Episode 52: Hail to the Victors: KLA-Tencor Selects Ann Arbor, Michigan For Major R&D Facility
December 6, 2018
The Michigan fight song and an interview with KLA-Tencor’s Chief Strategy Officer Bobby Bell is featured in this podcast. Bobby describes how the company and consulting partner Deloitte navigated a search that went from 350 locations to 12 communities to 3 finalists. And in the end, Ann Arbor, Michigan was the last location standing. The new, $70 million research and development center will house an estimated 500 positions. Ann Arbor Spark SVP Phil Santer also describes how a “trip to the big house,” the University’s fabled football stadium, helped add some color to a three-day site visit with the company’s selection team.
Patience Fairbrother (DCI): If you are a serious college football fan, you’ll recognize this music as the University of Michigan’s fight song, “Hail to the Victors.” And it’s a fitting opening for today’s story about KLA-Tencor, and their decision to bring a research and development facility housing up to 500 people to the University’s home in Ann Arbor, Michigan.
Andy Levine (DCI): Ann Arbor 1 of 350 locations initially considered by this global supplier to the semiconductor and nanoelectronics industry. With the help of Deloitte Site Selection Consulting team, the list was narrowed to 12 communities, and then down to just 3 communities. And in the end, Ann Arbor was the last location standing.
Patience: As you’ll hear in the episode, this California company decided to look outside of Silicon Valley to find the talent and business environment they needed.
Andy: Now that’s enough of the University of Michigan’s marching band. Let’s hear the sweet music of The Project’s theme song. So welcome to Episode 52 of The Project: Inside Corporate Location Decisions. I’m Andy Levine of Development Counselors International.
Patience: And I’m Patience Fairbrother, also with DCI and Andy’s co-host of The Project. This week we bring you the story of KLA-Tencor and their decision to bring a $70 million research facility to Ann Arbor, Michigan. The new facility will house an expected 500 individuals in the next 5 years.
Andy: We’ll start our story with Bobby Bell. Bobby is a 24 year veteran of KLA-Tencor, and we asked him to give us the elevator speech about the company.
Bobby Bell (KLA-Tencor): So we’re founded in 1976 in Silicon Valley, actually part of the original Silicon Valley startup and momentum. We’re based in Milpitas, California. We make manufacturing equip…develop the manufacture equipment to help our customers, which make semiconductor chips, the chips that are computers, mobile devices, you know, the automotive industry. So let’s say we’re a global company of more than 6,500 employees worldwide, with operations around the globe. Headquartered in the Bay Area.
Andy: Bobby had just started a new role as the company’s chief strategy officer. And as one of his first assignments, he was given the task of managing the search for a new location for a research and development facility.
Bobby: We started seeing an emerging need, you know, for attracting greater and greater talent, to have enough suppl of that talent to support our future growth plans. If you’ve been to the Bay Area recently, you know, the cost, the congestion, the traffic, the quality of life is, you know, and also just the amount of competition with other companies, it’s been harder and harder to attract the talent that we need. And you know, and having a good cost associated with that talent. So we really wanted to kick off and explore, you know, locations in North America, compare with our existing and other locations internationally to see what would be a good strategy for attracting the talent that we need.
Andy: So it sounds like, you know, a decision was made. We’re gonna build an R&D center. Was the decision we’re gonna do it somewhere in North America, but not California?
Bobby: Well, we were looking for alternates outside of the Bay Area was really the main motivation, whether it be North America, or building off of one of our existing R&D locations internationally, those were also options that we explored.
Andy: What were the different criteria that you used to sort of, you know, try to identify potential locations to set this up?
Bobby: Talent supply and talent quality really was the number one factor. You know, the machines that we make are very, very complex. We require a high degree of physicists, high precision mechanics, precision motion control mathematics, data scientists, algorithm engineers, software engineers, and being able to get the quantity of those key talent supply was really, really the most critical. We also wanted an area where that we could build on the partnership with a major research university to really stay on the bleeding edge of research. Cost was a factor. Not hard to be less expensive than the Bay Area. And then another one was really the logistics, not only to our Bay Area headquarter location, but our other locations where, you know, we have either R&D or manufacturing, and our customer base, again which was Asia. So have a nice transport, you know, in and our airport was very important.
Andy: So those are a number of different factors, but it sounds like talent and access to talent was the overwhelming number one factor?
Bobby: That’s correct.
Patience: Next, we’re going to hear from Phil Santor, senior vice president and chief of staff for Ann Arbor Spark. We asked Phil how the project initially came on his radar screen.
