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Park Systems (KOSDAQ: 140860), World’s Pioneering Innovator in Atomic Force Microscopy (AFM) & Software System — H.E.R.O. Innovators Insights from CEO Dr. Park Sang-il 

We like to wish everyone on the H.E.R.O.’s Journey a Happy Thanksgiving! We are thankful to be able to share with you the stories and personal narratives of H.E.R.O. Innovators in Asia like Dr. Park Sang-il (below), founder of Park Systems Corp who developed the world’s first commercial atomic force microscopy that help revolutionize many industrial fields from life science/biotech and material science to electronics and grow exponentially in value. Gratitude in serving the community helps us to open our eyes and hearts to a more expansive view of reality and better respond to reality; to better recognize and appreciate the good that are present in our lives that might otherwise remain overlooked and ignored; to see the value, kindness, strength and beauty in ordinary people and purpose-driven entrepreneurs doing extraordinary things with emotional courage, industry, service, and honor to positively impact our lives, relentlessly seeking to make the positive change in the people they serve and care about as the unwavering destination of their everyday work. On this Thanksgiving, I am grateful to have the opportunity to gift three inspirational books on “women in science” as encouragement to my 12 year-old niece Shannon for her outstanding character, effort and performance in the PSLE exams as she embarks on her own HERO’s Journey to middle school and beyond. Like to share these books with all intrepid souls and discoverers on the H.E.R.O. Journey seeking to make a positive change in the people we serve:

  • Women in Science: 50 Fearless Pioneers Who Changed the World by Rachel Ignotofsky (Amazon)
  • Wonder Women: 25 Innovators, Inventors and Trailblazers Who Changed History by Sam Maggs (Amazon)
  • Forgotten Women: The Scientists by Zing Tsjeng (Amazon)

Breakthrough new insights into the live cellular physiological dynamics of cancer, neurodegenerative disorders and human diseases; directly observing how CRISPR-Cas9 gene editing cuts DNA to follow the guide RNA through cells in real-time with unprecedented details for the first time ever; automatically detecting nano-level defects in wafer 24/7, accurately measuring and analyzing the three-dimensional microstructures of 3D NAND memory chip used to power smart cars and artificial intelligence so as to increase yield and improve device performance; observing and understanding the surface behavior of lithium ions used in energy applications to improve the lifetime of rechargeable EV (electric vehicle) batteries — all these important secrets and mysteries are increasingly discovered because of the rapid adoption and implementation of the atomic force microscopy (AFM) in broad industrial applications from life science/biotech, material science to semiconductor.

Invented as a prototype in 1985 by Professor Calvin Quate, Nobel Prize in Physics 1986 winner Professor Gerd Binnig, and Professor Christoph Gerber, the AFM is quietly revolutionizing many fields as the indispensable measuring tool and emerging as the only alternative not just because of its imaging prowess that is more than 1,000 times better than the conventional optical microscope to reveal nano-size microstructures and measure for the first time ever the three-dimensional structure while not destroying the sample surface, but it also provides for the first time ever an interactive technique with the capability to measure the physical properties of the living cell, nano-size wafer microstructure, innovative new material, etc, including their electrical, conductivity, mechanical, magnetic and electrostatic fields, thermal and temperature distribution, chemical, pressure, stiffness, elasticity, adhesion, friction, spreading resistance, and morphology characteristics.

Park Systems Corp. (PSC) (KOSDAQ: 140860) is the world’s pioneering innovator in atomic force microscopy & software systems disrupting the conventional electron microscopy market that’s 10X larger and with growing ultra-high precision nano-scale industrial applications from life science/biotech, material science, rechargeable EV batteries to semiconductor, serving over 1,000 clients such as NASA, MIT, Apple, Rolex, Seagate, Micron, Infineon, Samsung Electronics and over 86% of sales are to overseas markets. Dr. Park Sang-il, who studied at Stanford under Professor Quate, founded PSC and went on to develop the world’s first commercial AFM in 1988.

“In 1590, Zacharias Janssen invented the first optical microscope, followed by the second-generation invention of the electron microscope by physicist Ernst Ruska and electrical engineer Max Knoll in 1931. The atomic force microscopy is considered the third generation microscope which breaks the myth that atoms are too small to be seen with any good microscope and is the essential tool in the nanotechnology era. Unlike an electron microscope, which can only see solid samples in an expensive vacuum state, the AFM is an indispensable measuring instrument in the nano and bio fields because not only can it know the shape of a liquid sample such as blood in the air, but also the physical properties such as pressure, magnetism, electricity, and thermal properties. Electron microscopy requires elaborate and complex sample preparation, but atomic microscopy does not require much sample preparation,” CEO Dr. Park commented.

