Johnson Matthey Blossoms Electronics Revolution Fuels Spectacular Growth At Spokane-Based Manufacturer Of High-Tech Products
We’ll start with a brief quiz.
1. Based on its present performance and growth rate, what company headquartered in Spokane plans to have $2 billion in annual sales by the turn of the century?
Hmmmm.
Well Egghead Software just moved to town, bringing with it annual sales of about $850 million. Washington Water Power Co. weighs in each year between $600 and $700 million. Kaiser isn’t headquartered here, but over the years we’ve come to think of them as our own. And in 1994, Kaiser’s Mead and Trentwood plants had sales of about $600 million. Key Tronic has been doing business like gangbusters. Its sales topped $200 million during the past year.
But $2 billion?
Think about it some more while we go to the next question.
2. What Spokane-based company is involved in some of the most complex, leading-edge high-tech research and development projects in the world?
No, you can’t count Boeing. They just make air ducts and wing panels here. So who else does that leave, besides maybe the folks over at Cyan Inc. who make those great computer games?
3. What Spokane operation was losing about $5 million a year six years ago?
There are probably a number of right answers to this one.
Of course, though, you already know that the correct answer to all three questions is: the Johnson Matthey Electronics Division. But the only reason you know that is because you read the headline on this story.
Otherwise, you probably wouldn’t think of Johnson Matthey in the same mental breath as Spokane’s major companies.
The truth is, though, that over the past six years, Johnson Matthey Electronics has quietly come from nowhere to establish itself among Spokane’s corporate elite.
Less than nowhere, actually.
When London-based Johnson Matthey Plc acquired Cominco Ltd.’s Spokane manufacturing facility in 1989, the operation was losing $5 million a year.
But the 175-year-old Johnson Matthey - a venerable $3.5 billion British company that built a global empire on precious metals trading - sent Geoff Wild here as general manager, and declared that Spokane would be the corporate headquarters from which it would expand its thenmodest efforts in the worldwide microchip industry. (The company’s global electronic material sales totaled only $35 million in 1986.)
By 1992, the Spokane plant’s $5 million loss had been converted to a $5 million operating profit, and electronic material sales had grown to $81 million. But that was only the start of things.
Last year, Johnson Matthey Electronics was elevated to the status of a full division in the Johnson Matthey corporate structure.
As president of that division, Wild now oversees 3,000 employees at 19 sites throughout the world from his Spokane office.
“We have become a significant force,” Wild explains. “The electronics division now produces in the region of one-third of the operating profits of the parent company, whereas it was insignificant - less than one percent - five years ago.”
Timing, foresight played roles
The leap from $35 million in annual sales in 1986 to a projected $610 million in 1996, and the expansion from a handful of manufacturing facilities on the West Coast to 19 facilities worldwide - including operations in Japan, Korea and Europe - is nothing short of phenomenal.
“We’ve had something like a 50 percent compound annual growth rate the last five years,” says Wild. “Nobody in their right mind sits down and writes a strategic plan that says that.”
One factor in the growth is timing. Five years ago, the world semiconductor industry rose and fell with the health of the personal computer industry because PCs were the only large-scale application for microchips.
But during the past five years those applications have broadened. A decade ago, Wild says, electronics accounted for perhaps 10 percent of the cost of an automobile. Today, computers and other electronic components make up as much as 50 percent of the cost of some luxury cars. Telephone systems have come to rely on microchips. Even kitchen appliances are becoming computerized.
Another factor is foresight.
“They had the vision in London to recognize that electronics was going to be a growth area,” Wild says.
But much of the extraordinary achievement, Wild emphasized, is based on Spokane.
“I think it’s a Spokane success story, really,” Wild says. “I remember coming to Spokane five years ago and the guy who was in charge at the time said, ‘The Spokane business is all right, but it’s just very pedestrian.’
“I remember that because I didn’t find it that way at all. The people here were so excited, so hungry to grow.”
And grow they did.
Johnson Matthey bought the Cominco plant because it was in the business of refining precious metals to extraordinary levels of purity, and manufacturing products with those metals that were then used by other companies in the manufacture of microchips. It was the only such operation of its kind in the United States.
The standards of quality demanded by customers were extreme to begin with, and became more extreme with each passing year.
