Aixtron Boosts Research Spend For 2009
Aixtron, the world s biggest supplier of MOCVD equipment, is to expand spending on research and development next year, even as orders for its systems continue falling.
The move also comes in spite of the uncertainties posed by what the German company s CEO Paul Hyland described as "unprecedented" economic circumstances and the expectation of a very challenging 2009.
With no long-term debt, plenty of cash on its balance sheet and an order backlog of some €158.1 million ($204.2 million), Hyland said that Aixtron was in excellent financial shape, and would be able to weather a significant downturn.
Although, Veeco aside, the MOCVD equipment space is relatively bereft of major competitors, Hyland added that accelerating development work was essential for Aixtron to maintain its edge. "There is no room for complacency," said the CEO.
For the first nine months of 2008, Aixtron posted total revenue of €192.1 million, up 20 per cent on the 2007 figure. In the latest quarter, sales totalled €63.9 million.
And despite a slowdown in new orders, something that Aixtron had been anticipating as the recent wave of LED capacity expansion for backlighting applications is digested, the company s order book remains much stronger than it was at this time last year.
Hyland also rejected any suggestions that the credit crunch had forced some orders to be cancelled:
"There have been no cancellations," said the CEO, although he did acknowledge that some scheduled deliveries may be delayed, possibly pushing out some sales revenues from 2008 to 2009.
As a result, Hyland and CFO Wolfgang Breme expect total sales for 2008 to total at least €270 million "“ meeting the lower end of expectations set at the start of the year.
Some 85 per cent (equivalent to €230 million) of those revenues can be attributed to MOCVD equipment for compound semiconductor research and production.
Using Hyland s estimate that the average cost per MOCVD reactor is between $2 million and $2.4 million, and assuming a dollar/euro exchange rate of 1.5 over the past year, that would equate to shipment and payment for perhaps 150 reactors.
Aixtron may actually end up benefiting from the current economic turmoil if the US dollar maintains its current strength, since the vast majority of its sales are carried out in that currency.
While confident that the underlying trends in notebook PC backlighting and solid-state lighting remain strong drivers for MOCVD orders, Hyland is firmly of the belief that predicting long-term spending patterns can be a fool s game.
"Anybody claiming to predict what will happen more than two quarters out is probably deluding you," quipped the CEO, preferring to recognize that while 2009 will inevitably be a challenging year for everybody, there are positive trends for Aixtron.
"We also recognize that we stand to gain from the recovery of the US dollar and the continued adoption of LEDs...the fundamentals remain as good as they were a year ago."
With continued weakness in spending by silicon chip makers, LED applications currently account for some 86 per cent of Aixtron's revenues.
Hyland also explained that it can be misleading to compare the cycle of capital expenditure (CAPEX) in the wider semiconductor industry with that seen in the compounds niche.
That s because whereas silicon industry CAPEX is driven by the move to new technology nodes, it is the adoption of new applications that drives step-changes in compound semiconductor production.
The most recent wave of capacity expansion is largely due to the acceptance of LED backlight units in notebook PCs.
The notebook PC market is still expected to double to some 200 million units per year by 2012. LED backlights feature in no more than 15-20 per cent of notebooks at the moment, but that proportion is expected to grow to at least 50 per cent over the same time "“ even according to the most pessimistic outlook.
Taking heart from that, Hyland s view is that Aixtron needs to remain positive and pro-active about its future, and not to agonize over market forces that it cannot control.