CyberOptics on WNIE Radio

Dr. Subodh Kulkarni, President and CEO of CyberOptics, talks with Chloe O’Brien of WNIE Radio, about what’s driving the market and CyberOptics’ business growth.

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Speakers:
WNIE: Chloe O’Brien
CyberOptics: Dr. Subodh Kulkarni, President and CEO

CO: Hello, and welcome to WNIE radio. I’m Chloe O’Brian with What’s New in Electronics. I’m here today with Dr. Subodh Kulkarni, the President and CEO of CyberOptics.

CO:  How has Cyberoptics been performing amidst the virus backdrops? I know that’s something that many companies have had different responses to.

SK: Sure, so CyberOptics overall has done very well, despite the pandemic situation. We have two facilities where we manufacture things, one here in Minneapolis and another one in Singapore. And we were fortunate enough the local government allowed us to continue our operations, even though the lockdown phases, because we make essential products. So that helped from a manufacturing standpoint.

Our employees did a wonderful job of following all the local laws and going above and beyond that. So we have had very, very few cases in Minneapolis and zero in Singapore. And thankfully, no one was hospitalized or anything that severe. So overall, our employees did very well. Most of us have been working from home remotely, including our engineers, they’re doing remote access and everything. So we’re doing as well as anyone can, given the severity of the global pandemic.

From a business standpoint, we are actually very pleased with our results. In 2020, we grew as a company 18% year over year. And because of that growth, our profitability improved significantly. We were always a cash rich company with no debt, and our cash position improved as the year went along, and we didn’t incur any debt. So overall, we did as well as you can imagine any company doing given the severity of the global pandemic.

CO: Wow, that’s fantastic. You mentioned growth. What’s the driving force behind the growth in your business?

SK: Sure. So we primarily service the semiconductor and electronics manufacturing markets. We were fortunate that the semiconductor market particularly improved quite a bit as 2020 went along. Part of it because of the pandemic – the need for electronic devices at home as people work from home – they needed more devices, they needed more bandwidth. People started using zoom calls and all those things quite often. And that actually helped the overall demand for semiconductor chips as well as electronic devices.

Because we are supplying to those customers, we did see an improvement in the market. The semiconductor market grew about 10%, Semi cap, which is semiconductor capital equipment market that services semiconductor market, grew about 15% in 2020. Electronics itself didn’t grow as much, electronics was probably closer to the inflation rate of 2 to 4%. We serve both markets, so we did better than the overall global market did. But certainly semi cap did fairly well, arguably because of the pandemic. So we were probably one of the sectors that benefited from the work from home environment. Anyway, we did better than the market, so we feel pretty good about that.

Within our company there are two technology platforms, one is called MRS™, which stands for Multi-Reflection Suppression™. That’s a unique way of doing 3D non-contact optical sensing and another technology platform that we call WaferSense®, which is an in-situ sensing device essentially, that can be used by semiconductor customers to do set-up and diagnostics. So MRS and WaferSense fueled our growth. MRS did a wonderful job. MRS grew almost 35% in 2020, both because of the semiconductor customers, but also some electronics customers. WaferSense, which primary services our semiconductor market grew about 8%. We do have a legacy business, which is the older stuff, 2D stuff, that declined a little bit. But overall, given the two growth platforms, MRS growing at 35% and WaferSense growing at 8%, the overall company’s growth YoY was ~18%.

CO: That’s amazing, and really, really positive figures there. And as you mentioned, the need for these types of products is growing. So how does CyberOptics differentiate itself from the competition in SMT?

SK: Sure, so as I said, we have two key technology platforms, MRS and WaferSense. We’ll take WaferSense first and then go to MRS.

WaferSense, we really have a very extensive patent position. We have more than 15 patents and more in the pipeline (23 pending). And we really have managed to get a very secure position. We have no real competition in WaferSense, so that that helps from a differentiation standpoint, because of our patent position. The value proposition is fairly obvious. It significantly improves time and efficiency for process engineers and equipment engineers in the semiconductor industry. So WaferSense is a relatively easy one to differentiate because of our patent position.

The competition is legacy manual methods that aren’t wireless, cannot go into a tool and/or require shutting the tool down, they aren’t able to provide real-time data or analytics, and they are outdated and cumbersome.

We are definitely in a much more competitive arena with MRS. Even though we believe we have a superior technology in doing 3D noncontact optical sensing, there are other ways of doing 3D noncontact optical sensing, so we compete with those technologies. Usually we are faster and more accurate, our images look better because of our proprietary algorithms. And we do add value in our software with things like multi-functionality. One of our key products is what we call SQ3000™ Multi-Function system where the main application is AOI, but in addition to that we also do SPI, which is solder paste inspection, as well as CMM, coordinate measuring machine. So we enable our customers to do multiple things with our equipment and they get better value this way.

