Editor’s note: This is 11th in a series of profiles of companies presenting at Venture 2003.As chips get smaller but even more powerful and MEMS become more commonplace, will traditional production procedures based on water and solvents keep pace?

The management team at Micell Integrated Systems thinks not.

Bolstered by a bevy of patents and intellectual capital centered on CO2 research, Micell believes it will deliver to the chip industry manufacturing means that will drive up production and improve performance.

“Based on our intellectual property in the form of patents, proprietary know-how, and CO2-based development capability, we can deliver performance enabling and commercially viable process solutions to the microelectronics industry with the help our current and future strategic partners,” says Kelly Boone, director of business development for Micell.

It’s Micell’s belief that forthcoming advanced materials will not be compatible with water, and integrated circuit manufacturers will need an alternative. Micell readily agrees that it has competition but contends its technology will prevail.

“We face three main competitors in the (super critical) CO2 stripping and cleaning application space,” Boone says. “Tokyo Electron/Supercritical Systems (TEL/SSI), Dainippon Screen/Kobe Steel (DNS/Kobe) and SC Fluids all represent significant competitors based on their access to program funding, end user facilities for development, and strategic partners. However, all of these programs
have taken a hardware centric approach to their development rather than an integrated chemistry, process and equipment development approach and have come up short of industry expectations for their developmental systems. We believe our integrated approach is more suitable for the generation of production worthy scCO2 process systems.”

Micell’s knowledge in CO2 stems a great deal from its founder, Dr. Joseph DeSimone, a professor of chemistry and chemical engineering at both UNC Chapel Hill and NC State. DeSimone also created “Hangers,” a garment cleaning business based on CO2 technology.

Micell is one of 23 companies preparing for presentations at Venture 2003, the Council for Entrepreneurial Development’s 20th annual venture capital event.

As it did a year ago, Local Tech Wire is featuring in-depth profiles of presenting firms built around a Q&A with a company executive as well as a Fact Box of important information. One profile will appear each day.

LTW put together a Q&A designed to not only produce facts about the presenters but also to give each a chance to state the case for venture capitalists to invest.

Venture 2003 is set for April 22-23 in Chapel Hill.

Answers for Micell were provided by Boone.

Times are tough. If you had only one chance and one paragraph to convince an investor, how would you answer this question: “Why should an investor choose your company?”

Micell Integrated Systems (MIS) will generate a five- to seven-fold increase in value over the next four years by providing supercritical carbon dioxide(scCO2) process solutions to the microelectronics industry. Our processes solve the current and pending yield/performance issues associated with several traditional water and/or solvent-based processes for advanced semiconductor and MEMS device production.

In general, these processes are hampered by one or more of the following problems; diminishing performance or excessive cycle-time on shrinking and/or challenging device features, material incompatibility, and excessive materials/chemical usage with
challenging abatement and recycle operations. These problems must be solved for the industry to stay on its product development roadmap.

Based on our intellectual property in the form of patents, proprietary know-how, and CO2-based development capability, we can deliver performance enabling and commercially viable process solutions to the microelectronics industry with the help our current and future strategic partners.

What is the “pain point” (or points) you address for your customers?

Two basic pain points:

As microelectronic devices continue to shrink in size and increase in
complexity, manufacturing yields continue to decline due to the inherent shortcomings and limitations of water-based processes. CO2-based processes do not suffer from these same shortcomings and are inherently advantaged for manufacture of advanced ICs and other challenging device structures.

New materials required for the production of advanced devices in the next two to three years are incompatible with water-based processes (i.e. the device will fail). CO2-based processes are compatible with these new materials.

What makes your company unique? Do you have a proprietary and/or a patented technology? Please explain why it is unique and what the status is of any patent filings.

MIS’s integrated approach to process development and our significant patent position in all of the basic components required to deliver performance makes our company unique in the microelectronics industry. The ultimate, successful delivery of any performance enabling scCO2 process application is predicated on the existence and optimization of three basic components we refer to as infrastructure, specialty chemistry/materials and process.

Infrastructure consists of the equipment necessary for the delivery of high purity CO2, chemical blending, CO2 recovery and waste abatement and storage.

