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HOWARD FINE Staff Reporter When companies need to ship silicon wafers to be sliced into computer chips, even the slightest jolt can destroy the goods. And when hospitals need to ship sensitive organs, an upset could be a matter of life and death. That’s where Air Packaging Technologies Inc. comes in. This 11-year-old Valencia firm with 35 employees is about to go to market with a package that uses sealed air chambers to lock a product in place. “Traditional bubble packs still allow the computer chips to move and can generate static electricity that can damage the circuitry,” said Garvin McMinn, president and chief executive. “An air package locks the product in place, preventing slippage.” To prove its point, Air Packaging has sent test packages containing eggs to local media outlets. The eggs arrived intact. Despite the promise of its air package, the company has traveled a bumpy road since it was founded in 1986 by inventor Dan Pharo, who was looking for a way to wrap a get-well gift. Pharo came up with the idea of using air pockets to lock the gift in place. When Pharo and McMinn took the air package to trade shows, it generated a lot of curiosity and orders. Sales hit $1.8 million in 1992. The two even managed to interest Hollywood, getting the package placed on NBC’s futuristic “Viper” series. But early on, there were signs of trouble, McMinn said. Leaks were found in about 5 percent of the packages; the trouble was eventually pinned on the type of “soft” valve used to inject the air. “In the retail world, this is not much of a problem; retailers often have to deal with products that get damaged in transit,” McMinn said. “But in the world of computer chips which we saw as our biggest market the package must work every single time or the test results will be affected. There is no room for a 5 percent failure rate. And we couldn’t deliver a product that worked every single time,” he said. Orders plummeted from $1.8 million in 1992 to $453,000 in 1995, before rebounding slightly in 1996. But for the first nine months of 1997, sales are running at less than half 1996 levels: $209,000 versus $542,000. Faced with what seemed to be an intractable problem, Air Packaging went back to the drawing board, convincing Motorola Corp. officials to help them retool. But before Motorola would commit its personnel and testing equipment, Air Packaging needed funds. So Pharo and McMinn turned to the Vancouver Stock Exchange and raised $5 million in venture capital. “With that money, we were able to update our equipment, come up with a ‘hard valve’ that would not leak and develop new sealing systems,” McMinn said. “It was a long process and Motorola stuck with us through it all.” The new air package is now undergoing its final round of modifications and the first mass-produced packages will hit the market in early February. The primary target will be the semiconductor industry; other potential customers are expected among hospitals and dental offices that need to transport sensitive organs or molds. “We need about $5 million in sales to break even and we expect to achieve that next year,” McMinn said. However, the market for Air Packaging’s pouches may be limited. Routine wafer shipments between plants are already shipped in special slotted packages capable of holding 10 to 20 wafers each, according to Nathan Brookwood, research analyst at DataQuest Inc., a computer industry consulting firm in San Jose. Air Packaging’s pouches can hold 24 wafers per pack. “This company’s products would be used for prototype or non-routine shipments where the chip-making companies now use bubble-wrap packaging,” Brookwood said. But one outside analyst believes that if the product is priced right, it can find a niche. “If the product is sound and is cost-effective, then the chip-making companies will go for it,” said Dan Hutchinson, president of VLSI Research, a San Jose-based consulting firm for the semiconductor industry. “You are not talking about a huge switching cost.”

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