CEO Dr. Park added: “Increasingly, AFM is being selected for nanotechnology research over other metrology techniques due to its non-destructive measurement and sub-nanometer accuracy. Park Systems’ cutting-edge AFM nanoscopic tools features reliable and repeatable high-resolution imaging of nanoscale cell structures in any environment without damage to the sample. At present, the world market size of atomic microscope is about one-tenth of the market of electron microscope. If the electron microscope market is about 4 trillion won, the atomic microscope is only 400 billion won. But this is one of the fastest growing markets. In particular, the industrial atomic microscope market is just growing rapidly. Park Systems is growing at a rapid rate of 20 to 30% every year by securing original technologies in the growth market and solving high-value problems. We are proud to be the only company that has achieved the estimated net profit for investors among the 44 listed companies on the list of technology growth companies since 2005. The atomic microscope manufacturing technology was selected as one of the 47 national core technologies by the Ministry of Commerce, Industry and Energy in Korea. We will grow to become a leading company in cutting-edge nano-instrumentation that realizes quantum jump based on differentiated technology competitiveness and product lineup.”

PSC commands a distinctive technological edge from its rivals with:
(1) the world’s only non-contact AFM which is critical in ensuring accuracy, resolution and operating speed as well as preventing wear and tear of the probe and contamination or damage of the sample. AFM tips are so brittle that touching a sample will instantly reduce the resolution and quality of the image they produce and they need to be regularly replaced like a consumable item. All AFM in the world uses the tapping contact mode with the sample. Not only does the probing tip becomes less sharp through repeated usage which results in leas accurate measurement, but more importantly, it results in contamination or damage to the sample. PSC possess the original technology of the world’s only contactless AFM. PSC’s non-invasive nanoscale imaging means cell biologists can also study living cells without disturbing them, opening new doors of inquiry into how these units of life work;
(2) self-developed innovative SmartScan operating software with a user-friendly interface which enables non-engineers and non-scientists to easily produce high-resolution images in five times the normal speed with a single click without the need to have the expertise to manually enter the coordinate values of the sample, acquiring a large number of new group of users.

As electronic components such as HDDs and semiconductors are increasingly miniaturized and highly integrated, the necessity of measurement at the nano level is increasing. While PSC is the world #2 leader in terms of market share behind Bruker (NASDAQ: BRKR), PSC claims supremacy in the industrial AFM market which requires even higher performance requirement than AFM for research applications, commanding a 90% share of the AFM market for hard disk drive (HDD) defect review systems, a technological leadership it intends to extend to the next-generation semiconductor market which has expanded from a 2D structure to a highly integrated 3D-laminated structure used in high-end chip applications from smart cars to AI (artificial intelligence). Noteworthy is the significance of PSC in solving the high-value problem in which it is difficult to develop and improve various semiconductor 3D fabrication process technologies due to lack of 3D measurement, analysis and evaluation system whereby the conventional electron microscope cannot observe and measure ultrafine measurements below 10 nm of 3D NAND microscopic structures and stacking surfaces at high resolution and detect nano-size defects of wafers.

PSC is positioned in the early stages of semiconductor market growth as many semiconductor companies are forced to make efforts to cope with confusion in the 3D NAND process and secure higher initial yields and lower costs, which they are more conscious of during the short-term cycle correction. As a result, PSC expects its market share to rise sharply with industrial AFM orders leading to long-term maintenance contracts as PSC claims that clients using the industrial AFM produced by its rival Bruker are recognizing that it is not enough to solve their measurement and wafer defect detection/inspection problems. PSC competes globally with Bruker, which has not developed new technologies or new products over the last decade despite being the #1 market leader and AFM contributes only around 6–8% of its group sales, Oxford Instruments (LSE: OXIG) (focuses more on X-ray spectroscopy equipment and has limited AFM product range and very high price range), and Keysight Technologies (NYSE: KEYS). PSC is of the view that the industrial AFM market is advantageous for them because the performance of the product is absolutely critical to winning the customer and PSC believes their only true competitor Bruker is passive in technology development. Besides capturing new demand, management estimates that the life span of the industrial AFM is around 5 years, and the replacement demand of its products will start in 2020–21. Expansion by PSC into other industries is under way, including (1) application to the analysis and improvement of display, especially OLED process, which requires deposition of organic materials, which is an industry that needs microfabrication as much as the semiconductor industry; (2) the AR / VR industry, (3) the lens industry.

