SLO's SAES Pure Gas keeps pumping out profits

Workers assemble parts for a semiconductor manufacturing tool inside a clean room at SAES Pure Gas in San Luis Obispo.
Workers assemble parts for a semiconductor manufacturing tool inside a clean room at SAES Pure Gas in San Luis Obispo.

The clock on the factory floor at SAES Pure Gas in San Luis Obispo shows 4 p.m. But to the workers, it is already 8 a.m. — the time when many clients in China are starting their workday.

“We’re always behind, always fighting because Asia’s always ahead of us,” said CEO Tim Johnson. “It’s a very demanding, very fast-moving industry.”

SAES Pure Gas in San Luis Obispo manufactures gas-purification equipment used by electronics manufacturers. Initially, its clients were major semiconductor companies such as Intel and Samsung. In recent years, it has expanded its client portfolio to include LED and LCD manufacturers, capitalizing on the rising popularity of flat-panel televisions and LED lighting.

Currently, 105 employees work at the SAES Pure Gas facility that sits on 5.5 acres alongside the San Luis Obispo County Regional Airport. It is a self-contained operation that encompasses electrical and mechanical assembly, equipment testing and inspection, purification material testing and development, customer site testing, and 24-hour customer service.

Still, SAES Pure Gas is just one subsidiary of a global enterprise with a history that stretches back more than 70 years.

SAES traces its history to chemical pump

The Italy-based parent company of SAES Pure Gas is SAES Group, previously known as SAES Getters. A getter is a chemical pump that absorbs gas molecules and is used to maintain a vacuum inside a variety of equipment. During World War II, Italy developed its own supply of getters for use in equipment such as radios and radar.

“They were very successful in doing that,” Johnson said. “Post-war, they were the leaders with a 70 percent to 80 percent market share that lasted more than 50 years.”

SAES has produced getters for products ranging from thermos bottles to particle accelerators. “Nobody knows us, but everybody has us in their house every day,” Johnson noted.

Producing getters for cathode ray tubes, used in old-style televisions, was a boon to the company. As that market began to decline, the company looked to diversify. In the late 1980s, the burgeoning semiconductor industry required extremely pure gases for manufacturing such as nitrogen, hydrogen, oxygen, argon and helium. SAES determined that getter alloys could be used to absorb trace impurities in those gases.

SAES initially planned to locate its gas purifier factory in Silicon Valley, but found it cost-prohibitive. The company discovered a San Luis Obispo company named Cryolab, which manufactured ultra-high purity valves used by the semiconductor industry. SAES purchased the company in 1989, envisioning a good fit with its goals — but also, as company lore has it, for other reasons.

“The story goes, the sun was shining that day, (the SAES executives) found a good Italian restaurant and said this is where they wanted to stay,” Johnson said.

Shortly after Johnson joined SAES Pure Gas in 1997, the company sold off its valve business to focus strictly on gas purification. According to Johnson, it currently has a 60 to 70 percent market share, particularly among manufacturers of bulk purifiers. Its closest competitor is Entegris, which is based in Massachusetts. According to Johnson, Entegris focuses more on smaller, specialty gas purifiers. “On big-system units, we really dominate,” he said.

Those large units command an impressive price: up to $1 million. SAES also produces smaller specialty purifiers, which sell for as little as $1,000.

Johnson estimates that more than 70 percent of its products go offshore, primarily to Taiwan, China, Korea, Singapore and Japan. Relocating SAES Pure Gas to China may seem like a natural move, and the company has considered it at various times. But, according to Johnson, the disadvantages outweighed the benefits.

“As soon as you go there, the Chinese customer wants a 30 percent discount because they think it’s much cheaper to build in China. The Koreans won’t buy Chinese. The U.S., for this high end a product, is going to be very hesitant,” he explained.

The SAES Pure Gas facility is located just outside San Luis Obispo city limits, and, for the most part, Johnson has found the county cooperative and accommodating. The facility has expanded from one to three buildings since SAES took ownership. The company has permits to expand existing buildings and space to build more, though there are no plans to do so in the near future. To the question of relocating, Johnson responded, “At the moment I’d say no, but we have to look at the business climate in the future.”

Hiring is the biggest challenge Johnson faces in operating SAES Pure Gas in San Luis Obispo County. With regards to recruiting qualified engineers, “it’s either Cal Poly or nothing, really,” he said.

On the flip side, the quality of the San Luis Obispo County lifestyle helps attract and retain those Cal Poly grads. Many have moved out of the area and are, according to Johnson, “desperate to come back.” This, along with a shortage of engineering jobs in the area, has helped him build “a very strong core of employees with extremely low turnover.”

Careful recruitment is key in a business where small errors can cost clients millions of dollars in downtime or lost product. “Every chip is made of millions of transistors. If any transistor is defective due to contamination, the chip will be worthless,” said Ron Maltiel, President of RMG and Associates and consultant to the semiconductor industry. “SAES Pure Gas purifiers provide very important tools for semiconductor manufacturing, starting from growing the pure single crystal wafers, depositing clean layers on top of them, and defining the shapes of the transistors."

According to Johnson, awareness of the importance of the company’s work, along with a company culture of loyalty and collaboration, helps employees navigate a challenging work environment where customers can be demanding, competitors aggressive, and production stops for nothing — not even holidays.

Demand for tablets and smartphones has kept SAES stable

While the earthquake and tsunami in Japan, coupled with the recession, have negatively affected a portion of the high-tech industry, SAES Pure Gas has remained relatively stable because of the sustained demand for tablets and smartphones, according to Johnson. He attributes a drop in revenues from approximately $80 million in 2011 to approximately $55 million in 2012 to “a very big year in 2011 due to the dramatic growth of the LED industry.” Although 2013 revenues have not yet been published, he said the company has returned “to a more level growth.”

Last year, the company expanded its portfolio of technologies for hydrogen purification with two acquisitions. The first was new technology from hydrogen purifier manufacturer Power + Energy in March. Then, in July, it bought out the hydrogen purifier division of precious metal company Johnson Matthey.

This new hydrogen purification technology is not only useful to the semiconductor industry, it will allow SAES Pure Gas to expand into fuel cell applications for the automotive industry beginning this year.

Another area of expansion for SAES Pure Gas is gas recycling. “Gases are an expense, and some are hazardous, so there is a cost associated with disposing of them,” Johnson explained.SAES has begun working with one major LED manufacturer on a product that will recycle gases back into the manufacturing process. According to Johnson, the company will have a unit up and running early this year.

Although Johnson sees his industry as less cyclical than in past years, diversification will be key to SAES Pure Gas remaining competitive in a rapidly changing market. For the time being, he believes the company has the tools necessary to move forward, including “the dedication of the workforce that we have here, which is immense.”