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News Article

Weak GaAs market affects AXT revenues

The firm's quarterly revenues have slid by over 25 percent
AXT, a manufacturer of compound semiconductor substrates, has reported financial results for the third quarter ended September 30th, 2012.

Revenues for the third quarter of 2012 were $20.8 million, compared to $28.3 million in the third quarter of 2011.



Total GaAs substrate revenue was $12.9 million for the third quarter of 2012, compared with $18.7 million in the third quarter of 2011.

InP substrate revenue was $1.6 million for the third quarter of 2012, compared with $1.5 million in the Q3 2011.

Germanium substrate revenue was $2 million for the third quarter of 2012 compared with $2.4 million in the second quarter of 2012. Raw materials sales were $4.3 million for the third quarter of 2012, compared with $6.5 million in the second quarter of 2012.



Gross margin was 26.3 percent of revenue for the third quarter of 2012. By comparison, gross margin in the second quarter of 2012 was 29.8 percent of revenue.

The drop in gross margin in the third quarter of 2012 was largely the result of lower selling prices of raw gallium, as well as lower tonnage sold, and lower volumes of sales in gallium arsenide substrates in both the wireless market and the LED market.

Operating expenses were $4.8 million in the third quarter of 2012, compared with $4.9 million in the second quarter of 2012.

Income from operations for the third quarter of 2012 was $0.7 million, compared with income from operations of $2.6 million in the second quarter of 2012.

Net interest and other income for the third quarter of 2012 was $544,000, which included a foreign exchange gain of $114,000. This compares with net interest and other income of $219,000 in the second quarter of 2012, which included a foreign exchange gain of $106,000.

Net income in the third quarter of 2012 was $0.9 million or $0.03 per diluted share, compared with net income of $1.3 million or $0.04 per diluted share in the second quarter of 2012.

"Business conditions in the third quarter were in keeping with the expectations that we outlined when we announced our results last quarter," said Morris Young, president and CEO.

"The compound semiconductor substrate market is currently experiencing a correction, largely driven by weaker demand and a moderate amount of excess inventory in the channel. However, our solid execution over the last many quarters is allowing us to weather the current down cycle and we are using this time to support significant qualifications that are still ongoing and to focus our resources on strategic geographies and applications that are likely to benefit AXT in the future. We view improving market conditions, new customer qualifications and a bottoming of raw material pricing as key catalysts for our growth in the coming year and beyond."

 

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