Such Great Heights

In 2003, an alternative rock band called The Postal Service filmed a music video at Skyworks’ Newbury Park, CA facility. The video for the song “Such Great Heights” features images of a male and female worker in their clean room garb interspersed with close-ups of wafer processing equipment operating with speed and precision (see Figure 1). As the two workers carefully hand over a wafer, the video unfolds through a sequence of shots: machines assembling wafers, a bank of RFICs making its way into a satellite that circles the Earth. The video then zooms down to a building complex in Salt Lake City, UT that resembles an integrated chip from above. A match cut is made to a monitor in the factory displaying an identical integrated circuit as the video cuts back to the two workers handing over the wafer.

Figure 1 Images from "Such Great Heights" video.

Budding love story or portrayal of workers isolated in their clean room suits focusing on their duties, the video depicts awe-inspiring technology and manufacturing capability. And in 2003, this high volume manufacturing was necessary to support one of the commercial wireless industry’s major growth spurts. It was one year after Alpha Industries and Conexant’s Wireless Division merged to form Skyworks Solutions, a new company that could leverage its broad technology portfolio and diversified customer base into a daunting competitive advantage in an arena that would become increasingly exclusive and lucrative.

In the cellular handset market, 400 million units were sold in 2001, a 500 percent increase over the levels five years earlier. During this time, enhanced wireless bandwidth (2.5G and 3G) and intensely competitive pricing resulted in a substantial increase in new cellular subscribers. Meanwhile, handset OEMs and contract manufacturers, driven by accelerated time to market and pressure to lower costs, were looking to simplify architectures with a more complete semiconductor solution, especially in the RF section. Following the lead of Intel’s Gordon Moore, Skyworks’ executives foresaw how exponential growth for mobile devices would transform the commercial RF chip market forever, they joined forces to create an entity with the capacity to drive economies of scale in manufacturing and technological development.

At the time of the merger, Skyworks had its eye on capturing a “disproportionate share of a $10 B total addressable market,” which included the RF, mixed-signal and digital content of the wireless semiconductor market. Skyworks’ strategy called for leveraging its market position in switches, power amplifier modules and single-chip direct conversion transceivers to be at the forefront of integrating the RF section into a single package. (Note: As transceivers became integrated into the baseband IC by manufacturers such as TI, Qualcomm, NXP, Free-scale and MediaTek, RF manufacturers such as Skyworks and RFMD lost the support of many mobile phone platforms for their transceivers and subsequently exited that business, at least for multi-mode phones).

The newly combined company had approximately 750 engineers worldwide (according to its annual report), state-of-the-art GaAs HBT and PHEMT fabrication facilities and access to key analog, RF CMOS, SiGe processing, along with a formidable assembly and test operations for high volume production of its multi-chip modules. By the time Skyworks filed its first annual report, it had streamlined the overall organization, shortened the manufacturing cycle, improved capacity utilization and achieved combined company revenue of $543 M (compared to the previous year’s $458 M). Nearly 10 years later, the RF chip market continues to grow and Skyworks, now with over 4,000 employees worldwide, posted earnings of $1.072 B in fiscal 2010, a year-over-year increase of 34 percent.

The company is targeting three key growth areas: mobile Internet, linear components and vertical markets. Growth in its mobile Internet sector is driven by increasing RF content per device (Smartphones), leveraging a diversified customer base, and the company’s sizable market share, reported by Skyworks to be more than 40 percent (based on units). The analog or linear components business unit targets broad market diversity including: infrastructure, broadband, industrial medical and military verticals. The company’s portfolio of linear RF components includes PLLs, timing and delay modules, network control functions, LNAs, discrete diodes, switches, attenuators and VCOs. The vertical markets sector addresses applications ranging from wireless local area networks (WLAN), automated metering infrastructure (AMI), automated meter reading (AMR), professional mobile radio (PMR) and other ISM band applications.

Efficient operation on this scale requires sophisticated organizational systems, well-defined processes and infrastructure. According to David Stasey, V.P. of the Analog Components business unit, “Our business unit structure is an important part of our overall strategy. The marketing groups are part of the business units. Product marketing managers have ownership of the products to avoid conflicting interests between individuals within the business unit. We have designers and applications engineers all working within that product marketing group. Then there are some common pools shared between the groups. For instance, all our techs are cross-trained. So in the lab all techs are organized under one leadership pool. They are assigned out to projects as needed along with other common functions such as layout support, product engineering, and test engineering.”

