New firm makes high-tech chip

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Kakaako plant built as part of $100 million U.S. military contract

Hawaii will rejoin the computer chip manufacturing industry in July when a new company begins making advanced prototypes in Kakaako.

Los Angeles-based Advanced Photonics Integrated Circuits is nearing completion of a 10,000-square-foot manufacturing plant, believed to be the first of its kind in the state.

The company secured a five-year, $100 million contract with the U.S. Navy to develop photonic integrated circuits for advanced military applications in aircraft, ships and tanks.

Chips will be produced in small numbers, with the operation focusing on perfecting photonics applications. The company plans to hire about 25 employees for the plant, most with doctoral degrees in physics and engineering.

Attracting computer-chip manufacturing to Hawaii was a key part of the state's effort to become a high-tech player in the 1990s. But with the exception of a small, short-lived operation in Mililani, the manufacture of chips has remained rooted on the mainland and in Asia.

Advanced Photonics researches, develops and builds prototypes of highly integrated photonics, incorporating a multitude of optical components on one chip. Chips that use photonics are seen as superior to chips that use copper wire, which have limited bandwidth.

While standard semiconductor chips use electrons to process information, photonics-based chips use particles of light.

Raj Dutt, the founder of Advanced Photonics, said the company also is working on other projects for the Air Force and the Defense Advanced Research Projects Agency, which bring in about $6 million to $8 million a year.

U.S. Sen. Daniel Inouye's influence in securing billions of dollars in military money for the state is seen as a key to a Hawaii-based operation receiving the contract. Hawaii's strategic location between Asia and the mainland, as well as high-tech tax incentives available through Act 221, were also factors.

Advanced Photonics' Navy contract is broken up into five phases, with the first phase the construction of the facility on Auahi Street.

The building is expected to be completed in June with equipment in place by July at a cost of about $11.9 million. Nearly half the space is devoted to a clean room required for manufacturing chips in a nearly dust-free environment.

Dutt said the company will eventually seek commercial applications for its photonic integrated circuits.

"Our first contract is with the military, but once the military breaks down the price points, the technology can be put on the commercial market at a much more affordable price," he said.

Dutt is a Calcutta native who holds a bachelor's degree from the Indian Institute of Technology and a Ph.D. in applied physics from the University of Southern California.

Advanced Photonics is donating $500,000 to the University of Hawaii's College of Engineering to help establish a $1 million endowment to create programs for photonics research.

"We will build a curriculum in the field of photonics, which will include electrical engineering, physics and the medical school, because photonics will have significant application in the medical school," Dutt said.

The company hopes to develop commercial applications in telecommunications, biomedical and optical processing. UH students and faculty also will use the Kakaako facility for course work and experiments.

Though the original plan was to build a facility on Maui or Kauai, Dutt said he believed the intellectual environment in Honolulu would be more conducive to building a world-class facility because it is the state's business, social and political center.

Dutt wants the state to float low-interest bonds to finance the eventual expansion of his facility.

Philip Bossert, executive director of the state's High Technology Development Corp., said he believes Advanced Photonics could qualify.

"It's the first photonics chip plant in Hawaii," he said.

But before the state can issue bonds, it needs to check if the company's credit rating would allow the bonding authority to issue bonds against a guarantee from Advanced Photonics or another financing source.

Bossert stressed that the state and Advanced Photonics are in only the early stages of discussion.

"He gets low-interest loans and we get his company to locate their facility in Hawaii," Bossert said. "But he has to guarantee to pay off the loans."