Interview with our CEO in High-Tech Systems magazine

CoreDux®, rambunctious newcomer in forgotten corner of high-tech industry

Jan Hennipman may serve a not-so-sexy corner of the high-tech industry, but his company, CoreDux, is growing by some thirty or forty per cent a year. The acquisition of US precision machining company Pyramid is fully in line with his strategy to serve the semiconductor, aerospace and Energy / hydrogen markets. An interview with Jan Hennipman, founder and CEO of CoreDux.

With its acquisition of San Diego-based Pyramid Precision Machine, CoreDux certainly put itself firmly in the spotlight this September. Pyramid has for years been the court-appointed supplier to Cymer, now part of Dutch semiconductor machine maker ASML. In the Netherlands, CoreDux supplies the litho-machine manufacturer and other high-tech equipment makers with high-end hoses from its production facilities in Tilburg, the Netherlands, and Reims in France.

Jan Hennipman, founder, CEO and major shareholder of CoreDux, says he needed just three months – from first meeting to final signatures – to complete the acquisition of Pyramid. But what does a manufacturer of pipes for gases and liquids want with a precision machining operation on the US west coast?

To answer that question, High-Tech Systems magazine went to Tilburg to visit Hennipman. “It solves three of my problems in one fell swoop,” he says. “Acquiring a company that can make OEM connectors and collaborate with us on the producibility of machined parts in our layouts has been my dream for five years now.”

CoreDux has seen unprecedented growth over the past four years, as revenues have increased by an average of thirty to forty per cent a year. Following the acquisition of Pyramid (120 employees), the number of people Hennipman employs now stands at six hundred. Yes, he says, with those numbers it’s a bit of a problem to know everyone personally and have a positive influence on people. Even if your name is Jan Hennipman. “I’m constantly being told that I exude so much positive energy and that’s quite touching to hear. But even I can’t influence six hundred people every day.”

Jan Hennipman was given the opportunity to spin off CoreDux from the BOA Group and, following the acquisition of Pyramid, now leads a company with revenue of one hundred million euros.

He sees it as his biggest challenge: not recruiting people, but educating them in his company’s culture. “Our biggest challenge is getting the entire staff to go along with our dream,” he says at CoreDux’s Tilburg plant, which was completed a year ago in the Droogdokkeneiland high-tech business park in the southern section of the city. “It’s not so much about whether they are willing to go along. It’s about everyone understanding what part he or she plays in the whole. I want them to play in the premier league and I think we need two years of training to get people to that level. That does tend to have a number of critical moments, because most of the trainers themselves are self-trained. Anyway, that is not an unknown phenomenon in this region.”

Is he perhaps too demanding? “Oh yes, definitely.”

Over the phone

Hennipman studied mechanical engineering and technical business administration at the University of Twente. He then worked for nine years at GEA, a systems and parts supplier in the food and pharmaceutical industries. In 2014, he was appointed general manager of BOA Netherlands, a German supplier of hoses and bellows with multiple operations in Europe, the US and Asia. BOA was generating fairly limited sales, around six million euros, in the Netherlands. Half of that came from maintenance in the chemical industry. “This was often done over the telephone, with orders for spare parts for repairs and the like.” At the same time, BOA was also producing customized parts for machine manufacturers around Eindhoven, with a focus on the semiconductor and medical industries. New product developments were often ordered via larger flow control contract manufactures. “At that point, we were responsible for the preliminary stages, but other manufacturers/ CM’s then brought in the revenue.”

As the director of a national satellite organization with revenue of six million turnover in a company with total revenue of two hundred million, Hennipman enjoyed the complete freedom he had. “But I faced a terrible dilemma,” he says. “What direction should we develop in? The first option was to expand in the transactional business. That meant automate, configure to order, sell quickly via good internet marketing and make sure you’re the cheapest. On the other hand, we could choose intimacy. In other words, becoming a solution provider working for a limited number of clients and literally becoming part of their organization and freeing them up to focus on their core business. Yes, that would mean that half of our revenue would eventually become strategically irrelevant.”

