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Veeco Chief Predicts Year-end MOCVD Boom

With sales of MOCVD equipment continuing to gather momentum, Veeco chief executive Ed Braun says that the end of 2007 could mark a major scale-up in HB-LED chip capacity to meet anticipated demand from makers of large LCD screens.

Having just reported a 42 percent increase in sales of epitaxy equipment for 2006, Veeco's chief executive believes that this positive trend will culminate in a major boom in orders for MOCVD reactors at the end of 2007.

Ed Braun, who believes that the market opportunity for Veeco in the high-brightness LED business is still in its infancy, says that the company sold $89 million worth of MOCVD and MBE equipment during 2006, compared with $63 million in 2005.

The bulk of those sales came from makers of HB-LED chips based in Taiwan, Korea and China, and that trend is set to continue this year with the introduction of more large-scale LCD screens featuring LED backlight units.

"Customers in Taiwan are buying two or three [MOCVD reactors] at a time to sample LEDs for LCD backlights," Braun told investors in a conference call to discuss the latest company results. "By the end of 2007, they are going to need ten or fifteen MOCVD tools at a time."

Although the market for large-size LED backlights in LCD monitors and TVs has yet to really take off, big-name brands such as Apple, HP and Samsung in particular have recently decided to design the technology into their notebook PC displays. TV applications, which tend to require more LEDs and a higher-quality color reproduction, are expected to follow this initial market penetration in 2008 and 2009.

Veeco is anticipating that the need for new MOCVD tools to meet the growing demand for higher-quality chip production will help to drive sales of epitaxy equipment to $115 million this year, and at a compound annual growth rate of nearly 30 percent thereafter.

The New York-headquartered company, whose Turbodisc MOCVD division is based in New Jersey, has recently launched its new K-Series of reactors. These tools feature a modular design that can be easily upgraded to meet the need for increases in LED chip capacity (see related story).

Braun indicated that by the close of 2007, sales of K-Series tools should account for the majority of orders for Veeco s MOCVD kit.

Company shareholders will be pleased to hear that the K-Series is being sold at a much higher gross margin than Veeco s previous MOCVD tools. That should help to boost its overall bottom-line profitability in the long run, as sales of the new equipment gather pace.

At the official launch of the K-Series reactors, Veeco revealed that it had already received orders for five of the systems, worth around $10 million in total.

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