We try to differentiate ourselves in MRS with a unique combination of speed, accuracy, multi-functionality and better image quality. We are using expensive components, so I will admit that we are more expensive than alternative, competing technologies that are using cheaper components. Our performance is significantly better, but our prices are usually higher. Needless to say, given the actual results of 35% plus growth, clearly we are winning in the marketplace with this kind of differentiation.

CO: Yeah, absolutely. Do you have any examples of the kinds of applications the technology can be used for?

SK: Sure. So with MRS we service multiple applications.

(In addition to integrating our MRS sensors into our systems), we sell our sensors to OEMs. A couple of partnerships we have been able to disclose – one is with KLA® and another is with Nordson® for SMT inspection. KLA obviously is a big player in the semiconductor inspection space. All of their back-end inspection equipment that gets sold under the ICOS brand name use our MRS sensors. That has been a great relationship for us, as well as for them. And the typical application they service is usually module and package inspection. These are packages towards the end of semiconductor fabrication that are already in trays or tape form, and you need to do a visual inspection to make sure that all the heights – XYZ components are okay. So that’s one application that has been very successful with MRS, with KLA.

Another one as I mentioned, our flagship product SQ3000™, is a multifunction system. It’s primarily meant for automated optical inspection (AOI). And with that, we are servicing many different areas. One of the more recent successes with our SQ3000 system is that it’s the only system that has been qualified for all the inspection steps that are needed for this new and emerging micro LED technology. That’s a new way of doing a display technology that’s getting a lot of attention right now. It is growing very fast because it can improve your display and improve the battery life quite a bit in your portable devices. And since all of us struggle with charging our portable devices, that technology is getting a lot of traction and we are partnered with the key players in consumer electronics and the technology developers. And that’s been a very successful application.

But the list goes on, we are getting into bumps and pillar inspection for semiconductor industry where they are doing stacking. We have some unique printer cartridge inspection capabilities. So really what we have is a broad technology platform that can be used in multiple applications. I just cited a few ones that are doing quite well. Probably one I should mention is memory model inspection. The MRS technology in our MX3000™ is getting routinely deployed by large memory manufacturers to inspect the memory modules as a final visual inspection step, again because it’s faster and more accurate than alternative technologies.

CO: That’s really interesting. And you mentioned that the micro led things are getting smaller and more complicated. So what do you see on the horizon for semiconductor?

SK: Well, in a way, semiconductor and electronics industry is boring In that sense. We always just keep making things smaller and more complicated year after year. It’s been going on for a few decades now. I don’t see that changing. I mean, our phones and electronics are going to get more loaded with processing power and memory as we go forward, just as what has been going on for the last couple of decades. So parts will get smaller, parts will get more complex, a whole area of stacking has started. Historically, semiconductor industry relied on shrinking the transistor, and everything was two dimensional. In the last few years, the third dimension has started coming in place. So now we are building skyscrapers, if you will, increasing the density even more. And that has unleashed a lot of creativity in the semiconductor and electronics industry.

A lot of interesting innovations are happening in new designs of processors. For instance, the Apple® M2 processor has a very unique way of doing processing, and similar innovations are happening in the memory side where 256 layers of NAND are getting stacked on top of each other. So the third dimension is coming into play. This is just like when architects got a new lease on life, if you will, when they found out that you can stack things vertically. The same is happening in electronics and semiconductors. Certainly the third dimension is unleashing a lot of creativity. A lot of interesting advanced packages are being built with the third dimension. That makes life interesting and challenging for us at the same time.

Suddenly now with all these complexities, they need inspection at various steps because the value of the parts is very high now. A single wafer, a high-end wafer by the end of its fabrication is almost worth $100,000 sometimes, so losing any wafer is a big deal for any company, even if they are large semiconductor companies. So you want to maximize your yield, maximize your productivity as much as possible, and inspection plays a key role in enabling that to happen. And that’s where we play in. Our job is to mostly do non-contact inspection and metrology, and give the best data to our customers so they can improve their yield and productivity.

But the trends will continue. If anything in the last year or two, the trends have accelerated, I would say, because it’s getting harder in two dimensions right now. The third dimension is beginning to pick up the pace, if you will, because customer demand continues to be there. Just like you said, right now you wish you had better bandwidth so we could just do this on video. Next year, it will be possible to do it on video, and then pretty soon all of us will have a much better bandwidth than what we have right now, so I think those kinds of demands will continue. That forces the semiconductor and electronics industries to accelerate the trends. And that forces companies like us to keep doing inspection and metrology for all these advanced packages. I expect the trends will be exactly the same as what you have seen in the past. If anything they will accelerate in the next five years compared to what they were five years ago.

CO: That’s very exciting. And we look forward to hearing what you have coming next. And we wish you all the success.

SK: Thank you for your interest and questions.

*Trademarks are owned by the respective companies.