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Rubicon posts disappointing Q4 results

Excess sapphire capacity and fluctuations in inventory continue to depress pricing

Rubicon Technology, a provider of sapphire substrates and products to the LED, optical and semiconductor industries, has reported financial results for Q4 ended December 31, 2015.

Revenue was $2.5 million, lower than the prior quarter revenue of $5.3 million. This was due to a temporary decline in wafer sales and weaker sapphire demand for two and four-inch core sold into the mobile device and LED markets, says the company.

Wafer revenue declined from $2.1 million in Q3 to $0.9 million in the fourth quarter, but the company expects wafer revenue to rebound to or exceed the level of third quarter wafer revenue in the first quarter of 2016 driven by growth in 6 inch PSS wafer sales. Additional growth in the wafer business is expected in the second quarter.

Excess sapphire capacity and fluctuations in inventory levels in the LED and mobile device supply chains continues to depress pricing in the sapphire market. The company limited the amount of two and four-inch core sold in the fourth quarter due to the particularly challenging pricing.

Bill Weissman, Rubicon's CEO, said: "There continues to be excess sapphire capacity in the market. However, we are working with developers of some very interesting potential new applications for sapphire which fit particularly well with Rubicon's unique set of sapphire knowledge and capabilities."

The company also continues to work on developing its optical sapphire business and expects to move two new technologies into production later this year, its LANCE technology, which produces large rectangular windows for defence and commercial applications, and its SapphirEX coating technology.

Mr. Weissman continued:  "We are on track to complete our LANCE crystal growth deliverables this year producing windows as large as 36 x 18 x 2 inch which are unprecedented in the market. We also expect to move SapphirEX into production later this year and we are pleased with the initial interest in that product."

The company's GAAP loss per share was $0.49 for the fourth quarter as compared with $1.84 in the third quarter. Non-GAAP loss per share, which excludes charges and accruals as detailed in the reconciliation of non-GAAP measures to the nearest GAAP measures near the end of this release, was $0.38 in the fourth quarter and $0.29 in the prior quarter.

Mardel Graffy, Rubicon's CFO commented, "Building a consignment inventory for a key wafer customer and limiting core sales in the fourth quarter resulted in an increased use of cash in the period but improving cash flow remains a top priority. We are implementing changes that we expect to reduce wafer costs over the next several months and expect cash flow from operations to improve."

First Quarter 2016 Guidance

The company expects revenues to increase to between $4 and $5 million in the first quarter with increased wafer revenue, particularly from six-inch PSS wafers, and an increase in four-inch core sales. GAAP loss per share is expected to be between $0.24 and $0.28.

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