7 Graphics Drive
West Trenton, NJ 08628
Date Visited: October 13, 1994
Report Author: P. Shumate
Epitaxx is a manufacturer of high-performance, high-reliability packaged photodetectors, detector arrays, pin FETs, and surface-emitting LEDs. The company also sells packaged edge-emitting LEDs containing chips manufactured elsewhere. In 1994, Epitaxx expected to supply over 300,000 devices (73% detectors, 27% SLEDs) for use in telecommunications applications such as fiber-in-the-loop (35%), data communications (20%), cable television hybrid fiber/coax networks (15%), military and space applications (15%), test and measurement applications (7.5%), and near-IR (infrared) applications (7.5%). Overall, 75% of Epitaxx's sales are to OEMs. The company is growing rapidly and expects to be shipping between 1 and 1.5 million devices within 5 years. Revenues for 1994 will exceed $15 million. The company's customers for telecommunications products include some of the largest in North America, Europe, and Japan, with sales of 45%, 40%, and 15%, respectively. Epitaxx sells both modules (packaged devices) and discrete devices (chips) to these telecommunications customers.
The company's annual R&D investment is about $2.5 million (15% of revenues). Of this, $1.5 million results from contract (funded) R&D at the request of customers, and $1 million is internal or unfunded. In addition, efforts on reliability and product qualification are about a 4-man effort funded from a separate product-support and manufacturing budget. The Epitaxx staff currently numbers 150, having grown from 70 in the 18 months preceding the JTEC visit. The expansion has been almost entirely in the production area in order to meet rising demand. There are 20 members of the engineering staff, 5 in the production area, and 4 in QA. (There are a total of 8 people in the QA department.) Management is matrix style, with line managers for materials, devices, optics, and mechanical design and packaging. The product managers align with the four customer groups. Epitaxx has a 44,000 sq. ft. facility containing Class-100 clean rooms for material growth and other critical steps, Class-1,000 clean rooms for assembly, and Class-10,000 areas for other routine operations through packaging. Overall clean-room space is 10,000 sq. ft. The facility buildout was funded by a bond from West Trenton Township.
The company was founded in 1983 by Drs. Gregory Olson, Yves Dzialowski, and Vladimir Ban. In 1990, it was bought by NSG America, Inc. (Nippon Sheet Glass). At that time, Olson and Ban departed to set up other businesses. The company has been profitable every year except its first 18 months and during the Gulf War.
Epitaxx's business was initially focused on a small variety of InP-based photodetectors, spanning everything from materials growth to subsystems. Now it has a broader, high-volume, limited product line but no subsystems efforts and minimal efforts on materials growth. (It has found several reliable commercial sources of wafers.) Epitaxx attempts to design the best possible devices and focus on the mass production and packaging of these. The company's management feels that the company should not dilute its design efforts to work on subsystems, many of which only compensate for the performance defects of poorer devices. (They also believe that if they were successful in designing subsystems like data links, this would bring them into undesirable competition with their customers. However, they do value-added electronics as a service to their customers when requested.) By having the best and most-reliable devices (with extrapolated lifetimes approaching 10 12 hours), Epitaxx can supply even the biggest system manufacturers, even though these customers have in-house device capabilities. The company takes the view that this is the lowest-cost solution for these large companies, particularly in view of recent reengineering to cut costs. If the Epitaxx product offers highest performance and reliability at reasonable cost, these customers will use their in-house capabilities only as their own second source.
The engineering staff generates a few ideas for new products, but most are designed in response to customer requests. Because of the type of customer the company generally and successfully works with, Epitaxx management has learned to trust the customer's assessment of needs and market forecasts, although they monitor industry trends. Therefore, the company's management does not feel it is necessary to take a role in influencing emerging or potential markets. Furthermore, there is rarely any need for formal ROI or IRR workups on new products.
Epitaxx, like others, has found that technology transfer works best if the design engineer goes with the product rather than handing it off. Most of these engineers eventually return to the design phase to develop another device for transfer into production.
Epitaxx planned to begin the ISO-9000 certification procedure beginning early in 1995. The panel's hosts did not believe certification is critical (at least currently) for maintaining sales, because their large customers have their own stringent qualification processes and incoming inspections.
JTEC team members asked whether sales in Japan increased after Epitaxx was acquired by NSG. In fact, the company did business in Japan three years before the acquisition, and no significant changes have resulted from the NSG relationship.
Because it is now a Japanese-owned company, Epitaxx is no longer eligible for SBIR funding. On one hand, that is unfortunate, because previously the company used SBIR funds for R&D that otherwise would have been taken from earnings; on the other hand, JTEC panel hosts observed that no commercial product ever came out of that R&D.
Although Epitaxx does not have a separate R&D department, the company does have the focused efforts of a group of researchers at NSG's research laboratory in Tsukuba.
Epitaxx has not gone to full production automation, because the volume is spread over many different product types. The company has, however, built and installed numerous yield-enhancing tools.
Epitaxx is a fast-growing, small-to-medium-sized company with a clear view of its mission; namely to lead in the production of a focused line of devices and to be a principal supplier of large companies with solid product lines. The company depends on its customers' assessment of markets and leadership in these markets to guide it in the development of new products. Aside from device performance, Epitaxx emphasizes device reliability to differentiate its products from those of competitors, and also because it is a metric important to its customers. (Furthermore, in the early 1980s, the reliability of different long-wavelength photodetector structures -- mesa versus planar -- was one of the areas of greatest debate, strongly influencing the company in its design of new devices.)
Development and manufacture of photonic devices for