MemsTech on board with products, public offering

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June 21, 2004 -As Mems Technology Bhd, or MemsTech, is preparing to raise money, it is also raising its profile as a product-oriented company.

The Singapore-based holding company of fabrication and packaging firms is planning an initial public offering this summer on Malaysia’s Mesdaq market. MemsTech expects to raise about $15 million, which would go to boosting production capacity as well as research and development.

But MemsTech, which formed with the acquisition of firms now called SensFab Pte Ltd. and SenzPak Pte Ltd., wants to be seen as more than the sum of the services it provides. The company is accelerating production to meet what it sees as surging demand for a wide range of microsensors — including many produced under the MemsTech brand.

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Its silicon microphone is just one of the products it hopes will fill orders. The company, which expects to make customer announcements within three months, is targeting cell phones, PDAs and laptops.

The acoustic chips will join several other MemsTech commercial sensors, including 10 types of pressure sensors for medical, automotive and consumer uses, along with accelerometers initially focusing on consumer electronics.

MemsTech has also created an array of thermoelectric infrared sensors, or thermopiles, for thermal imaging cameras. It is assembling the cameras, launched this month, for Michigan-based Ann Arbor Sensor Systems LLC. The cameras cost less than $5,000 — about half as much as competing products — and are designed for firefighters, building inspectors and border security.

The infrared camera is sold under the Ann Arbor Sensor Systems name, but the exterior of the product features MemsTech’s new trademarked tagline, “MEMS on board.” The line, inspired by “Intel Inside,” is a way for the company to acknowledge the evolution of its business plan and MEMS sensors in general.

“It’s a timing thing. Mostly people have looked at SensFab providing fabrication support … and SenzPak for packaging and testing,” said MemsTech co-founder Srini Naidu, who serves as executive director of the company’s U.S. office in Dexter, Mich. “Just now the products are coming in.

“We show our technology (through the companies), but the product is what we’re pushing to our customers.”

Naidu and the other co-founders, chief executive K. Sooriakumar and worldwide sales and marketing director Bryan Patmon, planned from the start to form a vertically integrated company offering technology, services and products.

Each area of business — fabricating and packaging — was intended to operate independently, while each assisted product development.

For instance, industry experts estimate that the price of packaging a product is 60 to 85 percent of the cost of its development. The challenge comes in packaging parts so they are protected from the environment, yet still able to interact with the environment. The one-size-fits all approach for integrated circuits doesn’t work for MEMS because of their diverse shapes, sizes, strengths and functions.

Patmon said MemsTech’s packaging operation allows it to place a priority on packaging from the beginning of the process, which saves money and aggravation down the line. “The future of MEMS, to me, is packaging — it’s no good to have a sensor if you can’t have a package around it.” Patmon said. “There are a lot of sensors out there … and a lot of things that need packaging.”

Marlene Bourne, MEMS analyst for In-Stat/MDR , said MemsTech is not the only company to combine services and products. The list also includes California-based Silicon Microstructures Inc., Switzerland-based Colibrys SA and France-based MEMSCAP SA.  It’s a smart approach, she said, if a company can multitask with microsystems.

“If they’ve got strong skills … why should they give (one) up in order to pursue being a supplier of products?” she said. “You’re not throwing all of your eggs in one basket. Not just a supplier or fab. When one area is seeing a downturn, or slow growth, you’ve got a couple of other areas you can turn to.”

Paul Kolen, a San Diego-based professor and consultant, said a business like MemsTech “has the potential of being a goldmine,” depending on how fast MEMS sensors reach saturation level. But with that potential goldmine comes many prospectors, including those who arrived early to stake a claim.

Analog Devices Inc., for instance, labored for years before finally dominating the accelerometer market for automotive airbags. “That’s what’s driven MEMS sensors from the get-go,” said Kolen, an electrical engineering professor at San Diego State University. “(Companies) are driven by high volume to amortize their R&D costs.”

Still, Kolen predicts plenty of demand in the years ahead for those who are prepared: “All of a sudden, this is a class of sensors that’s never existed before. It lends itself to all kinds of applications that were not possible,” he said. “This is the golden age of sensors and instrumentation.”

Vital facts about

MemsTech

Company: MemsTech (MEMS Technology Bhd)

Headquarters: 85 Science Park Dr., The Cavendish #01-02, Singapore 118259

History: MemsTech originated from a 2001 management buyout of a Fortune 500 company working in micromachined accelerometers. As a result of that buyout, MemsTech became Asia’s first independent MEMS foundry. The company has executive offices in the United States with manufacturing facilities in Kuala Lumpur (Malaysia) and Singapore.

Industries potentially served: Automotive / Transportation Equipment; Aviation / Aerospace Equipment; Biomedical / Life Sciences; Communications; Consumer Products; Integrated Circuitry / Semiconductors

Employees: 100

Small tech-related products and services: MemsTech functions as a holding company for Singapore-based firms focused on packaging (SenzPak Pte Ltd.) and fabrication (SensFab Pte Ltd). Already well-established as a foundry, the company hopes to become a key global source for wafer testing, fabrication and assembly. In addition, MemsTech is developing its own pressure sensors, microphones and accelerometers for integration into client-branded products.

Management: Datuk Ahmad Kabeer Nagoor: chairman (chief executive officer of AKN Equity Venture; Sdn Bhd, MemsTech’s majority investor); Srini Naidu: co-founder and executive director, U.S. office; K. Sooriakumar: co-founder and chief executive officer; Bryan Patmon: co-founder and worldwide sales and marketing director; Ooi Boon Leong: director; and Foon Wee Hin: marketing director, SensFab

Financials: Revenues are about $15 million. MemsTech is scheduling what it hopes will be a $15 million IPO for this summer; the company plans to trade on Mesdaq, the Malaysian stock market, and completed its underwriting process with sponsor, underwriter and placement agent Commerce International Merchant Bankers Bhd (CIMB) on June 11 in Kuala Lumpur. Primary funding for the private company came from AKN.

Selected customers and strategic partners: Ann Arbor Sensor Systems; Argon Medical Devices: CoventorNanochip; and Perusahaan Otomobil Nasional Bhd (Malaysia’s national automobile company)

Selected competitors: Colibrys SA; MEMSCAP SA; and Silicon Microstructures Inc.

Barriers to market: By broadening its offerings — fabrication, testing, packaging and its own product development — MemsTech broadens its revenue streams. However, while its product may offer key performance and cost advantages over existing microphone technology, MemsTech could find it challenging to own 30 percent of the worldwide microphone market in just two years. The company is functioning in a crowded niche occupied by many large players who have the infrastructure to provide products at a high volume and low cost.

Contact (U.S. office): URL; Phone, (734) 560-5506; Fax, (734) 420-3004; and E-mail, srini@memstech.com

Research by Gretchen McNeely

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