Koch Micro Put on Auction Block

Electronic News, Nov 22, 1999 by Jeff Dorsch

Koch Microelectronic Service Co. Inc. (KMSC) of Houston, a supplier of wafer cleaning chemicals, deionized water and water reclamation systems for the semiconductor industry, reportedly has been put up for sale by its parent company.

Carter Vande Beek, a spokeswoman for Koch Microelectronic Service, referred questions to Koch Industries Inc. headquarters in Wichita, Kan. Repeated messages seeking comment from Koch Industries, which is privately held, were not returned.

A source in the process chemicals business said a prospectus on Koch Microelectronic Service is being circulated to potential buyers, who are said to include such competitors as Air Products Chemicals Inc. and Kanto Corp. AlliedSignal Inc., which boosted its Electronic Materials business last summer with the $655 million acquisition of Johnson Matthey Electronics, may also be interested; the company is drawing closer to consummating its $15 billion merger with Honeywell Inc., which will add a fab-related equipment line to AlliedSignal Electronic Materials (ASEM), and Koch Microelectronic could supplement ASEM's portfolio in acids, etchants, solvents and strippers.

Koch Microelectronic Service joined Semiconductor Equipment Materials International (SEMI), the industry trade group, in 1997 and exhibited at this years Semicon/West and Semicon/Southwest shows, among other exhibitions. The company has sales offices in Austin; Portland, Ore.; Littleton, Mass.; and Witney, Oxon, England. KMSC is reportedly a supplier of process chemicals to Advanced Micro Devices Inc.'s Fab 25 in Austin.

KSMC's production facilities include the UP-1 plant in Bryan, Texas, where ultrahigh-purity hydrochloric acid, hydrofluoric acid, isopropyl alcohol and ammonium hydroxide are made. Other plants are in Corpus Christi, Texas, where semiconductor-grade xylene is made and in Tulsa, Okla. and in Riverton, Wyo., where commercial- and semiconductor-grade sulfuric acid is produced.

Last June the company opened the KMSC Technical Center in Houston. The $3.6 million, 25,000-square-foot facility is responsible for RD and technical analysis for customers and its own production facilities in the company's process chemical fields.

More recently, KMSC reported last month making a patent application for its proprietary copper reclamation system. The technology is used to extract copper residue from the wastewater of wafer fabs, returning the copper and solids for disposal or resale and allowing the purified water to be reused in the facility or safely sent down the drain.

A large volume of purified water is used for dilution during the chemical mechanical planarization and rinsing process. When copper layers on silicon wafers are planarized, the wastewater from the process contains relatively large amounts of dissolved copper, KMSC noted.

The process developed by KMSC separates the solid particles of the waste from the dissolved copper and removes most of the dissolved copper from the water so that it can be reclaimed as metallic copper.

KMSC is affiliated with Koch Industries, ranked by Forbes magazine as North America's second largest privately held company. Founded in 1940, with roots in the oil and gas business, Koch Industries is a diversified conglomerate with interests in the energy business, animal feeds, asphalt and a variety of specialty chemicals, among other markets. Its annual revenues are estimated at $35 billion or more; the company says it employs more than 16,000 people worldwide.

Koch Industries has been the subject of a long-running dispute in the founding family, which holds most of the shares in the company. William Koch, a son of the late founder Fred C. Koch, sold his shares in the business 17 years ago for $1 billion and since has engaged in numerous legal efforts seeking to show that his shares in the family enterprise should have been valued higher than the original purchase price.

William Koch's brother, Charles Koch, is the chairman and chief executive officer of Koch Industries and another brother, David Koch, is executive vice president of the company. They are among the few shareholders in the company.