Incorporated: 1996
NAIC: 334513 Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables
SIC: 3823 Process Control Instruments
Headquartered in Flanders, New Jersey, Rudolph Technologies Inc. (RTI) designs and manufactures process control metrology (measurement) equipment that semiconductor manufacturers use to ensure that silicon chips are of the right thickness. In addition, the company makes inspection equipment that is used during the final stages of manufacturing to ensure that computer chips are defect-free.
The company sells inspection equipment to front-end "fabs," which are the facilities where chips are actually "built." "Front-end" also is referred to as wafer processing. The company also sells inspection and other tools to "back-end" fabs. Also referred to as final manufacturing or packaging, back-end fabs are usually separate facilities from the front-end. They perform steps necessary to get the die (chip) ready to be used in the end product, such as a computer, cell phone, or automobile. There are a number of different steps performed at the back-end, including the final test step, which is the absolute "end of the back-end" where each ready-to-ship die is tested.
Rudolph Research 1940-95
Although RTI was established in June 1996, the company's origins can be traced back to 1940, when Otto Curt Rudolph formed O.C. Rudolph & Sons. Originally an importer of microscopes and scientific instruments, this RTI predecessor was later renamed Rudolph Research Corp. The company eventually began designing its own optical equipment for laboratories and universities, according to the April 25, 2002, issue of the Star-Ledger.
Otto Rudolph, who had three sons (H. Curt, Hellmuth, and Werner) and two daughters, died in Caldwell Township, New Jersey, in December 1956, at the age of 72. However, the company he established continued to evolve, making breakthroughs such as "the industry's first production-oriented ellipsometer for thin-transparent film measurements in 1977," according to RTI. (An ellipsometer is an optical measurement device that measures thickness via a polarized laser beam.)
In 1966 the company named Dr. Richard Spanier as its chairman and president. A former chemistry instructor at the Stevens Institute of Technology and Fairleigh Dickinson University, Spanier was married to the granddaughter of founder Otto Rudolph. During his tenure, he was the guiding force behind the development of the company's metrology products. Spanier authored a host of technical papers on ellipsometry and came to hold many related patents. His accomplishments culminated in a Lifetime Achievement Award from the Semiconductor Equipment and Materials International (SEMI) trade association in 2002, at which time he served as RTI's chairman emeritus.
Formation of Rudolph Technologies: 1996-2001
Rudolph Technologies was formed in June 1996, when Richard Spanier decided to retire as Rudolph Research's chief executive. That year, Spanier forged a partnership agreement with Boston-based Riverside Partners and New York-based Liberty Partners who, along with other investors, poured $36.3 million in the company. In addition, executives from both investment firms joined the company's board, including Liberty's Stephen Fisher and Carl Ring, Jr.
At this time, the newly named Rudolph Technologies Inc. (RTI) was the third largest thin-film metrology firm in the world. According to a June 17, 1996, Business Wire release, the company's new name reflected its "expansion from ellipsometry into additional metrology technologies while at the same time demonstrating RTI's continued commitment to its large installed base of customers." Semiconductor industry veteran Paul F. McLaughlin was named as CEO at this time.
Three years later, in November 1999, RTI made its initial public offering (IPO) of common stock, offering 4.8 million shares at a price of $16 per share. The company revealed that 13.94 million shares would be outstanding following the IPO. At this time, Liberty held approximately 6.9 million shares (47%) of RTI's stock. The company's customer base had grown to include virtually all of the leading semiconductor firms, such as AMD, IBM, Fujitsu, Intel, Philips, Texas Instruments, Toshiba, and TSMC.
That year, revenues skyrocketed 90 percent over 1998, reaching a record $38.1 million. Despite an industry downturn, RTI maintained its research and development efforts. With a new facility that opened early in the year, the company continued to roll out new products, such as its MetaPULSE line of copper film measurement tools. In the fourth quarter of 1999, some 83 percent of RTI's revenues were tied to products that were not yet on the market in the first quarter of 1997, according to CEO Paul McLaughlin.
RTI ushered in the new millennium with McLaughlin assuming the additional role of chairman in January. Richard Spanier remained a director and was named chairman-emeritus. A number of important developments occurred that year. In April the company announced it had been included in the SEMIndex, a global index maintained by Semiconductor Equipment and Materials International. Midway through the year, the company also was added to the Russell 3000 Index, which ranked the performance of the leading 3,000 U.S. public companies.
