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. New CEO of Coherent, Andreas ‘Andy’ Mattes. Courtesy of Coherent. Q. The press release announcing your appointment noted your background at McKinsey & Co., and referenced your experience helping international businesses with high-impact transformations, agile change, and positioning companies for growth. What kind of high-impact transformation do you hope to instill at Coherent? Andy: If I take a look at Coherent, this is a classic case of what you would refer to as a good to great transformation. Coherent is a really good company; we’ve got a very solid business. We’re the leader in the OLED market. Our path going forward is very simple: Focus on improving operational excellence in parts of the company where we can do better, and focusing on profitable growth for the organization in the long run. Q. The coronavirus pandemic aside, how do you anticipate the Coherent of 2025 looking different from the Coherent of late ’19 or early 2020? Andy: Well, as you know the old adage, “the hardest thing to predict is the future.” It’s true now more than ever before, with all these crazy things that are going on. If I take a very high-level view, and keep in mind this is day 14 on the job, what I would see is a very strong OLED business. I would also see some of the investment bets that we made as a company, whether it is in a market like the medical instrumentation side or electric vehicles, to have paid off and start being more prominent in our overall numbers and our market system. Q. Where do you see an opportunity to gain market share from other competitors in the laser market? Andy: I think the even more important question is “Where can we actually have the first mover advantage?” The laser industry is truly a high-tech industry, and in many cases our teams are pushing the boundaries of what is technically feasible. So what we’re looking for is identifying market opportunities to where the puck will be going to, and being the first at providing not only technically feasible but also commercially viable product solutions for our customers, to develop those markets, to grow those markets, and get rewarded by the market share that we will take in those types of scenarios as well as the margins that you will be able to generate when you are the first to commercialize them. Q. Coherent’s announcement also discussed your role in advising Diebold Nixdorf, shifting the company’s focus and orchestrating a merger. Coherent has made some significant acquisitions in the last few years, notably Rofin-Sinar. Will Coherent continue to be active in M&As in the years ahead under your leadership? And if so, how will acquisitions play a part in the company’s larger strategy? Andy: Again, it’s super early, and my vision at this point in time is extremely blurry at best. But just in general how I think about it, the best way to improve your position in the market is to develop IP yourself. It’s the most dependable, it gives you the biggest advantage versus your competition, and it usually gives you the highest return. Having said that, of course we will be looking out and will be continuously asking the question, will we be faster to market if we buy versus make, and which of the two would be the preferred option? When and if we come to the conclusion that if we were to buy an asset, there are two types of acquisition that one can think through. The first one to think about is small tuck-in acquisitions; will you buy up some very specific IP in the market? Coherent has traditionally done that for many years. Mark, you can fill in how many acquisitions we’ve done. Mark: [laughs] I’m not sure I have it memorized; certainly in the double digits. Andy: Exactly. Especially in this day and age where you find other companies that may not be as well capitalized, smaller companies than Coherent, there might be an opportunity to pick something up, but the company has and will continue to be very opportunistic, and we’re talking small types of acquisitions. The second type of acquisition, the ones you were referring to, whether it was the Rofin acquisition that Coherent did, or what I did at my old company. Those big type of transactions wouldn’t be the first thing on my radar screen right now, at a time like the one that we’re in at the moment when cash preservation is king. I’d say when and if we were to do something like this, it would be mid-term, it would not be something we would do in the near term. Q. Mark, do you want to add anything? Mark: No, I think Andy actually summarized it well. I think that the company historically, if you look back over our 50-year history, we’ve certainly been an acquisitive company, on a reasonably regular cadence. And the majority of our acquisitions, through the company’s history, have been — the term Andy would use — the “talking type,” so a smaller acquisition that brought with it IP or customer base or a key technology that we didn’t have. I think we have a pretty successful track record of doing that and then being able to build upon those businesses, and that will be something we will continue to look at as we move forward. Q. What are the challenges of being named a