Site: Honeywell Inc., Microswitch Division
830 Arapaho Road
Richardson, TX 75081-2241
Date Visited: September 27, 1994
Report Author: D. B. Keck
D. B. Keck
Honeywell is a $5.96 billion company built on creating control components, products, systems, and services for residential, industrial, and governmental facilities and equipment. In 1993, the company employed about 52,300 people, had $4.6 billion in assets, spent $232 million in capital investments, and generated $322 million in net income. Honeywell invested $741 million in R&D, of which $337 million was internally generated. The company is divided into 3 major divisions: Home and Building Control, Industrial Control, and Space and Aviation Control, which generated $2.4 billion, $1.69 billion, and $1.67 billion, respectively, in sales, and 10%, 11.7%, and 9.3% operating margins, respectively. Together, these divisions represent 97% of Honeywell's business. Corporate headquarters is in Minneapolis, MN.
The Microswitch Division, which is part of the Industrial Control Group, is located in Richardson, TX. It began as the acquisition in 1978 of a spin-off of Texas Instruments, Spectronics, Inc. Most of Spectronics' business in 1971 was as a military supplier of early fiber-optic communications equipment (fly-by-light). Honeywell acquired Spectronics in 1978 and continued concentration on short-haul telecommunications. This was a relatively separate world from most of fiber-optic telecommunications and allowed Honeywell to quickly penetrate the datacom/LAN area. Military cutbacks over the last few years caused Honeywell to phase out of the night vision and display area and to deemphasize the military area, particularly in the Microswitch Division.
The central lab, with its 10-year horizon, became more interested in integrated optoelectronics. The Microswitch Division horizon is 3 years, with a planning cycle of 5 years; nevertheless, the company sees the central lab and the Microswitch Division coming more into business alignment.
Honeywell funds the central research lab in two ways: with a corporate tax and by division-specific funding.
A large percentage of the Microswitch Division's business is international. The division has achieved its greatest success in Europe, but has a mixed business in the East Asia/Pacific region. Business is dismal in Japan. Optoelectronics is a small part of Honeywell's business, probably less than 20% (about $330 million). As a company, Honeywell focuses on supplying customized products to OEM manufacturers. This strategy has worked well in the past by providing a platform for OEM manufacturers. However, lately the OEMs are transferring manufacturing off-shore lest the product become too standard. The Honeywell contribution becomes less valued and no longer of great interest. In Europe the customization model has worked less well than in the United States but has been sustainable.
Concerning its presence in Asia, Honeywell has divested its part ownership of Yamataki, but it maintains a strong partnership with that Japanese company. This is a long-standing alliance of more than 50 years that was formed for the control business. Honeywell has other points of presence in Asia, but not in optoelectronics. The company is still developing that strategy.
Optoelectronics funding to date has come principally from the Texas operation. The company's funding of the central lab was for low-bit-rate products and standards. The business unit at Richardson did the product development. The company sees high-speed LANs coming along nicely; however, for the next 5 years these LANs will not replace the revenue stream from Ethernet systems. FDDI is beginning to gain acceptance.
Honeywell sees its competencies as semiconductor device physics -- largely short-wavelength, LED-based packaging; and analog circuitry. The company's view is that LEDs are relatively easy and forgiving, that lasers are more difficult and temperature-sensitive, and that VCSELs may be even easier. Honeywell is working on short-wavelength VCSELs capable of gigabit operation. For Honeywell, optoelectronics technology has not been the driver. The company's business is based on solving a problem for a customer at the best price. This has typically been an MIS manager interested in wiring up a facility with a fiber network. At present, there seems to be very little competition from Japan for Honeywell's product; however, the consumer audio market in Japan seems to be running its course, and producers may begin to reorient their product for the datacom market. Honeywell estimates that the audio link market volume is worth about ten times its datacom market volume. Company representatives indicated that they believe the manufacturing infrastructure for audio links is highly automated and will pose a competitive threat to Honeywell. Toshiba is believed to have the largest share.
One Honeywell optoelectronics product is a source/detector pair sold by OEM to the computer industry to sense end of tape. Sharp began to produce a similar product (the side-looker) for the consumer market. It was developed to sense capstan speed on record players and CDs. Eventually, it grew into remote control for TVs. The Sharp volumes are higher and are tied to products made in Japan.
At present, the company's strategy for LAN work does not target automotive applications. Since Microswitch Division's R&D is largely self-funded, targeting automotive applications would dilute its LAN work, where the division is becoming much more competitive. Motorola is the latest competitor to offer products in this area.
Microswitch funding for R&D is comparable to the overall Honeywell percentage. The Microswitch Division has very little government funding; it sees government contracts as supporting work that is commercially too far in the future. Although typically the division has operated by solving customer problems 3-18 months out, it is now trying to look out 5 years. This division helped to write the Honeywell proposal for the Affordable Gigabit Link project. The Technology Center has looked at ATP programs, but this division has not.
