MFG Austin Ep 16: Larry Smith, Chairman of Tokyo Electron US

Larry Smith, Chairman of Tokyo Electron US, is a respected leader in the global semiconductor industry. He has spent decades guiding Tokyo Electron US to be a top-ranked provider of semiconductor equipment and services. In this interview, he shares his thoughts and perspective on what the current moment means for the business but also for the country, as geopolitical forces are shaping investment, policy, and growth in a rapidly changing landscape. Along the way, we discuss workforce, the importance of establishing a veteran pipeline, and some personal stories that shaped his leadership style and approach to the community.

Can you give us a quick overview of Tokyo Electron globally and then also North America?

Absolutely. Tokyo Electron provides technology that enables life. And we do that through manufacturing semiconductor equipment to make microchips for our customers like Samsung here in the local central Texas area, NXP Infineon, and then expand that up to North Texas, you got Texas Instruments as part of that. We are number three in the equipment provider manufacturing equipment for semiconductors. And we have a global presence across all the major regions of the world and annual sales for Tokyo Electron globally is somewhere between 15 and $17 billion a year, depending on the exchange rate, which is fluctuating pretty significantly right now. Our US operations, we have 17 sites that are very familiar to most of our colleagues or customers that provide chips across the nation. And so we’re really anywhere in the United States where our customers are making microchips.

What’s your footprint here in Austin?

This is our headquarters. We have a variety of individual shared services, sales support. We got about 400 people. And then that’s going to expand with the Samsung plant up in Taylor. So, we’re excited about adding an additional office up there—kind of a sales and service and parts warehouse/supply depot up in the Taylor area.

I think everybody knows this is an incredible moment in semiconductor. Talk for a moment about what that means to you after spending decades in this industry, but then also about maybe what it means for you as a leader of a company who is going to be responsible for meeting unprecedented demand.

Ed, it’s interesting. I am at 34 years in the industry. I spent some time in the army coming out of college, so I’ve seen a lot of changes over those 34 years. But it’s unprecedented right now with the CHIPS Act. With some of the geopolitical strategic competition with the US and China which has impacted our industry. But the number of projects we’re seeing right now are unprecedented. You know, we’d see a Greenfield site from maybe some of our larger customers, or maybe there was a new site every few years. And, you know when you look at the hubs of expansion right now, it’s really unprecedented—with the incentives that come from the CHIPS Act, but also the demand of the industry. Like right now, the industry of our customers, about a half a trillion dollars in that $500 billion range. And we have some senior leadership symposiums or technical conferences that talk about a trillion transistors in a trillion-dollar market. And we see that over the next, probably five to seven years, that this market for semiconductor chips is going to double. Well then what does that mean to infrastructure, and employment, and R and D, and collaboration with public-private partnerships which is going to come out of like the NSTC and other entities that are incentivized through these CHIPS act?

The NSTC being the National Semiconductor Technology Center that will be a shared R&D center for companies to create new technologies. There’s kind of two things driving it forward. You have this incredible demand from all these new products coming along online that require semiconductors but you also have the geopolitical angle. Do you think we have CHIPS without the geopolitics?

When you look at some of the data from our market share, where we invented the chip, and then the manufacturing market share, and then we’re really a global industry prior to this most sensitive tension with the US and China over the last couple of years. But our market share went from roughly 37% a decade or so ago to in the lower teens, I would say right now, 12 or 13%. So pretty significant from a manufacturing jobs that went to different parts of Asia to include China because of global competitiveness, labor markets, supply chain issues. And so this strategic competition has changed it. One of the reasons was the incentives that came from other governments. So as those incentives created the industries in other parts of the world, we were at a competitive disadvantage due to those incentives. It wasn’t market pure and our incentives here are trying to bring that critical technology—when you think of artificial intelligence, and quantum computing, and our supply chain for the automotive industry, and then in particular, for the defense industry, in light of some of the tensions with the Russian/Ukraine conflict and the tensions with China and Taiwan. You know, I think it’s a good public policy for incentivizing that critical technology to come back to the home front.

You’ve kind of already hit on this, but I can’t think of anything else that Republicans and Democrats are agreeing on right now besides we need to be investing in technologies that allow us to maintain our competitive advantage around the world. Do you think that that sentiment’s going to hold up as we progress through this period that we’re in right now?

You know, it’s really interesting, that our political system in our country, I think is the greatest in the world, but the cycle of two-year changes can create changes within the policies. But like you said, there is a very aligned bipartisan approach to the CHIPS act. It’s benefiting a wide variety of regions in the United States for jobs and investments and economic development of which Central Texas has done a wonderful job in that particular space. I think it will be something that we can carry forward. You know, the far right may want to restrict more than is needed to be restricted. The far left may want to put in some constraints that can cause some disruption. But if you look to the middle on some of these key incentives—when you look at national defense, and economic security, and supply chain security, with some of the issues we faced during COVID, I think this will maintain its importance over the next several years.