Stasey also says the product marketing, design and application piece of the operation is very homogenous and responsive to the customers needs. “If there is a customer issue, then customer quality will get involved. Customer quality along with management will assign responsibility for taking corrective action. The applications group and designers will work together to resolve the issue. That way we have problem solvers from two perspectives working on it and everyone is aligned to achieve the same end result.”

When deciding which products to develop, Skyworks operates by a well-defined set of procedures that could have easily been conceived by engineers. According to Technical Director David Whitefield, the company solicits a lot of new product ideas from within the individual product groups and the entire Skyworks community. As a result, the company regularly conducts a fairly rigorous prioritization process that involves both bottom-up and top-down forecasts to determine the best resource allocation, which results in investments that are a function of customer demand and the overall market opportunity. “We don’t throw away ideas that might take a little more time, but we do look for a fit within our current state of technology and capabilities. Other ideas might get delayed until the technology or sales channel evolves. Or, sometimes a new technology is required, and that is where I might come in.”

Some engineers are notorious for just wanting to focus on technology with little interest in the business or marketing side of their company. Stasey and Whitefield do not encounter much of that with the team at Skyworks. As Whitefield states, “We are a very pragmatic company – cost, size and performance are big things for us and our designers get that. On the technology side, there’s a lot of interaction between disciplines.” Designers and process engineers as well as the modeling group work on problems together. So while the designers have a pretty deep reach into the tools and the process technology, they are also engaged directly with customers.

How designers, application engineers and customers interact is a little different depending on product line, according to Applications Engineering Manager Rick Cory. This is due to the demands of the market niches they address. According to Cory, “As a company, we have to develop products that the market wants and that work better than other products on the market. We also have to work with the customer to make sure they understand how best to use these products. So, you can’t have someone who is solely an applications engineer or solely a design engineer, because everyone has to look beyond just getting their job done.”

Cory believes the differentiations between the role of the designer and the applications engineer are not minor, “but many of their functions overlap quite a bit.” Designers have to be very sensitive to what the market wants so Skyworks designers talk directly to customers. Designers also have a different perspective on the products because they have designed them and they know them inside and out. “We want designers designing, but they will be less effective if they don’t have customer input.”

A company’s way of operating evolves from its past experiences with success and failure, guided by its culture. History and people define a company. A powerful business case might exist for merging companies, but success depends on the compatibility of their cultures. Stasey describes the culture at Skyworks as very open and communicative. In fact, every employee, including the executive staff, works from cubicles, fostering this spirit and a very flat organization.

At the time of the merger, there were admittedly different perspectives and approaches for handling things at each company, but Skyworks has successfully blended cultures and all groups now work well together, taking the best approaches from each. Marketing Director Thomas Richter, who worked for Conexant at the time of the merger, concurs. “It did not take too long to merge cultures. The Conexant employees saw how Alpha employees were successful in doing some things differently. So we would adapt various methods. After a short while I don’t think there was much difference among the various locations. Today our design centers are characterized by their core competencies rather than anything else.”

Whitefield conceded that pre-merger, Alpha’s systems and processes were not as robust as Conexant’s so it was a nice marriage. “As we’ve been getting bigger, many of those systems have been critical to our ability to do what we do. If you look at us today, we are the largest company in [RF] power amplifiers globally. We’re in just about half of all the mobile handsets made. We 100 percent RF test the chips, which is 4 million parts a day. All this indicates that we’ve got pretty good systems in place.”

The RF/microwave industry is composed of hundreds of small-to- medium-sized businesses. Very few of them have grown to the size of Skyworks with annual revenue above nine figures. Even fewer have done so without shifting their focus from RF components toward system integration or evolving into a large defense contractor. Ironically, Skyworks’ roots go back to a small, defense-oriented business with a colorful past and management that guided the company through an unprecedented transformation.

The openness described by Stasey began with the founders of Alpha Industries and has been perpetuated through successive leadership. According to a 2001 interview with then VP and CFO Paul Vincent, Alpha has always been set up in a nonhierarchical way, encouraging strong communications between people at all levels in the company. This goes back to George Kariotis, who used to exclaim that “there will be no neckties in this company,” even though the business culture at the time still wore suits and ties in the office (Figure 2 shows typical engineers from the early 1960s).

In 1962, George Kariotis and his brother Andrew set up shop in an old textile mill outside of Boston, building waveguide assemblies. As children of immigrants, they acknowledged their ancestry by naming the company after the first letter in the Greek alphabet – Alpha Microwave. Within a year, the company made its foray into the realm of microwave semiconductors when it began to make and sell point-contact diodes, the oldest of microwave semiconductor devices.

