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II-VI: The Laser Years


In the second of a pair of features to mark the fiftieth anniversary of II-VI, Chuck Mattera, the current CEO, looks back at the diversification of the company’s offerings through the introduction and expansion of its laser portfolio INTERVIEW WITH RICHARD STEVENSON

RS: Your involvement with II-VI started long before you took over as CEO in 2016. Back in 2000, when working at Lucent Technologies Bell Laboratories, you started a two-year stint on the II-VI board, offering your expertise surrounding a variety of InP and GaAs laser diode technologies. At that time, how much progress had been made on the laser side of the business?

II-VI: When I came into the company as a board member, I was coming from a perspective of a company making semiconductor laser components and fibre amplifier subsystems for communication networks. Whether they were 1480-nanometre pumps or 980-nanometre pumps, or both, they were ending up inside an amplifier for a long-haul network. I was aware that IPG was figuring out ways to combine these pumps to cut steel. The workhorse of II-VI at that time was CO2 laser optics, used by the Industry 3.0 infrastructure for cutting up to 25-millimetre-thick steel.

We had to ask ourselves the questions, ‘Is the one-micron laser an opportunity, is it a threat, or is it both? How should we think about it, from a strategic point of view?'

Well before I got here, on the heels of the invention of the YAG laser, which operates at 1064 nanometres, II-VI realised that one-micron solid-state lasers were also going to be important. So II-VI acquired two small materials companies: Virgo Optics, in 1995, and Lightning Optical Corporation, in 1996. Those acquisitions of Virgo and Lightning created the well-known II-VI VLOC. VLOC became a division, and Fran [Kramer, who went on to be the company's second CEO] had a lot to do with that. I think it was the beginning of the company starting to cut its teeth on acquisitions: how to stage them, how to execute them, and how to integrate them.

The acquisition of Anadigics in 2016 enabled II-VI to increase its production of VCSELs.

RS: In 2004, you joined II-VI as Vice President, with a charter to establish a compound semiconductors capability. You have been with the company ever since. What did you work on to begin with?

II-VI: Fran and Carl [Johnson, co-founder and CEO at that time] encouraged me to think long-term about one-micron solid-state lasers and fibre lasers. We had this strategic challenge, and the future was unclear, but we acted on what our board also believed was an opportunity to transform the company. They encouraged us to take the long-term view, including ten years and beyond, and come back with the management team and help lay out a number of scenarios that could play out and drive exceptional long-term shareholder value.

We laid out, over about a five-year period, a roadmap to enter the one-micron laser market. It was clear that IPG had already gotten started a few years before. It probably wasn't going to pay off to try and compete head-on without the basic competency, which was the semiconductor laser. So, we laid out a roadmap to take a view further up the food chain, for a component that was agnostic as to whether it used a YAG laser, a fibre laser, or a direct diode laser. Knowing that we would need time to either acquire or develop the competencies of the laser, we decided - and Fran guided us - to get two or three levels up in the stack as a high ground from which to learn the market and develop new competencies.

We identified a beam delivery system for cutting steel as a place where we could get organised and establish a beachhead and, from there, understand the market. So, in 2007, we acquired HIGHYAG. We acquired 75 percent of the company in 2007, and the remaining 25 percent in 2013. [With that acquisition] we could address people who were in the system business for establishing competencies for cutting steel, and at the same time collaborate with people who had a YAG laser, a fibre laser, or a direct diode laser. No matter where you looked, every place our optics were employed, a laser was being either focused, reflected, or refracted. A company that had this footprint could further accelerate its penetration into a growing market if they had access to the semiconductor laser. So, after Giovanni Barbarossa joined us in 2012 as our first CTO, we made a strategic decision to acquire a semiconductor lasers platform.

RS: How did you progress toward that goal?

II-VI: Along the way, in 2012, we acquired the Santa Rosa optics coating facility of Oclaro, which had been Cierra Photonics, a thin-film filter company acquired by Bookham; Oclaro got it through the acquisition of Bookham.

When we acquired the thin-film filter business, Fran established a rapport with Alain Couder, CEO of Oclaro. On the heels of a successful transaction in thin-film filters, and that CEO-to-CEO relationship, we expressed our interest in acquiring the Oclaro semiconductor laser capability in Zurich. That platform focused on the industrial market and was not in line with the core of Oclaro, which is communications. Fran saw that as a nice opportunity.

I had been to [Oclaro in] Zurich for the first time in 1988, when it was IBM, and I had been there a few times before 2013, when we started due diligence. I had a real good idea about what a compound semiconductor fab and team looked like, because I had said goodbye, in my humble opinion, to the world's best when I retired in January 2003. Maybe I spent a week or two there. I was so impressed by what they had accomplished, and I fell in love with the team, as I have with all the other acquisitions we have done since I've been at II-VI.

I really liked the gallium arsenide laser. What I liked about it, besides the team, was the technology endowment, the accumulated knowledge, and the experience they had developed, all the way back to the investment by IBM for getting high-power LEDs and lasers to keep pace with the high-speed printing infrastructure, including for 200-megabit optically linked mainframe computing.

What we got [from the acquisition] included Avalon Photonics, a VCSEL innovator. They were selling VCSELs into the mouse market and the Blackberry market for finger navigation.

In 1988, I was part of the Bell Labs development team for VCSELs. There were maybe 35 to 50 of us. So I had a perspective about VCSELs when I got to Zurich, and I was excited about that. It wasn't too long after that we learned about other opportunities for the VCSEL, including those for the 3D sensing market.

Given our long-term roadmap for the industrial fibre laser market, and the benefits of vertical integration of our components capabilities, we thought that the best thing we could do was acquire the amplifier business from Oclaro at the same time. So, our management team recommended that we do that. Fran understood the value proposition, and he could easily see that this long-term vision that he and Carl asked me to take early on with regard to the one-micron laser market was beginning and was complementary to Photop Technologies, the one-micron optics platform we acquired in 2010. So, by this time, we had established the beachhead, and now we were working to backward-integrate all the way to the laser component, which I believe was a great decision and a turning point for II-VI.

RS: What else did you need to complete the line-up?

II-VI: There was one step in between: the subsystem, as it relates to communications in the future. We acquired the core elements of the laser, the subsystem, and the beam delivery system. Those three things were ultimately essential parts of the industrial food chain that would also branch out to serve an aerospace and defence market.

[At the time] we had built the foundations and the roof but in a sense were missing some floors. We had to go a bit out of order; sometimes you can't time these things perfectly, and you've got to have a long-term vision. Carl always ingrained in us the value of not getting full of ourselves with big ideas about revolutionising things, preferring to maintain a posture that the long game is won by evolution, rather than revolution.