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3 May 2007


AXT’s sales dip due to 6” GaAs, but rebound expected in Q2

Substrate maker AXT Inc of Fremont, CA, USA has reported first-quarter 2007 revenue of $12.5m, down 5% from Q4/2006’s $13.1m, but still up 47% from $8.5m a year ago as the firm continues its recovery.

Total GaAs substrate revenue was $8.8m, down 20% from Q4/2006’s $11.1m but up 29% from $6.8m a year ago. Specifically, 6-inch diameter wafer sales were $3.3m, up from $2.8m a year ago but down from Q4/2006’s $4.9m. This was mainly due to the delay in BiFET qualifications of certain customers and smaller-than-expected orders from a few handset market customers.

InP substrate revenue has grown from $296,000 a year ago and $456,000 in Q4/2006 to $518,000 in Q1/2007. Ge substrate revenue is continuing to grow rapidly, from just $36,000 a year ago and $318,000 in Q4/2006 to $541,000 in Q1/2007.

Sales of raw materials (mainly 99.99%-pure gallium), which were $1.4m a year ago, have more than doubled from $1.2m in Q4/2006 to $2.6m, due to three new Japanese customers; however, these additional sales are not expected to be repeated in such magnitude in Q2/2007.

Despite the drop in total revenue, gross margin still continued to rise, from 17.8% of revenue a year ago and 38.2% in Q4/2006 to 43.2% in Q1/2007. As well as continued benefit from manufacturing yield improvements, this was due to “significant engineering and operating achievements in our cost reduction efforts, coupled with positive product mix,” according to CEO Phil Yin.

Net income was $1.3m, down from $3.4m in Q4/2006 but still a big improvement from a net loss of $2.2m a year ago. Also, Compared with a loss from operations of $2.3m a year ago, income from operations was still $1.2m in Q1/2007 (the same as in Q4/2006).

For second-quarter 2007, AXT expects revenue to rebound to $13.1-13.5m. “Qualification activity across all of our product lines has been robust and early feedback from our existing customers and potential customers leads us to believe that 2007 will be a strong year for AXT,” says Yin.

See related item:

AXT’s fourth quarter drove return to profitability in 2006