The AXT Way 

Meet Xuan Wen Li. Fremont semiconductor firm AXT, Inc. poisoned him with arsenic, then fired him - just as it did with up to 500 other Chinese immigrants.

Page 7 of 10

On February 1, 2001, after eight months of negotiating and delays, regulators sat down with AXT representatives and hashed out a deal. The company would pay just under $200,000 and formally agree to fix every problem identified by the government. But on April 30, as part of the agreement, AXT's lawyers sent Brown the results of nine months of arsenic testing. The news was appalling. Although company officials had spent the previous fourteen months assuring Brown that they already were cleaning up their operation, the test results indicated that harmful exposures actually had increased in the months after Brown shut down the facility. Employee Liu Shi was exposed to arsenic levels 14 times the legal limit, Chang Kui Ding worked around levels 28 times the limit, and Ke Yu Wang was exposed to arsenic at 31 times the maximum permissible level.

But AXT officials had figured out a way to solve their regulatory woes once and for all. Some years earlier, the company had bought land in Beijing to expand its manufacturing capacity. Now company executives announced they were moving the most toxic stage of their manufacturing process overseas. AXT was going to China, where Garrett Brown could never meddle in its affairs again. Its Fremont workforce dropped from 826 in 2000 to 317 in 2002, while in China the number of workers rose to nearly one thousand. Hundreds of immigrant employees, having been exposed to dangerous levels of arsenic for years, were wiped off the employment ledgers. Most have vanished back into the immigrant underclass from whence they came, back to Oakland's garment district or the Hobart industrial dishwashers behind most East Bay restaurants.

Xuan Wen Li hails from Western Canton, a region famous for the quality of its coffins. He is one of the few AXT employees to actively participate in the outsourcing process that cost him his own job. In the summer of 1999, Li brought his wife, daughter, and parents to America, in search of better job prospects for his only child. He quickly found work hauling material for a cotton processing firm, but the work proved too strenuous for his fifty-year-old back, and his boss referred him to AXT. There, he mastered the ingot-slicing machines and became one of the factory's crack workers, operating five laser cutters at a time with a partner. He had a family to feed and was proud of showing off his technical aptitude, which trumped his worries about gallium arsenide. "People from China don't really pay a lot of attention to that," he says, through an interpreter. "Because we're new immigrants; as long as we got work, it's okay."

Everything began to change once the government stepped in. At first, Li welcomed the investigation; instead of the paper masks he usually wore, AXT managers suddenly gave him industrial respirators. But one day in mid-2001, Li's boss had a new assignment for him: He was going to China. Li spent six months in Beijing, training hundreds of workers how to detect the fissures in gallium arsenide crystals, how to line up the laser cutters -- in short, how to do his own job. Once he had finished, the company flew him back to the East Bay and fired him.

Today, Li and his family live in the back of his brother's acupuncture clinic in East Oakland. He has tried to find work for more than two years, but no one wants a 55-year-old man who can't speak English. As the male head of a traditional Chinese household, he keenly feels the shame of not being able to provide for his family, of driving his wife and daughter to jobs he can't get. His kitchen, which also serves as the family living room, is littered with copper wire, mangled circuitboards, and old stereo components; Li has lately started taking apart electronic gadgets, hoping to learn a new trade. He also is pursuing work as a housekeeper. And he blames the government for putting him out of work.

"We are not young enough to find job and fight with the younger kids," Li says. "It's really hard to find job now, especially for men. Most people don't want male housekeeper. That's why I think the factory works for people our age. If the government gives us better plan, better solution like better ventilation, the factory would still be open, and we would still have jobs. So they don't have to move all the way to Beijing."

Despite having put the government investigation behind them, AXT's executives watched as the company began a long slide into the red. The technology bust had taken a big bite out of its sales figures, it underwent a painful restructuring, and the move to China was going badly. According to David Kang, an analyst who tracks the company for the investment firm Roth Capital, customers started complaining that semiconductor products from the Beijing factory were not up to the company's usual standard. AXT's bottom line dropped from a $21.6 million profit in 2000 to a staggering loss of $81 million in 2002.

Company executives began to radically contract their business operations, and an in-house, all-Chinese construction crew was dispatched to renovate the old factory at 4311 Solar Way, to consolidate administrative and manufacturing functions back into the building. But it was still contaminated with high levels of arsenic, as Connie Schultz, AXT's new director of Environmental Health and Safety, allegedly pointed out to senior management. According to two sources who asked not to be named, Schultz advised AXT executives to test the work areas for arsenic contamination and provide construction workers with gear to protect them from the poison lurking in the walls and ceiling tiles. Not only did AXT's senior executives ignore her advice, they began firing her employees. One by one, all six of her safety staff quit or were laid off. On May 2, 2003, Schultz tendered her own resignation.

On June 6, Garrett Brown showed up at AXT's door once again. Someone had called to warn him that the company was potentially compromising the health of its workers, and he walked through the renovation zone, conducting wipe samples that confirmed the presence of inorganic arsenic. According to government records, the construction crew did not use gloves or shoe coverlets, nor did they shower after work as required by California law. AXT did not train its construction workers how to handle arsenic and didn't even bother to test if the toxin had contaminated the facility. In July, Brown issued four citations, including one for willfully ignoring the possibility of arsenic contamination at the work site, and fined the company another $20,000. It has appealed the fine, and a final resolution is still pending.

By the end of last year, AXT had managed to stabilize its operations. The company sold a failing arm of its business and reduced its debt by 45 percent. Although sales revenue dropped from the previous year, AXT steadily whittled its annual net loss down to $26.7 million by abandoning money-losing ventures and restoring the quality of its semiconductor wafers. All it has to do now, believes analyst Kang, is to wait for the expected increase in purchasing by large customers such as Motorola. "About a year ago they had some issues, but that's pretty much behind the company," he says. "They're just waiting for the end market to pick up and then they'll go from there. They've got a lot of cash."

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