ATMI, Inc.

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Incorporated: 1986 as Advanced Technology Materials, Inc.
NAIC: 325131 Inorganic Dye and Pigment Manufacturing; 541710 Research and Development in the Physical Sciences and Engineering
SIC: 2816 Inorganic Pigments; 2819 Industrial Inorganic Chemicals Nec; 8731 Commercial Physical Research; 8733 Noncommercial Research Organizations

ATMI, Inc., is a leading producer of materials, materials packaging, and materials delivery systems used in the production of microelectronic devices, particularly semiconductors. The company's products, the materials used in the production of integrated circuits, enable chip makers to keep pace with the rapid advancements in production technology. ATMI serves semiconductor and flat-panel-display manufacturers, counting nearly every major producer in the world as a customer. A major focus of ATMI is using copper interconnects, as opposed to the more common aluminum interconnects, to increase the speed, stability, and size reduction of chips.

Origins

During its first decade of business, ATMI operated as Advanced Technology Materials, Inc., a company established by five entrepreneurs. Of the five founders, three remained with the company during its inaugural decade, Ward C. Stevens, Duncan W. Brown, and Gene Banucci. Each of the principal founders worked for a New Jersey-based chemical manufacturer named American Cyanamid Company before launching their entrepreneurial effort. Stevens, who served as Advanced Technology's vice-president during its formative years, worked as a materials scientist and project leader at American Cyanamid. Brown, also an Advanced Technology vice-president, functioned as a research chemist at American Cyanamid. Both Stevens and Brown made vital contributions to Advanced Technology's founding and its development, but their influence paled in comparison to what their American Cyanamid colleague brought to the table.

Banucci left a lasting imprint on ATMI. He helped found the company, presided over its transition from Advanced Technology to ATMI, orchestrated a series of acquisitions and divestitures, and served as the company chief executive officer and chairman for two decades. Banucci earned his undergraduate degree in chemistry from Beloit College and his doctorate in organic chemistry from Wayne State University. After school, he spent a decade at General Electric Company, serving in various management capacities at the company's corporate research and development center and its GE Plastics division. At American Cyanamid, Banucci served as a director of the company's chemical research division, leading more than 400 scientists and engineers in new product research and development who generated more than $1 billion in annual revenues for American Cyanamid. As part of his duties at the New Jersey-based company, Banucci oversaw the discovery of new specialty chemical and materials technology, managing efforts that led to new business ventures. In 1986, he left the company to launch his own venture, teaming with Stevens, Brown, and two other scientists to form Advanced Technology.

Advanced Technology was established to focus on semiconductor materials used in chemical vapor deposition (CVD) processes. In the CVD process, wafers (the base material of semiconductors) were placed in a reaction chamber and subjected to a gas or vaporized liquid material along with a form of energy, such as heat or plasma. The energy introduced into the reactor caused the decomposition of the gas or vaporized liquid, leaving a thin film of material deposited on the surface of the wafer. The process, one of several ways to deposit materials on wafers, was instrumental in the fabrication of semiconductors.

Name Change to ATMI in 1997

Advanced Technology converted to public ownership seven years after it was formed, completing its initial public offering (IPO) of stock in 1993. The next significant corporate milestone was the company's name change four years later, a change that drew its impetus from two transactions completed in 1997. In April, Advanced Technology purchased Austin, Texas-based Advanced Delivery & Chemical Systems, a company with manufacturing facilities in Burnet, Texas, and Anseong, South Korea. The acquisition, an all-stock deal valued at $92 million, combined ATMI's major strength, its technology, with Advanced Delivery's major strength, its manufacturing and distribution capabilities. A little more than a month later, Advanced Technology announced another all-stock deal, the $78 million purchase of Lawrence Semiconductor Laboratories. Based in Mesa, Arizona, Lawrence Semiconductor specialized in the production of epitaxial thin silicon films by CVD, generating more than $20 million in annual revenue.

The company, known as ATMI after the transactions in 1997, embarked on an acquisition spree after buying Advanced Delivery and Lawrence Semiconductor. Within the next six years, ATMI would absorb more than a dozen companies, seeking to become a "one-stop" provider of all specialty materials needed to make semiconductors. Banucci looked to add to the company's capabilities in providing the specialty materials and compounds to produce chips, and he looked to build ATMI's capabilities in providing equipment services. For the latter, Banucci began acquiring companies with expertise in cleaning up contaminates released in the chip-making process, a consequence of manufacturers' need to use caustic chemicals to scrub chip surfaces clean.

