industry stocks
Figure 1: Veeco’s share price has grown
throughout the year ending 30 April 2010, reflecting ever- improving sales and order backlogs
price after Veeco’s latest earning release to $62.
AXT’s revival Nestled between Veeco and Aixtron in the stock leader board is AXT. This GaAs, InP and germanium substrate producer has had a topsy-turvy couple of years. Wind the clock back 12 months and the company was in last place on the leader board, but its incredibly strong performance since then has nearly brought its share price back to where it was in 2008 (see Figure 2).
Strong demand for MOCVD equipment allows Veeco and Aixtron to charge a high price for their tools, and ultimately generate healthy profits. However, such success can also have its downside for the incumbent players, with firms operating in related fields trying to muscle in and get their own slice of the pie. In this market the equipment maker Applied Materials is developing a GaN growth tool for LEDs, but Dorsheimer believes this development will not threaten Aixtron or Veeco. He describes Applied Materials effort as “missing this backlighting cycle”. But he expects the company to have an offering for the next wave of growth, solid state lighting.
In the most recent round of quarterly conference calls Veeco was bullish about its future business, while Aixtron was more cautious. The tentativeness of the German outfit reflects uncertainty surrounding orders in 2011.
Chipmakers in China are the exception, and if they continue to place orders, then substantial MOCVD tool sales could continue throughout next year. In China MOCVD purchases are aided by a 50 percent subsidy from the government, but that could change, depending on the country’s next five-year plan. If you take the optimistic view, orders could keep coming at a good pace and help to maintain high MOCVD sales that will get a further boost due to a new wave of capital expansion when the LED lighting market takes off. Taking all these possibilities into account, Dorsheimer revised his target
This turnaround is partly due to the booming LED market, coupled to resurgence in handset sales. These factors have helped to lift AXT’s quarterly revenue from $7.7 million for the first three months of 2009 to $18.6 million in the same period of this year.
There have also been changes at the top - last March founder Morris Young replaced Phil Yin as CEO. Dave Kang from the research, trading and investment-banking firm B. Riley says that change has brought about a different approach in dealing with investors, with Young keeping a far lower profile than his predecessor. Yin has certainly being through many ups and downs with the company. Back in 2000 AXT had a 45 percent share of the GaAs substrate market, but this plummeted to just 5 percent in 2004. Market share has climbed since then: It is now 25 percent, and the company is targeting 30-35 percent by 2012.
AXT’s GaAs substrate sales figures are far greater than those associated with germanium, which netted $1.64 million in the last quarter. However, germanium sales could flourish if the terrestrial, concentrating photovoltaic (CPV) business takes off.
“AXT had a pretty significant opportunity in 2007, but the credit crisis pretty much wiped out all their customers,” says Kang. However, he says that the cost associated with CPV is falling, and if this trend continues it can offer cheaper electricity generation than that based on silicon and thin-film cells. “Over the next year your going to hear more about terrestrial opportunities, and that will drive [AXT’s] valuation.”
The current share price, however, reflects the RFIC and LED markets. Kang expects AXT’s valuation to continue to rise, and after listening to the recent quarterly conference call on 28 April he raised the target price from $4.90 to $7.20.
Figure 2: AXT’s share price has nearly recovered from two years ago
22
www.compoundsemiconductor.net June 2010
Footing the table Every III-V company has seen improvement in its share price over the last 12 months, but the gains of some have been far more modest than those of others. Propping up the leader board are Emcore and Infinera, two companies that many analysts are only willing to talk about in private.
Like AXT, Emcore has suffered from the failure of the CPV market to take off over the last few years. During 2008
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