I’d fully expect this investment that the US government is making to really impact Central Texas. We already see a lot of growth. You mentioned the Samsung plant and Taylor. There’re probably three or four other major semiconductor companies that are looking at expansion. You have all these suppliers moving in. If you talk to any of these leaders, including you, one of the things you hear first and foremost is a question mark, a concern about workforce. Just by way of background, in the last year, the Central Texas workforce has grown over 7%. It’s one of the fastest growing manufacturing workforces in the country. I do feel like the region is producing workers and I’m excited about what we’re doing as a community, but when I have heard you say that we have the opportunity to be one of the leaders in semiconductor workforce training in the nation—what does that look like for you? What does that mean?

Well Ed, I’ve heard John Taylor from Samsung talk about the investments in Taylor is a generational impact. And so, when we talk about workforce, we’ve got a wonderful industry of great paying jobs to include my company and many others in this ecosystem. I believe at this stage of my career, and I’m at the tail end of my career, one of my callings is to help hire veterans or get veterans into this industry and help house veterans on my public engagement with homelessness. But if I stay focused on the hiring and the workforce development part of it, and I’m focusing on how we train the workforce from a number of different sources. You and I took a trip up to Fort Hood. Between 150 and 200,000 veterans get out of the service every year. And we need between 75 and 100,0000 people probably over the next three to five years.

So, one of my personal goals is trying to get about 20,000 veterans into our industry. But the challenge is there’s not a good handoff. There’s the TAPS program, which is the Transitions Assistance Program, but there’s this tension between the service agencies of retention and making sure that they’re meeting their sustainability goals from their workforce part of it, and then an appropriate transition. Once they’ve decided to get out, where do we provide those opportunities? And to be honest, we’re an intimidating industry. I’m going to go from being an infantry person or a field artillery or maybe a tank or aircraft mechanic or a navy nuke—they’re really talented people— to manipulating atoms? I mean, our industry puts billions of transistors on chips the size of our thumbnails. So, we have to do a better job of educating and providing that workforce training.

You’ve done a great job partnering with ACC and putting together these certification programs. So, we took the trip to Fort Hood to take a look at Central Texas College, Austin Community College, Texas A&M, Texas A & Central. There’s an ecosystem that we can bring together to collaborate. And much like our research consortium up in New York that’s done research that’s effective collaboratively with a public-private institution, I’d like to translate and provide the opportunity for an NSTC that is a national semiconductor training center with a hub here in central Texas.

Speaking about veterans, you get around a base or anybody that’s transitioning out of the military, and they’re such high caliber people. You just know that every employer would want to hire them if they got a chance to meet them. I really respect your effort trying to build that pipeline. I think they are a critical piece of the puzzle here. This National Semiconductor Technology Center that you mentioned or something in the region that’s really convening the workforce partners, also could just be an incredible moment. One thing I like about CHIPS and what’s happening here is that there’s so much money being dispersed and the moment is ripe with opportunity that everybody’s actually paying attention. And I am optimistic that we’re going to be able to get some big stuff done. You mentioned your personal work, and I think that’s a really interesting piece of your story. Can you talk about your mission living at Community First Village and some of the things you’re doing there?

Sure. In fact, the meeting I just left was with Alan Graham, the founder and CEO of Community First. I’ve had the privilege of been connected to that organization, Mobile Loaves and Fishes in Austin, Texas, for about 15 years. Started working with them on a monthly basis, going out on their truck runs and feeding the homeless in our community. And over the last 25 years, Alan and the organization have been responsible for feeding about six and a half million meals to our community, our homeless brothers and sisters. About eight to 10 years ago, they established a village out in the east side of Austin called Community First. We’re currently housing over 400 formerly chronic homeless individuals in a very unique and eclectic group of tiny homes and park model RVs. It’s a real privilege to be part of that organization, which over the last seven or eight years has made a significant impact on providing a mitigating solution to the challenge we’re facing, not only in Austin, but across the country. I also had the privilege of having one of my former teammates at Tokyo Electron lead the education and replication model. So as individuals come and visit us and see a model for dealing with this challenge, which is really across the entire nation, Karen and the team have trained over 600 people from about 200 cities to come and learn from that particular experience. I’m grateful for the opportunity. My wife and I had the privilege of living out there for about five and a half year. And it was a pretty life-changing experience.

Well, anybody that walks through there is just so blown away by the magnitude of the mission and the success of the venture. Any personal lessons that you take away from that experience living there that you bring into your professional life?

