FSI International, Inc. CEO Interview: Don S. Mitchell

• On 11:03 am EDT, Wednesday August 26, 2009

67 WALL STREET, New York - August 26, 2009 - The Wall Street Transcript has just published its Semiconductors, Semiconductor Equipment, and Software Report offering a timely review of the sector to serious investors and industry executives. This 103 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: DRAM Industry Reorganization -- Semiconductor Supply Chain Status -- Netbook Growth -- LCD TV Growth -- NAND Pricing and Demand -- Micro-Electro-Mechanical Systems (MEMS) Demand Cycle -- Ultra Low Voltage Processors -- Semiconductor Inventory Aging and Type -- Processor Power Developments

Companies include: Intel (INTC); Micron Technology (MU); Microsemi (MSCC); STEC, Inc. (STEC); National Semiconductor (NSM); Texas Instruments (TXN); Taiwan Semiconductor Manufacturing (TSM); ON Semiconductor (ONNN); Intersil (ISIL); Linear Technology Corporation (LLTC); Monolithic Power Systems (MPWR);Advanced Photonix (API); Waytronx Inc. (WYNX); LTX-Credence (LTXC); Mattson Technology Inc. (MTSN); Oclaro, Inc. (OCLR); Silicon Laboratories (SLAB); Microchip Technology, Inc. (MCHP); Cohu, Inc. (COHU); FSI International, Inc. (FSII); Jaco Electronics (JACO); Cadence Design Systems (CDNS); Synopsys (SNPS); Mentor Graphics (MENT); Magma Design Automation (LAVA)

In the following brief excerpt from the 103 page report, Don S. Mitchell, CEO of FSI International, Inc., discusses the outlook for the sector and for investors.

TWST: What are your primary products or business units?

Mr. Mitchell: The microelectronics industry utilizes very complex manufacturing processes to build semiconductor devices within a clean-room environment. To produce devices, our customers begin with large, 300-millimeter diameter silicon wafers. The device manufacturing process utilizes a variety of exotic materials, chemicals and gases that are combined to form circuits in the form of millions of transistors on the 300mm wafers. A state-of-the-art factory may cost our customers between $2 billion and $4 billion to build, depending on device type and capacity. The semiconductor manufacturing processes they employ require hundreds of steps, utilizing an array of technologies, including deposition, etching, implantation, cleaning, lithography, etc. FSI's products are used to perform dozens of these steps, including cleaning, etching and the removal of microscopic particles from the surface of the silicon wafers. We refer to these processes as "surface conditioning" because we change the surface state of the wafer and therefore the device.FSI offers a complete portfolio of proven surface conditioning technologies to address the unique requirements of our customers, who produce memory, microprocessor or logic devices. Our products are designed to perform surface conditioning processes for a batch of wafers (25 or more) or on a single wafer. We have four flagship platforms, two are designed for batch processes and two are for single-wafer process steps. Our customers include global suppliers like IBM, Samsung, NEC, Chartered, STMicroelectronics and Texas Instruments.

TWST: Please describe your specific products.

Mr. Mitchell: Currently, our biggest seller is the ZETA Spray System with our patented ViPR technology; it delivers very high performance at the lowest cost for a broad range of film removal operations. We have over 1,000 of these systems installed throughout the world. With the recent introduction of our ViPR technology, our ZETA product is now used at the largest memory chip manufacturer in the world, which is a very important milestone for us. The second product, our MAGELLAN, is a batch immersion system which enables very high productivity. In this system our customers immerse their wafers in high-purity chemical and water baths to treat surface films. The system is capable of processing both 200-millimeter as well as 300-millimeter wafers. Our ANTARES System is a single-wafer cryokinetic cleaning system that provides yield enhancements by removing surface particles without using traditional wet chemistry. This system uses a patented process whereby a high-velocity spray of argon and nitrogen ice is used to dislodge defects from the surface of the devices. Our final flagship product is the ORION System. It's our latest product offering and enables single-wafer critical-path cleaning and etching for ultra-shallow device structures. The ORION system also features our patented ViPR technology and has demonstrated that customers utilizing this technology can improve removal rates for the more difficult films with very low material loss for the most advanced device features that are under development in the world. We just recognized our first revenue for this product and have received a repeat order from the customer who is using the ORION for the next two generations of advanced devices (45nm and 32nm). We expect to be shipping additional ORION systems each quarter under several joint development programs or as repeat orders.

TWST: What is the genesis of your technology?

Mr. Mitchell: We spent years developing technologies and know-how to move fluids, wafers and gases with great precision and control while maintaining very high purity of those materials. Over the course of time, we learned how to accurately meter, heat, convert, filter and re-circulate often very reactive chemistries in order to improve the functionality of advanced semiconductor devices. We have now packaged that know-how into a series of advanced platforms that operate in fully automated factories, which operate seven days a week, 24 hours a day. Our products, because of their complexity, generally sell for between $1.5 million and $4 million per system.

TWST: Obviously we are in an economic downturn, how has that impacted your company and your customers?

Mr. Mitchell: The semiconductor market entered the most recent downward cycle in early calendar 2007, well before the larger economic crisis hit and we believe has recently bottomed. Worldwide average monthly spending for the equipment we produce has dropped by 91% from the 2007 peak to the early 2009 trough. For FSI, our bookings dropped 75% during the same period - less than the industry because of new products and some increasing market share in Asia. However, during this period we have had to aggressively cut costs and realign our infrastructure to adapt to where we believe the industry and our business model are moving. And as a result, we consolidated our European and US operations, and we increased our investments in Asia, where the majority of our system sales are occurring. During this period, several of our competitors and peer companies have gone out of business. However, with our strong balance sheet and no debt, we have a leaner business model. I believe we can substantially improve our financial performance and gain share, as the cycle swings into positive territory again.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 103 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

For Information on subscribing to The Wall Street Transcript, please call 800/246-7673

Buzz up!