Sapphire Manufacturers that Enter Smartphone Applications Early to Gain Competitive Edge

In the sapphire substrate industry, GT Advanced Technologies (GTAT) has reaped benefits from its multi-year partnership with Apple, but other sapphire substrate manufacturers have seen revenues drop. Veeco’s latest financial reports showed losses in 4Q13, reflecting a dire need to change business strategies, while Rubicon’s yearnings were below financial analyst estimations. With smartphone applications on the rise, manufacturers that enter the smartphone market early will be the biggest benefactors. 

Veeco has especially suffered in 2013, having reported revenue plunge of 36 percent to US$ 332 million compared to the year before. Despite MOCVD revenues totaling US$ 50 million and contributing to nearly 89.29% of Veeco’s Solar and LED business in 2013, the company’s losses last quarter was mostly due to fewer MOCVD orders, noted LEDinside analysts. The company reported MOCVD bookings were down 22% in 4Q13, but remained optimistic as it anticipated rising LED lighting demands this year. Veeco assured investors in its report that it will not be axing its LED business because of the recent downturn.

Another leading sapphire substrate manufacturer Rubicon 4Q13 revenue reached US$ 11.5 million, an improvement from 3Q13. However, the financial results fell short of financial analysts expectations of US$ 11.7 million, according to a Barron’s blog entry. Poor performance in the silicon-on-sapphire (SOS) sector had affected the company’s revenue, noted LEDinside analysts. 

 Oversupply in the LED market, the largest market for sapphire substrate applications, over the last two years, has probably been the main cause behind Veeco’s shrinking MOCVD equipment shipments. Since LED manufacturers are unable to clear out inventory, there will be little demand for new sapphire furnace equipment. However, all this is likely to change in 2014, due to rising lighting demands. Previous LEDinside research reports noted LED lighting demands are expected to increase this year, as countries begin implementing incandescent bulb phase out policies including U.S., Canada, and other Asian countries. 

Furthermore, LEDinside has repeatedly noted rising smartphone applications are expected to further spur sapphire substrate demands. It is no surprise that early entrants in this market, such as GTAT have been big benefactors. The company’s 5 year sapphire supplier deal worth US$ 578 million with Apple has been a rather successful model that other companies might attempt replicating. The company’s stock prices have increased about 47% from around US$ 8.5 in Nov. 10, 2013 (a day before the Apple partnership announcement) to US$ 12.50 as of Feb. 21, 2014.

(Author: Judy Lin, Editor, LEDinside) 

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