated with a known DNA sequence. If the sample DNA binds to the known DNA sequence, the cantilever bends, indicating the presence of a specific DNA sequence in the patient, the report said.

Researchers said the technology also might be used in nanoscale applications for implants and timed releases of medications.

MEMS NOT SEEN ON AGERE’S CHOPPING BLOCK

Agere Systems is one of many optical switching firms announcing losses and cutting jobs in recent days, but small tech research and development won’t be on the chopping block, an analyst said.

Agere, based in Allentown, Pa., announced it would lay off 4,000 people, or 25 percent of its workforce. That follows an announced cut of 2,000 additional workers in April.

The cuts should not affect Agere’s work with MEMS-based optical switches, including news earlier this week that the company has created what it’s calling the industry’s first 16-channel high-voltage amplifier chip, said Lawrence Gasman of Communications Industry Researchers.

“I see MEMS … as one of their core technologies going forward,” he said. “This could have some implications, but they’re not about to drop MEMS.”

Agere, formerly the Microelectronics Group of Lucent Technologies, said its newest chip provides the voltages needed to position micromirrors that steer high-bandwidth optical signals between input and output ports in a switch. It replaces systems that require high-voltage transistors combined with lower voltage operational amplifiers, a company statement said.

RESEARCH SHINES LIGHT INTO SILICON

Cheaper lasers, computer monitors and TV screens could be the result of recent research by engineering professors at the University of Texas.

By mixing certain chemicals and solvents with pure silicon and heating them in a pressure chamber, researchers have created spherical silicon nanocrystals that emit light, something that has eluded scientists for more than a decade. The nanocrystals, or quantum dots, emit the colors blue and green, and researchers say red is not far down the road.

Silicon is a plentiful and inexpensive material used in transistors, but scientists have been unable to manipulate it to emit light. That has led to costly alternative semiconductors, such as gallium arsenide, for light-emitting diodes, lasers and sensors, the researchers said.

NANOTECH CENTER NAMED FOR EX-TAIWAN LEADER

Lee Teng-hui, former president of Taiwan and Cornell University alumnus, came back to campus this week for the groundbreaking of a nanotechnology center named after him.

The Lee Teng-hui Institute for Scientific Research will be part of a new $60 million high-tech research center. Completion is set for 2003.

Lee, who earned his Ph.D. in 1968 in agricultural economics from Cornell, gave a speech Thursday hailing the advent of what he dubbed “the nano age,” and its potential for solving problems such as pollution, natural resources depletion and food and energy shortages.

CHINA HOSTS NANOTECH CONFERENCE

The latest nanotechnology developments are expected to be discussed next week at the International Symposium on Nanomaterials and Technology in China, according to AsiaPort Daily News, an international wire service.

Topics at the conference, which is scheduled to be held July 2-5 at the Beijing International Conference Center, include nanotechnology applications in information materials, medicine, metal, energy and the environment, the report said. Related story: China opens new nanotech center

— Compiled by Jeff Karoub

By Tom Henderson
Small Times Senior Writer

June 28, 2001 — While large companies such as Motorola have benefited from Advanced Technology Program funding, about 55 percent of its awards go to small companies with fewer than 500 employees. Some small firms credit ATP awards with their success in bringing products to market.

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Ion Optics’ optical gas and
chemical sensors were accelerated
to market with ATP funding.

Ion Optics Inc. of Waltham, Mass., combines optical sensors with silicon chips to make gas and chemical sensors. Founded in 1994, it used a string of Small Business Innovative Research grants over the years to fund research and product development, said Brian Kinkade, vice president of marketing and sales.

In October, Ion Optics was awarded a three-year, $753,386 grant to develop low-cost, mass-market gas and chemical sensors. Existing portable technologies produced too many false positives; more accurate lab equipment was expensive and time-consuming.

In addition to providing crucial funds, the ATP award matched little Ion Optics with the Jet Propulsion Laboratory of the California Institute of Technology as a subcontractor.

“What the ATP did is take something we were paying for on a shoestring, that was moving forward at a snail’s pace, and accelerate it,” said Kinkade.

