MCC will sell FPD-tied units to SI Diamond

Electronic News, Jan 30, 1995 by Bernard Levine

AUSTIN, TEX.--Microelectronics and Computer Technology Corp. (MCC) last week agreed to sell a part of its main semiconductor packaging/interconnect laboratory and fab here to its Houston-based flat panel display (FPD) partner, SI Diamond Technology, Inc. (SIDT). The proposed sale of the FPD-related activity is reportedly the latest in a series of moves--including ongoing staff reductions--made by the MCC consortium to raise cash and cut expenses in the wake of funding cutbacks from key corporate sponsors.

SIDT and MCC, which has a 5-7 percent stake in the Houston firm, have been developing FPDS based mainly on SIDT's diamond field emission display (DFED) process for coating cathodes with a thin diamond layer (EN, Sept. 13, 1993).

Under the proposed deal, SIDT will acquire the assets and take over the operations of a portion of MCC's facility. SIDT will obtain equipment and leasehold improvements, as well as a license to approximately 100 patents and rights to commercialize a significant portion of MCC's packaging/interconnect and electronics technology.

In addition, it is expected that approximately 15 MCC employees, currently responsible for the affected R&D and operations at the facility, will become employed by SIDT when the agreement is final, probably in March.

In return for transfer of the facility, SIDT agreed to pay MCC $1 million in cash and an equal amount in lab/fab services over the next two years, replacing an existing agreement under which SIDT paid MCC a similar annual amount for services. As additional consideration, SIDT will pay a 3 percent royalty over the next six years from commercial sales of products or services based on the MCC technology.

MCC's Tech 1 is a 30,000-square-foot, custom designed research facility, including approximately 10,000 square feet of clean room space and specialized laboratories for materials research, assembly, testing and plating. It has served as MCC's primary electronic research facility since 1984. SIDT will assume MCC's current lease from the building owner and will, in turn, sublease control of certain laboratory facilities back to MCC for use in consortial projects or other MCC initiatives.

The Tech I facility is said to include several state-of-the-art capabilities, including 6-inch wafer fabrication (suitable for preparation of 6-inch plates for flat panel displays); plating, thin film and polishing; microelectronics assembly and packaging; and machine shop facilities.

In addition to the consortium's R&D activities conducted at Tech I, MCC has used the facility to provide a variety of commercial services to government and commercial clients including assembly of advanced modules, substrate, preparation and rapid prototyping.

Under the agreement, SIDT will assume responsibility for certain of MCC's commercial services currently performed at Tech I.

MCC has reportedly been pruning its workforce for some time. The consortium's budget, primarily provided by leading industry participants and the government's Advanced Research Projects Agency (ARPA), peaked in 1988 around $60 million, dropped to $45 million by 1993 and slipped again last year to $40 million.

In response, MCC has reportedly been looking to sell a number of assets and refocus efforts on its primary mainstream semiconductor packaging R&D thrust. The FPD-related effort also was reportedly viewed as now moving into a commercial phase and therefore no longer in line with MCC's consortial R&D focus. MCC is also trying to sell its Enterprise Integration Network (El Net) software project.

MCC workforce reductions are being carried out through layoffs and attrition. The total permanent employee roster has dropped from 250 to 200 over the past year, according to a consortium spokesman, and it also utilizes temporary assignees from members. The spokesman noted the total number of member companies grew from around 40 in 1988 to 70 now.

But according to several sources, a number of leading corporations have scaled back funding commitments to MCC. Along with generally tighter availabilty of corporate dollars, some firms reportedly also felt that technological results at MCC have fallen short of expectations.

But John McRary, who was named MCC president/ CEO eight months ago to replace Craig Fields (EN, June 20, 1994), said in an interview he has heard "no complaints" about the quality of the consortium's technical work. A "re-alligning" is currently underway to meet today's budgetary realities, Dr. McRary added, with future prospects strong.

While he has been doing "what any businessman would do," he suggested some MCC moves may have sparked unfounded industry rumors that the consortium might disappear. Some may have been wondering "Is MCC a stable company or in the process of going out of business? I think we have a stable '95 plan," Dr. Merary emphasized.

"There was a decline in some of the corporate funding over the past few years, but it is my belief that corporate funding will be stable in '95." As for government dollars, "we are bidding on a number of projects. You never know what you will win, but I am optimistic. The bottom line is, we have a good '95 plan, with a number of activities going on. We are considering an orderly rearrangement of projects and programs and assets that don't fit to the consortial R&D mission we are trying to strengthen. The primary mission is to rebuild the consortial R&D base."