Acquisitions

As the acquisition campaign progressed, ATMI's talents broadened and its list of subsidiaries grew. In April 1998, the company reached an agreement to acquire NOW Technologies Inc., a $15-million-in-sales company that became an ATMI subsidiary. Based in Bloomington, Minnesota, NOW was a manufacturer and distributor of semiconductor materials packaging systems based on its patented NOWPak system, a product that had a broad range of uses in the packaging of advanced photoresist materials.

In 1999, Banucci set his sights on three companies, completing deals that expanded ATMI's capabilities. In May, the company signed an agreement to acquire Advanced Chemical Systems International, Inc., a specialist in photolithography chemicals that generated roughly $17 million in annual sales. The purchase of the Milpitas, California-based company provided entry into the photolithography and chemical mechanical polishing (CMP) materials field, complementing ATMI's strengths in CVD, ion implant materials, and specialty materials packaging.

In October, the company signed an agreement to buy Newform N.V., a Belgium-based provider of high-purity, ultra-clean packaging to the semiconductor and pharmaceutical industries. Before the end of the year, Banucci completed his third acquisition, buying Buffalo Grove, Illinois-based MST Analytics Inc., a maker of semiconductor gas monitoring systems. "MST has two primary product lines, both of which are excellent strategic fits for ATMI," an ATMI executive explained in a December 19, 1999, interview with Microtechnology News. "MST's gas sensing products monitor the toxic gases widely used in manufacturing semiconductors on both a fabwide and personal basis."

Crisis at the Start of the New Century

As ATMI entered the 21st century, the strategy of developing into a more comprehensive competitor in its industry was producing encouraging financial results. Revenues in 2000 leaped 48 percent, jumping to $300 million. Quickly, however, market conditions soured, stripping the company of its vitality. "The semiconductor industry's worst-in-its-lifetime downturn, dissipated consumer demand, and the national recession all combined to create a difficult economic scenario," an ATMI executive explained in a January 30, 2002, interview with PR Newswire. Revenues fell 29 percent to $213.5 million in 2001, but more alarming was the severe decline in profits. After posting $43.7 million in net income in 2000, ATMI announced a $9.7 million net loss in 2001, a dismal effort that left a lasting impression on Banucci.

ATMI's financial health worsened before it improved. In 2002, when revenues slipped to $136.9 million, the company posted a staggering $30.7 million loss. The year proved to be the nadir of ATMI's free-fall--losses were reduced to $9.9 million in 2003, as revenues increased to $171.6 million--but once conditions improved, Banucci began to develop plans for sweeping changes. He remembered the bad times and vowed never to fall victim to the cyclicality of the semiconductor industry.

Strategic Changes

ATMI's corporate profile was about to undergo significant change. In 2003, the company operated in two segments, materials and technologies. The materials segment, which provided ultra-pure materials used in semiconductor manufacturing and delivery and packaging systems, generated 64 percent of the company's annual revenue. The technologies segment generated 36 percent of ATMI's annual volume, a percentage generated by sensing and abatement equipment used to treat effluent gases and warn factory workers of gas leaks. After the financial debacle in the early 2000s, Banucci decided to shed the company's technologies businesses, which had produced some of the worst financial losses during the downturn, and to focus entirely on creating compounds and specialty materials. The change in strategy signaled the beginning of a divestiture program, one that would rid the company of money-losing operations and direct all its resources on its fastest-growing business.

A Focus on Copper

Although selling businesses occupied much of the company's attention midway through the decade, ATMI did complete several acquisitions, particularly in the area of copper interconnects. Banucci saw copper as ATMI's future. Compared to aluminum, copper conducted electricity more easily and possessed superior capacity for miniaturization, enabling semiconductor manufacturers to keep pace with Moore's law, which holds that the number of a chip's transistors will double every 24 months. Historically, manufacturers had been able to increase the capabilities of chips by continually refining their design and improving the precision of the tools used to build integrated circuits, but Banucci believed future advancements in the capabilities of chips would rely on specialty materials, specifically copper, to make increasingly sophisticated chips. In his mind, aluminum-based chips could not be made small enough or work fast enough to perform the tasks that would be demanded of chips in the future. The widespread use of copper (only 5 percent of the chips produced in 2004 contained copper) had been held in check because it was four times more difficult than aluminum to embed in a chip, but analysts were predicting 35 percent of chips would contain copper by the end of the decade.

