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With R&D centers in North America and Europe, and sales and service operations in more the 40 countries around the world, FEI is bringing the nanoscale within the grasp of leading researchers and manufacturers and helping to turn some of the biggest ideas of this century into reality.
FEI Company manufactures structural process management systems, essentially dual beam microscopy and transmission electron microscopy, and related software for three primary markets: nanoelectronics, serving semiconductor and data storage manufacturers; nanobiology, with traditional life-science research customers and emerging sales opportunities in the medical devices and pharmaceuticals industries; and nanoresearch, selling to research institutions and university laboratories. FEI uses electron beams, focused ion beams, or a combination of both to create high-resolution, three-dimensional reconstructions of objects smaller than the sub-Angstrom level (one hundred-millionth of a centimeter). As industries have delved further into nanotechnology, working with structures and devices that range in size from one to 100 nanometers (a nanometer is one billionth of a meter), they have found an increasing need to perform tests, and have turned to FEI for the systems needed to provide the necessary magnification. Chip makers, for example, pack an increasing amount of capabilities on a single tiny wafer, which might be worth $100,000. As a result, they are eager to avoid defects and to fix them when found. FEI systems are able to focus an ion beam to make a cross-sectional cut in the chip, and then with the help of software provide a slice-by-slice 3-D rendition, allowing engineers to isolate flaws and correct them. Developing markets for FEI systems include car and aircraft manufacturers who are beginning to use nanotechnology to develop lighter yet stronger materials; pharmaceutical companies in the development of new drugs and delivery systems; and energy companies interested in using the technology to develop alternative energy sources and improve the petroleum refining process. Based in Hillsboro, Oregon, FEI Company is a public company listed on the NASDAQ.
Founder's Interest in Field Emissions Technology Begins in 1959
FEI was founded by Dr. Lynwood Swanson. He grew up in California with a career in medicine or pharmacy in mind, but he accepted a football scholarship to the University of the Pacific, which did not offer any majors in the health field. Instead, Swanson began to study chemistry and became enamored with it, ultimately earning a degree in chemistry and physics. He then earned a doctorate in physical chemistry at the University of California, Davis in 1959 and began doing postdoctoral work at the University of Chicago, involved in basic research in field emissions, the release of electrons from atoms. It was also in 1959 that Swanson met a pioneer in the field, Dr. Walter Dyke, a man who would become his mentor.
Dyke had earned a physics degree at Linfield in 1938, but his postgraduate studies at the University of Washington were interrupted by World War II. During these years he worked on radar research at the Massachusetts Institute of Technology and had to contend with the effects of emissions from the electron beam upon which radar relied. He sensed that if these emissions could be harnessed they might be exploited. After completing his doctorate following the war he returned to Linfield and began conducting field emission research. In 1955 the Linfield Research Institute (LRI) was formed in McMinnville, Oregon, to relieve the physics department of the burden Dyke's research placed upon it. LRI soon found a commercial application for its field emissions work: a flash x-ray system that could be used in stop-motion radiography and radiation research. In order to actually manufacture the system and other products that might result from LRI's research, Dyke formed Field Emission Corp. in 1958.
In 1961 Swanson joined Dyke at LRI and also began to teach at Linfield. He would form the second company to grow out of LRI, Field Electron and Ion, established in 1971 in a building on the Linfield campus with partners Noel Martin and Lloyd Swenson. Two years later the name would be abbreviated and the business incorporated as FEI Company. FEI was established to supply field emission researchers with high-purity, oriented single crystal materials. It operated quietly for several years and then became better known in its field, especially with the design and manufacture of electron and ion beam emitters. In 1981 it developed liquid metal ion (LMI) sources, improving focus beam technology and having a major impact on the semiconductor industry, which used focus beam technology to improve methods of failure analysis. A year later FEI began shipping its first LMI focusing column. The company began to take off, picking up major corporate customers such as Hewlett-Packard, Intel Corp., and Seagate Technology. FEI would eventually move its operations to Hillsboro, Oregon, to be closer to these customers.
Major Growth Spurt Beginning in 1987
Swanson was not fully committed to FEI as it rose in prominence. In 1973 he conducted surface physics research and advised students at the Oregon Graduate Institute, but by 1987 it was obvious that FEI was on the verge of major growth, due to changes in high technology. "When the semiconductor industry started talking in terms of nanometers," he told the News Register of McMinnville, "people needed tools to visualize that and create things. We had the technology ready at the right time." Not only in the semiconductor industry but also in structural biology and protein research were FEI microscopes of critical importance. Hence, Swanson decided to leave teaching in 1987, devoting himself full-time to running FEI.
To fuel its growth, in 1988 FEI raised $300,000 in a first round of funding from the Oregon Resource & Technology Development Corp. Fund, established by Northwest Technology Ventures. A year later the company achieved another milestone when it shipped its first complete ion beam (FIB) workstation. FEI closed the decade by recording sales of $4.5 million, a number that would increase to $7.5 million in 1990. The company also posted profits, something it had accomplished every year of its existence.
FEI started the 1990s employing around 85 people who worked in 25,000 square feet of leased space at Hillsboro's Oregon Graduate Center Science Park, later renamed AmberGlen Business Center. However, the company was growing so quickly at this stage that it needed to double its workforce and move to a larger space. Plans were announced in August 1991 to move into a larger custom-made building at AmberGlen, but a recession prompted FEI to be cautious. Instead, in December 1992, FEI signed a ten-year lease on a 43,300-square-foot building under construction in Hillsboro. It had been started seven years earlier but never got past the foundation stage when the area real estate market collapsed.