Phil Santor (Ann Arbor Spark): So initially came in through a conversation that I had had with some of our partners are Michigan Engineering about things that were going on that could potentially be opportunities for the economic development space. And this sort of came on as an idea that hey, there’s this company that could be considering a research and development opportunity outside of where they were currently located. They were sort of targeting around Midwest or other areas in the United States, and something for us to be aware of. So we sort of let that incubate for a couple months initially, and then I think over that period of time, it became more sort of a, kind of a real project internally at the company. And then we were sort of poised to be able to start the discussions directly with KLA-Tencor when it kind of got that point. But initially it was really through our partners at U of M.
Patience: So Ann Arbor saw the fastball approaching. Essentially, Phil and his team had a heads up that the project was coming their way before it was on the radar for any other community. Now let’s go back to Bobby and the site search.
Bobby: Well we did pick a partner to help us with the process. You know, so we ended up choosing Deloitte to work with, really a great guide through this. We started with more than 350 potential North American locations. We put in international locations where we existed, and some others that we wanted to look at. And basically the factors that I listed off, we you know, kind of did a quick pare down on talent supply, the nature of the local economy, the academic systems that were nearby. A cost, and actually did get into the airport logistics kind of at a very high order in the first down selection. And then we basically pared the more than 350 down to a group of 12 where we did deeper dived analytics, and got that down to a list of 3. And then you know, did detailed site visits with the local area, universities, other companies in the area, real estate, and just really get a core understanding with what was possible. And made it down to the final selection.
Andy: So the search went from 350 communities, to 12 communities, to finally 3 communities. And it came down to Ann Arbor, an unnamed community in Canada, and an unnamed community in the southwestern United States. Tell me about that process of making the cut from three to one.
Bobby: We actually took a core team to each of the three regions, you know, facilities, real estate, our HR recruiting teams, along with core engineering leaders where we did deep dives of real estate availability, what the area had to offer from a quality of life, and you know, availability of that point of view. And then we had another team that did deep dives with the local universities, deep dives of local companies, understanding their experiences, how they’re able to attract and retain, any issues they see currently going on within, you know, that community just to compare and contrast what our kind of desktop analytics showed us.
Andy: The team was made up of 10 people, and they spent about 3 days in each of the three communities. Let’s go back to Phil to hear about the visit, which included three different tracks.
Phil: One was the real estate component. So Deloitte and KLA-Tencor had a real estate track team, and we had really worked on figuring out what’s the right sites for them to be able to consider, and arrange really their entire process to go through with the brokerage community in town to understand and do that in a very efficient way. So that was one track. The second one is get into the details at the university level. I think what was really important for KLA-Tencor is being close in proximity to a major research institution, like the University of Michigan. So really getting into the details, and maybe even into the weeds on the different colleges and different curriculums that the University of Michigan had.
And then there was maybe I would say is the talent acquisition component. And that’s really where we were setting up and did prework on figuring out what is the types of companies that would be most analogous to the types of talent that KLA-Tencor would want to hire in the market, and then setting up those conversations directly with the companies, and with the HR teams there to say, have a conversation about the talent acquisition and talent development process. We were not a part of those conversations, and it was really critical for us to be able to say here’s your plan of action. Here are the questions that you might wanna consider for this company. And then sort of stepping out of the way so that they could have that direct conversation between the company, Deloitte, and the company that’s already located here in town.
Patience: Phil and his team thought it was important for them as economic developers to step out of the mix to allow the companies to speak candidly. Making KLA-Tencor feel at home was a big part of Ann Arbor’s strategy, so what better way to do that than to create a really memorable experience at the Big House.
Phil: So the Big House is the University of Michigan’s football stadium. It’s one of the largest in North America. So what we decided to do for their site visit is we had arranged for just to have a lunch with Nat Van Besen [SP], who’s the head of something called the University Musical Society, which is one of the cultural assets that we have in town. But we did it there so that they can kind of get a sense of the scale of the Big House really. It’s something that we have taken other sort of site selectors when we’ve had them in town for, but this was one of the first times that we’ve used it as part of the site process. And it was a great way to understand what that is all about. We had them out on the field. We had some footballs there, and they were kind of throwing around, and you know, getting the chance to sort of experience what it’s like to play football in the Big House. So that was, I think, a cool and hopefully something that resonated in their minds after their visit to Ann Arbor.
Patience: So when they were playing football on the field, were there teams? Was it Deloitte versus KLA?
Phil: No, it wasn’t quite as formalized as that. It was a chance to get some pictures and be able to kind of throw around the football a little bit. And you know, see if you can try and do a quick play. But nothing, there was no scrimmaging going on or anything like that.
Patience: Next time maybe consider challenging one of the competitor communities to a game, and then that’s how they decide.