On 14 Nov 2018, PSC announced its 3Q results (Jul-Sep 2018) in which 9M sales increased 81.2% yoy to W26.6bn, operating profit rose 478% to W4.7bn and operating cashflow of W3.2bn and positive free cashflow of W2.6bn with positive free cashflow margin of 9.8%. This brings PSC’s latest 12-month sales and operating profit to W42.2bn and W10.7bn respectively. Balance sheet remains healthy with zero debt and a net cash of W6.97bn (US$6.2m). PSC achieved a 81% and 232% absolute increase in sales and operating profit in the recent three years, which helped propel a 350% increase in market value since its Dec 2015 listing to US$229m.

Noteworthy is that on 1 Nov 2018, PSC disclosed that it had won a W1.8bn large order from Samsung Electronics for its NX-wafer AFM system that leads to vast process improvement and yield improvement, a significant deal not only because it is the first order by Samsung but it also demonstrates PSC’s technological prowess and indicates PSC could broaden the scope of the AFM across the value chain of the semiconductor industry. As Samsung Electronics begins to use AFM after Micron, it is expected that there will be a lot of semiconductor companies that adopt it in a ripple effect, a positive impact on PSC’s clear roadmap ahead in the acquisition of large-scale clients.

CEO Dr. Park commented that PSC’s product lineup from research to advanced industrial applications: “Our actual product lineup also evolves from research equipment that looks at the early atoms to core instrumentation equipment for advanced industrial applications. As electronic components such as hard disk drives (HDDs) and semiconductors become smaller and more integrated, the need for measurement at the nano level is also increasing. Our Park NX-Wafer is the only wafer fabrication AFM with automatic defect review. This gives it the power to increase the throughput of your lab by up to 1000% while ensuring a high level of accuracy and quality control when scanning wafers up to 300 mm in size. In addition to nanotechnology, we are also working to develop bio-products to meet the future bio-industry and expand the entire AFM market. Now, we are aiming to build a brand name so that ‘Korea’ can come to mind first when we are under an atomic microscope.”

What fascinates us is PSC’s innovative SmartScan software that enables users who are not engineers/scientists to produce high quality scans and measurements. CEO Dr. Park elaborated: “In an industry dominated by complicated and poorly designed user interfaces, Park Systems prides itself on creating systems that are both powerful and surprisingly easy to use. Our innovative, groundbreaking Park SmartScan OS software produces high quality nanoscale imaging in auto mode in five times the normal speed with a single click. SmartScan was designed to be highly effective by automating many of the processes that researchers and engineers perform every day. This can drastically improve efficiency in lab and industrial settings and allow more senior technicians to offload some of their work to less experienced users. Existing equipment was heavily dependent on the engineer’s expertise, such as the engineer manually entering the coordinate values of the sample. However, we have made the equipment universal by automating software. It made it easier for more people to use the equipment, even for beginners or less seasoned users to obtain quality data as good as an expert’s, without the day-and-night ordeal of using trial and error to acquire experience. Park SmartScan automates and guides the user through every step of the imaging process. All the user needs to do is place the sample on the stage, choose the area of interest, and specify the scan size desired. The rest is done by the software at a click of a button. The system will automatically do the frequency sweep for the cantilever, move the Z stage to the sample, and auto-focus on the sample allowing the user to see and navigate the area of interest for imaging. It will also adjust all the necessary parameters for optimum settings, engage the cantilever, and start scanning the sample. The scan will continue with no additional input from the user until the image is acquired and completed.”