Point-contact diodes, developed during World War II, were used for detectors and mixers in superheterodyne radar receivers. Sylvania Electric Products was the first to market a commercial point contact diode (the 1N34 in 1946). Theoretical work done in the late 1930s and early 1950s predicted that diodes could also be used for amplifiers and oscillators as well. In support of electronic warfare systems, solid-state research on diodes and transistors took place at a fevered pitch. By the early 1960s, researchers from Bell Labs and the US Army Signal R&D lab were investigating various silicon and GaAs diode technologies for their suitability in applications such as broadband amplifiers, harmonic generators, mixers, switching and limiters. Leading companies manufacturing microwave diodes included Bomac, Western Electric, Raytheon, Microwave Associates and Sylvania Electric Products, a subsidiary of General Telephone & Electronics (GTE) Semiconductor Division.

If the Cuban missile crisis represents the peak of the Cold War, the early 1960s were certainly a boom time for defense companies such as Alpha, which experienced rapid growth. Reflecting its expanding product lines, the company changed its name to Alpha Industries and formed the Microwave Components Division and Semiconductor Division in 1965 and began trading publicly in 1967.

Alpha pulled off a major coup in 1970 by acquiring the Microwave Device Department of Sylvania Electric Products (GTE) and its extensive product line of diodes, with an annual volume of approximately $4 M, reportedly for $10,000 cash down, a seven-year note and stock (see Figure 3). The acquisition greatly expanded Alpha’s customer base and Sylvania’s large existing diode inventory helped pay off the loan in half the time. According to its ads at the time, Alpha now possessed “the broadest selection of microwave diode types and packages in the industry, from UHF to Ka-band.” The sale also gave Alpha a new home, the current Skyworks’ headquarters at Sylvan Road in Woburn, MA.

Alpha’s strategic acquisition transformed the company overnight into a major supplier in the diode business and player in the defense market. The move also put them in direct competition with two local giants in the microwave semiconductor industry, Raytheon and Microwave Associates (name changed to M/A-COM in 1978) — a regional rivalry that would exist between these companies for decades as the companies battled each other for market share and even engineering resources.

From 1977 to 1984, the company grew from $10 M in sales to $60 M, accompanied by a corresponding growth in earnings. Two-thirds of Alpha’s business was military. Company growth led to the acquisition of MD-based ceramic filter manufacturer Trans-Tech in 1981. Further expansion of its millimeter-wave-diode product line came when it acquired Gunn diode manufacturer Central Microwave Co. (CMC) of Missouri. Just prior, George Kariotis left Alpha Industries to pursue his passion for politics, serving as MA Governor Ed King’s Secretary of Economic affairs in 1979 (Kariotis ran as the Republican candidate for Governor in 1986, but lost to Mike Dukakis).

And then the company hit a rough patch. The year-after-year high growth and growing complexity of product design led to production difficulties in its microwave component division responsible for making GaAs FET multi-function hybrids. As a result, the company had to stop taking orders at that plant. Meanwhile, a new plant in Methuen, MA, which was built to help expand production capacity, sat mostly idle. Alpha’s rapid growth faltered. Alpha removed the divisional management and brought in the company’s newly appointed President M.J. “Woody” Reid to run the division. (Reid joined the company in 1969 as an engineering group leader and became Division Manager of the Solid-state Division in 1971).

To add to Alpha’s difficulties, the company was indicted by grand jury on suspicion of bribery in 1984 for purchasing a marketing study that turned out to be a report previously delivered to the Navy. This led to a four-month suspension from receiving military contracts, costing the company $10 M worth of business. Eventually, Alpha settled with the Pentagon, and the Air Force dropped Alpha’s suspension. At the time, George Kariotis acknowledged his company’s poor judgment in buying the report, but denied that the payment was a bribe.

But the impact was felt, nonetheless. Alpha estimated that it began losing business at the rate of $2.5 M a month. The company stock dropped from a high of $19 a share to $9.50. Profits for the quarter that ended March 31, 1985 collapsed to nearly zero. In the next quarter, Alpha lost money for the first time since 1974 and continued to operate at a loss for two more consecutive quarters. The productivity problems forced the company to cancel orders, reducing the division’s backlog from $18 M in June of 1985 to about $12 M by the New Year. Investment in the Methuen plant and a new GaAs fab in Woburn had drained a much-needed $20 M out of the company’s cash reserves. With Alpha’s strategy for growth centered on the Microwave Component division, the setback was especially hard on the entire company. With morale at an all-time low, “Our dear competitors did a number on us and sucked a lot of good people out of that division,” stated Kariotis in an interview at the time.

