News Article

LED Overcapacity Halves Veeco Orders

Lower revenue in 2009 than 2008 and job losses are on the cards as the credit crunch and a glut of Asian fabs combine to vex the MOCVD tool company.

Orders for Veeco Instruments solar and LED equipment fell by half between the second and third quarters of 2008 as system usage declined at some LED wafer manufacturers.

The business unit took $26 million of orders in the three months to September, as sales also dipped to $41 million from $45 million in the previous period.

The Plainview, New York, based tool producer fell foul of $9.8 million in delayed sales in the September quarter arising from high-brightness LED makers.

“While we expected some fall-off in orders due to the significant MOCVD capacity build-up in Taiwan, the decline was greater than originally anticipated," commented CEO John Peeler.

The LED industry is again digesting a large number of recently-installed production systems, which have been purchased in anticipation of increasing demand. However, demand has not uniformly increased to the same extent as capacity, leading to lower average equipment usage.

“The utilization rates of some of the customers are still going down," Peeler said. “Others are still buying for capacity and managing ramp-ups of new factories for their particular applications. It s a mixed bag."

This digestion situation last arose as recently as 2005, when Veeco s orders recovered within nine months, but Peeler accepts that things could be different this time.

“It s difficult to tell if this is a flat spot or a downturn," Peeler said. “There are a lot of prospects, but it s a very volatile market."

Having only regained profitability in June, Veeco slipped to a net loss of $1.7 million from $115.7 million overall revenue in the September quarter.

Veeco says it will record less revenue in 2009 than in 2008, driven largely by the LED shortfall. This, and the impact of the global economy in its other markets, is now leading the company to make cost-cutting plans.

“Our management team is conducting a comprehensive review of our global workforce, and we re planning reductions in the current quarter," Peeler said.

So far in 2008, around 20 percent of the compound semiconductor segment s revenue and orders have come from solar companies, mainly for MOCVD and thermal deposition sources.

Although Peeler said many photovoltaic businesses are well established financially, he feels that broader constraints on credit availability have affected other potential customers equipment purchases.

Regardless of these issues, Veeco is continuing strategic investments in the LED and solar sector to build on its high-throughput K465 GaN MOCVD system s success.

“Our goal is to emerge from this cyclical pause with a better product lineup," Peeler said.

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