by Luke Jones
Posted 2/20/2012 12:00 am
Updated 2 years ago
A growing research and development company in Fayetteville is providing a place for the state's electrical engineers to thrive.
The story of Arkansas Power Electronics International Inc., which is a finalist for the Arkansas Business of the Year award that will be handed out Tuesday evening in Little Rock, began with electrical engineer Kraig Olejniczak (pronounced oh-leh-KNEE-check). In the 1990s, he was an assistant professor at the University of Arkansas, but he had always wanted to try his hand at business.
"In high school, I competed in the [Future Business Leaders of America]," he said. "I competed nationally in my senior year. I was always interested in business."
Then, John White, UA's chancellor at the, time approached Olejniczak with an idea.
"He was really big on economic development for the state of Arkansas," Olejniczak said. "At that time, he thought it would be a good idea for the faculty if we had a business incubator."
Using the university's incubator as a springboard, Olejniczak kicked off the consulting firm - then called K.J. Olejniczak & Associates - that would eventually become APEI. He started with 100 SF of office space.
"It wasn't really that long before we actually had a project," he said, adding that his first client was Ducommun LaBarge Technologies in Huntsville.
However, Olejniczak quickly encountered a roadblock. Valparaiso University of Valparaiso, Ind., his alma mater, offered him a job as dean of its college of engineering. Olejniczak was stuck. To take the dean job, which he wanted, Olejniczak would need to abandon his business, which he also wanted.
Luck, however, was on his side.
One of Olejniczak's former students, Alex Lostetter, showed interest in heading up APEI.
"He was one of the best theoretical and hands-on students I've ever had," Olejniczak said. "And I think I have a pretty good eye for talent. It was a perfect situation for him to step in and take over the business."
In August 2002, Olejniczak left Fayetteville for Valparaiso. Since then, Lostetter has been captain of the ship.
Lostetter immediately began transferring his Ph.D. research into his business model. The company became APEI, and its work truly began.
"Power electronics" are parts used in almost any industrial technology. Anyone using a laptop computer will be familiar with the boxlike object attached to the AC adaptor - that's a power electronics system.
"What it does is it takes the type of power that comes out of the wall and converts it into the type of power the electronics in laptops can use," Lostetter said.
APEI's work goes far beyond laptop computers.
"We do military systems, aircraft, hybrid vehicles, satellites, spacecraft, things like that," Lostetter said. "On a satellite, you have a solar array that turns power into electricity. Then you need to change that into a form that computers and electronics can use."
APEI research seeks to compress convertors into ever smaller packages.
"We focus on making things small, lightweight, highly efficient," Lostetter said. "We're in a brand new, state-of-the-art type of technology we're developing."
APEI handles clients both from the government and the private sector. The company's main commercial client is Toyota USA, and it also is teamed up with Rohm Co. Ltd., a large electronic parts supplier in Kyoto, Japan.
Many APEI products are designed for the U.S. military, specifically the U.S. Army Tank Automotive Research Development & Engineering Center. Frequently, APEI's products are tested and optimized for the military, then further designed to fit a commercial model.
"Our goal is, after we get it into high-performing systems, we'll expand the volume we can do, drive the costs down and get into more everyday uses," Lostetter said. "In the next five years or so, we'll be getting into some more commercial uses."
APEI has little in the way of stateside competition. Baldor Electric Co. of Fort Smith creates motor drives, which also involves power electronics. Even so, there's not much overlap.
"Baldor manufactures premium efficient motors," said Shawn Traylor, marketing communications manager at Baldor. "We also manufacture many other mechanical products like gearboxes, bearings and a whole host of products used in the industry. I don't know that we have anything that makes these two alike."
"They're in that field, but that's really the only, in general, the only other in Arkansas in this type of area," Lostetter said.
APEI now operates in 20,000 SF of laboratory and manufacturing space. The company's most recent expansion was a 10,000-SF manufacturing facility at the Arkansas Research & Technology Park on the UA campus. This, Lostetter said, was a milestone for APEI, a client firm of Innovate Arkansas and the Arkansas Science & Technology Authority.
"Our original goal was to develop technology and license it out," he said. "We were pushing the limits on some of the things we were doing, particularly for extreme environments. So far, there weren't any manufacturers or manufacturing processes that could do it. What we learned over the years was that it was simpler for us to actually do it ourselves than try to teach our manufacturing partners how to do it."
Lostetter said he saw a chance to compete in a low-volume, high-dollar niche market, and even turn a profit. The facility was built in 2010 and optimized in 2011. The building itself features a class 1000 "cleanroom" environment.
"It's a way to detect the amount of dust in the environment," Lostetter said. "In a cubic meter, there would be less than 1,000 particles in the air. It's a very clean type of environment, very high-tech."
Lostetter said with current resources, the facility produces about 5,000 units per year, with each unit selling for $500-$1,000 each. Only about five of APEI's 36 employees work in the facility.
"These are very highly skilled workers," Lostetter said. "These are guys and gals with 20 to 25 years of experience at the bottom level of training. The high side is up to Ph.D. level of engineers."
Melanie Ritchie, financial accountant for APEI, said the average salary for the company's full-time employees was $86,345 in 2011, while the engineers averaged $94,950.
Jared Hornberger, director of APEI manufacturing, works in the facility. The work there is extremely technical, he said.
"For example, we have a wire bonder," he said. "It connects a very small wire from the chips to the package. So you're working with a lot of microscopes and microscopic detail."
The facility's products include power modules for the Air Force's F-35 Lightning II fighters. In 2009, APEI won an R&D 100 award from R&D Mag for one of the modules. APEI is also designing for the oil industry, which needs instruments that can survive extreme temperatures.
During the next two years, Lostetter said, APEI will build a second, 13,000-SF manufacturing facility and grow its production rate to 20,000 units per year.
A World Leader
The development of APEI is important: It gives highly trained engineers a reason to stay in Arkansas.
"We're in an area that is very new and emerging," Hornberger said. "We're actually one of the leaders in what we do in the world. We're growing pretty rapidly, becoming key players in the field of high-performance power electronics systems."
Before he graduated from UA, Hornberger had no inkling that he would be able to use his talents so close to home.
"A lot of graduates from UA went off," he said. "There weren't any jobs here; it was an East Coast-West Coast type of deal. Now we're recruiting them to come back."
"It's a great thing," Lostetter said. "There are so many engineers at the university that when they graduate, they have to leave the state to get a good job. Now we've got a great company right here, where they can graduate and come into. Even at the undergraduate level, we bring them in for working part time and internships."
Lostetter feels that power electronics are going to remain significant, too.
"There's a huge variety of applications for renewable energy, solar arrays, solar panels - those require power electronics," he said. "Wind turbines for wind energy - those require power electronics. All of those systems are areas we're targeting for commercial use."
Ritchie reported APEI's general annual revenue for 2011 was $7.6 million. Lostetter said APEI has been growing at a rate of 40 percent per year and he said he doesn't see that slowing down.
"We're tying that to a great program here at UA," he said. "We're putting out engineers that specialize in this area. It's a very core expertise here in the region that you can't find anywhere else in the world."
Kraig Olejniczak is still chairman of APEI's board, and this summer he will return to Fayetteville to work with the APEI team for the first time in 10 years.
"I think the ideas that were conceived in the mid- to late 1990s are as valid today or more so than when we first conceived of them," he said. "The executive team and all the employees at APEI have done a masterful job of focusing on best-in-class work through creative, innovative problem solving. I'm very impressed with everyone there, and I'm anxious to work side-by-side with them to take the company to the next level."