News

16 September 2008

 

Rubicon cuts 2008 sales guidance from $47-49m to $41.5-42.5m

Rubicon Technology Inc of Franklin Park, IL, USA, which makes sapphire substrates and products for the LED, RFIC, semiconductor and optical industries, says that a contract modification for its major silicon on sapphire (SoS) customer Peregrine Semiconductor Corp of San Diego, CA, USA (which makes RF communications ICs) and the current slowdown in global market demand for 2” diameter LED wafers are expected to affect its short-term financial results.

“As we discussed in our last quarterly conference call, we have been working with Peregrine Semiconductor, one of our major customers, to better understand their unique situation involving a buildup of their sapphire inventories," says CEO Raja Parvez. "To assist them through this situation, we have agreed to shift the delivery of $4.3m of product currently scheduled for 2008 into the first half of 2009." Parvez explains that this should allow Rubicon to better manage production schedules over the next several quarters to avoid down time, while also assisting Peregrine. "The outlook for the SoS market remains strong, with a growth rate that is expected to be about 50% per year for the next several years," he adds. "We continue to be Peregrine's primary supplier and we are confident that, while we may be impacted in the short term, we will capitalize on our relationship to capture future sales."

The slowdown in the handheld device and small-display markets that use Rubicon's small-diameter LED wafers has affected customer orders throughout Asia, continues Parvez. "As an accommodation to our customers, we have agreed to move some of the contracted volumes for the remainder of 2008 [worth nearly $7m] into the first half of 2009, which is when our customers believe the market will begin to strengthen." So, despite LED revenue from larger-diameter material continuing to be strong, revenue guidance for Q3/2008 has been lowered from $12.5m to $11.5-12m. Together with Q4 revenue guidance of $8-8.5m, guidance for full-year 2008 has also been lowered, from $47-49m to $41.5-42.5m.

Gross margin will be 35-37% in Q3, but will likely drop to the mid-20% range in Q4, given the larger deferral of orders for that period, says chief financial officer Bill Weissman. "During this period, we will retool some of our manufacturing operations by retiring old equipment and installing newer, more efficient equipment this year and early next year in order to reduce costs and increase throughput," he adds.

The revised guidance includes an anticipated write-off of remaining book value of those assets to be retired of $1-1.2m in Q3. "In addition, we recently met the major deliverables on our agreement to develop a new 8-inch SoS product and will benefit from milestone payments this year.”

Rubicon's products serve the LED, SoS RFIC and optical markets - all of which offer strong long-term growth potential. "There is no viable substitute for sapphire in these applications," says Parvez. "LED chip manufacturers working on large-diameter processing seem to be moving faster than we had anticipated," he adds. "We continue to expect to benefit from future opportunities... Longer term, we will maximize shareholder value by continuing to invest in our facilities and technologies.”

See related items:

Sapphire substrate maker Rubicon grows 40% year-on-year

Rubicon starts producing 8” sapphire for Peregrine

Search: Rubicon Sapphire substrates LEDs Peregrine

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