Ichor looks to solar industry for growth

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Ichor Systems

A private equity company last fall bought struggling Celerity Inc., relocated its headquarters to Tualatin and renamed it Ichor Systems.

With that, Oregon was suddenly home to a company with sales that could reach $200 million this year, thanks in part to the growing demand for solar energy.

The company isn’t a new player in the Willamette Valley. It’s had its largest manufacturing presence here for years.

New York City private equity firm American Industrial Partners simply moved the company’s headquarters from San Jose to Tualatin last year in order to be closer to its strongest growth market.

Ichor also has manufacturing operations in Austin, Texas; Singapore and Malaysia.

The deal — terms of which weren’t disclosed — came at the end of a tumultuous slide for the company.

Mike Rath, the company’s recently hired chief financial officer and its highest ranking local executive, said Celerity in years past had sales around $225 million. Sales plummeted to around $75 million last year as the semiconductor industry screeched to a halt when sales of products like cell phones, flat-screen TVs and computers crashed.

The acquisition by American Industrial Partners provided enough cash to help the company make it through the downturn and into what it believes is a recovery in the semiconductor market.

Through two fiscal quarters, Ichor is on pace to reach $200 million in sales this year. Second quarter revenue alone reached $50 million, Rath said.

“The semiconductor industry is on a ramp,” Rath said.

Semiconductor makers slashed capital expenditures by 57 percent last year, marking the third-straight year that equipment suppliers like Ichor faced diminished demand, according to a report last month by Len Jelinek, a senior analyst with El Segundo, Calif.-based iSuppli Corp.

But demand is recovering, and Jelinek projects capital expenditures to reverse course, increasing by 56 percent in 2010.

Outwardly, little has changed at Ichor.

American Industrial Partners, which didn’t return calls, kept most of the management team. The company makes the same products and serves the same customers as Celerity.

The biggest change is the name.

“The reason we changed the name is we were not healthy,” said Mark Thomas, Ichor’s vice president of sales and marketing.

As the company struggled, it faced losing the trust of its suppliers. Some declined to extend the company credit.

To help that, Rath said Ichor will soon get a new line of credit, although he hopes not to need it.

Another major change was hiring Rath. He was brought in as chief financial officer to keep the company healthy during the semiconductor industry’s down cycles.

“You have to be prepared to make the tough decisions,” said Rath, who was previously chief financial officer at Stanley Hydraulic Tools in Milwaukie. “The downturn was fast and sharp. The company almost didn’t get through it.”

To help buffer against down cycles, Thomas said the company is working to boost its business with manufacturers of photovoltaic energy equipment.

Historically, about 90 percent of the company’s sales were to major semiconductor manufacturers. Ichor officials wouldn’t identify the names of its customers, but said it works with the biggest players in the industry.

The remaining sliver of its sales has gone to makers of solar energy products and other electronic devices, such as flat-panel TVs.

Thomas said Ichor expects the solar industry to represent 20 percent of sales in coming years .

“Moving forward, our greatest growth area is solar,” Thomas said.

The U.S. market for solar energy is expected to double by 2011 to 1,212 megawatts, representing about $6.1 billion in annual investment, according to a report last month by GTM Research.

Solar manufacturers, meanwhile, are expected to grow capacity by 50 percent a year, from 875 megawatts in 2008 to 3,880 megawatts in 2010, according to GTM Research.

“Historically, manufacturing has followed demand in the solar market, and pretty much the entire global solar market is looking at the U.S., if not as a near-term serving grace, but as a long-term primary market for solar,” said Shayle Kann, an energy analyst with GTM Research.