Specialty chemistry/materials are the raw materials or consumables blended with CO2 to enhance its utility for a given process or process sub-step. In our integrated approach, process then equates to the recipe for performance and uses the defined inputs from infrastructure and specialty chemistry applied in a specific sequence and in an optimized process chamber to achieve the desired result. Therefore, success of the overall process is dependent to varying degrees on each of these basic components (infrastructure, process, and chemistry).

Through our own inventive process and our licenses with external sources, we own or have access to 64 patents issued in the US with three additional filings recently allowed by the US Patent and Trademark Office. Our licensed patent rights account for 27 of those issued patents. An additional 34 US patent applications are
currently pending with the USPTO. These patents cover the three basic
components of infrastructure, specialty chemistry/materials and process that are required for a commercially viable system. In addition, MIS has the development capability to transform this patent coverage and process know-how into practical solutions for the industry

What makes your product(s) and/or services unique vs. your competition? (Who is your competition, and what do they offer?) If you have no competition, why not?

We face three main competitors in the scCO2 stripping and cleaning
application space. Tokyo Electron/Supercritical Systems (TEL/SSI), Dainippon Screen/Kobe Steel (DNS/Kobe) and SC Fluids all represent significant competitors based on their access to program funding, end user facilities for development, and strategic partners. However, all of these programs have taken a hardware centric approach to their development rather than an integrated chemistry, process and equipment development approach and have come up short of industry expectations for their developmental systems. We believe our integrated approach is more suitable for the generation of production worthy scCO2 process systems.

Does your company already generate revenue? If so, how much? Are you cash flow positive?

MIS currently generates revenue in the form of direct project funding from our development partner. Royalty revenue on commercial product for our first development project materializes in 2004/2005 and begins to ramp significantly for 2006 and beyond. Direct funding revenue for 2002 was approximately $1.1 million and will be about $1.3 million for 2003. Given this arrangement, we are not cash flow positive but we are accomplishing significant product development work at a very low burn rate.

What is your target market? What is the size of that market in terms of dollars? What share of that market do you believe you can win?

Our broad target market is generically referred to as advance scCO2-based semiconductor manufacturing equipment and chemistry, which represents a mature market between $1.7 billion and $2 billion. Based on our proprietary and patented approaches, we anticipate our capital equipment manufacturing and chemistry partners will capture between 25 percent to 30 percent of the broad market. As the technology provider but not the equipment or chemistry provider, MIS
will receive licensing royalty revenue in the 5 percent to 15 percent range for attributable product.

What will you do with the invested funds? What is the timeline for product delivery? If you have existing products and services, how will additional funding help you expand your company, if that is the intention, or will you develop new products?

The funds will be utilized to optimize our project offering(s) post concept and feasibility and pre joint development and commercialization and to execute on the subsequent development phase. In this type of scenario, the optimal project from our partner’s perspective typically equates to significant technology risk reduction. They are willing to pay for this risk reduction. As the technology provider, we balance how much of this risk we take on with the likelihood and magnitude of our gains post product commercialization by our partner.

What do you want from an investor other than money?

Guidance with respect to joint development and commercialization deal
structure.

Why will investors be impressed with your management team?

The team has significant startup experience, a deep understanding of CO2 technology, and a desire to create integrated, commercially viable
solutions. The team proved its product development capability with the successful development of its CO2 based drycleaning process for the Hangers franchise. Through coordinated effort over the last year, we have built on previous success and leveraged our current technology development effort to transform the company from an unknown entity in microelectronics to the leading CO2-based process technology provider fro the industry.

What is the exit strategy for the investor from your company? Are there potential strategic alliances with larger companies? Do you wish to take the company public? Or do you wish to grow the company and either sell it or acquire other companies?

The exit strategy for MIS is acquisition by a strategic (industry
incumbent). We have already formed the initial and requisite development and commercialization partnership with an industrial gas supplier to the microelectronics industry (BOC Edwards). Additional alliances or joint ventures with capital equipment manufacturers, specialty chemistry providers and IC producers are being discussed currently.

Just the facts on Micell: www.localtechwire.com/article.cfm?u=3905