Four years ago, Business in Focus explored the world of semiconductors through the lens of Minnesota-based Talon Innovations, a manufacturer of machined parts and complex assemblies for semiconductor tools. At the time, the company had been on a steady growth path with a plan to fully execute an acquisition, after which it would focus on the two primary goals of diversification and added capacity. We recently touched base with this ambitious company to see if it achieved its goals and find out what its plans are for 2019 and beyond.
In November 2017, Talon was acquired by Ichor Holdings, Ltd. “Ichor was a significant customer of ours – our second largest customer by revenue, and we shared a lot of common customers in the semiconductor industry, so when it acquired us, it was a good synergistic fit, if you will, with the products they provided to us and to the industry,” said Vice President Sales and Marketing Marty Dertinger. “We saw it as a 1 + 1 = 3 acquisition.”
Since then it has experienced massive growth. It nearly doubled its workforce in the first eighteen months, reaching four hundred employees in three facilities in Sauk Rapids, Minnesota; Osakis, Minnesota; and Tampa, Florida. “We have added more than 40 new CNC machines since 2014 as well a 3D printer, multiple CMM inspection machines, laser engraver, clean room expansion and many other investments in manufacturing and facilities. Talon is well positioned for the future.”
The majority of its customers are in the USA. However, it does supply many customers in Asia, Southeast Asia, and Korea, and it has some business in Europe. It plans to expand its reach in Europe with some targeted customers that require precision machining, assemblies, and weldment for liquid and gas delivery and semiconductors.
Talon has also become more diversified as a result. “The acquisition by Ichor gives us the wider breadth of supply chain and financial strength and clout with spend with our supply chain to continue to leverage our strengths,” said Dertinger.
Its capabilities and expertise have been proven in some of the most demanding applications for microelectronics, biotech, medical, and other instrumentation areas. It specializes in close-tolerance machining and finishing of difficult-to-process alloys and plastics, and its engineers work closely with customers to create an end-user product that has earned it a reliable reputation in the semiconductor industry.
Since the acquisition, there have been a few adjustments the company has had to undergo. It had to adapt to going from a private company to a publicly-held company with all the regulatory reporting and accounting requirements. The blending of the companies has also had an impact on the overall culture. The most important aspect has not changed, however, and that is its commitment to its customers.
“A little different decision-making process and a different culture we are adopting as part of Ichor,” explained Dertinger, “which is not necessarily bad, it’s just different from our previous culture and previous management team.”
“With regard to what we provide to customers and even to Ichor internally, nothing has changed with our product and our offering and our focus on semiconductors,” said Dertinger. “Since being acquired by Ichor, we are more focused on Semiconductor Equipment than the other markets because of the focus on gas and liquid delivery for Ichor.”
There have also been many advantages that Talon has enjoyed since joining forces with Ichor. “The best benefit is having access to other customers in semiconductors and having doorways opened for us to penetrate other companies in seeking qualification, growing our business that way,” explained Dertinger.
“Our strengths are the same as it have always been: having a wide array of machining capabilities, different types of machining, having the ability to do complex geometries, having the ability to do superior surface finish, which is required for gas and liquid delivery – primarily gas, and the ability to machine the different exotic metals,” he said. Although it primarily works with stainless steel, it can also work with a variety of “exotic alloy metals that are hard to machine, whereas many shops will not do those types of metals.”
Its expertise in this industry comes in part by purposefully hiring engineering professionals. Ten percent of its staff come from the engineering community and work so closely with clients that they essentially become an extension of the customer’s engineering department. It also has best-in-class rapid prototype resource group that is dedicated to helping customers get to market first with new product ideas.
Success does not come without a few bumps along the way. Skilled labor is still in shortage right across the manufacturing industry, but Talon has been proactive in addressing the issue by working with local technical colleges to get more young people trained.
“We have partnered with the State and have received grants for training, and partner with local technical colleges to train our employees,” said Dertinger. “So having the ability to train and retain employees is essential.”
The semiconductor industry can also be a volatile one, and many businesses have been affected by a bit of a lull in the market. Dertinger said that Talon has not seen that great of an impact on its bottom line, but it is trying to be prepared for an anticipated increase in business by the end of the year.
“When the industry comes back, we are going to need to hire people and a lot of them,” said Dertinger. “Our goal is to keep this region and potential employees aware of Talon and Ichor Precision Machining, so when the industry comes back, we are going to need to revamp that hiring and grow, even to the point where we made need additional capacities, additional equipment, and who knows, maybe additional factory space that we see coming down the road.”
When asked about his thoughts what lies ahead for the semiconductor industry, Dertinger looks to the future with a very pragmatic eye. “Our business in the semiconductor market is really tied to memory demand in the marketplace.”
Dertinger understands that as long as people use computers, tablets and cell phones for photos, videos, social media, shopping and any other reason, there will be a need for data storage and that it is only going to increase, which for the company, means the need for memory will increase, and therefore a need to create more semiconductor chips.
“There may be a temporary over-supply of memory chips now, but it will eventually come back to needing much more capacity to fill the needs of the data and memory as a result.” Whatever the future holds, Talon is ready to take on new challenges and opportunities, and more importantly, it is ready to grow.