Dan Maydan, president of Applied Materials, knows why he invested over one-quarter of a million dollars last month in two Israeli companies, Opal and Orbot Instruments. As the president of a company which ended 1980 on over $70 million in sales, and which will this year record business at a volume of $4.1 billion, he knows the semiconductor industry well, his competitors and technologies around the world, including the Israeli ones.
In his opinion, Israel can develop a $5 billion semiconductor industry by the turn of the 21st century. "Intel’s new factory, plus existing and developing activity, means a magnificent industry of semiconductors, components, machinery for the electronic components industry and all things related can develop." His interest in Israel, for the meantime, stems from other reasons; Opal and Orbot own manufacturing and inspection technologies for semiconductors which Applied needs in order to gird itself for the battle over the semiconductor market.
Negotiations were initiated by Applied, although both companies were notified ahead of time that the acquisition was conditional on their being purchased together, and that complete secrecy be maintained at all stages of negotiation. Secrecy was critical and any leak, even the tiniest one, could have weakened the deal. Maydan knows the Israeli habit of gossip well, because he himself is Israeli. He was born in Tel Aviv in 1935, went to high school in Haifa and studied electrical engineering at the Technion prior to his army service. He then worked at the Nahal Sorek nuclear research facility after which he completed his doctorate at the University of Edinburgh.
While on sabbatical in the US, he worked at Bell Laboratories, a stay which ended up lasting 13 years. In 1980 he joined Applied Materials with another two researchers from Bell: Israeli Sasson Somekh who today serves as Applied’s Senior Vice President of Worldwide Products Operations and David N. K. Wang, today Senior Vice President of Worldwide Business Operations. Maydan began as a project head, advanced quickly, and in 1990 was made a senior vice president. Since 1994 he has served as president of Applied Materials, which is a US company owned neither by Israelis or Jews.
Globes: Why did you make this purchase, at this time?
Dan Maydan: "In our industry, there’s a cyclical process of highs and lows, and after every drop comes a upward shift in manufacturing technology and equipment costs. A company such as ours has to go through the lull - and demonstrate the financial ability to do so - with a previously prepared development and manufacturing ability to meet market demand. In recent months, the market has undergone a slowdown, which will be followed by a leap to more advanced, innovative technologies which will require massive investment in equipment. These technologies demand intensive use of measuring and inspection systems."
How did you get to Orbot and Opal?
"By chance, the two companies were open to acquisition offers and according to our assessments, the equipment they have developed met the leading market standards, even surpassing them in a number of fields. We became familiar with Orbot only at the beginning of negotiations, but I knew Opal very well, as I serve on the company’s board of directors."
How do Orbot and Opal fit into Applied Materials’ strategy?
"Our acquisitions give us entry to 70% of a future billion-dollar market. Orbot and Opal’s technological products will supply the present generation of systems, and even the early stages of the next generation. Factories currently demand equipment to manufacture semiconductor wafers at a thickness of 0.24 microns. In the year 2000, they will demand 0.1 micron manufacturing technology. These two companies can supply this precision as they are based on a new generation of technology. They are not heirs to old methods."
The two Israeli companies have an aggregate turnover of $100 million, Opal’s sales were $60 million and Orbot’s, $40 million. Their goal, within the Applied Materials framework, is to reach turnovers of between $600 million to $1 billion by the year 2000.
Did you have any demands of the government, in the wake of this double agreement?
"We expect investment at a rate of 10% in research and development, on sales of some $1 billion in the year 2000. That is to say, we will have to invest $100 million per year to meet our goal and in order to do this here, we will request intensive government participation in research and development. Applied currently invests some $500 million in research and development, and around the year 2000 we will invest close to $1 billion.