As a manufacturer of high-tech materials for specialty glass, SCHOTT is currently playing an important role in the world’s fight against the Covid-19 pandemic by producing glass vials to safely package and transport vaccines and treatments. “Seventy five percent of Covid-19 vaccine manufacturers rely on our vials – this includes vaccines you hear about in the media every day” explains Dr Frank Heinricht, Chairman of the Board of Management at SCHOTT. “By the end of 2021, we will have supplied enough vials to hold at least two billion doses of various Covid-19 vaccines.”
SCHOTT is also involved in making glass substrates for antibody and antigen testing in diagnostics. “Our light-conducting glass fibres are used in intubation endoscopes and ensure that the physician can properly place the ventilator; specialty glass is also in the sensor components of such a ventilator” says Dr Heinricht.
As the pandemic took hold, SCHOTT adapted swiftly to implement extensive hygiene concepts and enable digital solutions, thereby ensuring its production and delivery capabilities.
“Of course, Corona had a major impact on our global production network” rues Dr Heinricht. “Whether in Mitterteich, Bavaria (a place with high numbers of incidences at the beginning of the pandemic), in Jinyun, China, India, or the USA, the year presented significant challenges. But it also unleashed unimagined forces” – a fortitude reflected in the company’s positive financial results for 2020, which saw sales rise by 2.2% to €2.24 billion, with an operating profit of €288 million.
The success story was “the result of a joint effort by all employees” maintains Dr Heinricht, along with prudent safeguarding – early, hard preparatory work on the investment and innovation side; measures that “have made us more robust as a company and are now paying off.”
“We actively drove change with a culture programme, bringing new and more agile thinking to the group” explains Dr Heinricht. “In total, we have invested over one billion euros in the last six years and significantly expanded our business with product innovations. At the same time, we first streamlined and then systematically expanded our portfolio. This balance is now helping us."
“Thanks to these measures, we have managed to come through this crisis well so far” he believes. “This trend has enabled us to set ourselves apart from many other industrial companies which have had to significantly revise their outlook.”
SCHOTT in fact made a record investment of €320 million in plant projects and upgrades during 2020. The spend was part of the company’s strategic investment programme initiated several years ago, while an unprecedented demand for pharmaceutical glass offered a key investment opportunity…
“We are focusing here, in particular, on megatrend health” Dr Heinricht elaborates. “Therefore, we invest significantly into fast growing pharmaceutical markets in China and India, where there is a massive demand for our pharmaceutical packaging and pharma tubing.”
In 2020, SCHOTT invested over €60 million in a state-of-the-art plant for FIOLAX pharma glass tubing in Zhejiang, China. “It has one of the world’s most modern production facilities in the industry” reveals Dr Heinricht. “In the first stage, the plant has an annual capacity of up to 20,000 tons. We intend to use it to meet the rapidly growing demand in China for pharmaceutical glass for drug packaging.”
In Germany, SCHOTT plans to expand pharma production at its site in Müllheim. “A completely new plant for polymer syringes will be added here by 2022” says Dr Heinricht. “In India, too, we have further expanded our capacities at our pharma glass plant in the state of Gujarat. Here, we have expanded our production capacities with a new melting tank. The background to this is strong demand in the Asian pharmaceutical market.”
It was “very challenging” to complete such investment projects during the pandemic he admits. “We worked very closely with the authorities, especially concerning freedom of travel. Our employees showed a high level of personal commitment – a big thanks for their engagement to keep everything running and in time.”
The melting tank project in India became particularly complicated due to multiple Corona lockdowns, travel restrictions and as a result, a construction period well into the monsoon season. One SCHOTT employee put in an exceptional performance, Dr Heinricht recalls: “Due to the Corona circumstances, a project engineer from Mainz extended his stay in India by more than seven months to complete the tank’s construction” – a commitment that enabled the melting tank to go into operation as scheduled.
Further investment plans concern ultra-thin glass for foldable smartphones. “This business area is developing very positively overall” says Dr Heinricht. “We also supply ultra-thin glass to various customers in the electronics and semiconductor industries. To meet rising demand in this business, we will increase our manufacturing capacity. In Germany, we will expand our thin glass production with a new production line and offer our customers supply security."