Still, the company held a strong position in the profitable off-the-shelf diode niche market and the general microwave market was growing at about 20 percent. Alpha dug in and re-tooled, starting with substantial cutbacks to its expenses and plans to launch any new ventures. And the future held promise. According to Vincent, the $ 20 M investment in the Woburn GaAs fab allowed the company to participate in the DARPA MIMIC program in the late 1980s. In 1987, the company entered a joint venture with Martin Marietta to share R&D expenses in developing millimeter-wave MMICs. As partners in the MIMIC program, Alpha focused on millimeter-wave technology, MIMIC partner ITT was responsible for microwave technology and Martin Marietta was the integrator. The GaAs fab investment, strategic partnerships and MIMIC program helped Alpha crawl its way out of the abyss. As a defense contractor, Alpha built specialized GaAs semiconductors for satellites, missile and radar systems. Although it was a defense program, MIMIC was instrumental in helping this microwave company move into high volume commercial applications, such as LNAs, GPS and base station components and switches for handsets. With a shrinking US military budget in the early to mid 1990s, company executives decided to push Alpha’s technology toward commercial applications, namely cellular telephones. But there were still plenty of obstacles to navigate.

In 1992, M/A-COM and Alpha were both trying to become more efficient and move into the nondefense electronics arena. They often called on the same large military and commercial customers. M/A-COM, under the leadership of President and CEO Thomas Vanderslice, had been downsizing – selling seven companies acquired during the booming military buildup of the 1980s. Cuts in military spending resulted in fewer potential dollars for either company, although each had made strides to be less reliant on government contracts while attracting a greater portion of nonmilitary business.

Driven by the same market dynamics and sensing a weakened competitor, M/A-COM’s Vanderslice attempted a hostile takeover of Alpha in April of 1992, offering to acquire the company’s stock for $4 a share, a total of $32 M. In a letter to Alpha’s President and CEO M.J. Reid, Vanderslice commented that Alpha’s short-term earnings and “relatively small size of Alpha’s operations, the capital and indirect cost requirements it now faces, and the consolidation which is taking place in the industry, make our combination compelling.” Alpha immediately rejected the offer. Three weeks later, Vanderslice went public to try and gain the support of Alpha shareholders.

"Alpha is a fine company, but they don't have the dollars to put in research and development - and they are a market niche-oriented company that would do better with us," declared Thomas Vanderslice, President and CEO of M/A-COM in 1992

In an interview with the Boston Globe, Vanderslice said he thought a merger with Alpha “could be a marriage made in heaven.” Kariotis disagreed, saying that for Alpha customers and employees, the M/A-COM offer “is more like a marriage made in hell” and insisted that Alpha had a new strategy it wanted to implement and therefore wanted to remain independent. Controlling 22 percent of Alpha’s shares, Harvey Kaylie, President of Mini-Circuits, was the company’s largest shareholder and an Alpha Director at the time. Kaylie assured the board that “he would stay with Alpha and if put to a vote he would not sell his shares.” Kariotis also retained the services of Wall Street investment bank Goldman Sachs to help fight the takeover threat. With the legal and financial guidance of Goldman Sachs, backing of the company’s largest shareholder and belief in the company’s future direction among board members, Alpha was able to fight off M/A-COM’s take-over attempt.

Despite the exodus of technical talent experienced by Alpha in the mid 1980s and the hostile takeover attempt in the early 1990s, the company was still able to recruit some key technical personnel and managers. Daniel Gallagher joined the company in 1989 as Director of Device Operations of Alpha’s Devices Group and became Vice President the following year. Gallagher had spent more than 21 years at M/A-COM, eventually serving as Vice President and General Manager of the company’s Advanced Semiconductor Division in Lowell, MA. Tom Leonard joined Alpha Industries in 1992 as a Division General Manager at the Methuen facility and served as its Vice President after 1994. Leonard had also held a variety of executive and senior level management and marketing positions at M/A-COM, Varian Associates Inc. and Sylvania. Leonard served as President of Alpha Industries, from 1996 to 1999 and served as Chairman of the Board from April 2000 to June 2002. In addition, Skyworks’ current CEO, Dave Aldrich joined the company in 1995 as Vice President, CFO and Treasurer. From 1989 to 1995, he had held senior management positions at M/A-COM.

Together, these managers led the company through a dramatic transformation from defense contractor to commercial vendor. They quickly recognized that by trying to serve these markets simultaneously, they ended up serving both poorly. And so the decision was made to pursue just the commercial market. In 1994, the company transferred certain product lines from the Methuen facility to the company’s headquarters in Woburn, closing that facility the following year. Leonard’s office also moved to Woburn as he became Vice President. One of his first actions was to implement company-wide training in the Total Quality Management (TQM) process, instilling tighter manufacturing controls. By the end of the 1990s, Alpha was primarily a commercial supplier; it transformed its culture, systems, and approach to designing products and supporting customers in the process.