While PSC is highly profitable and positive free cashflow generative now, CEO Dr. Park shared that the entrepreneurial journey to start PSC has been full of struggles. CEO Dr. Park shared reflectively the inspiring story which also traced the invention and commercialization of the AFM: “I graduated from Seoul National University and received my Ph.D. from Stanford University in 1987. I studied under the emeritus Professor Calvin Quate who, together with Nobel Prize in Physics 1986 winner Professor Gerd Binnig and Professor Christoph Gerber, developed the Atomic Force Microscope which opened the way to see the ultrafine world. The atom was so small that it broke the scientific legacy of using any tool. Binnig, Quate and Gerber were rewarded with the Kavli-Prize in 2016 for developing the Atomic Force Microscope. My Stanford dissertation thesis was ‘Surface Microscopy for Surface Physics’. STM and AFM (atomic force microscopy) can be called ‘cousins’. If the developed STM is a microscope that finds out the structure of the sample through the phenomenon that the electrons are tunneled after the electrons are fired on the surface of the object with the probe, the AFM can detect the interaction force between the probe and the object. This is the principle used for measurement. We can see atoms of 0.1 nanometer (1 nanometer is one billionth of a meter).”

What inspires us the most is CEO Dr. Park’s original Purpose which is to make the difficult choice to give up an academia life and instead tread the entrepreneurial journey to develop the AFM technology into a useful tool for science and industry, as he seeks to become the positive change for the people and community he serves: “If you studied the latest theory of a field that received a Nobel Prize in Physics under a global professor, it seems like you should go the professor’s path in the US or in Korea, but I chose entrepreneurship because I thought that the technology I studied could be a useful tool for science as well as industry. The Stanford university atmosphere then was also in the midst of the Silicon Valley startup boom. I was also informed that I should be a professor of physics at my alma mater, Seoul National University. When I refused to be a professor at Seoul National University and decided to set up a company, my Korean acquaintances tormented me to change my mind immediately, saying, ‘I do not know the world.’ Of course, I was confident that if I did not do well, I could go back to work as a professor. I have to challenge what I can do. I decided to change my paradigm of the microscope market instead of choosing a passive life in order not to fail.”

“Xerox, NTT, and other business associates visited the Stanford university lab and asked us to make prototype products after viewing the prototypes of AFMs. Confirmed that there was demand, in 1988, a year later, at the age of 30, I set up Park Scientific Instruments (PSIA), a AFM maker, in a garage in Palo Alto near Stanford University for $40,000. My first client was Max Planck, a leading research institute in Germany, in 1989. They heard that Professor Quate’s disciple was making AFM. At that time, scientists were awaiting the commercial release of the AFM. Max Planck asked me to deliver the microscope within six months. So I exported the world’s first commercial AFM for $100,000 in Dec 1989. And the atom is visible. Sales, which was only $480,000 in 1989, increased to $5.95 million three years later in 1992 and reached $12 million in 1996.”

“After nine years of doing business in the US, I sold the company to Thermo-Fisher for $17 million and returned to Korea in 1997. PSIA is now part of the US scientific equipment Bruker. The United States is pleasant and there are many places to see, but I was thinking of raising a high-end AFM maker in my home country. I had read a management book and I was overwhelmed by the phrase, ‘Think what people at your funeral will say about you.’ For the first five years, AFM finished products were imported from PSIA and core modules were assembled and sold in Korea. I started to develop an industrial atomic microscope which is used for semiconductor production process. I pledged to repair the weaknesses of the existing atomic microscope. The equipment was too sensitive to ensure reliability. There is no big deal for use in research laboratories or institutions, but reliability was an issue for industrial use, including being used in the wafer production process which are automation devices that operate 24 hours a day, seven days a week. Industrial AFM have a higher price unit than research AFM because of the extreme demanding requirement for ultra-precision and accuracy and cost around W1.5–2 billion per unit, or around 20 times more in price per unit than the ATM for research use.”

CEO Dr. Park went on to share about how they applied new innovations to the AFM which its rivals are still unable to replicate till today: “We applied three ideas to the product to ensure reliability. First, we upgraded the existing product which attached all three (XYZ) three-dimensional axes to the cylindrical tube scanner at the bottom, and separated only the Z axis separately as the upper scanner. This allows you to get a complete planar image to the correct value without image correction of the software. Next, we made it possible to measure in contactless mode. Because of the rapid wear of the probe, measurement by conventional contact methods is less uniform and less accurate as the measurement is repeated. We have improved reliability by switching it to non-contact mode.”

