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Buoyant AXT deals with Olympic disruption

The US substrate maker sees booming demand for 6-inch GaAs, while sales of germanium wafers near-doubled in just three months.

With sales of 6-inch semi-insulating GaAs and germanium wafers growing steadily, AXT has reported a solid start to 2008.

The Fremont, California, company said first-quarter sales of $19.6 million were up 11 per cent sequentially as key customers increased substrate purchases to support mobile handset and solar energy applications. AXT posted a net profit of $2 million for the quarter, up from $1.6 million.

CEO Phil Yin said that the expanding market for low-cost handsets in developing countries was a key reason why sales of 6-inch semi-insulating GaAs material jumped 37 per cent sequentially to $5.9 million.

Epiwafer foundry IQE was also crucial to that increase, placing a large order to support its 2008 manufacturing requirements in late 2007 (see related story).

AXT is set to increase its 6-inch GaAs capacity by a quarter in the coming months, in anticipation of further demand from both existing and new customers for RFIC applications. "Qualification activity is very high," Yin said.

Material qualification of germanium is also at a critical point, with five European customers evaluating AXT s substrates and two already in pre-production. "We re very pleased with the calibre of these customers," noted the CEO.

That helped germanium wafer sales near-double on the previous quarter to $1.4 million, although no serious ramp is expected before the second half of this year is well underway.

As well as expanding its 6-inch GaAs capacity, AXT is busy stockpiling raw materials because of the anticipated disruption that this summer s Beijing Olympics will cause.

Yin explained that the Chinese authorities have imposed a ban on the transportation of certain goods while the Olympics take place, something that would have hampered AXT s raw material supply lines.

On the semiconducting GaAs substrate front, Yin indicated that AXT would be more selective about which customers it would choose to work with, because of the intense price pressure in the LED manufacturing sector.

The CEO also welcomed recent moves within the concentrating photovoltaics (CPV) sector to collaborate under the umbrella of the CPV Consortium, and to evaluate a shift to manufacturing III-V cells on 6-inch germanium wafers (see related stories).

"We re pleased to see this conversion to 6-inch," he said. "We developed 6-inch material more than a year ago in anticipation of this."

While the switch to larger material ought to ultimately cut the cost of individual III-V cells in the long term, perhaps a more pressing concern at the moment is the spiraling cost of raw germanium.

The spot price of the material has doubled to $1300 per kilogram in little over one year, said Yin, while it was now forecast to rise further to $1800 per kilogram as demand increases "“ although AXT can off-set some of that price pressure through one of its joint ventures in China, which supplies raw germanium.

Somewhat cautious in its outlook because of concerns surrounding the wider macro-economic climate, AXT management said it expected continued strong demand for its substrates, and that sales for the second quarter would increase marginally.

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