The Forum - 10/15/2003
Alien CEO: Fargo 'the natural choice'
By Mike Nowatzki
mnowatzki@forumcomm.com
By 2010, Alien Technology Corp. will be thriving in Fargo, surrounded by spin-off businesses and a university recognized worldwide as a leader in radio-frequency identification technology.
At least that's how the company's skipper sees it.
As Alien broke ground Monday on a mass-scale manufacturing plant in the North Dakota State University Research and Technology Park, all eyes were on Stav Prodromou, CEO of the Morgan Hill, Calif.-based company.
The son of Greek immigrants, Prodromou, 59, has lived in the United States since he was 10 years old.
Prior to joining Alien in September 2002, he was president and CEO of Peregrine Semiconductor, a designer and fabricator of high-performance radio frequency integrated circuits for wireless, fiber optic and satellite communications.
Before Monday's ground breaking event, Prodromou sat down with The Forum to talk about RFID technology and Alien's future plans in Fargo.
(This interview was edited for length.)
Q: Explain again why you chose Fargo as the site for the first mass-scale RFID production facility.
A: We really had three major options in terms of where we would scale up our technology.
We're based in California right now, so that was certainly a consideration, just to keep on where we are and grow in California. A lot of technology companies go to Asia, with manufacturing facilities everywhere from China to Singapore and Taiwan and so on, and so we considered the possibility of going to Asia. And third was stay domestic but some place other than California, and we looked at some possibilities.
But Fargo seemed to us the natural choice because, first of all, we've had an ongoing research and development partnership with NDSU for a couple of years now...
We also saw that our business is based on patented and very strongly protected technology, and we wanted to continue to protect that technology. And having a scale-up facility here in Fargo is much better for us than doing that offshore and losing control of our technology...
But, ultimately, I think the final and most important factor was that North Dakota just clearly showed us a very business friendly attitude. We saw that from Gov. (John) Hoeven, we saw that from all the state officials, we saw that from (NDSU) President (Joseph) Chapman, we saw that with (U.S.) Senator (Byron) Dorgan. And so we just felt like this was a place where we will succeed.
Q. Did the central location have anything to do with it?
A. Yes, it certainly does. The geography works in favor of NDSU because we have customers throughout the U.S. and East Coast and West Coast and down to the south in Arkansas with Wal-Mart, back east to Gillette in Boston, and so on. So having a central location is very important.
Q. What sets Alien apart from other companies planning similar ventures?
A. First, the company played a real leadership role in defining a global standard for these kinds of chips to all work together, so that if you buy a product from Alien or if you buy it from any other company that uses the same standard, it will all work together. And that's very important for someone like a Wal-Mart ...
The other thing, in terms of continuing to sustain our leadership, we have a patented technology we call Fluidic Self-Assembly. We make these little tiny nanoblocks and that's what gets put into each of these tags with a little UHF antenna, and that's what makes this thing possible...Other people are using other ways to assemble these that are not as cost-effective.
Q. Speaking of cost, what is the cost of an RFID tag, and what do you need it to be?
A. Well, it's kind of like asking, "What does a personal computer cost?" It depends on what you want in it. But today you're talking about well below a dollar, in the 25-cent range, something like that. Some are more expensive, some are less expensive.
But, ultimately, we think that certainly in the next three to five years we need to get down to a nickel or lower, and maybe in the end they should be down to a few pennies or even a penny. And the Fluidic Self-Assembly technology helps us get there.
Q. Describe the relationship the manufacturing plant will have with NDSU in terms of research and employees.
A. It will be a manufacturing facility that will scale up for high volume manufacturing of this Fluidic Self-Assembly and RFID. The other thing that we will have will be some research activity related to...how we'll continue to reduce the cost, how we'll continue to improve the capabilities of this...
Certainly, we hope to be able to recruit some of the graduates of the university and also to have some joint research and development activity going on like we already have with the Center for Nanoscale Science and Engineering that's already here. And so we hope to build on that relationship.