“Finally, we created SmartScan, an innovative, groundbreaking AFM smart software that produces high quality nanoscale imaging in auto mode in five times the normal speed with a single click. In an industry dominated by complicated and poorly designed user interfaces, Park Systems prides itself on creating systems that are both powerful and surprisingly easy to use. SmartScan is the best AFM operating software available with the combination of extreme versatility, easy-of-use and quality. SmartScan was designed to be highly effective by automating many of the processes that researchers and engineers perform every day. This can drastically improve efficiency in lab and industrial settings and allow more senior technicians to offload some of their work to less experienced users. Existing equipment was heavily dependent on the engineer’s expertise, such as the engineer manually entering the coordinate values of the sample. However, we have made the equipment universal by automating software. It made it easier for more people to use the equipment, even for beginners or less seasoned users to obtain quality data as good as an expert’s, without the day-and-night ordeal of using trial and error to acquire experience. Park SmartScan automates and guides the user through every step of the imaging process. All the user needs to do is place the sample on the stage, choose the area of interest, and specify the scan size desired. The rest is done by the software at a click of a button. The system will automatically do the frequency sweep for the cantilever, move the Z stage to the sample, and auto-focus on the sample allowing the user to see and navigate the area of interest for imaging. It will also adjust all the necessary parameters for optimum settings, engage the cantilever, and start scanning the sample. The scan will continue with no additional input from the user until the image is acquired and completed.”

“The existing atomic microscope structure by our rivals was a technology applied in the 80s when PSI was established, and the tube scanner measures the entire X-Y-Z axis. The image is distorted due to the measurement through the movement of the tube. The curvature of the plane is distorted as the measurement surface becomes wider. Tapping mode is generally used because it is difficult to realize contactless mode due to low resonance frequency and slow reaction speed. Park Systems flexible hinge scanner system (X-Y scanner and Z scanner separated) can increase measurement accuracy by scanner independence. In the case of the plane movement, the voltage is applied to the hinge of the four sides, and the controlled movement through the constant expansion is possible. In the case of the Z scanner, the accuracy of measurement can be further increased by independently moving up and down. Our unique head design allows easy side access allowing you to easily snap new tips and samples into place by hand. The cantilever is ready for scanning without the need for any tricky laser beam alignment by using pre-aligned cantilevers onto the cantilever tip holder. Our new AFM Pinpoint mode accurately measures mechanical and electrical characteristics at each measurement point with controlled contact force. Nanotube-based Ion Conductivity Microscopy (SICM) enables advanced Scanning Electrochemical Microscopy (SECM), Scanning Electrochemical Cell Microscopy (SECCM), and in situ live cell nanoscopy. These new innovations in AFM will help scientists around the world to achieve better scientific breakthroughs.”

“In 1998, the first product, the atomic microscope ‘SM5–200’, was designed to detect defects in 200mm wafers. In 2000, Samsung Electronics ordered an atomic microscope for manufacturing a 600 × 720 mm liquid crystal display (LCD). There was no atomic microscope in the world to inspect such a large sample. If the atomic microscope frame is made large, it will not maintain its performance due to vibration. In one year, we developed an LCD atomic microscope that solves the problem and has automated functions. In 2001, there was a sudden change. Thermo Fisher, which provided technology under the contract at the time of the PSIA sale, was acquired by Veeco, a global manufacturing equipment maker which itself was acquired by Bruker in 2010. Veeco said that if we do not stop technology development, we will not be able to get major parts of the atomic microscopes. In other words, Veeco was telling us, ‘Do not make competing products but do only sales.’ I decided to take the opportunity to become technology independent. I devoted myself to researching from the second half of 2001, launching our current flagship product, the XE-100 series. The market response was explosive. It was awarded the ‘Nanotechnology Award’ in Japan in 2003 for its superiority over the existing products in the US. Direct AFM was produced and sold in Korea since 2002. We have also developed the world’s first 3D atomic microscope that can measure up to three-dimensional shapes with a sample tilted at 70 degrees. IMEC has requested this technical cooperation since May 2015. IMEC is a world-renowned nanoelectronics consortium that develops next-generation semiconductor technologies with the world’s best equipment. Intel and Samsung Electronics are IMEC members. We have recently completed the 3-year joint development project (May 2015 to May 2018) with IMEC for three years. Through our research with IMEC, we have discovered improvements and developments in various functions required by the semiconductor industry, and continue to improve performance and develop new ones accordingly. Due to these new development activities, we expect that the semiconductor production line adopting our atomic microscope will increase greatly.”

