Honeywell: Continuing momentum
Giant counts on diverse technological assets to carry it through acquisition and economic downturn.
By Caitlin Kelly -- Movers and Shakers, 6/15/2001
| AT A GLANCE | |
| Honeywell |
While it will be a few quarters before the OEM autobahn gets back to breakneck speed, Honeywell Electronic Materials, part of the parent company now being acquired by GE, says it will be ready. Honeywell EMS has three divisions, which together represent $1 billion in revenue, 54 locations in 17 countries, and 6,000 employees: Wafer Fabrication Materials, Power Management Materials, and Advanced Circuits.
The latter—in the business of manufacturing printed circuit boards—focuses on interconnects at the board level. “That’s really our forte,” Morton says. “We deal in the higher-end interconnect, so we’re working primarily with high-end computing and telecom infrastructure, where speed and density is critical, as well as Internet routers and servers.”
Primary accounts for the Advanced Circuits Division include Motorola, Ericsson, and Lucent for telecom infrastructure and IBM, Cisco, and Sun for Internet servers, routers, and high-end computing. While Morton and his colleagues won’t give out revenue figures for each client, he will say that marketshare is shifting. “We’re moving away from what used to be very strong in this business, which is telecom handsets, to more of the servers, routers, and interconnects.” Telecom handsets are better manufactured in low-cost areas such as Asia rather than Minneapolis, where the five sites of the Advanced Circuits division are located. “When cell phones and handsets were manufactured predominantly in the US, we were a direct supplier to that industry,” Morton adds. “As they changed their supply chain, we are adapting as well to serve them.”
Shifting away from handsets also reduces
the risk of relying on a commercial product in a volatile business. “We can
stabilize our business by sticking with more of the infrastructure piece,”
Morton says. “I think we’re after a little bit more stability.”
While relying on established firms such as IBM and Cisco, this division also works with emerging companies such as Juniper Networks and Brocade Comm-unications Systems. “As new companies emerge and introduce technologies, it’s critical for us to stay with those companies,” Morton says.
His division saw an extraordinary 16-fold jump in sales to Cisco in 2000, after Honeywell took over a 1,000-employee former Cray Research plant in Chippewa Falls, WI. The plant used to make Pentium II chips, but Honeywell retooled it to produce high-layer-count circuit boards. “As it came up to speed volume-wise, it was hitting a very good time in the market,” Morton says. “The biggest challenge for us was riding that capacity ramp in Chippewa Falls in a whole new product line for us.”
 |  |
| Mike Thomas, CTO, Honeywell Wafer Fabrication Materials |
Improving materials will drive the industry, enabling higher performance and greater functionality. “The new materials we have to put on the device to make the interconnects will be the key to smaller and smaller feature sets,” Thomas says.
While the industry is indeed competitive, Thomas says Honeywell’s breadth gives it an edge over others, such as Dow Chemical. “Dow makes a low-k organic dielectric used as an insulator on chip,” he says. “We have an organic material that has applicability in the same area. However, we have inorganic materials that do the same thing. Plus we have all the metal conductor technology, which they don’t have.”
By making materials used in all parts of the interconnect problem, from the device to the packaging, Honeywell gains a leg up on its competitors. “I don’t think there’s a company in the world that has the breadth we have,” Thomas says. In Honeywell’s Star Center, a research facility with 60 employees in Sunnyvale, CA, Honeywell materials specialists are building these new dielectrics from scratch, according to Thomas. The firm has invested close to $60 million in hardware and staff for this center, he adds.
This division supplies materials to all the major semiconductor manufacturers and sells the majority of the world’s thermocouplers, Thomas adds. “We have a very large business and marketshare there,” he says.
When GE completes its acquisition of Honeywell, expected in July, the division will enjoy deeper bench strength. “GE has done a lot of work on insulating materials that are very complementary to our inorganic spin-on dielectrics,” Thomas says. “So they have a lot of knowledge in the types of chemistries that we are working on for the microelectronics industry.”
The takeover, adds Jack Bolick, vice president of the Wafer Fabrication Materials division, will create a new company within GE, GE Specialty Materials, to focus on semiconductors, whether manufacturing or packaging. Currently, this division produces $350 million in revenue. “They want to expand with acquisitions very rapidly,” says Bolick, focusing on semiconductors, mic-roelectronics, and specialty chemicals.
“GE will go ag-gressively after ac-quisitions—and not small things,” he says. To power through the downturn, Bolick says Honeywell planned to consolidate some operations and, by March, had workers in California and Washington working three or four-day weeks. “We’re starting to see an upturn in automotive electronics. That’s definitely starting to strengthen.”
“We’re pushing full steam ahead on new products with Applied Materials and Novellus,” Bolick says. “I do not see them slowing down, so we are not either.”
While the industry has contracted recently, “it’s not as severe as people are making it seem,” Thomas says. “We’re not slowing down on anything we’re doing. Since we’ve been in industry a long time, we know that we have these cyclic downturns. Electronics always comes back, because this is what is driving the world’s economy.”
