9 February 2012

Rubicon’s largest customer agrees new $20m contract for 2012

Rubicon Technology Inc of Bensenville, IL, USA, which makes monocrystalline sapphire substrates and products for the LED, RFIC, semiconductor and optical industries, has entered into a new contract with its largest customer for large-diameter (6-inch) sapphire wafers worth $20m, representing a baseline level of shipments to be made from June through December. The previous contract expired at the end of December.

“As other LED chip manufacturers make the transition to large-diameter substrates in pursuit of greater efficiency, Rubicon — the world’s largest, most experienced and most reliable provider of large-diameter sapphire wafers—stands to benefit greatly,” reckons president & CEO Raja Parvez. “However, with LED chip capacity presently not fully utilized, the inflection point in demand for large-diameter sapphire wafers for LEDs is still some months in the future.”

In light of current market conditions and in the interest of further establishing a long-term relationship with the customer, Rubicon granted adjustments to fourth-quarter 2011 price and volume requirements under the expiring 6-inch contract (previously, on 8 November, management had indicated that this was likely). Consequently, Rubicon’s revenue for fourth-quarter 2011, was $19-20m, slightly below its previous guidance of $20-23m. The firm expects to release complete Q4 results on 23 February.

Rubicon also says that, as an accommodation to certain key customers of its small-diameter sapphire ingots (cores), it wrote off $1.8m of accounts receivable in Q4.

“The fourth quarter of 2011 was a period of limited demand for sapphire substrates resulting from the accumulation of excess inventory in the LED supply chain,” says Parvez. “This temporary decline in channel demand in turn resulted in sapphire prices falling sharply in the second half of 2011. Out of consideration for our important customer relationships, we made certain concessions that we deemed to be in the best long-term interest of our company,” he adds.

Near-term demand from the LED market continues to be limited, as inventory adjusts throughout the supply chain, but orders for 2-inch and 4-inch cores have begun to recover somewhat in the first quarter of 2012, and demand for large-diameter wafers for the silicon-on-sapphire (SoS) RFIC market is growing, Rubicon says. “As the channel inventory situation improves, and as LED technology further penetrates both the backlighting market and the general lighting market, we expect significant strengthening of the market for sapphire substrates later this year,” Parvez continues.

“We remain optimistic on the long-term outlook for the LED market and Rubicon’s positioning to capitalize on the opportunity,” Parvez comments. “To date, Rubicon has shipped more than 230,000 6-inch sapphire wafers to the LED manufacturing and RFIC industries,” he notes. “This has provided us with the experience and scale to drive process and cost efficiencies throughout our system while maintaining our industry-leading quality and service. Cost and quality leadership are instrumental to the acceleration of LED adoption in the marketplace.”

See related items:

Rubicon’s revenue falls less-than-expected 22% in Q3

Tags: Rubicon Sapphire substrates

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