“We will top our investments to €350 million in the current fiscal year” continues Dr Heinricht confidently. “We do not limit ourselves to one product area; the sum will go into our overall portfolio. But we will set specific priorities and place a particular focus on future markets and applications, e.g. in our thin glass production and the diagnostics business.”
Sales growth in 2021 and beyond
Acknowledging that economic growth is slowing down, Dr Heinricht is nonetheless prepared to meet the challenge of a ‘volatile’ economic environment with innovations and investments, especially in relevant growth markets, China and the USA.
“We want to continue to accelerate our development over the medium and long term” he expounds. Repeated record investment is considered an important step, both to define growth targets and set up future returns.
Reflecting the robust nature of his company, Dr Heinricht is convinced that SCHOTT can continue on its course of sustainable and profitable growth, maintaining the high level of earnings accrued in 2020. “Despite the Corona situation, we plan to increase group sales by between 3% and 6%. If I look at sales in the first quarter, we are at the upper level of this range. We have made a good start to the new year."
“Our broad portfolio with different business areas means that we have been able to balance setbacks well” he continues. “On the one hand, we have achieved double digit growth rates in the pharmaceuticals business. At the same time, demand has declined in other areas, such as aviation and automotive. In our Home Tech and Consumer Electronics business, we also experienced a clear downturn in the pandemic’s first months. However, we have noticed an upturn again in recent months.”
Asked which product innovation he is particularly proud of, Dr Heinricht plumps for SCHOTT’s flexible ultra-thin glass – thinner than human hair – for foldable smartphones. “In this market, we are a technology leader” he says. “Smartphone producers look for new possibilities to design their devices and foldable displays enable it. The challenge is to produce glass on an industrial scale that can be bent hundreds of thousands of times, in a tiny radius – without breaking. We succeed in doing so. The product is our Xensation Flex; it is robust and at the same time flexible and bendable aluminosilicate glass, which can be chemically strengthened.”
Another example is cover glass, which is already applied in premium smartphones from VIVO, Dr Heinricht continues. An “entirely new type of high performance cover glass” from SCHOTT will also play a role in the Chinese manufacturer’s next generation of smartphone, he reveals.
Meanwhile in the diagnostics field, there is also movement at SCHOTT. “We acquired MINIFAB in 2019 and can now offer a complete portfolio of glass and polymer solutions for diagnostics and life science applications” says Dr Heinricht.
“And last but not least, we developed a new generation of ultra-pure vials called EVERIC, available in three variants: EVERIC pure, smooth and strong. These borosilicate glass vials are optimised for high potency drugs. They provide better processability, a pure inner surface for sensitive drugs and an improved geometry and four times increased strength (EVERIC strong). The pandemic showed that borosilicate glass is a hidden champion for pharmaceutical packaging.” (Prescient founder Otto Schott developed borosilicate Type I glass (FIOLAX) for pharmaceutical packaging in 1911.)
“We are constantly innovating glass to meet customers’ increasingly complex requirements and offer suitable solutions” (under)states Dr Heinricht.
There is scope for glass manufacturing methods and production efficiencies to be improved, believes Dr Heinricht. SCHOTT has been working on energy-efficient production technology for decades, with numerous achievements already under its belt. “For example, we reduced the specific energy consumption per ton of glass by more than 30% by switching from conventional air-fuel melting technology to oxy-fuel” says Dr Heinricht. “We see further potential in, among other things, introducing big data and artificial intelligence into the melting process, as well as strict energy management” he continues. “With the technologies currently in use, the possibilities for reducing energy consumption are on a rather smaller scale. What the industry needs is a paradigm shift.”
A passionate pioneer for change, since 2015 Dr Heinricht has been President of BV Glas (the Federal Association of the German Glass Industry), whose mission statement includes educating people about ‘how original, individual and versatile glass is’. In 2020, the association received funding for its HyGlass project – in partnership with the GWI institute – to conduct research into the suitability of hydrogen as a substitute for fossil fuels in glass production.
