It sounds like something out of science fiction. Engineers in a laboratory in south-east England are working out how to build a giant chamber that could smash huge rocks to pieces using high-energy radio waves – so saving mining companies the job of pulverising the rock using mechanical hammers.
The effort to devise what amounts to a scaled-up microwave oven is taking place not in a wacky offshoot of an academic institute but at E2V Technologies, a company that has turned scientific expertise into commercial results.
E2V, which on Thursday announced a £76m ($140m) acquisition of Atmel Grenoble, a maker of electronic components, also provides a good example of a manufacturing business that suffers no disadvantages from having all its production in a high-cost location in the UK.
It commands roles in two broad but complex technologies: electronic tubes for generating microwaves or for high-frequency switches, and microchip-based sensors. These fields, each of which provided roughly half E2V’s sales of £112m last year, are difficult to move into, and the company has just a handful of competitors worldwide. Of its 2005-06 revenues, £11.9m was pre-tax profits, a good ratio by the standards of European engineering businesses, while nearly three-quarters of sales were outside the UK.
E2V has acquired its expertise after decades of work in these areas, helped by a cadre of development engineers, who comprise 350 of the company’s 1,300 staff. Virtually all of these are based in the UK, at the main site in Chelmsford or a smaller factory in Lincoln. They focus on areas such as new materials, electronics and microwave engineering.
“A lot of our intellectual property is at a sub-atomic level,” says Keith Attwood, E2V’s chief executive, referring to work aimed at finding new combinations of materials that will provide the latest miniaturised sensors built up from semiconductor layers.
Once part of Arnold Weinstock’s GEC, one of the UK’s premier industrial businesses of the past century, E2V, as it was later known, was spun off in 2002 in a management buy-out. It gained a stock market listing two years ago.
The electronic tubes it produces are used both for generating high-frequency radiation – for example in television broadcasting and cancer therapy equipment – and also for switching systems seen in high-voltage electricity distribution machinery.
E2V moved into its second technology “platform” – solid-state sensors for providing precise digital images – in the 1960s. Its expertise in this market – in which it has fewer than 10 significant competitors – has led it to supply a range of industrial products, from scientific instruments to mechanisms used in dental surgeries and space surveillance satellites. “One of the good things about the business is that we don’t rely on any single large industry,” says Mr Attwood.
Customers include BAE Systems, the UK aerospace company, Siemens, the large German industrial goods business, and Varian and Applied Biosystems, two US-based makers of scientific instruments. The company has also worked on top-secret space imaging programmes for the Pentagon.
High barriers to entry into its technologies mean prices can be kept relatively high. As long as E2V manages itself effectively, Britain’s high cost structure does not make it impossible to keep the company in decent financial shape. “We think being in the UK is a positive feature because of the high quality of engineering that the country is associated with,” says Mr Attwood.
Of the company’s staff, about 400 work in “touch labour” – delicate and complex assembly jobs in which the nature of the product changes frequently. These methods can be justified in a high-cost country only when the product itself commands a high price on account of its engineering complexity.
Many of the parts that go into its products are made by E2V itself. Of the company’s total costs, only about 25 per cent relates to bought-in components and materials; for most UK-based manufacturers the figure is normally 50-60 per cent. “I wouldn’t like E2V to be a simple assembly operation,” says Mr Attwood. “The linkage between our products and the parts we make in-house is a source of competitive strength.”
Mr Attwood says the products made possible by E2V’s two fields of expertise are in industries where sales are growing fast – at 5-10 per cent a year worldwide – and where new potential applications are becoming apparent all the time.
One uses the company’s expertise in sensors in “collision avoidance” equipment for cars. Another, based on the company’s microwave expertise, is the “rock-zapping” idea targeted at mining applications.