Investigation prompts reshuffle on AXT board
AXT, the California-based manufacturer of compound semiconductor substrates, has implemented senior management changes after an internal investigation revealed that the company was not complying with certain product testing requirements.
Morris Young loses his previous titles of chairman, president and CEO at AXT, and is now responsible for improving and expanding the company’s operation in China.
Donald Tatzin, former CFO, becomes interim CEO. Wilson Cheung, previously AXT’s vice president and corporate controller, has been promoted to CFO.
The investigation into AXT’s working practices revealed that some requirements for product testing, as well as the supply of product test data to its customers, were not being complied with.
The company says that it is now implementing measures to ensure future compliance, such as training programs for employees involved in production, testing and quality assurance. However, some customers appear to have seen enough already.
“In some cases our customers have agreed to work with us to review product specifications and testing requirements for the benefit of both parties. Other customers have cancelled outstanding orders until the issue is fully resolved,” admitted Tatzin.
Having delayed its fincancial update for a month pending the investigation, AXT finally reported its first quarter results.
Revenue for the quarter ending March 31 2004 was $9.8 million, up $0.7 million from the previous quarter. Gross profit for the recent quarter was just $0.5 million, leading to an operating loss of $2.5 million.
AXT’s strategy to return to profitability is to reduce manufacturing costs at a faster rate than the anticipated fall in the selling prices of its wafers.
Wafer sales for the recent quarter were dominated by GaAs, with InP substrates contributing only $0.5 million. Despite the emergence of SiC and GaN substrates into the market place, AXT says that it does not plan to branch into these materials until it returns to profitability.
Meanwhile, AXT has seen its geographical sales distribution shift away from North America, with 64% of its sales now resulting from the Asian Pacific region, 22% from North America, and 14% from Europe.
AXT expects to make a loss of $2.4-2.6 million in the current quarter. Cash and cash equivalents on 31 March 2004 stood at $16.6 million.