Stakeholder management

Hennipman saw that his major competitors at the time were primarily focused on offering standard products in a fragmented market. “I noticed that my high-tech clients had very different interests. They wanted a reliable party that could quickly develop and deliver a bellows or a hose. OEMs found us interesting, because we had the expertise to adapt our products to the needs of their applications. This is complex because you have to consider all kinds of influences: materials know-how, the influence of magnetic fields, vacuum compatibility, pressure resistance and flexibility. You also have to prevent fluid or gas flows from generating vibrations. Large OEMs who saw that we were developing products for an intermediate party were increasingly coming to us directly. They were looking for a company that could work with them through the entire development curve. After all, not only did we control the production, but also the design with all the simulations and data that went with it.”

Hennipman had the luck that he able to present himself as a representative of an organization that recorded annual revenue of two hundred million euros. “That was true, but I didn’t find it all easy internally to get the organization on board.” But in the end, the French director of the Reims plant, where the base hoses for Tilburg were made, was always willing to help Hennipman out of the fire. “By the way, in Reims we have some unique products. Our French plant is among the two or maybe three manufacturers in the world that can manufacture reproducible bellows hoses.”

Carve-out

However, BOA’s owner did not see his growing Dutch high-tech business as a core activity. He knocked on Hennipman’s door in Tilburg with the proposal for a carve-out. “He saw us working on innovation and rapid growth,” says Hennipman. “In his view, he was not the right owner for our business. BOA wanted to avoid the risky high-tech industry and focus primarily on a stable market, and on operational excellence in commodities.”

That same year, Hennipman split off the high-tech business as CoreDux, a compound of the English words core and duct. In the meantime, the production of base hoses for the high-tech industry at the Reims plant was now large enough to continue operating locally.

Hennipman says the carve-out helped him focus. In any case, his revenue has increased threefold since the carve-out. “We no longer had the baggage of the BOA Group and all their in-house operational excellence initiatives. Investing in growth and innovation has paid off.”

“Over eighty per cent of our growth potential lies in America.”

Not sexy, but crucial

The basis of his success, Hennipman explains, is that CoreDux came up with a solution for a problem that was crucial, but was not considered technically interesting. “It wasn’t sexy. We recognised that LT on flow control gas/ liquid layouts in their machines is a bottleneck during development. We saw designs full of Dfx errors, which meant that layouts had to be redesigned afterwards. The speed of development was actually limited at our clients by the layouts of gases and cooling. This may not be visible, but if it doesn’t work then it’s pretty ugly.”

Encouraged by its clients, CoreDux started developing standard building blocks that engineers could include in their layouts. “Just like a Meccano set, but specific to each client, including all the standards and requirements from their design environment. In addition to this, we train their engineers in the best ways to use our building blocks.”

Long conversations

Before it got that far, Hennipman had several long conversations with clients to explain that his company was getting involved in system development too late in the process. “If designs were wrong, we were always told too late and then we were blamed for this too. After all, we supplied the hoses on behalf of a middleman, the contract manufacturer who supplied the machine builder. Lots of mistakes were made because designers only added the gas and fluid layouts to their drawings at the very last moment when they were developing a module. If there were any issues at that point, they usually came to CoreDux asking if we could solve it minus three weeks .”

CoreDux was making designs on behalf of the first-tier supplier, so did not benefit from series production except for the spec’d components, but did get it in the neck from clients when things went wrong. Hennipman saw that this was where his opportunity lay. By talking to clients who were in trouble, he saw an opening. “Looking at the misapplication of our products and the lead time problems that caused, we came up with the idea of setting up our own project organisation for the development of new products.”

Hennipman was also constantly being asked whether he would produce gas boxes, but his answer was always a very firm ‘no’. “We are not a gas/ fluid layout contract manufacturer. We are a vertically integrated gas/ liquid solution provider. We have all our process technology under one roof. We can do everything ourselves. Strip material and wire is delivered to our plant and we use these materials to produce hoses and weld couplings. Then those dynamic links that are, say, one to two meters long are delivered to our clients. So, the supply chain of our own products is well organized.”