The JTEC panel's hosts at Honeywell see themselves as being in semiconductor components, but doubt that outsiders will agree. Their business is really as a niche product provider, and it is difficult to do volume (efficient) manufacturing with that base. The company tries to be very flexible in its approach to customer problems. While its scientists are capable of doing band theory and Schroedinger equation calculations, they know how to get down and dirty. Most of their products are analog. There are apparently a few small U.S. companies that do this.
Packaging is viewed as one of the Microswitch Division's core competencies. Many other U.S. firms take the view that packaging is not very glamorous and can only degrade the product performance.
Packaging equipment comes largely from the semiconductor industry -- nothing is yet designed for optoelectronics. The Microswitch Division is still using T O cans to package its LEDs. Division researchers thought that if they started from scratch rather than from a semiconductor base, the machines might be designed differently. Their LAN products are mostly multimode fiber-based, and therefore alignment tolerances are not as stringent. Positioning machines need to be good to about 50 microns to hit the fiber, in contrast to the equipment used to insert transistors in sockets, where about 375 microns is sufficient. The Microswitch Division will buy machines rather than develop its own. The JTEC team's hosts cited a small company, Megamation, which has machines capable of doing about 12 microns. Dr. Robert Baird remarked that while the CD-laser industry is sufficiently large to drive machine development, the optoelectronics industry for communications is not sufficiently large to do the same; consequently, Honeywell must rely on equipment designed for the semiconductor industry. Dr. Baird believes that equipment makers exist in the United States capable of achieving optoelectronics tolerances, but currently the industry cannot afford to develop them for the currently low production volumes.
Honeywell's off-shore activity is in Juarez, Mexico. It may move its LAN manufacturing there if volumes grow. However if it automates the operation, there is no particular advantage to moving to Mexico.
The JTEC team's hosts presented a number of the company's products. Most of these were variations on an LED-detector pair. These were put in customer-specific packages to provide simple beam-continuity sensing to short-distance communication links.
Mr. Shaunfield was pleased that the VCSEL work was going on at the central lab and that they are in close contact. The VCSELs will package very much like Honeywell's current LED devices. While the back facet can't be monitored, it is hoped that the devices will be sufficiently uniform and not require it. JTEC's hosts indicated they do not see the presently reported series resistance as a major problem, and they are in close contact with Professor Coldren at UCSB.
The VCSEL work was being done in the central laboratory at the time of the JTEC visit. It was scheduled to take one year to finish the product development and turn it over to manufacturing. To provide for a better transfer, there are quarterly meetings between the central laboratory and the Microswitch Division leaders. The scientists are in constant contact. The Microswitch Division sets the transfer specifications and also provides measurements. E-mail has helped the process. Occasionally there are transfers of personnel, but this did not appear to be typical. Apparently the lab does not have any internships. Division people may spend only a few days in the central lab to obtain technology.
The division appears to be moving toward a more team-oriented product innovation approach. Marketing is responsible for setting up and leading product development activities; however, they expect that when the VCSELs arrive, the central lab and Microswitch Division product development people will work with marketing to provide samples and obtain customer feedback. Microswitch Division representatives hold the view that the Japanese innovation cycle starts at a later time than what is generally accepted in the United States, and therefore, the development cycles appear to be shorter.
The division has initiated its Status Tracking of Actions and Results (STAR) program to measure cycle times. This is an internally generated computer tracking system for all projects. A worker indicates how much time will be required to do a particular job. The project timeline is then assembled based on all worker inputs. No attempt is made to prejudge the proper length of time that should be necessary to perform a job. Flags are raised whenever a problem arises, and the computer calculates a new project chart. Initially, the number of days-late/total project time was running at about 30%. As the system has become better understood, the division's scientists believe they are hitting the predicted project completion dates.
In the Microswitch workforce of 70 people, 6% have PhD degrees, 14% have MS degrees in technical areas, and 12% have MS degrees in nontechnical areas. The company has little turnover and proceeds slowly with new hires. The push is to become more efficient and to encourage engineers to practice multiple skills. The skills are becoming better balanced. Formerly, engineers were predominantly electrical engineers; now with package design becoming more important, more mechanical engineers are being hired. Currently the R&D staff apply off-the-shelf computer-assisted design (CAD) software, but think they could use better software, particularly for lens design packages. They have found only one supplier, Stallar Software, that looks at the problem of energy rather than that of image transfer.
In the area of manufacturing, Microswitch Division representatives look for sole sources for their supplies, preferring to partner with suppliers. They do not believe the Japanese are as sensitive to customer service and delivery time concerns as are U.S. companies. The Microswitch Division places heavy emphasis on quality. Honeywell has three levels of measures: team level, department level, and division level. Individual awards are tied to each measurement, and team awards are commonly given to reward team achievement. The Microswitch Division is a nonunion shop, and all employees receive annual performance reviews.