In the early 1990s FEI forged an alliance with Philips Electron Optics to develop an innovative new product. With experience in electron optics dating to the 1930s, Philips had built the world's first commercial transmission electron microscope in 1949 and had been responsible for a number of advances in the field in the years that followed. In 1990 Philips introduced a scanning electron microscope (SEM) suitable for use with six-inch semiconductor wafers. By directing a beam of focused electrons across an object and reading both the electrons deflected by the object and the secondary electrons produced by it, the microscope was able to create a three-dimensional image on a screen. FEI and Philips joined their technologies in 1993 to create the first DualBeam (FIB/SEM) workstation.
To support further growth, FEI looked to make an initial public offering (IPO) of stock in early 1994, but postponed it because of a rash of IPOs that depleted the resources of potential investors. It was not until June 1995 that FEI finally went public. With Black & Company Inc. and Pacific Growth Equities Shares serving as underwriters, the offering raised $23.8 million for the company. FEI's status as an independent public company would not last long, however. In September 1996 Philips Electronics N.V., parent company of Philips Electron Optics, acquired a 55 percent controlling interest in FEI. The operations of FEI and Philips Electron Optics would be merged under the FEI name in February 1997. While the merger was being sorted out Philips Electron Optics added some valuable assets that would become part of the business mix. ElectroScan and its ESEM (environmental scanning electron microscope) technology was acquired. ESEM did not require the high level of vacuum conditions in the specimen chamber as did conventional SEM. Philips also acquired a Czech company, Delmi S.R.O., in 1996.
In its first year of operation as an expanded company, FEI generated sales of $168 million. It was a global enterprise employing close to 1,000 people in plants in the United States, The Netherlands, and the Czech Republic. FEI also was beginning to make the transition from equipment manufacturer to provider of customized solutions. In fact, almost one-quarter of its revenues came from service and components.
FEI experienced a change in leadership in 1998 when Vahe Sarkissian was named president and chief executive officer. Swanson remained as chairman. Sarkissian was a seasoned executive, the former president and chief operating officer of Silicon Valley Group and the president and CEO of an electron beam meteorology company, Metrologix Inc. During its first year under the new CEO, FEI launched a pair of new product families: the Tecnai transmission electron microscope and the xP860 DualBeam system for chipmakers' fabrication process control. Traditionally, FEI products had been used in the laboratory, but now they would go from lab to "fab," integrated into the fabrication process itself to provide ongoing verification. As a result, the market for FEI systems was expected to rise sharply. For the year sales increased to $178.8 million, but the company also took steps to grow its business even more quickly.
Acquiring Micrion in 1999
In December 1998 FEI agreed to acquire Peabody, Massachusetts-based Micrion Corporation, a $70 million cash and stock deal that closed in 1999. With 200 employees Micrion manufactured FIB workstations, having shipped its first system in 1985. Micrion focused mostly on the high end of the FIB market, while FEI offered systems from the lower end and up. They often contended for the same business, so that by merging they created a near-monopoly in the FIB market. The consolidation actually served the interests of its customers, which were looking to deal with fewer companies and wanted the kind of integrated solutions to their problems that a combined FEI and Micrion could provide in the FIB arena.
With Micrion in the fold, FEI saw sales increase to more than $216 million in 1999. Another significant development in 1999 was the forging of a distribution agreement with Tokyo Electronics Ltd., an alliance that expanded FEI's product line while adding new markets. Revenues increased to $320.3 million in 2000 and $376 million in 2001. FEI also held a well-received secondary offering of stock in 2001, netting $89.3 million for the company. About $32.5 million was used to pay back a unit of the parent company, and a sizable amount was reserved for increased spending on research and development. Philips also sold some of its interest in FEI as part of the offering, so that it no longer held a controlling interest. With a 31 percent stake, however, Philips remained a serious investor and supporter of FEI's effort.
FEI was adversely impacted by a serious downturn in the semiconductor industry but fared better than most equipment vendors because its systems were finding an increasing number of industrial and medical applications. Consolidation continued in the semiconductor equipment market, and FEI almost became part of that trend in 2002 when an agreement was reached with Veeco Instruments Inc. to sell FEI for nearly $1 billion in stock, a deal that would have resulted in the sixth largest company in the field. However, the merger would never come to fruition and ultimately was dropped in January 2003. In the meantime, FEI took steps to solidify its ties to Oregon, agreeing to buy a 27-acre campus in Hillsboro where it planned to employ 350 people in five buildings, including a 112,000-square-foot manufacturing and research and development facility and a 68,000-square-foot office facility.
While revenues dropped to $341 million in 2002, FEI continued to expand its product offerings and diversify its markets, part of an effort to push the company to the $1 billion annual sales mark. It completed a pair of strategic acquisitions in 2003, buying software product lines for manufacturing and semiconductor fabrication yield, and acquiring Revise Inc., maker of laser etching products.
FEI enjoyed a strong year in 2004, increasing sales 29 percent to $465.7 million and improving net income from $7.2 million to $16.6 million. The year also saw the retirement of Swanson, who turned over the chairmanship to Sarkissian. In 2005 FEI realigned its sales, marketing, and research operations to focus on three major nanotechnology markets--nanoelectronics, nanobiology, and nanoresearch--as it prepared to take advantage of future opportunities.
FEI Asia Company; FEI Electron Optics International B.V.; FEI Deutschland GmbH; FEI Czech Republic S.R.O.; FEI Europe Ltd.
Applied Materials, Inc.; JEOL Ltd.; KLA-Tencot Corporation.