Under Johnson Matthey, the Spokane operation was able to keep up with those standards and steadily increase its market share in the intensely competitive industry. Along the way, the company’s Spokane employment has more than doubled to 575.
Those successes made Johnson Matthey officials in London pay attention when Wild asked for capital investment to move forward.
“I have not had a ‘no’ to a request for capital,” Wild says. “They’ve always supported us, and we’ve always justified it. They know they will get their money out of their investment.”
The company has invested more than $40 million in capital in Spokane during the past five years.
The Spokane results spurred Johnson Matthey to commit further to the electronics materials business. It has expanded through acquisition, and through building similar production plants in places like Korea. The most recent acquisition is a still-pending deal to purchase 1,700-employee Advance Circuits Inc., of Minnetonka, Minn.
Had Spokane’s performance faltered anywhere along the way, though, the pace of growth may well have been much different.
Johnson Matthey got into the electronic materials business in 1981 when it acquired a couple of small California companies that made materials used in the assembly of microchips - the electronic circuits built on tiny silicon wafers that are the brains of modern computers.
The operation existed as a dot on the giant company’s fiscal landscape until it acquired Cominco Electronic Materials, with operations in Spokane, and in Trail and Victoria, British Columbia. The Cominco acquisition was the fruition of a decision by Johnson Matthey Plc to diversify itself.
“Despite being a company that’s been around since 1817, and was founded on precious metals, (Johnson Matthey) has recognized that it doesn’t want to tie its future exclusively to precious metals,” says Wild.
It now bills itself as an “advanced materials” company, with emphasis in three areas: bio-medical materials; automobile catalysts, which use platinum to reduce internal combustion emissions; and electronic materials.
Based on the initial success in Spokane, the company decided to pursue the lofty goal of becoming No. 1 in world market share in every product category it chose to offer.
In 1992, Johnson Matthey Electronics ranked fourth or fifth in market share in each of those areas. Today, it is number one in six of the seven product areas it offers.
“There are no prizes for being second best,” explains Wild, “and in each case, it’s the people who have done it. Our people have just been totally committed towards the strategic intent to get into that No. 1 spot.”
Now, the company’s overall strategic goal is to become one of the world’s top 10 suppliers overall to the microelectronics industry.
“We are probably in the top 20 now,” Wild says. “Virtually all the top 10 are Japanese companies. In money terms, in order to get into the top 10, we’re going to have to double.”
If the industry itself was static, that would mean Johnson Matthey Electronics would have to push next year’s projected sales of $610 million to $1.2 billion by the end of the century. The industry, though, is growing at a pace to double in that time. That means $2 billion in sales by the end of the century if Johnson Matthey Electronics wants to keep up.
“Two billion dollars in sales is breathtaking,” Wild says, “but we think its achievable. It’s no faster growth than we’ve already achieved.”
Acquisitions help fuel growth
Growth on that scale will have to be achieved partially through acquisition and expansion. And during the past 18 months, Johnson Matthey has demonstrated just how aggressively it intends to pursue its goals.
Over that time period, the division acquired a tungsten powder manufacturer; started manufacturing operations in South Korea; established a Japanese joint venture; expanded European operations in the United Kingdom; opened new sales and service facilities in California and the Philippines, and initiated the Advance Circuits acquisition.
“And Johnson Matthey is anxious to invest more in electronics materials,” Wild says. “We’re quite public in saying we’ll do whatever we can in the right areas.”
Which raises the question, as the company continues to grow, and as the accumulation of companies and facilities throughout the world dwarf its operations in Spokane, what will the fate of the local facility be?
Given the company’s ongoing capital investment here, clearly Johnson Matthey will be a Spokane manufacturer for years to come.
But will Spokane remain the division’s corporate headquarters?
“We’ve discussed it,” Wild says. “And it’s true, for example, that now we’ve got more people in Minnesota than in Spokane. But our customers are global. And where the headquarters is doesn’t have to necessarily be where most of the people are.”
Anyone in the parent company who might wish to lead a corporate move out of Spokane should take a look at what Spokane has helped Johnson Matthey to achieve, Wild says.
“We musn’t forget we’ve grown fastest here, and been successful in terms of the quality of the people, employee dedication.
“And personally, I’d rather not move because I like it here.
“I don’t think we’re going to move anywhere.”
, DataTimes ILLUSTRATION: 2 Color Photos; 2 Graphics: JME’s sales growth, JME’s employment