2700 South 900 West
There are always lessons to be learned and improvements to be made in a business. The Company's management team has been and remains open to learn from these lessons. So what have we learned over the past two years? We have been reminded that the semiconductor industry is cyclical and that our business has been solely dependent on this industry. As a result, management is working to diversify the business operations without compromising our current position within the semiconductor industry. Further, we have found it much easier to deal with the challenges of growth than with the challenges of an industry downturn. The management group will continue to monitor our cost structure through the current downturn while staying ready for expected and anticipated growth. Lastly, our shareholders' investment remains our number one concern. The changes we are making and the opportunities we are pursuing are directed specifically at increasing shareholder value and providing for overall growth and profitability.--Letter to the Shareholders, Daw Technologies, Inc., 1997 Annual Report
Daw Technologies, Inc., is the leading American supplier of "cleanrooms," or ultra-clean manufacturing facilities, for the semiconductor industry. The company originates the design, engineers and manufactures the components, installs the environment, and provides comprehensive maintenance service for all the systems included in a cleanroom. Daw Technologies' integrated approach allows its customers to reap huge benefits from its accelerated design, installation, and project maintenance. Critical to the semiconductor manufacturing process, cleanrooms control contamination levels and environmental variables, including such factors as humidity, gases, electromagnetic fields, and temperature. Competition and shorter product life cycles within the semiconductor industry have enabled Daw Technologies to carve out its own niche by providing fully operational cleanrooms in the shortest possible timeframe. During the mid-1990s, company management has embarked on an aggressive expansion strategy and, in addition to its existing U.S. facilities, opened new sales and design offices in Livingston, Scotland; Aix-en-Provence, France; and Hsin-Chu City, Taiwan. In 1998 Daw Technologies won the largest contract in its history when the company reached an agreement with the People's Republic of China to provide a cleanroom system for a semiconductor manufacturing facility in Tianjin, China.
Early History
The founder and moving force behind Daw Technologies is Ronald W. Daw. Born and raised in the mountain air of Utah, Ronald Daw spent his childhood days like many other American children raised during the decade of the 1950s, with lots of room to play and unbridled optimism in the future. After graduating from high school, he attended the University of Utah, where he received a Bachelor of Science degree in the field of accounting. His did well at university, and was welcomed into corporate life in Salt Lake City. During his early career, Daw learned about corporate organization, people management, and financial operations. Extremely talented, with an acute sense of product development and marketing, by the time Daw reached his mid-30s he was running his own company, Daw Incorporated, an interior finish construction firm.
Having started his first company in 1984, Ronald Daw negotiated the difficulties of the construction industry and its cyclical nature with decisive action and a sharp sense of what the market required. Within four years he had built a sizeable firm that provided high-quality interior finishing. Always looking for bigger and better opportunities, the entrepreneur decided to enter into the cleanroom business after discovering the demand for ultra-clean manufacturing environments in the semiconductor industry. Formed and incorporated in 1987, DTI was one of the first companies to provide comprehensive services for all the principal components of a cleanroom environment. Of course, by the late 1980s, the semiconductor industry was already fully developed, with a number of small companies designing and installing cleanroom environments. But Daw's vision included a more thorough approach involving not only the design and installation of cleanroom manufacturing facilities, but also the manufacture and maintenance of the entire cleanroom, including its ceiling systems, wall systems, floor systems, and recirculating air-handling systems, as well as testing, certification, tool fit-up, and continuous on-site maintenance and repair.
Unfortunately, the firm was hit hard by the cyclical nature of the semiconductor industry during the late 1980s. Demand dropped precipitously, and, in light of the fact that a large supply of semiconductors was readily available from earlier production schedules, services provided by companies such as DTI were either canceled or placed on indefinite postponement. The severity of this particular cycle was intense, and resulted in a decision to downsize company operations. The most important lesson Daw learned from the detrimental effects of the cycle was to prepare for the next one.
Growth and Development During the Early 1990s
Before the 1990s, semiconductor manufacturers contracted a number of vendors to provide them with cleanroom systems and related maintenance services. Much like the approach in a wide range of industries, a request for a price quote for either cleanroom component systems and/or maintenance services was issued, competitors submitted their initial designs and estimated budgets, and, after review, revised both their designs and budgets in light of the needs made explicit by the contracting semiconductor manufacturer. This process of design and budget submission and revision would repeat itself until the semiconductor company made its final vendor selection. After the completion of this process, which might take as much as a year, the vendor would prepare its final design and initiate the cleanroom project. The final design might be installed by the vendor that submitted the original bid, but it might also be sub-contracted by the vendor to an independent firm for installation.
