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DALSA buys its way to dominance in imaging

24 Sep 2002

An aggressive acquisition strategy is fuelling rapid growth at DALSA, the Canadian maker of digital cameras and image sensors. Oliver Graydon investigates its rise to fame.

From Opto & Laser Europe October 2002

It's not all doom and gloom in the photonics market. Judging by the latest upbeat sales figures reported by DALSA, there's plenty of life, and growth, to be found in the digital-imaging sector.

Over the past 20 years or so, DALSA has transformed itself from a small consultancy run by an academic researcher into a dominant player in the machine-vision business. Savvas Chamberlain, the firm's founder and CEO, has seen his business grow from a staff of 10 and revenues of C$1m (€650,000) in 1988 to a headcount of 600 and an estimated turnover of C$120m in 2002. The company is so confident that its current vision statement is to be running a C$1bn business by the end of the decade.

Market explosion DALSA's impressive growth has been largely a result of the spread of digital imaging from niche scientific applications into mainstream industrial inspection tasks. Today, many high-volume production processes, such as the manufacture of printed circuit-boards, semiconductor chips and thin films, rely on machine vision to help check the alignment of parts and search for tiny defects. Combine this market explosion with four strategic acquisitions in the past three years to strengthen its product range, and it's easy to see why DALSA has become such a powerful force in imaging.

DALSA's buying spree started in 1999, when it poached two start-ups that had set up in the imaging business. Colorado-based business Silicon Mountain Design, which made high-performance CCD cameras for industrial inspection, was acquired for C$17.8m, while Arizona-based MedOptics Corporation - a start-up developing digital X-ray cameras for medical imaging - cost DALSA C$4.5m. Both companies had fewer than 30 staff, but rapidly growing revenues.

However, these acquisitions were just a warm-up exercise compared with what was coming next. Having seen strong growth in its earnings in 2001, DALSA flexed its financial muscle earlier this year and purchased a Zarlink-owned semiconductor foundry in Bromont, Quebec, for C$21.6m. At the same time, it also bought the Philips CCD business unit in Eindhoven, the Netherlands, for C$9.7m.

The foundry will be used to manufacture CCD image sensors and other specialized wafers for MEMS and power semiconductors. DALSA also plans to transfer the manufacture of Philips sensors to the foundry. "From our point of view, it [the foundry] is critical because it gives us security of supply and improved margin," said Brian Doody, president of DALSA's imaging business.

As for the Philips acquisition, it was attractive for a number of reasons. "One [reason] was the complementary nature of the products. We have designed and built our own CCDs for many years but frankly the focus has been more on line-scan architectures," explained Doody. "The Philips group is the other side of the coin. It has established a very well known capability in frame-transfer area image-sensors. Philips has also penetrated the medical market, X-rays and high-end digital still cameras - markets that we were not involved in."

What's more, Philips's design and technical know-how in the field of CCD sensors is considered to be world-leading. "They have exceptional low dark currents, far better than the competition, and this is really important for large high-resolution sensors," explained Doody. "They also have a very good anti-blooming process that is good for frame-transfer cameras."

The early days Today's technology is in sharp contrast with what was available when digital cameras made their debut on the commercial scene. Before DALSA introduced its first camera products in the early nineties, says Doody, people who wanted to build machine-vision systems had to adapt cameras designed for other applications, such as security, to fit industrial and automation tasks.

An early adopter of DALSA's digital imaging technology was the Post Office. When it first started printing fluorescent bar codes on envelopes so that they could be sorted automatically, fast CCD cameras turned out to be ideal for the job.

Since then the market has flourished, as new industries adopt machine vision to improve the speed and yield of their manufacturing lines. According to Doody, electronics and semiconductor manufacturing are two of the fastest-growing markets. Cameras are now readily used for aligning microchips on printed circuit boards, as well as checking the quality of lithography masks and semiconductor wafers.

The task of inspecting wafers to ensure that they have been exposed and etched correctly presents DALSA with some tough technical challenges. In the desire to create smaller and smaller features, chip makers are turning to lithography that makes use of shorter wavelengths. As a result, inspection systems that operate in the deep ultraviolet (DUV) are required to image the fine structures on the wafer.

"The challenge there is both speed and wavelength," said Doody. "That's a real driver for us right now in terms of pushing the technology. Over the past three or four years we have done a number of custom sensor and camera designs to work in the DUV and satisfy this market."

As for the performance of CCD cameras, Doody says that DALSA has come a long way and is continuing to improve, unlocking new applications as it does so. "When I look at the development of our cameras, we're continually being pushed to higher and higher speeds," said Doody. "As the internal bus speed of PCs continues to increase, we can pump more digital image data into a PC and our customers can process more pixels faster. Our first digital cameras had a data-transfer rate of 15 MHz. Today, our top-end products have a data rate of 100-200 MHz, and trying to get those into a PC bus is still a challenge."

Improved performance As well as getting faster, cameras are offering better imaging performance outside the visible range, in regions such as the X-ray and infrared. "There continue to be new applications that haven't used imaging before, such as biometrics or biotech, where imaging can automate or enable processes that couldn't be done before," said Doody. "X-ray applications are also continuing to grow, not just in medicine, but in industry and security. Automated and intelligent X-ray systems can help improve things like airport security."

As well as the creation of new application areas, a number of other emerging trends are likely to influence the future of the industrial CCD imaging market. "There is a period of consolidation happening and our acquisition of Philips [CCD business] is a clear example of that," said Doody. "The number of companies in the industrial imaging business is shrinking from the sensor side, although the overall market continues to grow by well in excess of 15% annually."

Would DALSA consider using its R&D knowledge and foundry to enter the growing market for consumer digital cameras? "It's quite feasible that we could get involved with people who are looking to design CCDs for consumer applications," admitted Doody. "Then our business model might be to do the design work but not get involved with the testing and manufacturing. In the strict consumer business there are enough players in there right now and you only have to look at some of the cost demands in that marketplace - it doesn't sound like much fun."

20 years at DALSA 1980 Savvas Chamberlain, a scientist at the University of Waterloo, Canada, founds DALSA.
1984 DALSA uses capital funding to develop a commercial line of CCD image sensors.
1987 The firm receives its first patents for line-scan image sensors.
1988 It launches its range of TDI (time delay and integration) line-scan image sensors.
1993 It develops IA-D9, the world's largest image sensor with 26 million pixels.
1996 An IPO on the Toronto Stock Exchange raises C$26m.
1998 DALSA brings the Piranha, the world's fastest line-scan camera, to market.
1999 It acquires Silicon Mountain Design of Colorado Springs, Colorado, for C$17.8m
2000 MedOptics of Tucson, Arizona, is purchased for C$4.4m.
2002 DALSA acquires Zarlink's wafer foundry in Bromont, Quebec, for C$21.6m and Philips CCD Business Unit in Eindhoven, the Netherlands, for C$9.7m.

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