Yeah. You know, Ed, it’s really interesting. As you know, I lead a pretty significant company and I’m disciplined and there’s an operational rhythm or cadence to that. And so I would go into those opportunities and it was like, alright, how can I efficiently and effectively feed as many people as possible? And Bryn Wilson was my partner on the truck runs 15 years ago. And I’m like, line up, behave, let’s not have any fights. But one of the lessons I learned was I really treated that as a transaction. And my friend Bryn would be on the curb with an individual. He knew their name, knew their drug of choice, he knew their story, their hometown, and I didn’t have that connectedness. I really looked at that service opportunity in a transactional mode. And now that my wife and I have been living in [the community] and I have the privilege of being on the board of directors and chairman of the board right now of Mobile Loaves and Fishes, I have learned a lot of lessons. To move from that transaction to now having about 50 close friends out in the village. That’s been probably the key lesson.

I think it’s great to hear that story. But, just as a point of feedback, I’ve been obviously fortunate enough to tour TEL as well and spend some time with you and your team. You really seem to have a personal connection with your leadership team and your staff. You have a great culture. Do you think these things are all connected together as an intentional effort on your part?

I do. Leadership from the top is setting the right tone. I love that part of our culture is based primarily on trust. Our vision is to be a trusted global partner, providing technology that enables life and trust. If I take Stephen Covey’s The Speed of Trust book, which had an influence on that vision statement, it’s built with character and competence. We try to have that integrated into our organization and have that as the foundation. That’s probably one of the areas I’m proud of. And the other one is that we also like to refer to as TEL Cares, TEL for Good and giving out to that community. So it’s a number of different ways, whether it’s Habitat for Humanity, or for the education, or for Mobile Loaves and Fishes and others. Our team has a commitment to engage with the community and I’m grateful for that.

I think it shows. You’ve had a couple other kind of formative experiences. I was looking at your resume. Obviously, you were a West Point graduate. I also saw that you played on the hockey team. I was curious what lessons you take from hockey and from West Point into your professional life.

Yeah, I’ll go to the West Point experience. I was fortunate enough to use an athletic town. I grew up in Northern Minnesota where there’s not much else to do in the middle of the winter than to play ice hockey. I grew up in a very working-class, middle-class family, and my father was a firefighter. Ed, you probably don’t know the interesting part of that story was my father was a World War II Marine in the Pacific and fought against the Japanese. And so I work for a Japanese [company]. He didn’t buy his first Japanese company until he was about 80 years old, and he regretted not doing it 20 years earlier. But I took him back to Okinawa and had the chance to have this healing trip when he was about 85 years old. And so that’s an interesting aspect. So, I used that athletic talent and was given the opportunity to play hockey at West Point and join that. But one of the things that I tell people as I get the opportunity for lessons learned from West Point, they teach you early on. In fact, I think reception day is in a day or two, so the new class is going to be coming there from day one. But in those first few days, they teach you five responses. Now, this is 39 years ago, Ed, so there may be some evolution there, but you had these responses. And it could be “Yes, Sir” or “No, Ma’am.” I’ll put that in the same category, Sir, Ma’am, because it’s in a leadership role. But yes Sir, no Sir, no excuse Sir. Sir, may ask a question? Sir, may I make a statement? The one that has the most meaningful impact for me as a leader and what I tell people is, we’re a society that has excuses, we’re victims. And when you have a mentality of I’m going to do what it takes and take no excuses, and ownership, and making sure that I’m going to get to that destination to make sure that right flank is guarded for my colleague, my teammate, to protect their life. If you take some of those same principles and I can save people four years of hell of going through that experience of just get away from being a victim, take that ownership. There’s a book of Navy Seals called Extreme Ownership. I’ll save you 20 bucks. It’s the same mentality. They just take no excuses to the extreme, both physically, mentally, and psychologically. And that’s one of the key lessons I learned.

On the hockey team it was a privilege. It’s an environment of my relationships I built over 39 years ago. I’m still connected to many of those, much like maybe your college roommates or classmates, as you stay connected. But I think those relationships are really critical.

Do you still lace up the skates?

I did until I was 50. And then my mindset, I could still do it. But my body had other thoughts on that.

Yeah, that’s not a lightweight physical investment, is it?

But my claim to fame, Ed, is I played hockey for 35 years and I still have my original teeth.

I know many others are not as fortunate, Larry. So good job.

Ed, thank you for your leadership and bringing this group of people around manufacturing to Central Texas. You’ve been tremendously successful in bringing this collaborative conversation to opportunities that we need to take care of this community. So I applaud you for the initiative and the incentives and reaching out to us and others to bring this collective group together to make a bigger impact. So I applaud you and I’m grateful to be part of your organization.

Larry. I really appreciate those words and I can tell you that it’s working with guys like you that make this job fun and worthwhile. I really appreciate your time.


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