Today, Skyworks is a direct descendant of this 1990 transformation. Through the 1980s and 1990s engineers frequently bounced from M/A-COM to Raytheon to Alpha Industries and back again. Today Skyworks and its competitors are much better at retaining talent. The landscape has changed because a number of these organizations are no longer the same as they used to be. Today all those companies are more highly specialized and focused on specific markets than they were. A defense contractor such as Raytheon is much more focused on systems than on microwaves. As a result, they are not pumping out the quantity of engineers with RF component experience that they used to.

Cory joined Skyworks right after it became Skyworks. Before that he “had done the merry-go-round,” including an interlude with the Analog IC group at Analog Devices, but it was not the same focus as Skyworks. Cory suspects that company specialization has made it harder for people to bounce between companies and hit the ground running. “So that makes us (the engineer) a little less portable, but on the other hand, the big advantage is that we can specialize and offer a lot more to our current employers.”

Whitefield had a different opinion on the labor market. He has been with Skyworks for 18 years and “didn’t get drawn into the exchange program. We currently have design centers, which we didn’t have years ago when engineers moved between the larger companies. Some companies could certainly see attrition, but fortunately we don’t see much.”

Skyworks is expanding. Today it has more than 90 open positions across the globe. It is a challenge to fill technical positions, but it continues to work with universities and expand its design centers, opening one in Greensboro, NC and one in Ottawa, Canada. The company is mostly hiring engineers with their master’s degrees and PhDs right out of school for application engineering. Engineering today, especially in RF, is so application intensive. The two most recent application engineering hires are both Mandarin speaking, one with his master’s and the other has his PhD. When the company hires these recent grads, Cory likes to congratulate them and tell them that “they are now ready to begin their real education. The advanced degree only proves they have the aptitude to learn this stuff. We like to assign them to senior people to teach them the practical side of engineering.”

According to Stasey and Whitefield, back in the 1980s, there were a bunch of analog guys and digital was sort of the new appealing place to be. And then in the 1990s, everybody was digital and you couldn’t get any analog guys. Because of the proliferation of wireless, Skyworks is seeing more multi-disciplined engineers coming out of university now, graduates are not labeled as either analog RF or digital as much as they used to be.

“Certainly they will come out of school with a tendency toward a certain discipline, but today you’ve got to know a little bit about all of those things,” said Cory. Today they are getting much more of a mix.” Just recently we were hiring for a couple of positions and we had a candidate with a good silicon background, but his work didn’t really pertain as much to RF as we would have liked. He reminded us that he was working with processors operating at 5 GHz; everything is RF now.”

Skyworks has a number of programs in place to coordinate engineering efforts and orient new hires. New employees at a design center will work from the Woburn (HQ) facility for a week at a time to get a feel for the environment. Groups will frequently visit remote sites for working meetings and design reviews, on top of being connected via phone and Internet.

Technical reviews occur quarterly by phone, in addition to a company sponsored technical conference. For the technical reviews, a couple dozen people across the company will travel to these reviews and there is a dial-in for the rest of the company to listen in. In these reviews, they walk through the latest technology updates on all aspects of business, such as packaging, PHEMT, Silicon, HBT, and all aspects of development. So for instance, they might talk about some new modeling technique now available and how to get to it. It’s an all-day event and they typically have about 200 people participating.

Whitefield is head of the steering committee for the company’s internal technical conference. “We solicit papers in different categories, review them and have people present them, just as they would at any other external technical conference. But the beautiful thing is that we don’t have to filter what we say because it is all Skyworks employees. So we can present proprietary and confidential information. It’s great because you don’t get the superficial, boiled down version. You get the real version. It is also about team building, because you get to talk directly to the author.”

Past Technical Conference Session Topics Have Included:

• Process Technology and Reliability
• Manufacturing and Test
• Packaging Technology
• Circuits and Systems
• Design Automation/ Device Modeling
• New Materials and Material Interactions

Stasey and the company also take pride in the Skyworks leadership development program. It's a multi-disciplined curriculum for potential leaders. In short, Skyworks believes in openness, professional development and operating within well-defined processes as the key ingredients to its success (see Figure 4). Is there any other way to achieve such great heights?

In May, Skyworks announced that it was acquiring SiGe Semiconductor for $210 M. Read more in this month's Around the Circuit column.