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3 August 2006


AXT’s sales rise 22% quarter-to-quarter

Compared to Q1/2006, AXT Inc of Freemont, CA, USA has reported Q2/2006 revenue up 22% to $10.4m. This includes: GaAs substrates $8.1m (up 20.3%); InP substrates $613,000; germanium substrates $169,000; and raw materials $1.4m.

“Much of this strength came from growing demand for 2-inch to 4-inch semi-conducting GaAs substrates used in LEDs and for 6-inch semi-insulating GaAs substrates used in wireless handsets, and the overall constrained capacity in the industry,” says chief executive officer Phil Yin. “Once again, we are pleased to report revenue and earnings that exceeded our expectations,” he adds.

Gross margin rose from 17.8% to 26.6% of revenue. Operating loss fell from $2.3m to $1.7m, despite operating expenses rising from $3.8m to $4.4m (mainly due to increased sales commissions as a result of higher revenues, additional de-commissioning expenses to close AXT’s US property, professional and legal fees, and severance payments). Net interest and other income rose from $366,000 to $925,000. Other income from selling shares in Finisar Corp rose from $376,000 to $1.0m. In total, net loss fell from $2.2m to $876,000.

“Gross margins in the quarter were also above expectations, driven by growing volume, favorable product mix and the benefits of innovative cost-cutting measures, including improvements to our slicing, lapping and polishing processes.”

“Our China production facility allows us to produce substrates in a low-cost environment and reach economies of scale at lower volume production,” says Yin. “Also, while demand is increasing, capacity for manufacturing 6-inch substrates is constrained.  However, we can rapidly and cost-effectively scale our manufacturing facility to accommodate increased market demand. We have both the manufacturing space and the furnaces required to increase capacity without significant capital expense.  In fact, during the second quarter, we increased our capacity for 6-inch substrates by 50% and we are planning to add an additional 40% to our six-inch capacity by the end of the first quarter of 2007.”

“Over the past year, we have focused tremendous energy into restoring and growing our customer base,” adds Yin. “We are actively engaged in a number of new and return-ing customer qualifications.”

AXT forecasts that Q3 revenues will rise to $10.5-11.0m.

Visit: http://www.axt.com