P.O. Box 215
Orbotech develops and produces the world's most advanced hi-tech equi pment for inspecting and imaging circuit boards and display panels--t he backbones of today's cutting-edge electronic products.
Orbotech's innovative automated optical inspection (AOI), imaging and computer-aided manufacturing (CAM) technologies enable customers to achieve the increased yields and throughput essential to remaining at the forefront of electronics production.
Orbotech Ltd. is the world's leading developer and producer of automa ted optical inspection (AOI) and related imaging and computer-aided m anufacturing systems. The company's imaging tools are used in the man ufacturing of bare printed circuit board (PCB), flat-panel displays, PCB assemblies, and IC packaging, among other applications. These sys tems aid manufacturers by providing highly accurate, high-speed, and automated optical inspection, allowing faster production speeds with less waste and at lower cost. Orbotech, through its predecessors Optr otech and Orbot, which merged in 1991, pioneered the AOI market and r emains its dominant player, with a global market share of some 50 per cent. The company's headquarters and main research and manufacturing facilities are located in Yavne, Israel. The company also operates ma nufacturing and research facilities in the United States, as well as a network of some 30 sales subsidiaries in Germany, Japan, Belgium, T aiwan, and elsewhere. Founded in 1981, Orbotech has been listed on th e NASDAQ since 1984. Optrotech founder Shlomo Barak remains company c hairman, and Arie Weisberg serves as CEO. In 2004, the company posted revenues of $305 million.
Inventing an Industry in the 1980s
The development of computer and electronics technologies faced a numb er of obstacles into the early 1980s. Among these was the need to ins pect printed circuit boards (PCBs) as an integral part of the manufac turing process. Yet inspection, which required human operators using microscopes, remained a roadblock in the production process. At the s ame time, the rapid miniaturization of electronic components presente d a still larger future obstacle; before long, PCBs were to become so small that manual inspection would become impossible.
Shlomo Barak had been working for Israel's Electro-Optical Industry L td., helping to develop laser and fire-control systems and other elec tro-optical systems. These were targeted, in large part, at military applications, but saw commercial use as well. Barak recognized that t he company's technology could be adapted to provide automated visual inspection applications. The PCB market promised to be particularly r eceptive to this technology.
In 1981, Barak led a team of fellow engineers at Electro-Optical in t he formation of a new company, called Optrotech. Financial backing fo r the start-up came from Elron Industries, a leading Israeli holding company with interests in a number of industries, especially the elec tronics industry. Among Elron's other holdings were Elbit Computers, a manufacturer of computers and electronics for military and other ma rkets; Fibronics, based in the United States, which manufactured and sold fiber optics systems; and Elscint, a company that developed and produced medical imaging systems.
Optrotech began developing its automated inspection technology. After 18 months of research and development, the company was finally ready with its first-generation product, dubbed the Vision 104. Although a number of other companies also had been working on their own automat ed inspection systems, Optrotech became first to market.
Success was immediate. As the first to market, the company was able t o maintain its frontrunner status into the middle of the decade. Over night, Optrotech had helped transform the PCB industry, enabling comp anies to begin the first of a series of dramatic productivity improve ments. The faster production times and greater volumes helped drive c osts down, and the steadily dropping prices of PCBs provided still fu rther stimulation for the development of the global electronics and c omputer industries. The simple existence of an automated optical insp ection system made the Vision 104 indispensable to PCB producers.
Yet the appearance of new rivals, such as fellow Israeli company Orbo t, created in 1983, and rival technologies, forced Optrotech to conti nue to invest heavily in its research and development effort. Despite the success of the Vision 194, Optrotech found itself strapped for c ash by 1984. Although still a young company, Optrotech turned to the stock market that year, placing its listing on the NASDAQ. As former Optrotech and Elron Chairman Uzia Galil told Electronic Business: "There was no better alternative to bring $10 million into th e company. They would have lost the time window." Elron nonetheless r etained a major stake in the company.
The initial public offering (IPO) allowed Optrotech to begin developm ent of its next-generation AOI technology, while continuing to refine its initial technology. In 1984, the company launched a new system, the Vision 104X, which was followed by the Vision 105 in 1985. The co mpany also launched an effort to diversify its market, beginning deve lopment of its first CAD/CAM system, the Image 2000. This technology targeted the front-end phases of the PCB production process, providin g automated capacity to the artwork generation stage.
Heightened competition, however, forced Optrotech to defend its marke t in 1986, and in that year the company rushed its new-generation AOI system, the 206, to market. The 206 departed from the company's earl ier systems, which employed reflective technology, by using a nonrefl ective imaging technology. The initial release of the 206 proved faul ty, however. As Barak told Electronic Business: "There was mis judgment of the difficulty in introducing this technology. It was a l ong way to solve the problems and clean up the machine." During this time, Optrotech found itself outpaced by rival Orbot, which took over as AOI market leader in 1986.