The pace of competition, innovation, and technological development within the semiconductor industry increased rapidly during the late 1980s and early 1990s, however, and resulted not only in briefer semiconductor product cycles but also in shorter cleanroom facility cycles. Semiconductor manufacturers strove to bring their products to market more quickly, with cleanroom design and construction time both shortened as much as possible. A higher product volume, in conjunction with smaller wafer sizes, increased chip densities, and the growing number of steps in the manufacturing process led to a heightened emphasis on the control and manipulation of environmental variables within the cleanroom setting. More than ever before, the elimination of even the slightest deviations in environmental parameters within the cleanroom was the only way to assure a higher product yield.
Ronald Daw understood the changing nature of the semiconductor industry, and, using his broad experience in cleanroom environments gleaned from some difficult years leading DTI, he decided to reorganize the company, refine its vision, and create a new approach to the business. Renaming his company Daw Technologies, Inc., in 1992, the entrepreneur took advantage of the pace of competition within the semiconductor industry. In direct contrast to the traditional approach of submitting designs and budgets, revising them, and then resubmitting a bid, under the leadership of Daw the company offered fully integrated services for cleanroom environments, including the design, engineering, manufacture, installation, testing, evaluation, product development, and continuous maintenance service. Daw was convinced that his integrated approach not only gave customers greater control over the design and installation of a cleanroom environment by eliminating the number of vendors and subcontractors involved in the process, but also led to a higher product volume.
Continued Growth During the Mid-1990s
By the mid-1990s, Daw Technologies, Inc., was selling its products and services to some of the world's largest and most prominent disk drive, semiconductor, and flat panel display manufacturers. Sales had increased dramatically since the company's reorganization in 1992, with $30 million in sales in 1993 jumping to more than $70 million in 1995 and $112 million in 1996. Along with the increase in sales came an increase in the number of employees, amounting to more than 300 by 1995. Much of this success was due to the company's ability to patent various components of its cleanroom wall systems, floor systems, and air handling systems, which constituted some of the most sophisticated technology ever developed for cleanroom environments.
Each cleanroom that is constructed requires a variety of systems that provide an uninterrupted flow of filtered air circulating from the ceiling to the floor with the purpose of eliminating or flushing out every possible contaminant and particle. Within each cleanroom, the air pressure is slightly higher than in the surrounding rooms so that any leak or open door results in clean air escaping rather than contaminated air entering the environment. Cleanliness within a cleanroom environment cannot be compromised for any reason whatsoever; consequently, all wiring, piping, and movement of materials and personnel are considerations in the design of such an environment. To meet the stringent requirements for cleanroom environments, Daw Technologies patented systems including the following: the Stratus Air Handling System, which provides a source of recirculated air that reduces noise, vibration, and power consumption and adapts to changes in humidity, temperature, and pressure variations by employing specialty sensors; the Air Frame Ceiling System, which provides ultra-clean air filtration and an airflow that is unidirectional for the cleanroom environment; the Network Wall System, which separates cleanroom environments into distinct, individual airflow zones; and Matrix Raised Access Flooring, which provides removable panels that meet the exacting industry requirements for air flow, cleanliness, and structural design.
In 1997 the company was once again hit hard by the cyclical nature of the semiconductor industry. Although management tried its best to prepare for the downturn, the variables of the marketplace were overwhelming, and Daw Technologies lost a significant number of contracts. Sales, or contract revenue, dropped precipitously to a low of $52 million in 1997, and management was forced to lay off employees. To compensate for the downturn in the U.S. semiconductor industry, management at Daw Technologies, under the leadership of Ronald Daw, decided to launch a strategic international expansion program that would minimize the effects of cyclical downturns in the future.
In April 1998, Daw Technologies secured a major contract from an American-based semiconductor manufacturer to provide airhandling systems for the company's new cleanroom under construction in mainland China. Even though the worsening economic situation in Southeast Asia resulted in lower sales for personal computers in Thailand, Korea, Malaysia, Indonesia, and the Philippines, the Chinese market was growing at a rate of approximately 40 percent. Daw Technologies also secured another major contract from a Japanese semiconductor manufacturer to design and install a cleanroom for the company's growing operation in the United States. In June 1998 the company won two more contracts to provide fully integrated design and installation services for major semiconductor firms located in Western Europe.
In an additional move to strengthen its position within the industry, in April 1998 Daw Technologies purchased Intelligent Enclosures Corporation, a leading American provider of contamination control solutions and high-performance controlled environments. Located in Norcross, Georgia, the new acquisition was an innovator in the field of process equipment enclosures and tool isolation environment technology.
Soundly managed, Daw Technologies, Inc., is considered a prime candidate for significant growth within the next five to ten years. Having found its niche in a highly specialized field, the company should reap the benefits of its plan to expand overseas and acquire other firms that provide similar services.
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