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Coherent boosted by flat-panel display bookings

27 Jul 2012

Laser giant ends June quarter with a record backlog, and will formally release its kilowatt fiber laser by the end of September.

Coherent, one of the world’s leading laser vendors, says that it now has a record order backlog, thanks in large part to booming demand for excimer systems from makers of LCD and active-matrix OLED (AMOLED) displays.

Announcing revenues of $196.4 million and pre-tax earnings of $24.4 million for the June quarter – Coherent’s third quarter for its fiscal 2012 – the company said that a sequential decline sales for the scientific and OEM markets was offset by growth from its microelectronics and materials processing divisions.

“Both the scientific and [OEM] instrumentation markets are subject to funding reductions and uncertainties which have negatively impacted customers’ order rate,” the company explained. “We continue to see weakness in the advanced packaging market but our remarkable successes in the flat-panel display market more than offset this shortfall.”

Coherent’s CEO John Ambroseo indicated that the faltering macroeconomic climate has taken the edge off of the optimism that he had sensed earlier in the year, pointing out that customers in many markets were now more cautious and trying to keep their inventories low. The apparent slowdown in China’s growth and the partisan politicking in the run up to the US presidential election are also dragging on demand in general.

But for Coherent the strong demand from displays companies, who use Coherent’s excimer lasers in annealing applications, is doing much to allay those concerns. Company CFO Helene Simonet told an investor conference call that flat-panel display applications now accounted for approximately half of the company’s 12-month shippable backlog.

Field modifications
Earlier this year, Ambroseo had highlighted the emergence of AMOLED displays as a huge potential growth area for the laser company, noting particularly the appearance of TVs based on the new technology at the Consumer Electronics Show in January.

Coherent has been gearing up in anticipation of high demand from displays firms for its excimer lasers, with an expansion of its service and manufacturing facilities in both Korea and Göttingen, Germany, with costs rising as a result.

The expansion hasn’t quite been plain sailing, with early problems in sourcing key optical components and a need for field modifications for some lasers. But Ambroseo told investors that the supply of optics was now “under control” and that critical issues relating to a “performance dislocation” with some of the excimer lasers – which negatively impacted Coherent’s Q2 profits - had been identified, and that the necessary fixes were now being rolled out.

Thanks largely to those displays applications, Coherent’s overall order momentum gathered pace in the latest quarter, with the company registering Q3 bookings worth $218.9 million – up nearly 20% on a sequential basis and pushing the company’s book-to-bill figure to a healthy 1.11.

Fiber laser launch
In terms of new product development, Coherent shipped the first of its giant “Gen 8” annealing systems for display manufacturing last month, with more set to follow soon. Ambroseo added that the company would formally release its first kilowatt-scale fiber laser before the end of the current quarter in September.

Prototype versions of this laser have been on view since the 2011 LASER World of Photonics trade show more than a year ago, with Ambroseo saying that the first volume orders should arrive in fiscal 2013.

Coherent’s strategic approach to the fiber laser market, which is becoming ever more crowded as Jenoptik, Rofin-Sinar and others look to challenge IPG Photonics, is also becoming clearer. Ambroseo said that Coherent would be selling an OEM module, rather than a one-box system, to avoid duplicating parts that its customers would likely already have, and added:

“The [fiber laser] product is designed to be field-serviceable, which we have heard from multiple customers that they see as an advantage.”

While fiber lasers are often regarded as maintenance-free systems – certainly in comparison with more conventional materials processing lasers – Coherent feels that some level of field servicing is inevitable. Whether that is sufficient to make customers select its designs over those of its rivals should become apparent by the end of this year.

For the current quarter, Coherent’s management team expects sales to be slightly down on a sequential basis, at between $193 million and $196 million. The major impact of the boom in orders from displays OEMs should be felt towards the end of this calendar year, with virtually all of those lasers set to be shipped in Coherent’s fiscal 2013 – which starts in October.

• Investors reacted positively to Coherent's earnings call, with the company's stock rising by around 10% in early trading on July 27. With shares trading at close to $50, the company's market capitalization was just under $1.2 billion.

Omicron-Laserage Laserprodukte GmbHPhotonTec Berlin GmbHCobolt ABBRD Optical Co., LtdAVANTES BVNUBURU IncFISBA
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