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26 Oct 2010
Key equipment supplier generated record net income of $91 million as orders continue to flood in from China and Taiwan.
Veeco Instruments, whose metal-organic chemical vapor deposition (MOCVD) reactors represent the key pieces of equipment for manufacturing high-brightness LEDs, has posted record revenue and profit figures, as the LED market shows little sign of slowing.
The US company shipped more than 100 MOCVD systems in the third quarter and, after announcing sales of $277 million and $91.1 million in net profit, CEO John Peeler said, “We generated a record $79 million in cash from operations during the quarter and are in the best financial position in our history.”
Although the latest financial figures are mostly the result of MOCVD equipment orders placed more than six months ago, very strong demand from LED manufacturers is likely to continue – although order patterns appear to have plateaued. Veeco said that bookings for its “LED and solar” division, which mostly comprises orders for MOCVD equipment, dropped 7 per cent sequentially in the quarter to $243 million.
Backlog
But with a backlog valued at more than half a billion dollars, hundreds of MOCVD reactors are still waiting to be shipped to customers either ramping up existing production, or building completely new LED manufacturing facilities. “We continue to see high levels of quoting activity, particularly in China and Taiwan,” Peeler said. “We believe there may be an opportunity to sell thousands of MOCVD systems as LEDs fully penetrate display applications, and adoption accelerates for solid-state lighting (SSL) in 2011 and 2012.”
One slight issue identified by Veeco is the timing of some of the tool shipments to certain customers in Taiwan and Korea, which have been rescheduled recently. But the company says that this is only likely to mean that some revenues end up being recorded in the opening quarter of 2011, instead of the fourth quarter of this year.
Projected fourth-quarter revenues, which are estimated at anywhere between $285 million and $320 million, include a number of multi-tool shipments to key Chinese customers. In China, the government has heavily subsidized the purchase of MOCVD equipment, to encourage strong uptake of the technology for making high-brightness LEDs in huge volumes. The Chinese government provides a subsidy of $1.5 million per tool – around two-thirds of the typical selling price – according to LED industry analyst Ross Young at IMS Research.
Flexible capacity
Veeco, which has a flexible tool-manufacturing capability, is now able to ship up to 120 systems per quarter. Once qualified for volume production, which typically occurs about six months after tool delivery, one of Veeco’s larger systems is capable of producing tens of millions of high-brightness LED chips every year.
With the huge number of new reactors being shipped to customers by both Veeco and its larger rival Aixtron during the second half of 2010, global LED manufacturing capacity is set to grow massively in 2011. IMS Research has predicted that more than 4000 MOCVD tools will be shipped between 2010 and 2013, as the SSL market begins to ramp in mainstream applications.
According to a forecast made by Morgan Stanley Research, the total LED market – which it expects will be worth more than $10 billion in 2010 – will grow at a compound average growth rate (CAGR) of 21 per cent over the next decade, by which time it will be worth close to $60 billion.
While backlighting of TVs and other displays represents the key driver of MOCVD equipment sales right now, that will change over the next couple of years as general lighting becomes a much more significant market sector and demand for the TV market saturates – Veeco says that leading TV makers will use LEDs in virtually all of their products as soon as 2012
Morgan Stanley Research suggests that, in 2013, general lighting applications of LEDs will represent a $10 billion market sector alone, growing to $30 billion by 2020.
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