Versum Materials marks a milestone

Tempe firm has been independent for a year

RUSS WILES

Several of Arizona’s larger public companies were gobbled up in recent years. With Versum Materials Inc., just the opposite has happened.

Versum was spun off by Air Products & Chemicals, an industrial-gas giant, allowing the offshoot to focus on its niche of supplying chemicals, gases, other products and equipment to the semiconductor industry.

Tempe-based Versum (pronounced “ver-soom”) marks its first anniversary as an independent entity Sunday.

Despite the company’s concentrated customer base, relatively high debt and other concerns, new President and CEO Guillermo Novo sounded optimistic in a talk to roughly 200 local business leaders, politicians, academics, employees and others this week.

“This is an industry where the possibilities are immense,” he said at a ribbon-cutting ceremony at Versum’s headquarters at the Arizona State University Research Park.

“We have a unique opportunity to be a leader in the materials part of the industry.”

Versum’s shares are worth about $4 billion, placing the company among the 20 most valuable Arizona-based corporations.

It joins a handful of other local entities with semiconductor roots, including Microchip Technology Inc., On Semiconductor Corp. and Amkor Technology Inc.

Versum earned $194 million, or $1.78 a share, over the past four quarters on $1.1 billion in revenue. The company has slightly higher liabilities than assets, $1.19 billion compared with $1.18 billion, with most liabilities represented by long-term debt.

Versum makes cleaners, etchants, slurries, other materials and equipment used in the manufacturing of semiconductors.

While Versum has a relatively concentrated base of industrial customers — a scenario that normally could raise cautionary flags — those customers invest time, money and effort in ensuring Versum’s products fit, which makes it costly for them to change suppliers.

The Arizona company’s research and manufacturing facilities typically are located near customer plants around the U.S., Europe, Asia and elsewhere. Close proximity allows for rapid response on customer orders.

Three customers — Samsung, Taiwan Semiconductor and Intel — account for 45 percent of Versum’s revenue, noted Morningstar stock analyst David Silver in a report.

“Among the challenges the newly independent company faces is the need for management to successfully create a separate identity apart from its parent and execute its strategies amid direct investor scrutiny and a leveraged balance sheet,” he wrote.

Significant cash flow will provide management with opportunities to broaden the company’s product base and improve R&D, he added. Versum owns more than 1,300 patents.

Versum’s business is driven by underlying demand for semiconductors, including those used in personal computers, smartphones and cloud computing. “The semiconductor has transformed the world as we know it,” Novo said.

These transformations aren’t over. The emergence of big-data applications, the Internet of Things and other trends are likely to continue driving demand for semiconductors.

The company expects the semiconductor industry to enjoy long-term growth at rates equal or exceeding growth in the general economy.

Despite the company’s global operations, Novo emphasized Versum’s Arizona roots, promising to develop the company as a local corporate-responsibility leader and describing the Valley as a convenient location from which to work with key customers in Asia.

Versum currently has nearly 180 fulltime employees in the Phoenix metro area, including a few dozen recent relocations and newly created jobs in Tempe.

“This is a great location for us,” Novo said.

The United States accounts for roughly 30 percent of the company’s sales, 40 percent of its manufacturing sites, 60 percent of its employees and 75 percent of its research and development resources.