What would have been a 10-year project became a three-year project, he said. The rapid pace in turn led to Ion’s first round of venture funding, a deal it closed at the end of 2000 for $1.4 million. And that equity funding pushed Ion Optics past the R&D stage to marketing, product development and purchase commitments from original equipment manufacturers, with sales expected to begin before the end of the year, said Kinkade.

A second round of funding is targeted for late third quarter or fourth quarter. Ardesta LLC, which is the parent company of Small Times Media, was among the companies included in the first round.

“I think this is going to be one of the good, good programs ATP has been involved in,” said Carlos Grinspon, the project manager at ATP who oversees the Ion Optics grant.

SUCCESS STORY

Advanced Technology Materials Inc. of Danbury, Conn., was started in 1986 by five scientists who thought there was a market niche for a company supplying materials and equipment for chemical vapor deposition. This process is used widely in the semiconductor industry.

The founders were right — ATMI went public on the Nasdaq exchange in 1993, had $300 million in revenues in 2000 and employs 1,000 in 20 locations worldwide.

ATMI officials said the company would not have pursued this technology without the $1.7 million, three-year grant awarded by ATP in November 1999.

“We wouldn’t have been doing this research at all,” said ATMI scientist Frank DiMeo. “While the potential reward was large, the technical risk was too large for us to fund it internally. And the time to market would have been too long, as well. This would not have been created.”

“This” is a MEMS-based gas sensor to monitor gas concentrations in the chambers where silicon wafers are made. Gases etch the features into the surface of the silicon, but often gases continue to flow into the chamber after the work is finished because until now there has been no way to effectively measure the gas concentrations.

The problem is compounded by the harsh nature of the gas, which can quickly destroy any sensor installed inside.

The ATP grant partnered ATMI with the Massachusetts Institute of Technology and IntelliSense Corp. of Wilmington, Mass. The result, said DiMeo, will be a cheap sensor than can be thrown away as the gas makes it ineffective.

The grant expires in November 2002 and DiMeo said the company plans to be marketing sensors to the semiconductor industry in the first quarter of 2003.

DiMeo says that ATMI had won previous grants from the Defense Advanced Research Projects Agency and the U.S. Department of Energy, “but ATP was the most rigorous about going through our business plan, and making sure it matched the technology. They’re very methodical about their analysis.”

FACTS AND FIGURES

William Long, who owns a Maryland-based consulting firm, Business Performance Research Associates Inc, was hired by ATP to review its first nine years of operation, 1990-1998.

His 1999 report concluded:

  • 39 separate peer-reviewed competitions had selected 431 multiyear research projects. They totaled $2.8 billion, of which industry committed slightly more than half and ATP the remainder.

  • Counting for-profit companies and those brought in to partner with them, such as universities, nonprofit laboratories and federal laboratories, there were more than 1,000 participating organizations.

  • By March of 1997, 38 projects had been successfully completed and 12 terminated for lack of progress.

  • Of those 38 projects, 15 were in electronics; six in computing, information and communications; five in biotechnology; four in energy and environment; four in manufacturing; three in materials and one in chemicals and chemical engineering.

  • ATP spent a total of $50 million on the 38 completed projects and 12 failed ones. One of them, called the Auto Body Consortium and studying ways to improve auto quality in the U.S., was estimated to have $3 billion in economic returns.

  • 24 of the projects had resulted in new or improved commercial products.

  • A wide variety of award winners had been honored by technical journals for their ATP-funded research.

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CONTACT THE AUTHOR:
Tom Henderson at [email protected] or call 734-994-1106, ext. 233.

Related story: Advance Technology Program saved from budget ax

By Candace Stuart
Small Times Senior Writer

June 19, 2001 — In the next four weeks, a corporation best known for its cell phones and semiconductor business will release two new small tech products that have little to do with communications or computing, but perhaps everything to do with its future.

Motorola Inc. (NYSE: MOT) expects to begin selling two biochip technologies that analyze genetic material, but serve different users. Its two-pronged approach may give it a foothold in some potentially lucrative markets – genetic diagnostics and the research branch of the pharmaceutical industry.

