MFG Austin Ep 13: Scott Lingren, Managing Director, Schunk Xycarb

Scott Lingren has a long legacy in technology, including the past 15 years in semiconductor. He currently serves as the Managing Director for Schunk Xycarb, a leading supplier of quartz, graphite, and advanced ceramics. He is at the forefront of the global semiconductor supply chain and the forces that are pushing for more regionalization. In this episode he discusses his thoughts on what we can expect globally and locally as well as his philosophy on being a growth catalyst.

Yeah, this is a great opportunity. Thanks again and it’s exciting time for all of us in technology and manufacturing.

Again, thanks for having me. I’m Scott Lindgren, managing director and president for Schunk Xycarb technology in the US. Basically, I’ve got all of the US operations, production, planning, engineering, also sales, manufacturing. Basically, everything from top to bottom. But we are part of a global company. I’ve got sister companies and affiliated companies in Netherlands and across Asia and Europe. So we’re all over the world wherever semiconductor customers need us.

We’ve been in Georgetown now for about 25 years. The company’s been operating 40 years globally, and the Georgetown operation specializes in high precision quartz parts that are used in the manufacturer of semiconductors. So, when a company like Samsung or Intel sets up a fabrication facility—a production facility that gets nicknamed as a fab—they buy all of these multi-million-dollar pieces of equipment from companies like Applied Materials, and ASM, Tel, and others. And then inside of those machines, many of those machines are running off of parts that are made by Xycarb. Some of them are coded in silicon carbide graphite which our company in Netherlands makes. And then some of them are high precision quartz parts which are designed and built right here in Georgetown, Texas. So, we make them new. We’re also able to refurbish these parts and it’s a very broad portfolio of quartz parts. And quartz is interesting because it looks a lot like glass. It’s either clear or opaque. So, it looks kind of like a milky white. All of that is quartz, but it’s much more dense. So it takes diamond tipped coring and drilling bits to be able to work with it. You can’t melt it and pour it into a mold like you can with glass. So it’s very difficult to work with. Although it’s extremely dense, it’s also very fragile. It’s easy to break, easy to scratch. It takes a lot of skill to be able to work with this. And our workers are basically a combination of artists and skilled precision machinists. So it’s a fascinating blend of artistry, automation and the use of machinery and tools. It’s a very challenging material to work with.

You’re exactly right. I mean, when we talk about the Samsungs, Intels, NXPs, etc. they’re all reliant on these machines running to be able to create a silicon wafer that then gets turned into a set of semiconductor chips. And these chips, really, depending on how you use electricity through them will either conduct or not conduct electricity, which is where the term semiconductor comes in. And these are anywhere from microprocessors, micro controllers, memory chips, analog sensors, RF radio, and the like. And these machines that these customers buy to make these chips have to have quartz parts in them to be able to run.And so you’re right. Without Xycarb parts, then the machines don’t run. The semiconductors don’t get made. So, we’re a really critical part of that semiconductor supply chain.

Thanks for that. You know, a lot of companies focus in on the technical part of things and they tend to hire leadership into a specific technical range. But what I’ve found is that companies aren’t just batches of technology. They’re not brick and mortar buildings and logos and products. They’re people. It’s groups of people that get together and have a like-minded desire to produce good services and basically, companies need focus, number one.

A lot of companies try to be all things to all people and it’s really tempting to try to be kings and queens of the universe everywhere. Whereas I’ve found that if you can find where you offer the greatest advantage to your customers and where you’ve got the greatest skillsets internally and externally, that focus is really critical to getting a company back onto a really high-trajectory growth path.

The second one is just developing ownership. Bringing the employee base from every level of the company into the conversation about who are we, and what are we doing, and what is it that every one of us does. When we wake up in the morning and we go to our jobs, how are we contributing to the success of the company? And that’s the success of the customers and that’s the success of that industry. So, making sure that everyone feels like they are directly contributing to the growth of that company gives that level of ownership. And then all of that—if you do it well and you’ve got transparent communications, you care deeply about your employees, you thank their families for their role supporting all of us that work very long hours and travel and have difficult roles, and you pull that all together into kind of a family—that’s when you get to the third piece. And that’s passion. People who have passion about what they do can overcome anything.

