Wafer-polishing Company Evolved Along with Arizona’s High-tech Cluster
By Janet C. Whittle IPEC Planar, through a predecessor company, was one of the early seedlings that eventually grew into Arizona’s “silicon desert.” The company recently demonstrated its continued commitment to the state’s high-tech cluster with a new manufacturing facility in Phoenix.
More than 700 fast-growing technology firms have established a manufacturing base in Arizona over the past 20 years, creating one of the nation’s most dynamic high-tech clusters. Today one out of every five jobs in the state is supported either directly or indirectly by high technology.
One company that has participated in this development is Phoenix-based Westech Systems, now a part of Integrated Process Equipment Corp., or IPEC Planar. IPEC Planar, which is based in San Jose, Calif., acquired Westech three years ago through a Class A bond action.
Westech had spent 20 years developing chemical mechanical wafer polishers (CMP) for the semiconductor equipment industry. CMP is a polishing technology that makes the wafer as smooth as possible so that it can hold the maximum amount of memory. “It was the classic case of the canary eating the cat,” said Phil Coons, facilities manager for IPEC, of the acquisition. At the time, IPEC had only 13 people to Westech’s 60.
Since then, CMP technology and the company have grown — IPEC now employs 1,100 people. “We’ve doubled revenue every year with the exception of 1998, due to the current slowdown in the semiconductor industry,” said Coons.
The company expects the market for CMP to grow 30 percent annually through the year 2001, with CMP becoming the accepted polishing process worldwide for Logic and next-generation DRAM devices. IPEC’s greatest growth has been international, with Russia and Asia two of the company’s biggest overseas markets. Worldwide, the company has a field service organization of 300 people.
To keep up with growth, IPEC needed a facility where it could develop and produce a newer CMP technology, orbital polishing, which could be combined with existing processes. Phoenix was a natural choice for that expansion.
“We do a lot of business with the local semiconductor companies here in Phoenix,” explained Coons. “We also have customers in Albuquerque, in Austin, Texas, and in California.” Today, most of the integration and assembly of IPEC’s machines is done in Phoenix at a new, state-of-the-art, 156,000-square-foot hybrid facility that also includes a testing and process development laboratory. A smaller facility in Tempe, Ariz., performs some sub-assembly work.
“Phoenix has a relatively stable work-force, one that has been well trained in semiconductor protocols.” — Phil Coons of IPEC
According to Coons, tax advantages, an expedited permitting process, and a readily available labor force were all critical factors to the company’s decision to expand in Phoenix. Arizona has no unitary tax, no inventory tax and no tax on equipment used in manufacturing.
“There were some established tax packages developed through some of the larger semiconductor industries that enabled a tax break for relocating into the state, and because we were tied to the semiconductor industry we were able to take advantage of that,” said Coons. “We wanted control of the building so we decided not to go after the municipal tax savings packages that were available. There were also some tax advantages on leasing equipment which we took advantage of.”
In addition, the city of Phoenix was first-rate in expediting the facilities permitting process for IPEC.
“When we were picking out a location we met with a lot of contractors and architects to see what sites were actually available within Maricopa County, and what their reaction was to the actual permitting process,” he said. “We found that in terms of time length, Phoenix was the exception,” he said, approving permits in much less than the typical eight to 10 weeks.
“We also found an architectural firm, Barry Deutch and Associates, who had an excellent relationship with the city. In the high-tech industry, it’s all about capacity and size, and how much you can squeeze out of a building site in terms of productivity. With Phoenix’s help, we were able to take out a lease on what was basically a shell and build out 156,000 square feet in just over three and one-half months, whereas the normal time length could be eight or nine months,” said Coons.
Coons said IPEC also wanted a location central to its local suppliers and workforce, and with proximity to the airport. “Phoenix has a relatively stable work force,” he said, and one that has been well trained in semiconductor protocols. He acknowledged, however, that the labor supply is smaller than the number of high-tech jobs available, a situation that “hurts all of us a little bit. We’re always looking for new recruits at high-tech job fairs and the like,” he said. “We try and pull from outlying states, especially California since the military bases have closed.”
IPEC Planar also has taken advantage of state and privately sponsored human-resources programs as well. “The state OSHA (Occupational Safety and Health Administration) has incentives and internal education programs through its local consultation division,” said Coons. “We take advantage of a lot of internal support from the different agencies that exist, not only with tax breaks for training in certain kinds of industrial technical jobs, but job training and continuing education.”
