Cohu, Inc.

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Cohu, Inc.

5755 Kearny Villa Road
San Diego, California 92123-1111
U.S.A.
Telephone: (858) 541-5194
Fax: (858) 277-0221
Web site: http://www.cohu.com

Public Company
Incorporated: 1947 as Kalbfell Laboratories, Inc.
Employees: 900
Sales: $171.5 million (1998)
Stock Exchanges: New York
Ticker Symbol: COHU
NAIC: 333298 All Other Industrial Machinery Manufacturing; 333999 All Other Miscellaneous General Purpose Machinery; 33422 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334419 Other Electronic Component Manufacturing; 334515 Instrument Manufacturing for Measuring and Testing Electricity and Electrical Signals; 334519 Other Measuring and Controlling Device Manufacturing

Cohu, Inc. is the largest U.S.-based supplier of test handling equipment used by semiconductor manufacturers in final test operations. Its subsidiaries Delta Design and Daymarc design, manufacture, market, and service a broad range of test handlers for the semiconductor industry. The company’s second segment comprises television and other equipment manufacture and marketing, including electronic products used in electronic imaging, surveillance, detection, closed circuit television, metal detection, and microwave communication. The company’s Cohu Inc. Electronics Division, the original core of the company, has been a designer, manufacturer, and seller of television cameras, closed circuit television cameras, camera control systems, test equipment, lenses, monitors, and other accessories to support its camera lines, for over 40 years. The customer base for these products is broadly distributed between machine vision, scientific imaging, and security/surveillance markets. A third segment, the company’s Fisher Research Laboratory, Inc. subsidiary (“the world’s oldest and proudest name in metal detectors,” according to the company), supplies metal detectors, cable fault location devices, and related equipment to the utility and construction industries for use primarily in locating or tracing buried pipes and cables. Fisher also manufactures a line of portable metal detectors used by hobbyists and treasure hunters, including the Gemini-3, a lightweight unit for the hobbyists or prospectors to find ore veins, and the Aquanaut, an underwater detector used by sport divers, salvagers, and professional treasure hunters. Finally, Broadcast Microwave Services, Inc. (BMS) serves as a manufacturer of microwave radios, antenna systems, and support equipment used to transmit television video and audio signals.

Kalbfell Laboratories: 1947

Cohu, Inc. is the result of an evolution from a tiny laboratory partnership created in 1945. One of the partners was Dr. David Kalbfell and the partnership, called Kalbfell Laboratories, Inc., was created to build machinery such as precision voltage standards. The company eventually moved into the manufacture of solid state test equipment, including voltmeters and ohmmeters. In 1947 the company was incorporated in California under the same name and commenced active operations that year. In September 1954, the company name was changed to Kay Lab. In June 1956, the company issued 400,000 shares in its first public financing, and the name Kintel Electronics was adopted. In 1957, Kintel Electronics and the remnants of Kay Lab were liquidated, and all of the assets and liabilities of the company were acquired by Lamott T. Cohu and other investors; the company was reincorporated in Delaware as Cohu Electronics Inc. Cohu went public, and the current name, Cohu, Inc., was adopted in 1972.

After selling his company to Cohu, Dr. Kalbfell went on to purchase Instruments, Inc. The San Diego, California-based company, founded in 1941, had been in the electronics manufacturing business since 1962. Management of the company was eventually turned over to Kalbfell’s son Ken, who oversaw its surge to the forefront of technology in the area of high power solid state amplifiers for over 30 years through its manufacture of both linear and switching amplifiers used in sonar and low frequency radio transmitters. The linear amplifiers became the de facto standard for every sonar transducer manufacturer in the country. The switching amplifiers, likewise, became the preferred choice for most of the U.S. Navy’s submarines. The units were best known for their reliability and the limited amount of damage caused when a failure occurred. Kalbfell also served in several positions in IEEE before his son.