Divestiture of One-Third of ATMI: 2004

As ATMI invested heavily in copper-related technologies, the company began shedding its unwanted operations. The divestitures were made in 2004, beginning with the sale of its gallium nitride business in March to Durham, North Carolina-based Cree, Inc., "The sale of our gallium nitride business is the first element of the planned disposition of ATMI's six technologies businesses," Banucci said in a March 25, 2004, interview with PR Newswire. In May, the company sold its life safety sensors business to City Technology, Ltd. The following month ATMI sold its fabrication services business to Materials Support Resources Inc., a sale that included operations in Arizona, New Mexico, Texas, Oregon, and Ireland. In July, the company divested its specialty silicon epitaxial services unit, selling the business to one of its major customers, International Rectifier Corporation. The final two divestitures were made in August, when the company's Emosyn smart card business was sold, and in December, when its environmental treatment systems business was sold.

As the divestiture program was winding down, Banucci announced he was scaling back his responsibilities at ATMI. In November 2004, he announced he was stepping down as chief executive officer, but staying on as chairman. His restructuring efforts nearly completed, Banucci decided to focus his energies on strategy, investor relations, and governance, paving the way for the promotion of Doug Neugold to the position of chief executive officer. A 20-year veteran of the electronics industry, Neugold joined ATMI in 1998, becoming the company's president two years later. In 2003, he added the title of chief operating officer.

Well Positioned for Future Growth

In the wake of the divestitures, ATMI performed admirably, recording substantial increases in its financial totals. The gains ensured that the company's 20th anniversary was an event to be celebrated. The company's discontinued operations generated revenues of $71.8 million in their last year as part of ATMI, but the absence of the business volume was hardly missed. Revenues increased from $246.2 million in 2004 to $281.7 million in 2005 before reaching $325.9 million in the company's 20th year of business. Far more impressive were the increases in profits during the period. After posting a $9.9 million loss in 2003, ATMI surged into the black, generating $31.5 million in net income in 2004. By 2006, the company's net income had increased to $39.9 million. In the years ahead, ATMI hoped to continue to benefit from its sharpened strategic focus and from its investment in copper interconnects. The company's materials appeared in 70 percent of all chips that contained copper, leaving ATMI poised to reap the rewards of the industry's increased use of copper in the future.

Principal Subsidiaries

Advanced Technology Materials, Inc.; Epitronics Corporation; ATMI Ecosys Corporation; Advanced Delivery & Chemical Systems Nevada, Inc.; Advanced Delivery & Chemical Systems Holdings, LLC; Advanced Delivery & Chemical Systems Operating, LLC; Advanced Delivery & Chemical Systems Manager, Inc.; ATMI Materials, Ltd.; ATMI Korea Co. Ltd.; ATMI UK Limited; ATMI Packaging, Inc.; ATMI International Holdings, Inc.; ATMI Taiwan Holdings, Inc.; ATMI Belgium Holdings, Inc.; ATMI Belgium, LLC; ATMI Packaging N.V. (Belgium); ATMI International Trading Co. Ltd. (China); ATMI Japan KK; ATMI Taiwan Co. Ltd.; ATMI GmbH (Germany); ATMI Pte. Ltd. (Singapore); ATMI Fab Services Ireland, Ltd. (Ireland); ATMI Acquisition BVBA (Belgium).

Principal Competitors

E.I. du Pont de Nemours and Company; Air Products and Chemicals, Inc.; Rohm and Haas Company.

Further Reading

"ATMI Acquires ESC Inc.," Fairfield County Business Journal, August 11, 2003, p. 5.

"ATMI Acquires NOW," Semiconductor Industry & Business Survey, April 27, 1998.

"ATMI Buying Epitronics, Guardian," Electronic News (1991), December 4, 1995, p. 62.

"ATMI Buys MST Analytics Sensors," Microtechnology News, December 19, 1999.

"ATMI to Acquire Newform," Electronic News (1991), October 18, 1999, p. 6.

"CEO to Step Down at Danbury, Conn.-based Microchip Supplier ATMI Inc.," Hartford Courant, November 17, 2004.

Fasca, Chad, "ATMI, ADCS Plan $92M Merger," Electronic News (1991), April 14, 1997, p. 1.

------, "ATMI Buys Lawrence for $78M," Electronic News (1991), May 26, 1997, p. 4.

Lubanko, Matthew, "Danbury, Conn.-based Materials Company to Split into Two Parts," Hartford Courant, April 25, 2004.

Tortoriello, Richard, "Riding a Chip Rebound with ATMI," Business Week Online, March 25, 2003.

— Jeffrey L. Covell