We were intrigued by the technological supremacy of PSC in the HDD industry, commanding over 90% market share. CEO Dr. Park explains: “Hard disk industry is the smallest man-made structure in all industries. In the case of a terabyte-class hard disk, the height of the structure (PTR) of the head for reading and writing data must be controlled with a precision of 0.1 nanometer or less. The industry leader in nanostructures is the HDD. The only equipment that can precisely measure this small unit and be used for production management at a reasonable cost is an atomic microscope. Since 2005, major hard disk manufacturers around the world including Seagate, Western Digital, Hitachi GST, Hoya, Showa Denko and Toshiba have been using our atomic force microscope. In recent years, Rolex, a global watch company, has used our AFM to increase the watch’s lifespan by reducing the wear of numerous cogs and axles running in the watch by analyzing the surface in nanometers.”

CEO Dr. Park also expresses his confidence in the growing application use of the AFM in the semiconductor market and that PSC has gained an overwhelming competitive edge: “The semiconductor market is also getting bigger. Park Systems’ interest in semiconductor process atomic microscopy has been increasing with the rapidly changing industrial flow of semiconductor miniaturization. Accurate measurement and analysis of microstructures due to the reduction in the size of semiconductor devices is becoming an important factor because of its direct influence on the device performance. Compared with a scanning electron microscope with a magnification of hundreds of thousands of times, the magnification of the atomic microscope is up to tens of millions times, and it has the merit of being able to observe in three dimensions. The atomic microscope is unique because it is possible to measure the smoothness of the silicon wafer surface. If the surface of the wafer is rough, it will lead to defects. Although the electron microscope can obtain the shape information through the current image by shooting the electron on the sample, the surface can be seen but the depth information is unknown. The surface of the wafer becomes contaminated or deformed by the electron beam generated during the electron microscope measurement also becomes a serious issue. The equipment (CD-SED, TEM, OCD, etc.) used for microstructure measurement has disadvantages such as resolution problems, sample damage caused by sample preparation. It is a fact that we are facing limit. Therefore, AFM, which is capable of non-destructive microstructure measurement and hybrid metrology, is emerging as a next-generation in-line measurement analysis method.”

“3D designs such as FinFETs do not provide accurate measurements with electron microscopes, and new atomic force microscopes such as our 3D atomic microscope (NX-3DM) are emerging as the only alternative. With atomic force microscope, the circuit line width of the semiconductor, the shape of the three-dimensional structure, and the electrical characteristics can be precisely measured. It has become important to measure the line widths of the upper and lower portions of the pattern separately and measure the uniformity accurately and automatically at the same time as the line width of the semiconductor device is narrowed and laminated in three dimensions. In addition, non-destructive measurement is essential for measuring photoresist (PR) patterns.”
“IBM, which has pioneered the history of the world semiconductor industry by inventing DRAM in the mid-1960s, is also a customer, buying our AFM to observe the nanostructures during the R&D process prior to mass production of semiconductors. It is meaningful to supply equipment to a company that is regarded as a pioneer of semiconductor technology in the world. Other semiconductor companies such as Soitec in France (ENXTPA: SOI) have been looking for purchases since the recommendation of IBM. Shin-Etsu, the world’s largest maker of silicon wafers, is also using our AFM to manufacture wafers. Samsung Electronics, Samsung Electro-Mechanics, LG Electronics, LG Display, Hyundai Motor, and Hyundai Heavy Industries also use our AFM for yield and defect analysis of advanced products such as semiconductors, displays, LEDs, and solar cells. Park Systems has gained an overwhelming competitive edge in the semiconductor atomic microscope market.”

Given that AFM for research use and industrial use have very different performance requirements — and hence a 20-times difference in price per unit, we wanted to understand more about PSC’s strategy in the AFM market for research applications: “Current research atomic force microscopy market is very competitive and per unit of less than US$50,000. The AFM for research is made up of a large number of customers all over the world, but the product itself does not guarantee a high market share. Rather, inferior products can be sold more because of the brand’s reputation and sales network. In addition, we have to overcome prejudice against Made in Korea and have to overcome language barriers in marketing activities. Nevertheless, we are expecting that these obstacles will gradually disappear once our effective marketing strategy is steadily expanded and our awareness rises and our products are sold more. We offer advanced research AFM models that improve convenience and productivity. Our low-cost and high-priced models offer accurate measurement results with no image distortion due to the non-contact image measurement technology and the unique scanner design. The industrial atomic microscope market has very limited competitors compared to the research atomic microscope market. In addition, technology verification, rather than marketing or brand awareness, has the greatest impact on a customer’s purchase decision . We already have outstanding technology and the ability to develop the technology required in the changing market. We are already well received by many industrial customers. Therefore, the industrial atomic microscope market, which is expected to grow in the future, is expected to contribute greatly to our sales growth in the future.“