Dozens or at most hundreds a year

As a ‘progressive client’, ASML was one of the driving forces behind CoreDux’s growth. “Things worked out well at ASML, so we were able to go to other clients with the same kind of proposition. First and foremost, ASML helped us to recognise our value. We learned what our organisation needed to focus on to be in a position to roll out a product for other clients too. You need a ‘first friend’ who trusts you with that.”

Hennipman says this allowed CoreDux to develop as an original design manufacturer, a manufacturer with its own IP portfolio. “And this doesn’t always have to involve protected knowledge,” he explains. “We have built up a portfolio of technology that enables us to deliver high-grade modules.”

The fact that CoreDux delivers customized solutions can be seen in the Tilburg plant. A lot of work is done by hand to assemble series of dozens or at most of hundreds a year. And that also applies to manufacturers of large medical systems, says Hennipman. “Each medical scanner client also has their own specific requirements and these affect the arteries we supply for it.”

Hoses and tubing that CoreDux produces for the high-tech industry are typically one to two meters long.

Vacuum chambers

CoreDux’s latest acquisition, Pyramid, produces a range of products, including the vacuum chambers for ASML Cymer’s krypton and argon fluoride lasers in its San Diego plant. In addition to the semiconductor industry, Pyramid supplies the aerospace industry. The acquisition solves three problems for him, says Hennipman. “Each hose has a welding adapter, as it has to be connected. The overwhelming majority of these are custom-made parts. I’ve long had the ambition to enrich my product portfolio by adding connectors. We do design those, but until now we were not able to produce them. Now we do have that knowledge. Pyramid can also collaborate with us on producibility, so CoreDux can broaden its product portfolio of hoses and pipes to include connectors. That has been my dream for five years.”

The second advantage is that Pyramid is a springboard to the US. “When we talk about our growth potential, over eighty per cent of it lies in America. We want to focus on the aerospace and defense industries in the US. By acquiring Pyramid, we’ve bought ourselves presence in the US. The company already has ITAR (International Traffic in Arms Regulations) registration and is AS9100 certified, something that is important in that market. We needed that for our dream of building a global presence in aerospace and defense. Semiconductor equipment builders are also demanding that we have a local presence, and I’m not just talking about lithography. Those clients are literally asking: could you please take added value such as purification and cleanroom packaging over from me? Freeing up companies so they can focus on their core business is a big thing in the semiconductor world. Pyramid serves clients in that market that are either existing CoreDux clients, or that CoreDux would very much like to have as clients too. So that will generate a lot of synergy in the market.”

Pyramid itself had already chosen the strategy of becoming strong in vacuum compatibility. “That is precisely the industry in which CoreDux is growing with its flow control products. Vacuum know-how is the biggest driver behind our success. We typically transport gases in a vacuum environment. We want Pyramid to move from precision components towards purified components and subsystems. That is exactly the same journey that CoreDux has made under my leadership over the past four years. Build up strength as tier one. So you shouldn’t see CoreDux as a collector of a consortium of businesses, so to speak. Under the hood, we are all about synergy. For us, that’s about vacuum precision components and subsystems.”

Are we going to see any CoreDux acquisitions in Asia? Hennipman: “If we zoom out, we are obviously seeing major shifts in geopolitical terms. I don’t want to go into too much detail about it, but originally our plan was to build a site in Singapore or Malaysia to supply US semiconductor equipment manufacturers. Develop in the US, produce for Asia was the plan once we had achieved sufficient volume. All US semiconductor machine builders are in Singapore, after all. Now against everyone’s expectations, everything is moving towards reshoring. Our US clients are asking us to build resilience in the supply chain. We saw the pressure emerging to not just develop, but also start manufacturing in the US. Whether we will do that organically or via acquisitions, I don’t have any answers to that yet. Not even within our own boardroom.”

This article is published on High-Tech Systems (only available in Dutch).