Optimised for applications
Every application could really use someone to design a sensor and a camera that meets its requirements exactly. While some applications do have their very own sensor and camera, the rest have to try and make do with a standard product. e2v believes it has come up with a compromise. It has developed a range of products that are optimised for a few applications areas where there is at least some reasonable volume to justify the development cost. The end result is an optimised, if not customised, product, but at a price comparable to the standard off-the-shelf version.
The approach has won it a lot of friends and propelled the company from being a forgotten corner of a large corporation obsessed with the idea that it would make a fortune from telecoms, to being a successful player in a number of significant imaging niches.
The history of e2v goes back more than 60 years to the production of radar systems during the Second World War. It became known as the English Electric Valve Company and eventually became part of the GEC Group, which was the UK’s technological national champion during the 1970s and 80s. During the 1990s there was a change in the top management at GEC, which had been criticised in the financial markets for accumulating a vast pile of cash and doing nothing with it. Among other things, the new management changed the company name to Marconi and it embarked on a campaign of using its considerable cash reserves to buy up companies in the telecoms sector where it believed the future lay.
Deep inside this corporation was e2v, which had been quietly making money for many years, mostly in the defence industries, and it had developed quite an expertise in imaging. The Marconi management tried to make it do something in telecoms, but it really did not fit.
After the Great Telecoms Bubble burst, Marconi began to struggle and it started selling off any ‘non-core’ businesses. This included e2v, which was itself profitable and growing – but had very little to do with telecoms. The venture capital group 3i backed a management buyout in 2002. The now independent management decided to focus the company on what it could do well and concentrate on the vacuum tube and the semiconductor sensors.
In 2004 it launched a successful IPO (Initial Public Offering) and is now on the main list on the London Stock Exchange. Its shares have more than doubled in value since the IPO. It currently has a market capitalisation of more than £240m and reported profits of £11.9m on a turnover of £112m in 2006.
Last year saw the company take over the Grenoble facility of Atmel Corporation for $140m. This business has a similar profile to e2v in the UK – it was once part of the Thales Group – and expanded both its capacity and reach in sensors and aerospace. Atmel added more than 500 employees taking the total for the company to more than 1,800.
According to Christian Olivier, director of the imaging and semiconductor division, the strategy of the company since the management buy-out has been to identify niche markets where there is significant potential rather than try to compete in the very high volume mass sensor markets, supplied by the likes of Sony and Kodak.
He says: ‘We are a component and sub-system supplier in some profitable niches. The two main niches are tubes and imaging. We are working in medical, aerospace and industrial imaging markets making sensors, but we have the capacity to integrate these sensors into sub-systems, like cameras. We are not in the high-volume imaging business; we are in the markets that need, for example, high sensitivity or high resolution or speed. Our sensors all have particular specifications that are required for certain applications. In industrial imaging we are designing the sensor to meet the exact specification of the camera.
'CCD is definitely dominant today in terms of installed base' Christian Olivier, e2v director
‘We are also working on CMOS sensors, which are quite high volume, but they should not be compared to the mobile phone type sensor.’
Olivier says that the product range has been developed to address the needs of certain applications. Some have a special specification for things like pixel size and others have pre-processing electronics built in. The idea is to identify niche markets that can sustain a reasonable volume and produce something optimised for that market where the customer would otherwise require a custom sensor, which would cost them a lot more.
e2v has developed a particular expertise in line scan cameras for machine vision. It has been adding to the number of pixels, the readout frequency, the low light capability and the embedded electronics. It has been extremely successful in the flat panel display market, as well as food inspection and paper manufacturing. The customer is always looking to increase line speed, but Olivier says there are many other factors that are important to customers, such as the way the camera interfaces to the outside world.
Most of the market has been in CCD devices, but e2v has been investing in CMOS technology, because of the ease with which it can integrate the electronics. He says: ‘We see that CMOS is improving and maturing and eventually you will be able to move to a very large number of pixels per line at a reasonable price. CCD is definitely dominant today in terms of installed base. What they want in the flat panel market is very high speed and very high resolution. They are the most demanding guys in the market and they push everyone to their limits. At the moment we are addressing their requirements with CCD, but eventually we may be able to offer CMOS. They are also demanding when it comes to price and at the moment we cannot meet the price they want with CMOS, because the volumes are low, but that may change.’
e2v has developed a range of area scan cameras, but Olivier says that this is a difficult market with many competitors and has yet to really pay off for the company.
It has recently added Gigabit Ethernet to its camera range, but this does not mean it sees the market moving over. Olivier says: ‘As soon as you move to a data rate which is higher than 90 or 100MHz, GigE or one channel of GigE is no longer relevant For this type of application we still stick to Camera Link. We have joined a consortium of other major European camera manufacturers and we aim to work together to discuss what the future interface will be for very high data rates.’
Most of its business is with OEMs and integrators with a focus on the leading integrators in each country. It also has a network of distributors who keep in touch with the integrator community in their countries, but it is very particular about the distributors it uses.
Olivier says: ‘In the areas where we are building products, we are usually very strong, so our distributors are not usually representing competing lines. They are not exactly exclusive, but they are not selling competing lines into these markets. There are too many opportunities and too many players around the world. It is a very fragmented market. You would need a lot of people to cover that market and it would not be efficient. Our distributors are cross selling, of course, because if our channel was only dealing with us then they would not be generating the right level of business. The channel has a larger sales force, because they are cross selling and can address customers across a very wide area of products.’
Some 80 per cent of its business is standard products with the rest being customised, but only where there is going to be a sizeable demand for that custom version. It constantly tries to work out what new variation it can come up with that can address a niche market of useful size, and designs a standard product optimised for that market.
Olivier says: ‘Our marketing people are constantly trying to extract major trends and from there we try to design some technology that will cover 80 per cent of the requirements in that market. The market is very fragmented and a very cost-competitive environment. It is extremely difficult to justify specific custom development, which is only justified in some very small niches. Most of the custom work we do is in defence and the scientific market rather than machine vision. We are always trying to develop building blocks and reuse technology whenever we can, but there are some applications that need specific features and specific electronics.’
Industrial imaging is about one third of the business. The medical and scientific market is about the same size. e2v has a patented low light technology called L3 Vision, which is becoming very popular in scientific applications such as spectroscopy. It does not make spectroscopy cameras, largely because it has important relationships with camera manufacturers who specialise in this field. In the medical field it has been successful in the dental x-ray market with a sub-system that includes the scintillator and control electronics, and even a wi-fi interface integrated onto the PCB. To the layman, teeth would seem to be the same all over the world, but Olivier says that the requirements of each market in terms of form factors and degree of integration varies considerably around the world, so it has had to create a range with differing features.
The other third of the business is aerospace and defence. Olivier says that e2v is number one in this market in Europe and is very strong in the US. The two companies that make up the modern e2v both have their roots in the defence industries, so there is a wealth of experience in meeting its requirements. He says that the company is often acting as project manager for advanced systems, such as space applications.
He says: ‘Defence is one of the pillars of the company’s business, along with medical and scientific and industrial imaging.’
For the future, e2v has shown an interest in acquiring other companies where it believes they will accelerate growth, but Olivier says that he does not want to start straying outside of the core markets where e2v is successful.
He says: ‘There is a willingness to strengthen what we have, so we are looking. But the acquisition business is not completely rational. You are always looking for something that does not exist or you see something that would be great for the strategy, but it’s not available. So, when something passes by, you always look at it twice.’