There were other highlights during 2000. For the sixth straight year RTI was named as the customer satisfaction leader among thin-film metrology firms, based on a survey conducted by VLSI Research Inc. Finally, the company opened an 8,000-square-foot training center in Mount Arlington, New Jersey, near its Engineering Center.
In early 2001 RTI made a public offering of 3.5 million shares of its common stock, including 1 million company-owned shares. At this time Riverside Partners sold approximately 300,000 of its shares, valued at $12.5 million. Liberty Partners sold about 1.8 million shares, valued at almost $79 million. That year, RTI's net income totaled $11.7 million on revenues of $79.4 million.
Worldwide Growth in 2002
With tech industry heavyweights such as IBM and Intel among its client base, RTI's market value grew to approximately $560 million in 2002. This was wonderful news for the investors who had forked over a collective $36 million for Rudolph only six years before. As Spanier remarked in the April 25, 2002, issue of the Star-Ledger, "It worked out like gangbusters. The combination of Liberty Partners, Riverside Partners, (current Chairman) Paul McLaughlin and me has been a textbook, classic, wonderful case."
A major development unfolded in July 2002 when RTI agreed to acquire the Richardson, Texas-based defect control company ISOA. A spinoff from Texas Tech University's International Center for Informatics Research, ISOA had been licensing technology to the semiconductor industry for about 16 years, offering defect detection tools under brand names such as WaferView. The all-cash, $24.2 million deal was completed in September, with ISOA becoming RTI's Yield Metrology Group. While the business remained based in Richardson, ISOA's manufacturing operations were relocated from Japan, to Ledgewood, New Jersey.
Several months later, RTI expanded into China by establishing an office in Shanghai's Pudong industrial area. In an October 14, 2002, PR Newswire release, RTI Vice-President of Global Customer Support Robert DiCrosta said: "China continues to emerge as one of the world's fastest growing semiconductor markets. Rudolph has been doing business in China for well over a decade and the time was right for us to establish a strategic-presence in Shanghai to be in close proximity to our major Chinese customers." In order to ensure the new operation's success, the company hired industry veteran Wai-Man Li, who brought technical experience and local knowledge to the table.
Legal Disputes Begin in 2003
In the wake of an industry downturn, RTI began 2003 by reducing its employee base by 10 percent worldwide. Later that year, the company became entangled in a legal dispute with then competitor August Technology Corp. An intellectual property dispute between RTI subsidiary ISOA Inc. and August subsidiary STI Inc. escalated when August sued both RTI and ISOA on September 23. This led RTI to file a counterclaim on September 30.
A number of positive developments also occurred in 2003, including a multimillion-dollar order for seven of the company's tools from a manufacturer in Taiwan. Spanning the MetaPULSE, WaferView, and S-ultra product lines, the order included delivery dates that ranged from the fourth quarter of 2003 through the second quarter of 2004.
After nearly one year, RTI and August ultimately settled their legal dispute. As part of the settlement, announced in August 2004, RTI received a $502,500 payment from former STI parent ASTI Holdings Ltd. The company capped off 2004 by celebrating the fifth anniversary of its listing on the NASDAQ. On Wednesday, November 24, RTI Chairman and CEO Paul McLaughlin presided over the Market Open in honor of the special milestone.
As RTI headed into the middle of the first decade of the 2000s, the company once again made headlines in connection with August Technology Corp. However, this time the news was in relation to RTI's hostile bid to acquire its chip-testing competitor. On January 27, 2005, RTI made a $190 million cash and stock bid that trumped a $150 million all-stock offer made on January 21 by Nanometrics Inc. of Milpitas, California.
Compared to a 13 percent drop when the Nanometrics offer was announced, August Technology's stock increased 18 percent following RTI's bid, which August initially rejected. Several factors then led August Technology to change its stance and consider RTI's proposal. The first was a confidentiality agreement that RTI agreed to sign. Then, on February 4, August Technology's shareholders filed a lawsuit to stop the Nanometrics deal on the grounds that it was preventing the acceptance of RTI's superior offer.