The Arizona Association of Industries has a supplier information pool that the company has used, as well as a job pool. “Everybody understands who’s doing what locally so you really get to know who you’re dealing with. It’s a very collaborative and well-supported environment,” said Coons.
In addition, there are numerous local industry groups, including a facilities management group and a high-tech facilities roundtable, that serves to attract potential workers from out of state and provide the company with information on other facilities-related issues. “We do everything from deregulation of the electric industry to how we set standards for the buildings. We also do a lot of partnering with legal groups,” he said.
Phoenix’s utility, the Salt River Project, has helped the company with supply-usage forecasts and rate reductions. “Because of the facility we’re in, and with the amount of electricity we use, we’ve been able to apply for two rate reductions,” said Coons. “This was something the utility instigated on our behalf. They also did some studies on the existing five buildings we used prior to our consolidation here, and what we were using then versus what we use now. All together our cost savings averages about $50,000 a year from the reclassification. And they have provided us with a plan for an alternative power support grid we could have access to within the hour in case of a power failure.”
For other suppliers, the company often uses local and Oregon-based companies to maintain supplier consistency. “There’s a lot of local vendor bases that we can pull from in terms of knowledge and expertise, and we also work through the Arizona Association of Industries as well,” said Coons.
“We just went through a supplier base review, and I believe we have about 500 independent suppliers, which is probably double what we had three years ago. We’re very concerned with secondary sourcing requirements to feed the business in case of default or disaster. Just like us, their product changes rapidly and we’re always working with the vendors and customers to insure that our training and documentation reflects the latest changes.”
IPEC has not outsourced much of its logistics. “We’re very protective of what we have,” explained Coons. “There’s a tremendous amount of confidentiality.”
Coons said IPEC is just starting to use a vendor-management program “that will drive our MRP (materials resource planning) and integrate final customer demand with our logistics process. It will also help us partner better with our vendors, who will eventually be using the same type of program.
“The typical CMP application tool is produced in six to twelve weeks and we have to be very careful to take advantage of the parts that are already here and not build inventory,” explained Coons.
The Silicon Desert
One of the key growth industries for Arizona is high-tech and semiconductor manufacturing. Indeed, the greater Phoenix area is now known as “the silicon desert” and high-tech is the largest single manufacturing employer in Maricopa County. The Arizona Department of Commerce estimates that 56 percent of the state’s manufacturing jobs are in high-tech.
Semiconductors are expected to add an additional 7,000 workers to the state in the next three years. With 18 wafer production labs in the Phoenix area, the state is the number three semiconductor-producing state in the U.S., behind only California and Texas. Some companies, such as Intel and Motorola, have had a presence in Arizona for years. Others, such as MicroAge, Sumitomo Sitix and Materials Research, are more recent immigrants.
Since 1989, Arizona has operated under a program known as the Governor’s Strategic Partnership for Economic Development, or GSPED, in its effort to promote business relocation and expansion into the state. GSPED is an innovative public/private partnership that targets 11 critical industry clusters in an effort to promote economic growth and quality of life development statewide.
Steve Zylstra, head of the high-tech industry cluster and director of business development for Zylstra Technologies Inc., said numerous innovative, public/private-sector industry programs are under way to continue to attract high-tech. His group has five initiatives to help keep the region growing. First and perhaps most important is education and workforce development. “This is vital to our industry. Recently, we went out and competed for and won the state’s largest school-to-work program. Industry works collaboratively with the schools to provide all kinds of programs for kids to help them better prepare for entrance into the high-tech workforce. This involves job mentoring, job shadowing, and a whole array of other programs.”
Another initiative is technology transfer between the state’s universities and industry. Said Zylstra: “We’ve made great progress in the last two years to change the Board of Regents’ policy on the issue of transferring and reassigning patent and data rights to technologies that have essentially been funded and sponsored by private industry but are in the hands of academics.”
Additionally, the high-tech cluster group is working on the entrepreneurial development of small high-tech businesses through an incubator, a small business innovation research program and an entrepreneurial fellows program at Arizona State University. “We leave the direct marketing to the economic development people,” said Zylstra. “What we’re trying to do is raise the boat for the aggregate high-technology community as a whole.”