And so when you add that focus, the ownership, and the passion—I found you bring that together and companies across many different types of technology, many different types of industries, can very quickly get back on track and be able to get to a high growth area. That’s been the case with the companies that I’ve worked for. And that will be the case going forward, and I’ve found that it’s pretty successful.

It really been an interesting couple of years because semiconductors have been critical to every piece of electronics and have been part of our daily lives for decades and there’s been a cyclicality to it. When we see the macro economy go up and down, the semiconductor industry goes up and down. But what’s been quietly happening over the years is there’s been a deeper and deeper penetration of semiconductors into every single piece of our lives. Some of these terms are the internet of things, others industrialization, others the electrification of vehicles—for instance, going from mechanical to electrical, and EVs are a very clear and obvious example of that. But now you’ve got electronics, and toasters, and you adjust the seat in your car, and you’ve got six different sensors and processors working that. It’s amazing how semiconductors have become so integral to our lives. And it was during COVID and the supply chain disruption when that became just front and center obvious to everyone. You saw so many industries shut down because they did not have a critical chip somewhere in their service or their product. And so now everyone is keenly aware of just what a fundamental piece of our working lives that semiconductors are. So yeah, it’s really exciting from a growth perspective. It’s exciting to know that semiconductors are finally getting their due respect if you will. That these critical pieces of our lives are now front-page news. And it means the entire supply chain is now part of that. So it’s not just the fabs that get the headlines. That 17 billion dollars in Samsung, and the tens and tens and tens of billions for Wolfspeed, and GlobalFoundries, and Intel, and others. I mean, certainly those are the big dogs in the space from a fab perspective, but their fabs don’t run if Applied Materials, and ASM, and others, can’t get their machines. And a lot of those machines don’t run if you can’t get Xycarb parts. So it’s all tied together and we now see that, and that’s a really good thing. And the US government’s done a great job with the CHIPS Act and some other incentives to highlight just how critical that is from a US perspective. I think one of the big trends we’re seeing is regionalization. But perhaps that’s something we’ll talk about later.

I’m a big fan of global trade and free trade when it’s done right. I think it’s a beautiful thing, but it’s unfortunate that governments, some kind, they just can’t help themselves apparently. They start putting in trade tariffs and restrictions and they become weapons for politics between countries and that hurts global technology. So it makes our jobs harder. Because if you’re sourcing globally, then you have to restrict your sources to certain areas. And I think the direction that we’re heading, and actually it’s pretty clear, is that we’re going to have some pretty heavy regionalized operations. So you’re going to have, kind of, China incorporated is how I look at it—where they’re having their own ecosystem of raw materials suppliers through consumable parts. Suppliers like Xycarb, to the machine suppliers like Applied, and then to the fabs like Samsung and Intel. And they want to have all of that within their borders. And they’re clearly making strong moves in that direction and they’ve been making a lot of progress there. And that is absolutely, clearly going to push the US to do the same thing. And you’re seeing that with Taiwan Semiconductor, the world’s largest chip maker, has made their biggest investment ever in Phoenix. And there’s a reason for that. It’s because there’s the China influence directly on Taiwan, of course, which is scary. But there’s also this regionalized approach where they can see that they’re going to have to have a direct fab chip making presence in the US and they’re going to have to bring their supply chain in on it as well, which is why we’re working with them and all the other fab providers and equipment providers for that reason. So you’re seeing all these huge investments in the US because at some point there’s going to be either effectively, or almost literally, a wall off where you see that the entire ecosystem for semiconductors has to be available within free trade countries, otherwise they won’t be able to produce and that will shut down again what’s a really critical part of their infrastructure.