CEO Dr. Park also made additional comments on his view on AFM application in material science, biotechnology research and lab on chip diagnostics market: “Finding new materials with innovative characteristics at the nanoscale have helped guide the development of many industries in the modern age. Such materials have been behind breakthroughs in sectors such as energy, transportation, and life science. To investigate and characterize innovative nanomaterials, scientists choose Park AFM. Our technical know-how and deep knowledge of various applications helps researchers find a way to examine their samples with unmatched accuracy and productivity. Characterizing electrical, magnetic, mechanical, and morphological properties of materials are possible with the dedicated operating modes available with Park AFM. With this versatility, our customers can upscale their research capabilities and continue kindling the spirit of innovation and progress brought about by breakthrough nanoscale investigations.”

“The growing demand for diagnostics with high speed, efficiency, and sensitivity of results has increased the demand for atomic force microscopes globally. The need for diagnostics is increasing in order to monitor and detect various infectious diseases and blood-related disorders. Furthermore, rise in personalized medicine, drug discovery and life science research, need for high speed diagnostics, and increased government funding are some of the key factors driving the global lab-on-chips application market. These factors are expected to boost the growth of the lab on chips market.”

“The market for biotechnology research is still small compared to the total atomic microscope market. However, if the technology development reaches a certain level or if a killer application is found in a specific field, the market may increase explosively. Major atomic microscope vendors have yet to offer solutions that measure the binding force of DNA or Cells, but we expect to be a breakthrough in expanding the market size. Only Park AFM has developed an innovative in-liquid living cell precise membrane imaging technology, Scanning Ion Conductance Microscopy (SICM). This technique has enabled researchers to study complicated physiological phenomena in liquid directly, something not possible with conventional microscopes in which cells can be seen only after the cells have been killed and dried. Not only are physiological biomaterials and live cells able to be imaged with Park SICM, but various pipette-based applications can be integrated into the investigation such as patch clamping for ion channel signal detection, electrochemical reaction analyses, and even nano-injections or nano-biopsies. It has the advantage of making research possible on the nano scale, which is likely to form a unique market in the future bio-field. With the development of ultra-precise manufacturing technology, existing measurement sensors are made into nanometer size and applied to an atomic microscope. There is an endless market for the future.”

When asked about the potential crowding out effect of powerful chaebol conglomerates on the Korean economy and the resulting effect of an uneven competitive landscape for SMEs in Korea, and how PSC overcome the obstacles in the initial years, CEO Dr. Park was spirited and said, “Business in Korea was not easy. AFM production required a high level of science and technology. Unlike a large corporation, it was impossible to pay a salary equal to a doctoral worker of a prestigious university. It was a reality compared to the fact that the younger students of Stanford alumni in Silicon Valley in the United States did not need to worry about the workforce because they would participate in new ventures. When I was in Silicon Valley, there were 70 staff, including Stanford University, 15 doctoral degree holders, and top talent from the Harvard MBA. After two or three years in Korea, there was no one to work with. The first condition for a venture’s success is its talent. The reason why Silicon Valley of the United States was born is because the companies were founded by excellent talent. Korea is the opposite. When professors do not become professors, they work in public corporations or large corporations, and they do not join venture companies. As long as this social awareness does not change, venture companies will never succeed. I went through countless times. No matter how hard I try to find good people back then, venture companies like us are not considered at all. It was not once or twice when I came back to Korea and was regretful. I also struggled to adapt to the Korean climate because we decided to do transparent management. It was customary to give gift money. Of course, sales are important. But there is something more important. It is a new value. It is best not to compromise justice, to be honest, and to work on principles.”

“I have had bad experiences with large corporations in our business. Large corporations had verbally said that they would like to buy our atomic microscope, but they had unilaterally cancelled orders. I also had a lot of heartburn due to the way the big company paid me. Our atomic microscope is a high-priced machine and we have delivered to large corporations, research laboratories and institutions. However, large companies show the most backward behavior in payment. One such large company paid us six months later after delivery. I do not know why there is such a system for a large company that has millions of cash. The research labs and institutes that normally carry out national projects paid cash in a month. In the US, we usually send invoices for payment within 30 days, at the latest within 60 days.”