Motorola faces competition, but none with such a marque. And each of Motorola’s biochips has a novel component that could give it an edge in the marketplace – a small but potentially significant boost for a corporation that has seen sales and profits tumble this year.

“Motorola is the sleeping giant,” said Valerie Kellogg, an industry analyst and author of the recently released report, “The Surging Microarray Biochip Business.” “They’re not the key player right now, but they could be if they stick with it.”

Motorola’s Clinical Micro Sensors in Pasadena, Calif., will send its first shipment to Europe “in the next few weeks” of a diagnostic biochip that detects genetic alterations in food, said Randy Levine, CMS director of business development. Laboratories will use the device, the eSensor, to screen out genetically modified crops shipped into parts of Europe where such foods are deemed unsafe.

The eSensor can identify up to 36 different genetic alterations per chip, and clients can designate which genetic bits they need on the chip. One chip is about a square inch and disposable. CMS also developed a reading device that can analyze 48 cartridges at a time.

The eSensor has medical applications, as well. Doctors one day may use it to identify what strain of bacteria is causing a sore throat, for instance, allowing them to prescribe exactly the right medicine. Or a clinic could test patients for common genetic flaws that interfere with drug therapies. If the patient is a carrier, then the clinic will know to never dispense that drug.

Motorola’s BioChip Systems, based in Northbrook, Ill., expects to unveil another biochip technology in the next month that is targeted for genetic researchers and drug companies, said Jodi Flax, manager of new business strategy.

The system, CodeLink, can test thousands of strands of genetic material at a time and helps scientists pinpoint exactly what segments in a gene are flawed. CodeLink also lets them observe if and how a potential drug interacts with the diseased gene. Because it eliminates guesswork, the approach can save researchers and drug developers time and money.

In that way, Motorola serves both clinical users with the eSensor and industrial users with CodeLink. “They’re complementary markets,” Levine said.

Many biochips, Motorola’s included, use a version of a microarrays. Microarrays usually are tiny slides or chips dotted with snippets of DNA, the biological blueprint in genes that dictate how a life form develops. The system takes advantages of DNA’s structure, which is based on two complementary molecules that bind together to form a double helix. The chip contains one exposed strand of the helix.

The test sample, after a preparation process, holds similar strands that will bind onto the exposed helix if they are the same DNA segments. Fluorescent additives in the sample light up when any binding occurs, and a scanning device determines the DNA type by its location on the chip.

The biochip market totaled about $397 million in 2000, Kellogg wrote in her report, and is expected to top $1 billion by 2005. That includes sales of not only microarrays but also the auxiliary technologies – the preparation regime, scanning tools and interpretive software. She estimated the microarray market alone will be $536 million by 2005, with an annual growth rate of almost 19 percent.

Kellogg said her figures are deliberatively conservative. Depending on market conditions, biochip sales could exceed $1.5 billion by 2005, she said.

“It will get that high eventually, but not quickly,” she predicted.

Motorola made several key alliances in the late 1990s to pave the way for its entry into the biomedical arena. In 1998, it entered into a licensing agreement with Argonne National Laboratory to develop Argonne’s three-dimensional technique for gene analysis. That same year it launched its life sciences division in suburban Chicago. Argonne is also in suburban Chicago.

Motorola entered into an agreement in 1999 with Clinical Micro Sensors, a start-up that had created an electronic DNA biochip. Motorola acquired CMS the next year for $280 million, and this year incorporated CMS in the life sciences division.

Argonne’s biochip technology has two advantages, said Flax, who has worked at Argonne on the biochip project as a graduate student at nearby Northwestern University: It uses a gel to attach the DNA segments, and it exposes the DNA strand out rather than on the chip surface.

“With two dimensions, you only have the top that you can be detecting,” she said. “From a biological perspective, this makes a lot more sense. It is more sensitive because there is more surface.”

The gel has the benefit of being, like cells, aqueous — “a much nicer environment for biology,” she said.

