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Veeco Hikes Epitaxy Research Investment

Ploughing resources into its best growth opportunities, the MOCVD and MBE equipment vendor has earmarked a 40 per cent increase in epitaxy research and development activity for 2008.

Equipment supplier Veeco Instruments is to invest heavily in its epitaxy division as part of a wider plan to boost the US company s financial fortunes.

Noting very strong growth in bookings for MBE and MOCVD equipment, CEO John Peeler said that the strong market pull for high-brightness LEDs and high-efficiency solar cells was providing "an exceptional multi-year growth opportunity".

To support its efforts, Peeler said that Veeco would hike its research and development spending in the epitaxy field by some 40 percent in 2008.

Although Veeco still lags behind Germany s Aixtron as the dominant global supplier of MOCVD equipment, Peeler believes that his company made inroads into Aixtron s market share during 2007.

Based on orders placed, Peeler said that Veeco had increased its share of the MOCVD process equipment market from 20 percent to 35 percent during the year.

"We have penetrated several top-tier accounts where [Aixtron] holds the installed base," observed the CEO.

Although Veeco has been struggling overall "“ it posted a net loss of $9.4 million on revenue of $106.8 million in the final quarter of 2007 "“ its epitaxy tools have been selling well and profitably.

In 2007, sales of MOCVD and MBE equipment were $116 million, up 23 percent on the 2006 figure of $94 million.

2008 promises to be an even stronger year, since Veeco registered a 37 percent increase in orders for MOCVD and MBE tools, with $164 million worth of bookings.

That growth means that epitaxy equipment for LED, III-V solar cell, and RFIC manufacturing is now Veeco s biggest single business segment, accounting for 36 percent of total company bookings in 2007.

Solar ramp
Demand from solar cell makers is now fueling a significant element of that growth. Veeco received $20 million worth of bookings in 2007 for its MOCVD tool used for multi-junction cell fabrication, and has already shipped half of those orders.

According to Peeler, Veeco has a technological advantage over its competitors in the III-V solar sector, because its E475 As/P TurboDisc tool provides over 50 percent more wafer throughput than its competitors systems.

The CEO believes that there is no sign of a let-up in the growing demand from LED and solar cell makers, despite worries over the wider macro-economic picture.

And Veeco s increased investment in epitaxy research may reflect a need to protect itself from any emerging competitors in the MOCVD space.

With MOCVD tools now a highly profitable business segment for both Veeco and Aixtron, there is some speculation that a third process tool vendor may try to get in on the act.

Responding to a question in an investor call to discuss the latest Veeco results, Jack Ryan, Veeco s CFO, said that he would not be surprised if another competitor did try to crack the MOCVD market "“ despite the high barrier to entry presented by the required technological expertise.

"We will continue to stay on our toes, to build better products and to work on next-generation [tools]," Ryan added.

For 2008, Veeco is predicting 20-25 percent growth in sales of epitaxy equipment over the 2007 figure, which would translate to revenue of $140 million-$145 million if correct.

With Veeco s other two areas of focus "“ metrology tools and data storage process equipment "“ only growing very slowly, it is the epitaxy division that Ryan and Peeler are looking to for the predicted 10 percent growth of Veeco s overall business in 2008.

• Investors reacted positively to Veeco s outlook, with shares in the company jumping by 20 per cent in early trading after it posted its results.

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