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8 May 2009


Aixtron sales fall 44% in Q1/2009

Affected by the global recession and the current difficult market environment, for first-quarter 2009 deposition equipment maker Aixtron AG of Aachen, Germany has reported revenue down 26% on €62.6m a year ago and 44% on €82.3m last quarter to just €46.2m.

However, the severity of the year-on-year decline was largely due to silicon-related revenue falling 98%. Despite the current market environment, compound semiconductor equipment revenue was down only 12% year-on-year to €41.9m (91% of total revenue). Spare part & service (the other 9% of revenue) was also lower due to customers reducing inventories. Asia fell from 87% of revenue last quarter to 68%, due mainly to inventory reduction being particularly evident in Asia. In terms of applications, 68% of systems are now used to manufacture LEDs, e.g. for backlighting laptops, monitors, TVs and other devices.

Despite the drop in revenue, gross margin has risen from 39% a year ago and 43% last quarter to 45%. This is due mainly to a stronger US dollar rate, a more favorable revenue mix (with a higher percentage of final customer system acceptances in the quarter), and benefits from Aixtron’s flexible operating-cost model (outsourcing about 90% of manufacturing while retaining most key final assembly & test work internally).

Operating income (EBIT) was €7.6m, an operating margin of 16% (up from 14% a year ago and 9% last quarter). However, this included €3.8m from two one-off events: €1.3m from the sale of the firm’s headquarters building in Aachen, and €2.5m from a compensation payment for a cancelled MOCVD system order by a customer that decided to outsource LEDs manufacturing rather than making its own. Excluding these, EBIT would have been €3.8m, an operating margin of 8%. Net profit of €5.5m was down from €5.9m a year ago but up on €4.1m last quarter.

Boosted by cash inflow of €6.7m from the sale of the headquarters, free cash flow of €10.4m was a significant improvement on last quarter’s -€2.9m (although still down on €12.9m a year ago). Cash and cash equivalents at the end of March remained a healthy €81.6m, down just 7% on a year ago and up 16% on last quarter.

After declining steadily throughout 2008, equipment order intake is down 64% on €85.5m a year ago and 23% on last quarter’s €40.6m to what is believed to be a bottoming out of €31.2m. Of this, 98% was for compound semiconductor equipment (€30.6m, down 60% year-on-year). Silicon system order intake was near to zero, as the persistently negative memory market environment was again worsened by the global credit crisis and recession.

Order backlog at the end of March was €100.7m (including just 7% for silicon systems). This was down 36% on €157.3m a year ago but just 4% lower than last quarter’s €105m. Aixtron expects that about €96m of that backlog will be converted into revenues by the end of 2009 (including €89m of compound semiconductor systems).

“Whilst we are still looking for firm evidence of a sustainable recovery, we are now having some more positive dialogue with our customers that is leading us towards a sense of cautious optimism,” says president & CEO Paul Hyland. “We seem to have reached the point in Q1 where inventory levels need to be replenished,” he adds, citing reports since mid-Q1/2009 of some customers’ equipment utilization rates rising from 20% to 80% (though still prone to volatility).

Another positive influence is increased interest from customers who are not necessarily motivated to buy systems because of short-term demand signals, but because investing in LED production is seen as a timely strategic development. Aixtron believes that its flexible manufacturing model will allow it to ramp up production rapidly if strategic investors need systems quickly and as demand picks up.

“These positive developments persuade us that we can now offer an initial revenue and EBIT guidance range for fiscal year 2009,” says Hyland. Aixtron believes that in 2009 it can deliver revenue of €200-220m and an EBIT margin of 10-11%.

Aixtron maintains that the medium- to long-term fundamentals for the LED industry remain strong, especially as new customers are emerging. Despite the current weak demand for consumer electronics, laptop LED backlighting will almost certainly grow from the 10% penetration rate last year to close to 100% in the next 3-4 years, while the adoption of LEDs in TVs has accelerated in recent quarters, it adds.

In addition, LED streetlights and other energy-efficient and environmentally friendly lighting applications are beginning to appear on the market and are being supported by national and regional government stimulus programs. “The medium- to long-term prospects for our business are better than at any time in the last six to seven years,” believes Hyland. Correspondingly, Aixtron’s increase in R&D spending reflects its focus on new product development programs. “The world economy will eventually recover and, when it does, it will almost certainly be technology-led... We intend to be prepared and able to take full advantage of the opportunities that will emerge once a real recovery takes hold,” concludes Hyland.

See related items:

Aixtron’s growth in Q4/2008 driven by Asian LED manufacturing

Aixtron rides Q3 bumps on track for full year target

Aixtron orders dip 15% in Q2, but backlog still rises

Aixtron’s orders hit peak after doubling year-on-year

See: Aixtron Company Profile

Search: Aixtron MOCVD LEDs