The core of Kalbfell’s original company was recreated as Cohu Inc. Electronics Division in 1957, following the sale of the company. Recognized worldwide as a leading U.S. manufacturer of high-performance closed-circuit television cameras and systems, the Cohu Electronics Division earned its reputation through the development and production of advanced designs, reliable products, and a firm commitment to customer service for over 40 years. The company continued to expand through sales and new geographical areas covered. However, its greatest growth came from the acquisition of other companies and diversification into new industries.

Key Acquisitions: 1960s–80s

In the late 1920s, Dr. Gerhard Fisher, a German immigrant who had studied electronics at the University of Dresden, relocated from New Jersey to Palo Alto, California, to work for the Federal Telegraph Corporation. There, Fisher served as an assistant to Frederick Kloster, who had developed an electronic direction finder for the Navy during World War I, and who, after the war, had come to Federal Telegraph to develop this technology for commercial shipping applications. In 1929, Fisher developed airborne navigation aids for Western Air Express, that improved on designs from Kloster’s radio direction finder and was awarded some of the first patents issued in the field of airborne direction finding by means of radio. In the course of his work he encountered some strange errors and, once he solved these problems, he had the foresight to apply the solution to a completely unrelated field, that of metal and mineral detection.

Fisher Research Laboratory got its start in Fisher’s garage, located at 1505 Byron Street in Palo Alto in 1931. There, with four employees, Fisher began manufacturing a device he called the “Metallascope.” Laboring at the new technology, the tiny group filed and received patents on the metallascope, and drew some notoriety along the way, as Dr. Albert Einstein was one of the people who came to the tiny garage to visit. Fisher would later recall their historic meeting: “He [Einstein] didn’t think my Metallascope was very useful.” Apparently Einstein was wrong.

By 1936 the “M-Scope,” as it had been nicknamed, became a better known and more widely used product when it was found helpful in locating buried metal such as coins, jewelry, ore veins, and relics. Sales increased, and suddenly the garage was no longer large enough to contain the fledgling company, which also began manufacturing a variety of electronics products, including radio telephones and marine radios.

Fisher Research Laboratory moved to a small building at 745 Emerson Street in Palo Alto. In 1939, just prior to World War II, Fisher Research Laboratory moved to a larger building on University Avenue in Palo Alto. The company continued to bounce around, looking for more space and better facilities. Among other moves, in 1961 Fisher adopted a larger production facility in Belmont, California; in 1974, the company moved about 90 miles southeast to a building on I Street in Los Banos; and, in 1990, Fisher built its present plant in the Los Banos Industrial Park.

During World War II and the Korean War, Fisher Research was called upon to contribute its technical competence to the war efforts. While doing so, and because the company was busy with the call to national security, Fisher patents began expiring and competitors sprang up and began building similar products. Over the years, Fisher had also manufactured Geiger counters, radio communications systems, voltage detectors, and cable fault locators. Dr. Fisher retired in 1967, when the company was acquired by Cohu, and died in 1981. A new line of security products was released in the 1990s, such as walk-through metal detectors and hand-scanning devices, giving the division entry to a new market segment.

Delta Design, Inc. was founded in 1957 to manufacture environmental and ambient high-speed component test handlers for semiconductor devices, environmental test chambers, life-aging and burn-in chambers, and systems and programmers. The environmental and high-speed component test handlers are used by the electronics industry in the testing of integrated circuits. The temperature devices are used by laboratories to control temperature of isolated environments. The rate-step programmer is used with a temperature control chamber to control the rate of change of the temperature within the chamber. Products are sold to the semiconductor industry. Delta Design was acquired by Cohu in 1983.

Daymarc Corporation was founded in 1959. The privately held company was among the first to manufacture gravity-feed, fully-automatic semiconductor test handling equipment. Acquired by Cohu in June 1994, Daymarc, with four lines of test handlers—the 717 Series, 3000 Series and 4000 Series of gravity handlers, and the Enterprise test-in-tray handlers—was a complimentary company to the pick-and-place test handling equipment manufactured by Delta Design.