Clinical Micro Sensors took an unusual approach in designing the eSensor. Rather than rely on fluorescent dyes, lasers and expensive scanners to detect binding, CMS found a way to tag DNA strands with electron-heavy molecules. Any coupling of the treated DNA strands with their helix mates creates an electronic charge that jolts the electrons in tag. Electrodes then detect the signal.

“It’s not a chip in that sense,” Levine said. “It looks more like a printed circuit board.”

The technology includes a molecule-thick insulating layer that is thin enough to pick up the charge released in binding but thick enough to prevent false readings, Levine said. The entire system is in a disposable cartridge that fits in an electronic reader for quick analysis.

CMS has partnered with GeneScan Europe AG of Freiburg, Germany, to sell eSensor in test kits in Europe. Motorola’s BioChip group is collaborating with the Mayo Clinic and Rochester, Minn., to use CodeLink as a research tool.

But even with those associations, Motorola faces competition.

“There are a huge number of home-brew microarrays,” Kellogg said, that like the eSensor test for a handful of DNA strands at a time. Academic researchers have jury-rigged their own devices, for instance. “There’s even instructions on the Internet on how to make one.”

The market for high-density microarrays, which refers to systems that test a thousand or more DNA strands at once, is dominated by Affymetrix Inc. of Santa Clara, Calif. Kellogg estimates that Affymetrix has cornered as much as 90 percent of the market. Its clients, which have included Pfizer, GlaxoSmtihKline and other large companies, purchase an instrumentation system as well as the chips. In 1999, that system cost as much as $200,000 – an upfront investment a company might be loathe to write off in favor of CodeLink.

Motorola itself is facing a poor year, mostly due to the decline of its mobile cell phone segment, according to Morningstar analyst Todd Bernier. Bernier follows the wireless and cable industries for Morningstar, a Chicago-based company that tracks mutual funds and provides investment strategies. In three years, Motorola has gone from the industry leader in mobile phones to No. 2, supplanted by its rival Nokia, he said.

Motorola’s mobile phones sales totaled $2.3 billion in the first quarter of 2001, down 29 percent from the first quarter of 2000. Softening in demand for semiconductors, its other core business, led to a 22 percent drop in sales, to $1.5 billion. Overall revenue for that quarter was $7.75 billion, down from $8.77 billion.

Its stock has also suffered. Its highest posting for 2001 was on Jan. 13, at $24.69. It closed Monday on the New York Stock Exchange at $13.07.

“The problem is they don’t do one particular thing well,” Bernier said. “They need to focus on a few things.”

Both Flax and Kellogg see Motorola staying in biotech for the long haul, gradually making its mark on the industry. Motorola converted its expertise in chip making before, for instance when it became a supplier of MEMS accelerometers for airbags. And it is building a reputation in microfluidics, which deals with channeling minute amounts of fluids such as a blood sample to various chambers in the chip for a series of analyses.

Microfluidics can turn a biochip into a mini laboratory, Kellogg said, a crucial step in making small tech diagnostic tools for the home or doctor’s office.

“Motorola is thinking long term and they have the pockets to do it,” Kellogg said.

“Everyone’s going through tough times now with the economy slowing down,” Flax said. “Motorola believes in us…. Motorola sees the value in the future. It has been around since 1928 and it wants to be around in 2028.”

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CONTACT THE AUTHOR:
Candace Stuart at [email protected] or call 734-994-1106, ext. 235.

June 6, 2001 – Beverly, MA, and Midland, MI – Axcelis Technologies Inc. and Dow Corning Corp. are working together to develop a novel process that enables use of porous ultra-low-k dielectric materials in next-generation semiconductor manufacturing.

Developed under an ongoing joint development program, the new process delivers “unsurpassed” mechanical strength for a porous low-k dielectric, the companies reported. The process has been demonstrated using Dow Corning XLK Spin-on Dielectric (k=2.0). Results have shown a high mechanical strength (greater than 6GPa), while at the same time maintaining the ultra low dielectric constant values.

