Investing in Ceramics: Advancing Technical Ceramics

June 1, 2002
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Ceradyne is on track to become a $100 million company through its unique blend of market-oriented advanced technical ceramic products.

Ceradyne’s cam rollers and rolling elements are used in diesel engines.
Ceradyne is a ceramic manufacturing company specializing in the development and manufacture of advanced technical ceramics using materials such as silicon nitride, aluminum nitride, silicon carbide, boron carbide and titanium diboride.

Joel Moskowitz, president and CEO, co-founded the company in 1967. From the start, his forward-looking vision set the course for the company’s growth and success. "I have always felt that advanced technical ceramics would be the pacing material that would allow other technologies to advance," says Moskowitz. "I believed, even early on, that Ceradyne should focus in the area of non-oxide structural ceramics where, even as a small company, its technology focus would allow it to excel."

New Materials, New Technologies

Ceradyne had its start around the Moskowitz kitchen table in 1967 with one idea—to create a single crystal of potassium tantalate niobate (KTN) for use as an electro-optic modulator. That initial project, which ultimately led to a government contract, also resulted in the development of proprietary technology that moved the small company’s focus to developing more advanced technical ceramics, with an emphasis on defense applications.

The early ’70s saw a move to a larger facility and the installation of the company’s first hot presses for the production of hot pressed boron carbide, which was used to produce Kevlar systems for U.S. and allied military attack helicopters. The use of this material for defense applications was pivotal to the company’s early success and enabled Ceradyne to begin to lay the groundwork for its position as a leading supplier of ceramic armor for military ground-based vehicles and personnel protection.

Those early innovations formed the foundation for many of the company’s current product lines. Today, Ceradyne is a solid, diverse public company that develops, manufactures and markets advanced technical ceramics for industrial, electronic, defense and consumer applications. Continuing innovations in high-volume manufacturing processes, including automated diamond grinding—with the incorporation of robotics—and high-volume precision manufacturing of dimensionally smaller components, led to new applications, such as ceramic orthodontic brackets and cam rollers for diesel engines. These innovations, as well as the events of September 11, 2001, also continue to drive the expansion of lightweight ceramic armor systems, including military body armor, helicopter seats, components and panel systems, combat and commercial vehicles, and modular armor systems.

Strategic Partnerships and Acquisitions

Over the years, the company underwent changes that added to the diversity of its products. From 1974 to January 1983, Kyocera owned Ceradyne, which was then repurchased in a leveraged buyout structured by Moskowitz. In 1984, Ceradyne was taken public, and in 1986 the company entered a strategic partnership with Ford Motor Co.

This partnership had a strong impact on Ceradyne’s product diversification outside the defense industry. Ford selected Ceradyne to manufacture a new ceramic—sintered reaction bonded silicon nitride (SRBSN)—that Ford had developed in its research lab. Ford transferred the SRBSN technology to Ceradyne, purchased approximately 15% of the company, and retained a seat on Ceradyne’s board of directors.

Today, more stringent emissions requirements are being imposed on the heavy-duty diesel engine industry that will require engines to operate with higher fuel and cylinder pressures, which can result in potential durability problems. SRBSN components can withstand the higher operating stresses and improve the durability of current and future engines. SRBSN components, which are also used for industrial wear applications, accounted for 14% of Ceradyne’s sales in 2001. The Ford/Ceradyne relationship continues to be strong through a series of joint development programs.

Another strategic relationship was formed in 1986 with the Unitek Division of 3M to develop and produce ceramic orthodontic brackets marketed under the brand name Clarity™. Produced using Ceradyne’s Transtar™ translucent polycrystalline aluminum oxide, these aesthetically appealing ceramic orthodontic brackets accounted for 18% of company sales in 2001, with a historic growth rate average of 24% over the past four years.

That same year also saw the acquisition of two companies—Thermo Materials, located in Scottdale, Ga., and Semicon Associates of Lexington, Ky. Ceradyne Thermo Materials produces fused silica ceramic products for use as a refractory material by the glass and metal fabrication industries, while Semicon Associates supplies cathodes for use in satellite communications and microwave applications. These two acquisitions now account for approximately 30% of Ceradyne’s business. Because of the need for the fused silica ceramics produced at Thermo Materials, Ceradyne expanded the Georgia factory in 2001, introducing more equipment and technical personnel.

Planning for Growth

After leading Ceradyne through lean times and breakthroughs, Moskowitz proudly reports that the company is stronger than ever, experiencing a 50% growth over the last three years. "In 2001, Ceradyne shipped approximately $45 million in products," he says. "We expect to see continuing increases, with a target of $100 million in shipments in 2005." Moskowitz believes that the company’s products for industrial wear, semiconductor and microwave applications will experience steady growth in the future, particularly in the markets of lightweight ceramic armor, ceramic orthodontic brackets, and ceramic valve train components for diesel engines.

In 2001, the company positioned itself to meet this demand in projected growth by undertaking a $6 million expansion program at its Advanced Ceramic Operations in Costa Mesa, Calif. This expansion quadrupled the hot pressing capacity for the production of boron carbide armor, increased the SRBSN processing capacity, and increased the capacity and capabilities in the precision machining arena for the production of diesel engine components. A completely new, electronically controlled state-of-the-art hot pressing facility was designed, built and put into service in November. This hot pressing line has the capacity to produce sufficient ceramic armor to increase the company’s sales by approximately $20 million per year. Additionally, a dedicated diesel cam roller work cell, including cutting-edge machining processes, was installed to manufacture high volume diesel engine components.

This year, Ceradyne will further expand its manufacturing facilities by 50% through the lease/option of a new 40,000-square-foot-facility in Irvine, Calif. Some operations will be transferred there from the company’s Costa Mesa facility.

An Entrepreneurial Success Story

Over the past three decades, Ceradyne has grown from the kitchen table to a projected $100 million company. Moskowitz believes Ceradyne’s blend of market-oriented advanced technical ceramic products is the key to the company’s success. "It has been 35 years since we started the company with $5,000 that my wife had saved," says Moskowitz. "I’m confident that, as the saying goes, ‘The best is yet to come.’"

For More Information

For additional information about Ceradyne and its products, contact the company at 3169 Redhill Ave., Costa Mesa, CA 92626; (714) 549-0421; fax (714) 549-5787; e-mail sales@ceradyne.com; or visit http://www.ceradyne.com.

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