Phil: That’s true. Maybe we can have Columbus come up and we can do sort of an Ann Arbor versus Columbus economic development thing, something like that.
Andy: All right, you heard it here first. Future site selection decisions will be decided by intercommunity football scrimmages. Let’s go back to Bobby. We asked him how Ann Arbor came out on top.
Bobby: Well I think, you know, they did very well throughout the entire process of, you know, holding up well against each of the attributes. You know, the talent supply locally, but also with the Midwest universities and the attractiveness of the area, we saw, was very good. One of the big surprises for me personally was the Detroit airport, 25 minutes away. You know, I don’t know, in the Bay Area, getting to the San Francisco airport is hard to find somewhere where it’s 25 minutes away to the airport. And then the connectivity from Detroit airport, you know, globally is pretty impressive.
The cost, you know, was favorable. The incentive package that the state and local municipalities, you know, came with were very good and appreciative. And then the thing that really, I say, really was differentiating, we’ve had a partnership with the University of Michigan for many years. Just the strength of that what we saw continuing to extrapolate and build on that, was really, you know, one of the major deciding factors.
Andy: Sounds like that gave Ann Arbor a little bit of a leg up in the process, sort of your comfort level with the University going into.
Bobby: Oh yes.
Andy: There was one yellow flag in the process.
Bobby: I’d say one issue that we’re continuing to struggle with a little bit is just availability of real estate and facility space at Ann Arbor. That was the one, you know, red area, and we can overcome it, but it’s been a challenge. And just I think, you know, became obvious once we started doing the real estate search, and talking to these other companies in terms of their experience of available space.
Andy: There was one other element that is important to this story. KLA-Tencor’s CEO, Rick Wallace, is a University of Michigan alumnus. We asked Bobby how that influenced the project.
Bobby: I don’t think it hurt the process for sure. You know, part of our long-term relationship that we’ve had with the University of Michigan is due to Rick and his continuous engagement. And you know, through ties, we’ve built research programs. With them, you know, one of the things we were very diligent, you know, not select Ann Arbor just because Rick went to school there. We wanted to make sure that it was because it really stood out, and that the criteria and the needs of our future growth.
Andy: Have you done this sort of a major site selection search previously in your career?
Bobby: I’ve supported activities in the past, but this is the first one, you know, that I personally have led.
Andy: So if you were giving advice to someone else who was leading a search like this for the first time, what advice would you share with them?
Bobby: I would say having a partner that’s, you know, understands and has a good process for working through possibilities, and down selecting, and ultimately selecting, you know, is very valuable, whoever that partner might be. Also talking to other companies, which I also did that did relocations, or new site startups, just getting, you know, their process and also kind of lessons learned or scars that they had going through the process.
Andy: On October 23rd, KLA-Tencor announced their decision to establish a research and development facility in Ann Arbor, which is expected to result in an investment of $70 million, and the creation of up to 500 jobs.
Patience: So let’s talk about the takeaways for this episode. Andy, what stood out in your conversation with Bobby Bell?
Andy: A couple of things. I think first of all, Bobby strongly felt that it was important to have a guide. In this case, it was a site selection consulting firm, Deloitte. They really helped drive the process, and helped do that narrowing process from 350, to 12, to 3. I think what was interesting then next is once they got to the three, these guys really dug in deep. And yes, there was lots of data they had in advance. But to bring a team of 10 people to each of 3 communities, and spend 3 full days there on 3 different tracks, to me, that was really impressive.
Patience: So Ann Arbor really stood out during that visit. They were able to visit each of the three communities. They stood out most, I think, it sounds like from the experience of the Big House, obviously that was the fun part of the visit.
Andy: I don’t think anyone else did something like that. And so, while clearly the business meetings that we set up everything, you know, was done smoothly. Everything was done well. If you can inject some fun into a site visit, something that the group will remember, you know, I think that’s really powerful. And I’m guessing all of the 10 people that got to scrimmage on that football field that day are never gonna forget that experience in their life.
Patience: So that is a wrap on Episode 52 of The Project: Inside Corporate Location Decisions.
Andy: Our sincere thanks to Bobby Bell of KLA-Tencor, and to Phil Santor of Ann Arbor Spark for taking the time to sit down with us.
Patience: We also wanna thank the University of Michigan’s marching band for recording “Hail to the Victors” with us. It was a little challenging fitting all 400 of them in our offices here in New York City, but we made it work.
Andy: The Project is sponsored by DCI. We’re the leader in marketing places, and have served over 500 different cities, states, regions, and countries. You can learn more about us at aboutDCI.com.
Patience: We hope you will keep listening. There are many more projects to come.