Merging Market Leaders in the 1990s
The loss of its top position allowed Optrotech to shift its focus awa y from a reliance on core AOI technologies to include more diversifie d front-end technologies. As such the company added competence in rel ated areas, including artificial intelligence, machine vision, and sy stems engineering. By the late 1980s, the company featured two strong product lines: Vision, for its AOI technologies; and Image, for its front-end businesses.
Optrotech also continued to invest heavily in research and developmen t. This led the company to seek additional capital toward the end of the decade. In 1989, the company turned to Canadian-owned Claridge Is rael Inc., which agreed to acquire 22 percent of Optrotech for $1 6 million.
The capital injection provided Optrotech with a new opportunity. At t he start of the 1990s, rival Orbot began experiencing its own financi al difficulties. Orbot had grown strongly in the late 1980s, in part through the 1988 launch of subsidiary Orbot Instruments Ltd., which d eveloped AOI systems for the booming semiconductor market. Orbot's gr owth was further supported by its close relationship with IBM, which remained a major customer throughout the decade. At the same time, Or bot developed an early international strategy, looking beyond the U.S . market to target Japan and other Asian markets as early as 1985. In 1990, Orbot hoped to go public in an effort to inject new capital. Y et the collapse of the stock market, and especially the IPO market, f orced the company to reconsider.
Instead, Optrotech and Orbot entered talks to merge their complementa ry operations. Initial discussion failed to find an agreement between the two companies. By 1991, however, the slowdown in the global AOI led the two market leaders to try again. At last, in August 1992, Opt rotech and Orbot reached a merger agreement, in which Optrotech absor bed Orbot. The resulting business was then renamed Orbotech.
Orbotech started out as the clear dominant player in the global AOI m arket; into the late 1990s, the company continued to command some 70 percent of certain market segments. Orbotech also continued to seek n ew areas for growth. In 1995, for example, the company adapted its te chnology to provide automatic check reading capabilities for banks an d other check processing customers, marking the launch of the company 's expansion beyond its focus on the electronics industry. Closer to the electronics field, in 1997, Orbotech launched a new imaging and p rocess control system for use as part of the manufacturing process. I n this way, Orbotech's AOI products spanned the range from PCB design to production to testing and inspection.
Global Leader in the 2000s
Into the 2000s, Orbotech launched a new acquisition-based growth stra tegy. This led the company to form a joint venture with Jenoptik AG, which had developed its own laser-based direct imaging system used fo r the production of PCB prototypes. Launched in 1997, the partnership came under full ownership of Orbotech in 2000. The company boosted i ts presence in Japan in 1998, acquiring Toyo Ink Manufacturing's PCB sales and marketing operations.
By then, Orbotech had emerged as the leading producer of AOI systems for the fast-growing LCD industry. The purchase of KLA Acrotec in 199 9 allowed Orbotech to firm up its leading position in that market. Th e acquisition of the Japan-based company cost Orbotech $13.6 mill ion and gave Orbotech as much as 80 percent of the LCD AOI market. By then, Orbotech also had added operations in Europe, with the 1997 ac quisition of the AOI business of Germany's W. Schuh GmbH. That compan y specialized in the production of post-solder inspection equipment.
Orbotech also sought to provide a seedbed for future technology devel opments. To this end, the company set up a new subsidiary, Orbotech T echnology Ventures Ltd., in order to invest in technology start-ups. At the end of 2003, the company had invested nearly $9 million. A mong the companies that received investment capital from Orbotech was Negevtech, majority held by Clal Industries and Investments Ltd. In 2004, Orbotech and Clal agreed to transfer ownership of Negevtech to Orbotech for $14.1 million.
Orbotech also continued to attract new customers. After reaching a co operation agreement with Korean giant Samsung in 2004, the company sc ored a new sales success with a large-scale order for several AOI sys tems from Quanta Display Inc. That deal solidified Orbotech's positio n as a global leader in AOI systems for the LCD market. With sales of more than $300 million in 2005, Orbotech expected to continue to dominate the market it had created just 25 years earlier.
Principal Subsidiaries: Frontline P.C.B. Solutions Limited Par tnership; Frontline P.C.B. Solutions Ltd. (50%); Laser Imaging Sy stems GmbH & Co. KG; Orbograph Ltd. (91%); Orbotech Asia Ltd. ; Orbotech B.V.; Orbotech Holding GmbH; Orbotech Japan Ltd.; Orbotech Medical Solutions Ltd.; Orbotech Pacific Ltd.; Orbotech S.A.; Orbote ch Schuh GmbH & Co. KG; Orbotech Singapore Corporation Pte. Ltd.; Orbotech Technology Ventures Limited; Orbotech, Inc.
Principal Competitors: Canon Inc.; 3M Co.; Krasniy Gigant; Oly mpus Corporation; Nikon Corporation; Citizen Watch Company Ltd.; Magn a Donnelly Corporation; Hoya Corporation; Showa Electric Wire and Cab le Company Ltd.; NeoPhotonics Corporation.