Exclusive Interview with New Coherent CEO Andy Mattes and COO Mark Sobey, Part 2

Coherent’s new CEO, Andy Mattes, and COO Mark Sobey granted Photonics Media an exclusive interview to discuss, among a variety of subjects, the company’s response to COVID-19, their unique working dynamic, and gaining market share in the near future. This interview has been edited for concision and clarity.

COO Mark Sobey. Courtesy of Coherent.

Q. Do you feel the laser materials processing market is a potential area of growth for Coherent in the future?

Mark: So I think the terminology of “materials processing” is used a little loosely. Certain people refer to the microelectronic space as being “in the materials processing space.” At Coherent, our terminology and in our view of the market, materials processing tends to be more on the cutting and welding, and less sophisticated applications in that space. Specific to materials processing as we see it, that market had its challenges even before COVID-19. There was definitely a downturn in some of the machine tool industries around the globe, obviously the major three. Historically, the top three markets for that are China, Japan, and Germany, and the United States to some extent.

It’s been well reported in the press that more and more Chinese competitors are moving into that space; there has been margin pressure and price declines. As Andy said, the challenge here is profitable growth. That’s something that we’re going to have to determine on the other side of this current pandemic, when there is a noticeable recovery in the market. It will be interesting to see the competitive dynamics and determine if there is profitable growth to be had there. But I think it’s too early at this time to have an opinion on that.

Q. Can you predict any macro trends that will have a direct impact on the market?

Mark: We definitely do. Specific to additive manufacturing and Industry 4.0 and those types of initiatives, I think that’s just the price to play in those types of markets. If you’re going to play in those markets it becomes the minimum entry-level capability that your equipment has to have and your company has to have in terms of being able support on the data side.

For us personally, I think we’re focused more on some bigger macro trends and markets. One we feel particularly good about is health care. This was the case even before the recent pandemic, and it’s been brought into focus pretty acutely in the last few months. We’re already an industry leader in supplying lasers and actual optical systems into the biomedical instrumentation space. Our lasers have been on the front lines around the planet used in diagnostic instruments for a whole plethora of applications such as gene sequencing, biomarker identification, and vaccine development. We sell to pretty much all the industry leaders in the biomedical and life science instrumentation space, and that’s been a really good market for us. That’s one we’re particularly optimistic about if we look out over the next 10 years.

Q. The coronavirus pandemic has affected global markets in ways few could have foreseen even a few months ago. Can you comment on the pandemic’s impact on the laser market in China, Europe, and North America? Can you forecast what factors will be the most important for these regions as the economy re-awakens in the coming weeks and months?

Andy: I think the honest answer is absolutely nobody knows exactly how long this crisis is going to last, and where and how and how fast we’re going to get out of it. We’re not medical experts, but we’ll listen to all the expert advice. All I can tell you is that, in relative terms, as brutal as the decision was to shut operations down in places [Coherent is deemed an essential business; production has been ongoing but it has been a fluid situation, as office workers shifted to work from home], it’s actually the easier of the two decisions. “How do you ramp back up?” and “how do you do that in a manner that is helpful for your customers while at the same time making sure your workforce is working in a safe environment?” is not trivial.

We’re spending a lot of time and energy in making sure we’re well prepare for that. It’s a country-by-country, site-by-site type of conversation. We talk with our customers as well as our suppliers to make sure this is closely connected. Heaven forbid, but we might be able to open back up and then we could be exposed to a second wave of virus somewhere on the planet. It’s very hard to predict, but that’s why we have implemented a central nerve center [the executive COVID Steering Committee], and under Mark’s leadership we can ensure that we stay on top of things and we know how to respond and put our best foot forward.

Q. Give us an insight into company operations right now in April. Are your plants operating? Are operations restricted to essential personnel? How have you had to shift operations as a result of the pandemic?

Mark: As you would expect, the COVID Steering Committee, which I lead as the chief operating officer, is full of cross-functional team members. We meet on an extremely regular basis [twice a week] and we really look at all aspects of this pandemic.

Employee safety is absolutely paramount. That’s the first conversation we have at every meeting. But we also have a responsibility to run our business in a responsible way. They all have continuity plans in place that are site specific, in strict accordance with the legal orders that are in place at any point and time. We have a tremendous team of people keeping that all intact so that we can make sure we have best practices in place.

At a high level the answer is yes. The vast majority of our sites are operational today, and we’ve had some sites, as Andy indicated, that have been completely closed down. The majority have been able to remain open with some form of production being able to be maintained, and it goes without saying that that’s completely under the compliance with all the changes you would make in a manufacturing organization to comply with social distancing. We’ve gone to many split shifts so that at any given time we have a limited number of our staff physically in the building. We’ve had a lot of effort on personal protection such as gloves, masks, cleanliness, etc. And there are people designated at each site to oversee that.

Q. We’ve heard of some photonics companies stepping in to help their surrounding communities by altering their facilities to develop hand sanitizer or make masks. What steps is Coherent taking to help the globe and surrounding communities to cope with the pandemic?

Mark: I can only speak for myself, but there are without doubt examples in different business we could cite. For example, we’re actively trying to procure enough masks, not only for our employees to use but also so they might be able to take care of their families as well. The number of masks is pretty staggering when you come across a company of almost 5000 employees.

We are blessed in that we are on the front lines. We have a specific customer that was reliant on products from a site we had closed. They were in a situation where they needed to ask us for help getting them more lasers because they had immunology instruments in Wuhan early on, and they were looking for immunological responses. One of the things that has resulted in the deaths of quite a lot of patients is a phenomenon called cytokine storms, which is when the body’s immune system overreacts and you have a wildly overreaction in the immune system. The treatment for these patients is completely different from the treatments of other patients, and being able to identify which patients are going to be prone to these cytokine storms through looking at the immunology reports has been a riveting story for us, and we found a way to reopen under California orders to support health care customers.

Andy: I was actually on the phone with one of our companies, and they were begging us to give them laser sources as fast as we could possibly produce them, because their credo was simply, “the sooner we get testing equipment out for a multitude of medical instrumentation sites we could save lives.”

It’s great to be part of something like this. Needless to say we’ve promised that customer our fullest support, and anything that we can get out of our factory to support them we’ll give them the product that they need.

So why are we not involved directly in areas that can help? We help our customers who can actually help others. Another example that I heard was that we just helped one of our customers to use our lasers to cut the Plexiglas that people put up behind cash registers. So wherever we can help with our technology and our limited manufacturing capabilities we’re doing so and trying to do our share for the community for which we are a part of.

Q. Are there any final words you would like to leave for customers or investors?

Andy: I’m just super excited to be here. Coherent is a fantastic company in an incredible industry. And despite all the near-term issues that we all face in our global economy, there’s a lot of goodness happening. And depending on which segment of the market you’re in, the markets are moving forward. If you just think about it, 5G will come. There’s no stopping it, and our lasers play a big role in how one can fit an antenna into the next generation of smartphones. OLED displays will continue to become super important if for nothing else than they extend the battery life of the device.

The SIMD industry, if you take a look at the numbers Intel has reported, is pumping on all cylinders. Needless to say, we’re an important part of those companies.

We are pretty optimistic about the midterm outlook once we sort all the COVID craziness out and ensure things are up and running full speed again.

Read part 1 of the interview here.