Company Perspectives:

Cohu’s long established role in advanced technology is based on a continuing commitment to quality, product performance and competitiveness.

Broadcast Microwave Services, Inc. was founded in 1982 by a group of former Tayburn, Inc. employees to develop and market microwave products for video transmission. Two years later, the company was purchased by and became a wholly owned subsidiary of Cohu Inc. Since then, BMS developed an extensive product line for television broadcasting providing connections between studios and transmitters (STL, TSL, ICR), electronic news gathering (ENG) capabilities for mobile vans, fixed wing and helicopter aircraft, and portable applications. An extensive capability was developed for military and law enforcement applications for unmanned vehicle video, data and control, test range instrumentation and advanced ground & aerial surveillance. BMS completed an extensive product improvement program in 1996, updating the product line to surface mount technology.

Changes: 1990s

In 1997, a difficult year for the semiconductor equipment industry hit. As a result, Cohu entered 1998 with a strong backlog, but order rates declined during the first quarter and, by mid-year, had fallen to less than 50 percent of earlier year levels. In response to these conditions and, like most companies in the industry, the company reduced its workforce and production rates significantly throughout the year. However, the company continued to fund product development at record levels, since a continuous stream of new products remained vital to its long-term success. Despite the tough conditions in the industry, the company performed well, increasing net sales to $187.8 million, and increasing net income to $29.2 million, and Delta Design won its second straight Supplier Excellence Award from Texas Instruments.

In 1998, the company was again impacted by the worldwide slowdown in demand for semiconductor equipment. As a result, net sales decreased nine percent to $171.5 million, and net income slipped to $11.7 million. However, in May of that year, the Cohu Semiconductor Equipment Group (SEG) was formed “to provide a strategic focus and organizational structure for continued growth,” said company President and CEO Charles A. Schwan in a press release. The SEG encompassed Cohu’s Delta Design subsidiary, Daymarc, and the Asian operations of both companies.

Numerous changes took place at the highest levels in 1998 and 1999. In July 1998, C. Kenneth Gray joined Cohu’s semiconductor equipment group as vice-president of sales and marketing. A year later, William S. Ivans, who had been with the company since 1957 and served as the company’s president and CEO from 1965 to 1983 and chairman of the board since 1983, was killed in a glider plane accident. He was replaced by Schwan, who gave up his title of president. Shortly thereafter, in October of that year, the company named James A. Donahue, who had joined Delta Design in 1978, as president and COO.

Aside from changes in management, the company was doing well in 1999. Schwan, in the company’s second quarter report, said that the company “benefited from the improved business conditions in the semiconductor equipment industry and strong demand for our new pick and place test handlers.” The company also increased its workforce to compensate for increased demand. A two-for-one stock split in August reflected just how well the company was performing. The third quarter continued apace, with record sales of $61.7 million and net income of $7.5 million as sales of the company’s “Castle and Summit handlers … resulted in record orders for the quarter,” said Schwan. “We believe our strong balance sheet and global market presence place the company in a position to benefit from the positive long-term outlook of the semiconductor and semiconductor equipment industries.”

Principal Subsidiaries

Broadcast Microwave Services, Inc.; Cohu Inc. Electronics Division; Daymarc Corp.; Delta Design, Inc.; Fisher Research Laboratory Inc.

Principal Competitors

Ultrak Inc.; Adaptive Broadband.

Key Dates:

1931:: Fisher Research Laboratory is founded.
1947:: Kalbfell Laboratories is founded.
1957:: Lamott T. Cohu buys the company, which reincorporates as Cohu Electronics Inc.; Delta Design is founded.
1959:: Daymarc Corporation is founded.
1967:: Cohu acquires Fisher Research.
1982:: Broadcast Microwave Services is founded.
1983:: Cohu acquires Delta Design.
1984:: Cohu acquires Broadcast Microwave.
1994:: Cohu acquires Daymarc.