For Subscribers

Get the complete article now!

TWST: Can you give us a brief overview and history of Orbotech (NasdaqNM:ORBK) ?

Mr. Auman: Orbotech has been around for about 20 years. We are pretty much centered on the design, development, manufacturing, marketing and servicing of systems, mostly inspection and yield enhancement systems to the manufacturers of bare and assembled printed circuit boards and flat panel displays. We are also a leader in providing imaging solutions to those industries. We are tied in pretty closely to the electronics industry. When things are going very well in the electronics industry, it is a good time for Orbotech. However we are not immune to times when the electronics industry goes into a downturn or a recession, which happened in the last two years. We have been affected in certain parts of our business and, at the same time, we have had to align our cost structure accordingly.

TWST: What can you tell is about the markets you address and the underlying dynamics?

Mr. Auman: Traditionally, more than 50 to 60 percent of our business was in the US and Europe, as most of the manufacturing of advanced electronics were in those geographic regions. In the last two years, with pricing pressures on the manufacturers, and as the labor and production costs are much cheaper in the Far East, a lot of business has shifted over to that region. Secondly, the flat panel display business has become a greater part of our business, and the flat panel display market is pretty much a market that exists in Japan, Korea and Taiwan. So today more than 80 to 85 percent of our sales revenues are derived from the Far East, specifically Japan, China and Taiwan. Less than 15 percent of our business remains in Europe and the US. Most production facilities of electronic components in the US and Europe have shifted over to the Far East, as the OEM’s, who give the work out to the contract manufacturers, have decided to move the business to that region, leading to the closure of facilities in the States and in Europe.

TWST: What are the new developments for Orbotech since we last spoke?

Mr. Auman: Well, first of all, in the flat panel industry we introduced our new Invision inline inspection system, which sits directly within the manufacturing process and can inspect a hundred percent of the glass substrates in less than one minute per substrate. There are different concepts of how the manufacturers look at inspection. Some like to use the inline inspection system. Some will only go with the offline system, and some will go for both systems. So, that is a new system that we introduced in 2002. Additionally, in the printed circuit board area, we have introduced a new high-end system. Our InFinex 3100 system for fine line, high definition boards. It’s a system for very advanced printed circuit boards with a line width below one mil or 25 microns. That system is already selling very well in Japan and we look at it to be a seller in the States in whatever high-end market is left there.

TWST: Can you talk about your competitors and what kind of advantages you have?

Mr. Auman: In the flat panel display industry we have pretty much the main share of the market. There are two competitors in the areas we are in. In our inline inspection there is a Japanese competitor, Kubotec who has a low-end solution, lower cost system. They have been around for a while. And in the offline system, there is a Japanese competitor called V Technologies. In the printed circuit board industry inspection area, the main competitor is a Japanese company called Dainippon Screen, they like Orbotech, have both high end and low end systems. Two small competitors, one in the high end is an English company called Lloyd Doyle and on the low end is another Israeli company called Camtek. In the printed circuit board assembly business, we have a number of competitors. We believe we have about a 20 to 25 percent market share. We believe that the other three competitors have similar market share to Orbotech. One of them is a company called Teradyne, another company Agilent Technologies and the third company, a Japanese company called Omron. In the direct imaging area, that revolutionary product we introduced in the printed circuit board industry, we are the only player out there at this stage.