“Alongside the electrification of the glass melt, hydrogen is one of the glass industry’s great hopes for technological change” explains Dr Heinricht. “For both approaches, our industry has to carry out enormous development work. But we are also dependent on external factors. For both renewable energies and hydrogen, there are currently still serious availability and cost problems. That’s why we need to massively expand renewable power generation and establish industrial production for green hydrogen. And both energy sources must be made available at competitive costs.”
“We know we have to do our part to stop climate change” Dr Heinricht affirms. “This is why ‘zero carbon’ is a central component of our new group strategy, which we launched in early 2020.”
Worldwide, the group already covers 75% of its global electricity needs with green power via relevant certificates of origin. At the same time, it has initiated a series of projects to develop the use of hydrogen and other energy sources for heating melting units. Underpinning the whole strategy project is SCHOTT’s aim to be a climate-neutral company by 2030.
“No other company in our industry has set such an ambitious goal” states Dr Heinricht. “Based on the principle of ‘avoid – reduce – compensate’, we are pursuing an action plan with four fields of action: Technology change; increasing energy efficiency; switching to 100% green electricity; and compensating unavoidable greenhouse gases. In some countries, like the USA, 100% of our energy needs (are) already covered by green electricity via certificates.”
Co-ordinating SCHOTT’s zero carbon strategy across international operations is “a giant puzzle” Dr Heinricht acknowledges. “The technology change that comes with replacing fossil fuels cannot be achieved overnight and is associated with high development costs. Besides, our business is very diverse. This is why we first look at the individual prerequisites of each business unit, which then feeds into a corporate plan” – one that will ultimately help to secure the company’s long-term competitiveness.
The zero carbon project also reinforces SCHOTT’s responsibilities for society, the environment and its employees as a foundation company. “Tackling social issues has always been part of our DNA” says Dr Heinricht. “For our founders, installing workers’ rights was a main driver. For us, climate change is one of the greatest challenges. With the zero carbon strategy project, we make an active contribution to climate protection. This fits very well with our heritage as a foundation company, characterised by a pioneering spirit, long-term thinking and responsible action.”
Advancing research and development
To achieve carbon neutrality, the main focus of SCHOTT’s development work is currently taking place at its site in Mainz, where the company’s central research and development is located. In early January, SCHOTT announced plans for a second melting tank for pharmaceutical glass tubing at the site, with the production facility scheduled to go into operation in mid-2022. When new technologies are ready to progress from development stage to production, pilot projects will also be carried out at other melting sites, explains Dr Heinricht.
SCHOTT employs 600 scientists and application engineers, with its research and development team collaborating closely with the developers in the operative business units.
“The primary R&D focus is on the digitalisation of material development (material informatics) and process simulation, the development and research on materials in general, detailed know-how in melting and hot forming processes and technologies like surface modification of glasses and laser processing” says Dr Heinricht.
“With regard to our suppliers, technological advances are required above all in the technical equipment of our production, for example with state-of-the-art machines for glass processing” he adds. “When it comes to raw materials, quality is naturally a top priority.”
The company can afford to be particular about where it sources materials and support for its investment, additionally stipulating that suppliers adhere to an internal code of conduct and comply with international compliance guidelines. “In times of high volatility and ever-changing requirements, we have a high focus on our suppliers’ reliability and flexibility” confirms Dr Heinricht. “After we have made a pre-selection by considering our high quality requirements, we run a very transparent and open sourcing process to determine the best candidate from a total cost of ownership point of view.”
It is clear that this mindful yet professional approach to working practices feeds into an ethos that has kept SCHOTT buoyant during even the most testing of circumstances. “The pandemic is an exceptional situation” notes Dr Heinricht. “It shows us the limits. But it has also made clear what is and remains essential; sustainable thinking and action. I can tell you that we have mastered the path well so far. We are in a strong position to look ahead with confidence."
“We believe that glass offers an extensive range of possibilities” he concludes. “It is a material that provides application potential for a wide variety of markets. Raising this potential is our explicit goal.”
Xensation, EVERIC, FIOLAX and CERAN are registered trademarks of SCHOTT AG