Completely. Yes, absolutely, for the same reason—to be able to supply a 17 billion dollar investment from Samsung and Taylor, and all these other expansions that are going on across Texas and across the rest of the US, you’re going to have to have parts suppliers, and repair shops, and engineers, and clean room technicians, and all the people that make this work. I mean, you can’t just to the semiconductor fab store and pick off the shelf all the stuff that you need. You need training, you need to find people to work. You need to keep them there while there’s a highly competitive trade and job market in central Texas. And that’s not an easy thing. And so I think we’re all wondering how this is going to play out. And we’re all doing the best we can to attract and keep the best people to make the right investments in the area. You know, we’re making a huge bet on this. In fact, even before Samsung announced its expansion, Xycarb made a bet that we have not yet announced this publicly. So I guess actually you’re getting an exclusive here. We have not announced this until now, but we’re going to have 130,000 square foot facility that’s being built in Georgetown. It’s going to be three to four times the size of our current facility, state-of-the-art manufacturing for semiconductor quarts. We’re really excited about this. We own the land. We’re in the detailed design phase. We’ll be breaking ground in four or five months and in the back half of next year, we’ll be moving into that space. So we’re putting a lot of money towards this expansion and we’ll see. This may not even be the last US expansion on an additional site that we have, but it’s certainly the next one. So we’re all in on this and we’re excited about that.

Huge. I can’t wait. I’m drooling just thinking about it. Yeah, you’re spot on about the automation. They’re clear examples that it’s required for consistency and repeatability in the industry. There’s a thing called copy exactly and chamber matching where you have to have the exact same piece operate the exact same way every single time. And that doesn’t come from hand-building parts. It comes from precision that a lot of times only machines and automation can do. But there’s such a heavy people element involved that what we’ve done is used automation to offload those tasks that our machinists and our welders and our fire polish technicians don’t want to do. And free them up towards work that they like doing much more. So we’ve not only extended the labor pool in a sense, as you were alluding to, it’s also then increased satisfaction with our employees because they’ve got a better quality of life. They’re able to work on the more challenging and interesting things. So our automation hasn’t taken jobs. It’s just the opposite. It’s increased jobs. We’ve almost doubled the number of employees that we’ve got in our welding and fire polishing area over the years partly because of automation. So when we get into a new space, then we’re going to be able to spread out and really be able to replicate some of these systems where today we only have room for one of this and then one of that, and then one of this other thing. We’ll be able to have two or three or four and have development areas which make it easier for us to go even further into cutting edge.

We’re the world’s leader in semiconductor quartz automation, and we’re very proud of that, but we recognize we can’t rest on our laurels, so we have to keep moving forward and keep expanding. Having a new state-of-the-art space with expanded engineering, expanded r and d, and of course, expanded production is exciting and I just absolutely can’t wait to get in there.

A little bit. Certainly, globalization is a greater concern than it was when we used to have a diversity of raw material suppliers all across the world. We’re having to increase that diversity just because we think that some of those sources are eventually going to be cut off or at least become so unattractive through tariffs and restrictions that it just doesn’t make sense for us to continue doing that. So we’re having to expand our own supply chain and partner efforts as well. But a lot of our challenges have been just around finding and keeping great labor, making sure that we are keeping our culture and our people priorities as we continue to grow. How is it that we can maintain a level of precision and leadership while keeping up with just this massive, almost crushing demand coming from all of our customers? And those are challenges that we’ve had for some years and they continue going forward. So I’d say it’s a lot of the same with a few new challenges added on.

I think it’s full steam ahead. I mean, there are going to be pockets of investments by some companies that either get delayed or maybe muted slightly. But I think that’s very short-term thinking and it’s something that unfortunately the semiconductor industry has been guilty of in the past is these wild fluctuations between under and oversupply. But that’s smoothed out over the years and I’m seeing a bit more of a mature approach. And the backlog of demand, at least in our space, is so big that you could basically cut off a year of orders and we would still be at full capacity. And so I see those investments continuing. Again, you might, out of caution, especially for public companies where you’ve got perhaps people outside the industry that don’t understand and they don’t want to see their stock take a hit, that they might delay some investments or maybe mute what they’re publicly saying they’re putting in. But the smart ones are going to be full in because this isn’t going anywhere. The number of chips and things isn’t going to go down. It’s going to go up. The demand for all semiconductors will continue to rise. And the companies that are best positioned to take advantage of those opportunities are the ones that are going to keep taking market share. So I just urge all of my colleagues around the world to resist the temptation to give in to quarterly earnings pressure and continue to the long term because this is just going getting bigger and bigger and we need to drive it.

Thanks, Ed. And thanks for all the great work that you and ARMA does. We’re proud to be a part of that organization and proud to be a part of Central Texas. So, let’s keep on rolling.