The entire situation became even more complicated when a third potential acquirer emerged. California-based KLA-Tencor Corp. offered $205 million in cash for August Technology on February 9. Ultimately, RTI was the winner when a merger agreement was reached in June for $193 million in cash and stock. The deal cleared antitrust hurdles in July. KLA-Tencor withdrew its offer for August Technology in January 2006, and the RTI-August Technology merger was completed on February 15.
Postmerger Growth in 2006
Following the deal, RTI's workforce grew to 550 employees. The company remained based in Flanders, New Jersey, with additional operations in Texas, Massachusetts, and Minnesota. Paul McLaughlin continued in his role as chairman and CEO, while August Technology CEO Jeff O'Dell became an RTI board member.
In an April 1, 2006, Semiconductor International interview with Alexander E. Braun, McLaughlin commented on the benefits of the merger, explaining: "There are three strategic benefits to be considered as a result of the merger. These are benefits to the customers, to the industry, and to the shareholders. We now offer a much broader scope and scale, we have more R&D resources and, what's very important, we have more staying power in a very dynamic--and cyclical--marketplace. This gives customers a solid choice and an alternative to the larger guys in the same space."
McLaughlin also offered some insight into how RTI would maintain the agility of a smaller enterprise despite its larger size, commenting: "We've organized into three separate business units. The metrology business unit, which will remain in New Jersey, will continue doing our transparent and metal metrology businesses. The inspection business unit, located in Bloomington, Minn., will be a combination of August Technology activities and Rudolph's in the macrodefect arena, both front and back end. Our Texas operation will report into Bloomington. And the third business unit is a software unit--data analysis and review--residing in Lowell, Mass., offering fabwide and product-specific software solutions. All three are small enough to be agile and still connect with one another, providing benefits from economy of scale."
Leadership and Acquisitions for the Future
Heading into the second half of the first decade of the 2000s, several significant leadership changes occurred at RTI. In November 2006, the company named Alex Oscilowski, a semiconductor industry veteran who was vice-president of strategy for the research and development consortium SEMATECH, as its chief operating officer. That year, revenues reached $201.2 million.
In January 2007 RTI made two significant appointments at Rudolph Technologies Japan KK, naming Yasuomi Uchida as chairman and Yoshiro Ogaya as president. Also in early 2007, Chairman and CEO Paul McLaughlin dubbed the aforementioned acquisition of August Technology a success. In a February 7, 2007, Market Wire release, McLaughlin said the integration of August exceeded expectations, commenting: "This merger was, in my estimation, a clear case of 1 + 1 equaling 3. We now have attained the scope and scale necessary to be increasingly important to our customers and to become a consolidator in our space."
RTI ended 2007 by acquiring Issaquah, Washington-based Applied Precision LLC. In a December 18, 2007, Business Wire release, McLaughlin indicated that the deal was beneficial on several fronts, explaining, "This acquisition combines two successful companies with complementary products and technologies, and will accelerate our efforts to be a more complete supplier of back-end equipment and software."
From its origins as an importer of microscopes and scientific instruments some 68 years before, by 2008 RTI had evolved into a leader within the semiconductor testing industry. As the company approached the twenty-first century's second decade, its prospects for continued success seemed strong.
Principal Subsidiaries
Yield Metrology Group.
Principal Competitors
Camtek Ltd.; KLA-Tencor Corporation; Nikon Corporation.
Further Reading
Braun, Alexander E., "Paul McLaughlin, Chairman & CEO, Rudolph Technologies Inc.," Semiconductor International, April 1, 2006.
"Rudolph Research Signs a Partnership Agreement to Support Expansion in the Semiconductor Metrology Arena; Name Change to Rudolph Technologies Reflects New Strategic Focus," Business Wire, June 17, 1996.
"Rudolph Technologies Acquires Semiconductor Business of Applied Precision LLC," Business Wire, December 18, 2007.
"Rudolph Technologies Announces Record 2006 Quarterly Earnings in Line with Guidance," Market Wire, February 7, 2007.
"Rudolph Technologies' Dr. Richard Spanier Receives Technology 'Lifetime Achievement' Award from SEMI," PR Newswire, October 4, 2002.
"Rudolph Technologies Expands into China; Hires Seasoned Semiconductor Veteran as General Manager," PR Newswire, October 14, 2002.
Saitz, Greg, "A $36 Million Gamble that 'Worked Like Gangbusters,'" Star-Ledger, April 25, 2002.
— Paul R. Greenland