Q. You've said the plant will start construction in 2005 and have 300 or so employees by 2006...
A. Yeah, something like that. It's hard to predict accurately, obviously, but it will grow from a small core team to a couple hundred or a few hundred people in the first couple of years. Ultimately, it could become a very significant employer in the Fargo area...
Q. Will these be local hires, or are you bringing some people from California?
A. We're going to transfer some people as part of the initial core team who kind of know our manufacturing technology, who know the processes and equipment. But we intend to supplement that with local hires, either people already in Fargo or people who can move from other parts of the country to Fargo to work on this.
You know, it's really amazing, because right after the story first appeared about Alien coming to Fargo, we immediately started getting calls and e-mails and so on about, "I want to come to work at Alien in Fargo."
Q. Since that July announcement, most of the talk about RFID has been centered on the retail and supply-chain uses. How close are you to implementing those in a store or warehouse?
A. There are actually many, many pilot programs that are going now in the U.S., actually around the world.
We have a pilot program going on in England right now using these very same tags that you see here with the tracking of supply totes. É We have a warehouse in Gillette's manufacturing operation in Massachusetts that is already using these. We have a pilot program going on at San Francisco International Airport that is using the tag. We have a pilot program going on with a pharmaceutical manufacturer to ensure the safety and authenticity of pharmaceutical drugs that you buy.
All of these are pilot programs. None of these are massive scale. And so they're not necessarily visible to the average consumer today, that you can pick up some goods and see it on there. But there will come a point and time where it will become visible.
Q. Like any new technology, RFID has its detractors. Some critics say that it will be, or already has been used to spy on shoppers or invade people's privacy. How do you address those concerns?
A. We think privacy is extremely important. We think protecting consumer privacy is a vital part of this technology, and in fact it has been designed into the technology from the beginning.
One of the things about the technology is that the tags can be erased at the point of purchase. Imagine when you go into a store and you buy this (holds up a bottle of water) and you've got the bar code on here, imagine that this bar code can be erased so that no one can read what the label says. And the same kind of thing, conceptually, will apply to the RFID codes being erased.
But I think the one thing that most people should keep in mind is that today, we have trusted transactions, whether it's online retailers or whether we go into a store and so on. What do we do? We give them our credit card. They know what it is we bought. And why do we trust them with that information? Because we know they enforce a privacy policy very, very strictly, and our personal information doesn't get out there in the hands of people who can abuse it. And RFID is no more, no less of a privacy concern than any other information technology, whether it's online or in a real store.
So, I think we should never minimize our vigilance in terms of maintaining privacy, but it is no more a problem no less a problem than it is with anything else we do in our lives day to day. It certainly doesn't deserve to be singled out as something that's going to violate your privacy.
Q. Describe your production plans, as far as ramping up production, and why that's needed.
A. Today, we're producing about 1 million-unit volumes, which are really pretty small volumes for this kind of technology. We expect to see this get into tens of millions and hundreds of millions of units in the next couple years.
The industry market forecasters are saying the total industry will be shipping several billion units by 2005, and that by the next five to seven years the numbers could get up into the tens of billions or hundreds of billions of units.
So the projections are pretty high in numbers, but I think several things have to happen in order to get there, including the cost, including the information networks able to take all this information and do something with it. Absorbing any new technology is a major challenge for business.
Q. In August, you announced your latest round of financing was $38 million, bringing the total to $125 million so far. Are investors knocking down your door, and at what point do you become public?
A. We haven't set a plan for going public. Obviously, that's important for any company to continue to grow is to have access to the public finance market. But right now we're very fortunate the company is very well financed. We have a financial package to continue to do our research and development, develop new products, and that's what our investors have come up with, that latest $38 million.
And, also, to help finance the facility in Fargo, the state has come up with an attractive package of loans and grants and so on to help us get started here. And that helps make the financial burden of building up a massive enterprise affordable for a company like Alien.
Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528
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