Under the agreement, the companies will demonstrate the advanced process technology using XLK at Dow’s Global Applications Center in Midland. Axcelis will install a prototype system — a 300mm bridge tool– at the facility to enable this activity.

As the industry migrates to smaller device geometries, semiconductor manufacturers will require dielectric materials with k values lower than 2.0. In order to achieve low k values, film porosity will be increased, which often does not result in materials with the mechanical strength needed to withstand CMP and other rigorous semiconductor manufacturing process steps.

This newly developed technology specifically addresses these concerns by hardening and strengthening porous ultra-low-k dielectrics, and easing their integration into advanced process flows.

“Chipmakers will need ultra-low-k dielectrics in order to continue improving device performances, but the smooth integration of these porous materials is a huge challenge,” said Michael Dreyer, VP and general manager of Axcelis Technologies’ Photoresist Processing Division. “By using advanced process technologies that we have within our technology portfolio, we can strengthen low-k films and minimize process flow integration worries. Axcelis’ process and equipment expertise coupled with Dow Corning’s low-k dielectric leadership clears a major technology barrier for our customers.”

“Developing a hardened material like XLK is a key part of Dow Corning’s customer commitment to meet and surpass 70nm dielectric material requirements, where full integration is a necessity,” said Phil Dembowski, application development manager for Dow’s Semiconductor Fabrication Materials business unit. “Our goal of providing significant benefits for the most advanced technology applications has led to this relationship, and the development of this enabling technology for ultra-low-k dielectric materials.”

By Candace Stuart
Small Times Senior Staff Writer

June 1, 2001 — Engineering-management types like Walter Merrill and Keith Ritala may be improbable matchmakers. But these small tech specialists are doing a lot of pairing of partners these days to create profitable unions.

Their goal: to introduce industries in need of small tech solutions to university researchers who excel in MEMS and microsystems. If all goes well, the two sides become collaborators, combining their expertise and resources to forge a new destiny.

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  Source: Washington Technology Center’s
  2000 annual report
Their means: their respective states, Ohio and Washington, which are allocating money to help establish MEMS and microsystems businesses. The investment is already paying off in the creation of products and companies that could grow into industry leaders.

Many states have programs to encourage emerging technologies and entrepreneurial efforts. But Ohio and Washington are among the few to put state funds directly into projects earmarked for MEMS and microsystems.

Ohio has committed $4.5 million over five years to fund the Glennan Microsystems Initiative through 2003. Washington invested about $1.5 million in the Washington Technology Center’s (WTC) MEMS Initiative, which was launched in 1995.

“The growth has been phenomenal,” said Ritala, director of the MEMS Initiative and manager of its Microfabrication Laboratory. The initiative led to at least 15 collaborations between university researchers and industries, and helped establish promising start-ups such as Micronics Inc., which makes lab-on-a-chip devices for analyzing blood, cells or chemicals.

The Microfabrication Laboratory, which includes a 15,000-square-foot clean room, has 130 registered users from 17 companies and 31 academic research groups. The MEMS Initiative earned almost $374,000 in lab fees and other revenue in 2000, funds that can be used to support more staff, materials and equipment.

WTC, buoyed by the success of the MEMS Initiative, has launched another four-year project to promote collaboration in the optical field. “The MEMS Initiative clearly has been a real bright spot,” said R. Lee Cheatham, WTC’s executive director.

Merrill, who is the Glennan Initiative’s executive director, said his goal is to get researchers and industry collaborating to produce marketable and useful microsystems, “technologies that would really distinguish us,” he said. Now at its midway point, the initiative has brought together 15 companies, four universities and four nonprofits, as well as two federal organizations that have a presence in Ohio – NASA and the U.S. Air Force.

The program has narrowed its mission to exploit the region’s strengths, focusing on silicon carbide MEMS and microsystems that can be used in harsh environments such as blood or smoke stacks. Case Western Reserve University and the NASA John H. Glenn Research Center, both in Cleveland, have expertise in silicon carbide.

“We’re looking at those areas where we have an advantage,” Merrill said.

