FREE subscription
Subscribe for free to receive each issue of Semiconductor Today magazine and weekly news brief.


8 February 2008


Emcore’s CPV order boom to drive spin-off

For its fiscal first-quarter 2008 (to end-December 2007), Emcore Corp of Albuquerque, NM, USA has reported revenue of $46.9m, flat on last quarter but up 21% on $38.6m a year ago.

Fiber Optics revenue was $34m, up 34% on $25.3m a year ago and 9% on $31.2m last quarter, due mainly to record broadband product sales (up 43% year-on-year), as well as a recovery of the digital fiber optics sector (up 16% on last quarter as the sector continues to recover to 2006 levels, driven by market share gains and the demand for 10G products, particularly for optical backplanes).

Photovoltaics revenue was $13m, down 18% on $15.8m last quarter, due to a delay (from November to January) in the delivery and installation of automated, high-volume die-attach equipment purchased for the new concentrator photovoltaics (CPV) solar cell and receiver manufacturing line (causing a shortfall of about $3m on scheduled CPV receiver shipments). However, all required capital equipment is expected to be online in the current quarter, so shipments should start soon. Emcore expects to make up the shortfall this fiscal year, with no impact on revenue guidance. Without the delays, overall revenue would have exceeded the guidance of $49m, believes CEO Reuben F. Richards Jr.

Gross margin has continued to rise, from 14% a year ago and 17% last quarter to 21%. Fiber Optics gross margin is up from 18% last quarter to 23%, mainly due to increased revenue and restructuring efforts completed last year (consolidating design centers in Virginia, Illinois and northern California into the manufacturing sites in Albuquerque, NM and Alhambra, CA). Also, during the quarter, Emcore began shipping products from its new packaging facility in Langfang City, China, which should improve the cost structure and gross margin. Photovoltaics gross margin is down from last quarter’s 17% to 14%, but this was due to the deferred revenue and unfavorable product mix. Without the delays, gross margin would have risen from last quarter.

Excluding adjusted expenses (stock-based compensation expense, professional fees incurred associated with the review of past stock option granting practices, non-recurring legal expenses, and severance and restructuring-related expenses), net loss has been cut from $7.8m a year ago to $6.8m.

During the quarter, order backlog rose from $149m to $156m: just $14m in Fiber Optics, but a massive $142m in Photovoltaics ($53m in satellite and as much as $89m in terrestrial). The latter includes a 300kW CPV system for Spain’s Institute of Concentrator Photovoltaics Systems (ISFOC) to be installed in Castilla–La Mancha by December 2008. However, it excludes orders taken since mid-December 2007 for: 850kW for a project in Extremadura, Spain (to be completed by July); 60MW for Pod Generating Group (PGG) in Ontario, Canada over three years from mid–2008; 5.7 MW for South Korea, plus a letter of intent for 14.3MW more (expected to be released in the next six months); and at least 15MW annually from a new manufacturing joint venture formed with Seoul-based semiconductor packaging company DI Semicon. The backlog should rise significantly in the current quarter as these terrestrial orders are included, based on committed delivery dates, Richards says.

“Fiscal 2008 has started on a positive note with our recent success in developing large CPV solar power system opportunities to be deployed in the Canadian, South Korean and Spanish markets,” says Richards. Also, at the end of January, Emcore agreed to supply 200-700MW to SunPeak Solar for two utility-scale projects in southwestern USA (of 200MW and 500MW, respectively, for construction from early 2009), pending US Congress renewal of the federal investment tax credit for renewable energy sources to 2009 and beyond.

Emcore’s ‘Gen II’ CPV system (which is expected to achieve $3 per Watt installed) is also now operational in Albuquerque, with 8% high-than-expected output. The new design has now been moved into production.

In addition, the Fiber Optics divisions continues to experience significant revenue growth, both year-over-year and quarterly, adds Richards. The firm’s digital fiber-optic product portfolio has also been complement by December’s acquisition (for $85m) of the telecom–related portion of Intel’s Optical Platform Division (tunable lasers and assemblies, tunable transponders and 300-pin transponders).

“We remain confident that 2008 will be a year of solid earnings improvement and profitability,” says Richards. Emcore expects fiscal second-quarter revenue of $56–57m (including $4m from the Intel acquisition, assuming that it completes by the end of February). Full-year fiscal 2008 revenue should be $265–285m, including $35m from the acquisition (up 25% on October’s guidance of $210-230m and up 60% on fiscal 2007’s $170m), due to order backlog for new terrestrial solar cells and receiver products as well as the launch of the new CPV solar power system.

For calendar 2008, Emcore expects revenue of $340m ($190m in Fiber Optics and $150m in PV), representing a substantial increase in PV revenues in calendar Q4/08 due to the contracts announced last December. In addition, even without the 700MW for SunPeak, 2009 revenue should scale significantly beyond the Q4/08 run rate of $112m per quarter to total $450-475m (which can be addressed with the current capacity in Emcore’s fab). Nevertheless, Emcore plans to bring online four CPV receiver lines (three in Albuquerque and one in China), Richards says. It will also expand further, pending progress on the SunPeak projects. The majority of the extra capacity needed could be brought online within 6 months (by calendar Q4).

“Progress in each of our business segments continues to point towards the path of separating Emcore into two separate companies,” concludes Richards. “Given the fact that the size of renewable energy projects contemplated will require dramatic and unprecedented expansion, it is likely that the board of directors at this March’s meeting will determine that, in order to finance this rapid growth, Emcore will split into two separate businesses: a standalone fiber-optics company and a renewable energy company that would be spun off to Emcore shareholders after an initial public offering (IPO) to raise the capital in support of the significant growth in the terrestrial power business,” says Richards.

“With the Intel telecom acquisition, the fiber-optic business, along with the growth from the broadband digital products, will make a very competitive and profitable company,” he reckons. Broadband revenues should grow 20-25% in 2008, with expanding margins and profitability. After discussions with customers and cable MSOs, Emcore expects its 2008 capital expenditure to be up on 2007’s record.

The splitting of the firm and the spin off the PV division will be eased by Emcore’s agreement (announced at the end of January) with holders of about 97.5% ($83.3m worth) of its outstanding 5.5% convertible senior subordinated notes (due in 2011) to convert them into about 11.9m shares of common stock (at $7.01 per share). The conversion should also save about $4.8m annually in interest expense through 2011, which should accelerate Emcore’s path to profitability, Richards says. Emcore has also called for redemption of all outstanding notes (about $2.1m worth) on 20 February.

See related items:

Emcore to supply CPVs for utility-scale projects in southwest USA

Emcore supplies Spanish market with CPV components and systems

Emcore acquiring tunable telecom assets from Intel

Emcore raises fiscal 2008 guidance due to PV revenue doubling

Emcore receives record concentrator photovoltaic cell order

Emcore claims record efficiency for volume-production, multi-junction solar cell aimed at terrestrial applications

Search: Emcore