Applied Materials on track for record year

When Applied Materials acquired Kalispell-based Semitool about 18 months ago, the idea was to leverage the strengths of both companies to create a competitive edge in the manufacturing of processing equipment for the semiconductor industry.

At this point, it’s a marriage that’s working very well.

Applied Materials’ latest big upcycle began in December 2009, right around the time it bought Semitool for $364 million. Last year the company set a record for revenue, and through the first six months of 2011 Applied is on pace for another record year, said Larry Murphy, vice president and general manager of Applied’s Semitool business unit.

For the second quarter of fiscal 2011 that ended May 1, Applied generated orders of $3.19 billion, net sales of $2.86 billion, operating income of $677 million and net income of $489 million. Net sales were up 25 percent year over year.

An explosion in the popularity of smartphones, iPads and other portable computing devices on a global level and in developing countries has driven Applied’s recent success in what is perpetually a cyclical industry.

But there’s more to it than that, Murphy said.

Applied — by virtue of its stature as the world’s leading supplier of manufacturing solutions for the semiconductor, display and solar industries — has helped Semitool develop a higher level of trust and better exposure among its global customers.

“It’s changed the playing field in a positive direction,” Murphy said. “It’s opened a lot of doors.”

To illustrate the acquisition during a visit last September from Applied Chief Executive Officer Mike Splinter, Murphy took a photograph of himself, representing the Semitool business unit. He took a second photo of himself flanked by two linebackers from his alma mater, Michigan State, to represent the business strength Applied has brought to the table.

Semitool operates as a business unit of the Silicon Systems Group, a wholly owned subsidiary of Applied that handles the company’s portfolio of semiconductor manufacturing systems. Applied also operates solar and flat-panel groups as other tentacles of a multilayered company.

The Semitool business unit includes three facilities in Montana.

The main building on West Reserve Drive has been expanded through the years to encompass 200,000 square feet. A total of 585 employees are based at the West Reserve facility.

Several years ago Semitool acquired the former Costco building at the intersection of U.S. 2 and Birch Grove Drive for use as a machine shop. The 75,000-square-foot Birch Grove facility houses 180 employees.

Another 40 employees work at a 12,000-square-foot facility in Libby.

The Semitool business unit has about 1,000 employees worldwide, with two-thirds of the work force based in Montana.

The company has taken advantage of an impressive amount of “brain trust” in Montana, Murphy said, by recruiting talent from the state’s universities. It recently completed a recruiting trip for graduating engineers at Montana State University and the University of Montana.

“These guys can come in and compete with any engineer in the world,” Murphy said about the caliber of Montana graduates. “It’s a mechanical engineer’s dream to work at a place like this.”

Keeping one step ahead of the competition is crucial, he stressed.

“There’s no finish line to these things,” Murphy said. “If you rest for a second you’ll get your lunch eaten. You might have the winning product today, but not tomorrow.”

Applied Materials has made the news in recent months for its consistent performance. Over the past year the company has received three awards for outstanding performance from major solar customers in China. In February the Massachusetts Institute of Technology’s Technology Review placed Applied on its annual list of the 50 most innovative companies in the world.

There’s no time to rest on laurels in the fast pace of the semiconductor industry, though.

“We have to earn the right [to compete] every day,” Murphy said.

Murphy, who joined Semitool in 2004, said he was pleased when Santa Clara, Calif.-based Applied Materials was the top bidder for the company. In addition to better exposure to its customer base, the company has more career paths for employees.

“One of our directives is a mandatory personal development program” for each employee, he added.

Philanthropy is mightily stressed, with the company matching up to $2,000 for each employee’s donations to charity. Employees are paid up to $250 for 20 hours of volunteer work a year, and paid time is allotted for several employees to work on a Glacier National Park trail crew. The company gives grants twice a year to local nonprofits and has embraced the local food bank as one of its biggest contributors.

The company launched its newest product, the Raider S, within the last year and is now fine-tuning it, “getting ready for high-volume manufacturing,” Murphy said. The Raider is the fourth-generation single-wafer processing tool produced by Semitool.

Technology is constantly being stepped up. The industry standard not long ago was a 200-millimeter wafer; now the majority of Applied’s business is geared for 300-millimeter wafers and there’s talk in the industry of a 450-millimeter wafer, Murphy said.

A wafer is a thin, round slice of semiconductor material, typically silicon, from which microchips are made.

When Murphy joined the company seven years ago, Semitool had four final assembly bays and the same number of final test bays for its Raider units. Now the company has a dozen of each.

Customers are strung out across the globe — China, Taiwan, Singapore, South Korea, to name a few.

The global nature of the business takes Murphy out of the office and the country up to 60 percent of his time. About 80 percent of Applied’s business is done outside the United States.

“Customers buy from people they know and trust and it’s important to be in front of the customer,” Murphy said. “My whole team travels. The goal is to make our customers raving fans.”

It was Semitool founder Ray Thompson’s vision in the industry that attracted Murphy to the company in the first place.

“Ray was one of the last innovators in the industry, and I wanted a chance to work with a guy who’s a visionary. A lot of Ray’s fingerprints are still all over this company.”

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com.