The initiative already has created one start-up, FiberLead Inc., which designs fiber bundles for optical uses. But FiberLead’s second project, a novel process for commercially producing micromolded parts on silicon carbide chips, could give the Cleveland-based company and the Glennan Initiative both a major boost. Batch fabrication already exists for a number of devices made of silicon, the most common MEMS material, but not for silicon’s sturdier cousin, silicon carbide.

For Ritala and Merrill, the challenge has been linking up people who can turn good ideas into commercial products that may have an economic impact on the state. “It’s a matchmaking function,” said Ritala, who worked for 20 years in the semiconductor industry before joining WTC as a market manager almost 10 years ago.

Workshops and lecture series organized through the initiatives helped bring people together, too, the directors said.

Other states support fledgling MEMS and microsystems work through a variety of programs. For instance:

* Michigan has several grant programs to promote new technology, including its Life Sciences Corridor initiative. Award recipients include Integrated Sensing Systems Inc., which received $1.9 million this year to start a Bio-MEMS Commercialization Center, and Advanced Sensor Technologies, which makes sensors, actuators and MEMS-based microfluidic systems.

The state plans to give MEMS an even higher profile this September with the creation of a MEMS consortium, according to Michigan Economic Development Corporation spokesperson Jennifer Kopp. “We want to make Michigan a MEMS leader,” she said.

* North Carolina helped launch optical switch maker Cronos Integrated Microsystems through the state-supported Microelectronics Center of North Carolina. The state opened the center in 1980 to attract semiconductor companies to the Research Triangle Park region, and provided funding through 1999. JDS Uniphase Corp. bought Cronos for $750 million in 2000.

State involvement — whether through state-funded programs, investment of state pension funds or simply a strong public policy that favors entrepreneurship – is critical for launching new technologies, according to Perry Wong, an economist at the Milken Institute who specializes in high technology and its role in regional economic development.

Wong sees state funding alone as ineffective. “They need a policy to encourage state institutions to create an atmosphere and culture to deliver what they research to the marketplace,” he said. “They need to encourage a culture that promotes entrepreneurship…. High-tech growth in any region is converting ideas in the lab into products.”

Both the Glennan Initiative and WTC owe their existence to visionaries such as NASA Administrator Daniel Goldin and Case Western Reserve University President Agnar Pytte in Ohio, and entrepreneur John Fluke and University of Washington engineering dean Ray Bowen in Washington.

“Goldin wanted to infuse technology into companies, to take advantage of the technology being built at NASA,” Merrill said. Goldin challenged the state, industry and universities to find a way to work together. When he had sufficient support, he put out a call for proposals. Merrill, then a chief of a NASA division that handled microsystems and other technologies, offered the winning plan.

Washington’s program started with discussions between Fluke and Bowen, who insisted there should be more interaction between business and academic researchers, Cheatham said. They convinced state legislators to underwrite the idea, and launched WTC in 1983 as part the University of Washington.

In order to serve the entire state, WTC became independent of the university in 1991. “We expanded to ensure that all universities and cities had access,” Cheatham said. WTC now has satellite offices with headquarters still on campus. It augments its state funding with grants, gifts and in-kind services.

But public funding has its drawbacks. The sluggish economy is forcing state and federal agencies to trim their budgets. The Glennan Initiative, which gets money from NASA as well as the state, is bracing for federal cuts and possibly less state support, too. The State of Washington has called for belt tightening across the board.

Both Merrill and Ritala expect to get by despite cuts. Merrill, who is on unpaid leave from NASA, has begun to convert his initiative to a nonprofit agency, subsisting on membership and licensing fees instead of state and federal money. “I’d like to see this through, to see it become a self-sustaining organization,” he said.

WTC’s MEMS program has evolved beyond the initiative phase, Cheatham said. It is now considered a developing industry. WTC will continue to support its existing MEMS enterprises and the Microfabrication Laboratory, he said. And the lab is on sound fiscal footing.

“Actually, we’re at the point where we’re matching operating cost and revenue,” Ritala said.

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CONTACT THE AUTHOR:
Candace Stuart at [email protected] or call 734-994-1106, ext. 233.