“If you go to court because of patent problems, 80% is won by big companies. By strengthening the patent system on the intellectual property rights of small and medium-sized venture companies, venture companies can create patented technology and succeed. It is not easy for small businesses to sue big companies. Could a small business exist until the end of the lawsuit? When a large corporation comes to the court with a strong legal team and the financial power, the SMEs end up with no quality legal services. Even if they succeed in a lawsuit against a large company later, it is useless if they only pay for the royalties. That money ends up paying the lawyer. During a court battle, SMEs are already shutting down. This is the reality. The problem of large corporations and SMEs is also directly related to the legal service issue. The United States is a very developed legal service, so even a small venture company uses advanced legal services from the start. Although they are small venture companies, the level of attorneys who provide services to them is comparable to that of large corporate attorneys. One of the reasons why venture companies in Korea are hard to blossom is because of legal services.”

“Good people should decide to start a venture. Silicon Valley is full of entrepreneurship. Everyone is going to do business if there is an opportunity for business. We have to create such a culture and atmosphere. We can reproduce in Korea the vigor of Silicon Valley in the United States by solving only a few wrong practices. Innovation is not a R&D department, but a choice and concentration. In a knowledge-based economy, we need to know science and technology to play a leading role in the nation and society. For Strong Korea, R&D and business are not enough and we need to create a cultural climate that emphasizes science and technology. It is a difficult situation, but our company is confident that the future is bright because of our excellent technology and R&D ability.”

We are an admirer of CEO Dr. Park for his management philosophy and values. CEO Dr. Park summed up: “True mental satisfaction does not come from material abundance. Let’s say you have a lot of money and power. But everyone around you hates you. Because you live in the wrong way. If you live a life that is not self-righteous, you will not be recognized by people around you. On the contrary, even if you do not have a lot of social status, you do not compromise with injustice and do your jobs faithfully. Everyone around you will like you. You will receive respect. He is truly a happy person. Of course, such a person is a person who makes a right choice for himself. I have to do my best no matter what I do, and I should have no regrets in my work. If I do my best, but it does not work out well, then I will be distracted from my heart. Once you have made your decision, you must accept the success of the work as the will of the sky. That way, you get mental relaxation and comfort in the worst case. In the long term, I think it is the best strategy to be honest and to work on principles. It is a happy life that you can take pride in your work without compromising with injustice. I always thought I should live straight and I am proud to have done so. I always talk to my employees. When I work, I have to work with a sense of mission and reason.”


Intrigued and want to read more? Download this week’s H.E.R.O. HeartWare: Weekly Asia Tech News with brief highlights of the inspiring entrepreneurial stories of tech leaders in Asia whom we have been monitoring over the past decade in our broader watchlist of over 300 listed Asian tech companies and our focused portfolio of 40 HERO Innovators who reveal their problems and successes behind building the company. Inspired by Brandon Stanton’s photo-journalistic project Humans of New York which collects and highlights the street portraits and moving stories of people on the streets around us who were doing things that changed lives and made a difference in the city but often went unnoticed, we have curated a collection of Hear the Heart of the H.E.R.O. stories on our website which we aim to update with refreshing and uplifting new stories weekly. Please check them out and give us your valuable feedback so that we can improve to make them better for you.


It started with rethinking a few questions. Question №1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question №2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart — IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2–5 years) on the type of business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. — “Honorable. Exponential. Resilient. Organization.”, the inspiration behind the H.E.R.O Innovators Fund, (surprisingly) the only Asian SMID-cap tech-focused fund in the industry.

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

The H.E.R.O. HeartWare Weekly highlights interesting tech news and listed Asian emerging tech innovators with unique and scalable wide-moat business models to keep yourself well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy in Asia as part of our thought leadership for our ARCHEA Asia HERO Innovators Fund to add value to our clients and the community. Hope you find the weekly report to be useful and insightful. Please give us your candid feedback and harshest criticisms so that we can improve further to serve you better. Besides the BATTSS (Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung), do also tell us which Asian tech entrepreneurs & CEOs whom you admire and respect and why — we will endeavor to do up profiles of them for sharing with the community. Thank you very much and have a beautiful week ahead.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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