News Article

Veeco Profits From MOCVD Sales Burst

Rapidly increasing sales of MOCVD equipment for high-brightness LED manufacturing is the key as Veeco Instruments swings into the black.

The CEO of semiconductor manufacturing equipment vendor Veeco Instruments singled out strong sales of its latest MOCVD systems as the critical reason for his company s improving finances.

Ed Braun said that traditional applications of high-brightness LEDs, including signage and automotive lamps, were behind the strong performance, as Veeco posted total sales of $99.2 million and a net profit of $0.3 million in its first quarter.

Combined revenue of $21 million from sales of systems for HB-LED and RFIC manufacturing (including MOCVD and MBE equipment) in the quarter that ended on March 31 represented a 39 percent increase on the equivalent period last year.

The company s order book paints an even rosier picture: "Orders [for HB-LED/wireless chip manufacturing equipment] were up 60 percent year-over-year, as we continue to experience positive customer acceptance for our new K-Series MOCVD systems," Braun said (see related article).

"We received multi-system orders from six LED customers," added Braun, who also said that orders for similar equipment used to manufacture multi-junction solar cells were now starting to gather momentum.

With $39 million worth of equipment sales booked in the latest quarter for HB-LED/wireless applications, this business sector now represents Veeco s biggest. In the past, sales of equipment used to make hard drives has typically been the Woodbury, NY, firm s largest revenue driver.

But Braun believes that there is more to come, primarily because the anticipated market for LEDs used in large-scale liquid-crystal display backlights is yet to really materialize.

"We believe that large-LCD applications of high-brightness LEDs remain six-to-twelve months away," remarked the CEO in an investor conference call to discuss the latest figures.

Crucially, strong sales of the latest MOCVD systems has also improved the profitability of the company s epitaxy equipment division. This, along with lower warranty costs, has meant that Veeco is now selling the systems at a gross margin of close to 40 percent.

The company had inherited a financial problem when it acquired the TurboDisc division from Emcore in 2003 that had resulted in systems being sold at a very low profit margin (see related story).

With those accounting difficulties now a thing of the past, and with ten of its twelve leading customers currently representing compound semiconductor manufacturers, Veeco is looking forward to solid, sustainable growth for its epitaxy equipment business.

In a recent investor presentation, the company said that it was expecting the division to post sales of $115 million this year, rising to $150 million in 2008, and $175 million in 2009.

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