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Rubicon: sapphire demand 'rebounding'

20 Feb 2014

The sapphire boule manufacturer adds core capacity as adoption of LED solid-state lighting boosts momentum.

US-based Rubicon Technology, which makes sapphire boules, substrates and windows used in LED lighting and optics applications, says that demand for the material is rebounding after a long hiatus, thanks to the growing momentum in solid-state lighting and adoption from the likes of Apple in high-end mobile devices.

With products such as the iPhone 5S now featuring sapphire in both their home buttons and camera lens covers, Rubicon saw its revenues from sales of two and four-inch sapphire cores increase by 28 per cent sequentially to $9.2 million in its latest financial quarter.

Half of that growth resulted from higher pricing, and half from an increased sales volume, and the Bensenville, Illinois firm has responded by increasing its core fabrication capacity.

However, that growth was largely offset by weaker sales in other areas, said the company in its latest financial results call. Total sales of $11.5 million resulted in a net loss of $15.2 million for the quarter, and of $30.4 million for fiscal 2013 overall – much worse than the $5.5 million loss recorded for 2012 as annual sales plummeted from $67.2 million to $41.5 million.

Despite that, CEO Raja Parvez remains upbeat, pointing out that Rubicon is now operating with increased utilization of its crystal growth facilities, meaning that the costs of running idle plant have been reduced.

William Weissman, Rubicon’s CFO, added: “The majority of our negative gross margin in 2013 resulted from idle plant costs associated with low utilization of our manufacturing facilities. We have just completed the re-starting of all of our crystal growth furnaces and we expect to see significant increases in wafer production over the course of this year, which will continue to lower our idle plant costs.”

Patterned progress
Looking at near-term trends, Parvez said: “In the past several quarters we have seen a meaningful improvement in the demand for sapphire with steady price increases as a result. Based on our conversations with others in the market, we believe that trend will continue this year.”

Parvez also pointed to progress being made with the company’s new patterned substrates and polished wafers, saying that Rubicon has already received requests for samples from sixteen different customers for patterned substrates. It shipped samples to nine of those customers in the closing quarter of 2013, and the CEO now expects the product to deliver revenues of “at least $15 million” this year.

Rubicon is emerging from what Parvez admitted was a “challenging” 2013 with a relatively small cash pile of $21.1 million on its balance sheet as of December 31. And while Apple’s huge and exclusive sapphire deal with GT Advanced Technologies takes the Californian electronics giant out of the equation, it does leave the rest of the field free for Rubicon to target.

Parvez told investors that the recent momentum generated by applications in solid-state lighting and mobile devices remain in their infancy, but that from this year onwards they should generate strong growth for several years to come.

“We expect strong demand from sapphire in both the LED and mobile device market in 2014,” he said. “We also believe that the LED market will be looking for more advanced sapphire substrates this year in terms of larger diameter, tighter specifications, and sophisticated patterns.”

“There’s a strengthening pricing environment and improving utilization of our production facilities, we expect to begin seeing strong improvement in operating results this year.”

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