new CEO in the midst of a global pandemic? How do you balance the pressure of steadying a company in the midst of a crisis while developing a battle plan going forward? Andy: This is a very unusual time to take the reins of the company; it’s even more unusual to have to do all of that in a very virtual world where all of us are under stay-in-place orders. I’ve just got a very simple order of priorities. The first thing that we have to do is make sure all of our employees and their families stay healthy. We spend a lot of time and energy talking around that and making sure that wherever we manufacture, and where we extend from the shutdown orders, that we can guarantee that. The second order of business is we have to make sure that our company stays healthy. That predominantly means preserving the cash we have as an organization. The third order of business is we need to be good partners to our customers. Mark and I have been on probably a dozen customer calls, usually until late into the night with our customers in Asia, and in each country they’re in a different state of where they are and what type of help they have. To give you an example, we talked to a leading tech company in China late last night, and they were asking us how we can get service and support engineers to help them ramp up some new gear. It’s all over the spectrum. And then finally, how do we make sure we get the company back on a growth trajectory once this pandemic is in the rearview mirror. So, our days are filled. Our to-do list is long, but it’s a very exciting task and I had the pleasure of meeting a phenomenal team at the company. And with the promotion of Mark to the COO position I also have a partner here who can help me share the load, and we’re working really hard to get through all of this and come out at the other end of the pandemic as yet a better company. Q. We don’t always see a scenario in which there is both a CEO and COO. Why did you, Andy, and eventually the board, elect to implement this infrastructure? Andy: It’s pretty simple. My predecessor [John Ambroseo] had spent his whole business life with the company, and John was in the chair for 18 years. What I and the board wanted to accomplish was to send a very strong signal to the market of how important our OLED business is, and to send a very strong signal to our customers how important the customer relationships are, the trust that we have developed, and the partnerships we have developed. Mark stands for all of that, and that message was very well received by our customers. In addition to all of this, you have the proverbial fresh set of eyes and outside view, and experience in other parts of the tech industry that I bring to the party. So I think the simple way to think about it is, with Mark and I teamed up as a power team, we get the best of both worlds. Q. Could you comment on Coherent’s role within the microelectronics market? Notably, you sell short-pulse and CO2 laser systems into China that are important in flexible OLED units and flexible displays. What is the importance of this market to the company’s future? Mark: Microelectronics, as you know, historically being the market segment that we report having a larger share of across the company, and clearly we’ve had a lot of success, specifically in the mobile display industry. Maintaining a leadership position in that as it moves to OLED is clearly a top priority of the company. Andy mentioned that we’ve spoken to a number of customers around the world over the last two weeks, and quite a few of those have been in the display industry in Asia, so that’s a top priority. It’s well known that we’ve had a leadership position in the excimer annealing space, and we see every reason that that should continue. As a result of that, we have access to all these display customers, and we have that success also with ultrafast and CO2 lasers and many other types of lasers. Those lasers are part of the other display applications, such as cutting out the actual flexible OLED screens from the main panels and a number of other applications in display, and we actually see that across the whole microelectronic or mobile device sector. If you take a cellphone apart today there are a large number of laser-processing steps, and we’re engaged in a variety of those applications. The majority of that business is in Asia. China is clearly one of the two leading countries, the other one probably being Korea. The market will transition to 5G, and the 5G radio antennas do require more power to run at the higher frequencies, which leads to a desire to have bigger batteries. If you want to put a bigger battery in the phone, the other components have to get thinner or smaller, and that fits well with flexible OLED displays, because the flexible OLED displays are so thin that they can actually put larger batteries inside the phone. If you look at the correlation between 5G phones and flexible OLED in the same device, it’s probably in the order of 80% or more. So we see out of this trend, as well as just in general, that the need to use lasers in many of the manufacturing processes just expands, and Coherent is well positioned. Read part 2 of the interview here.