Earnings Season — Canaccord Genuity says sapphire market shows signs of stabilizing

It is earnings season and LED and sapphire related companies continue to struggle due to the slow economic recovery and oversupply of sapphire. One financial analyst sees light at the end of the tunnel.  In observation of Rubicon Technology (Nasdaq: RBCN) earnings last week, Canaccord Genuity’s Jed Dorsheimer found some positive signs for Rubicon and the sapphire industry.

According to Dorsheimer, “the sapphire industry is actually showing signs of stabilizing. While we do not expect much in the way of price increases again, we note that Rubicon is one of the low-cost providers in the industry. With this in mind, we feel that when the industry turns and inventory is worked down the increasing utilization should return a good amount of leverage and income to the model.”

Rubicon is already showing signs of recovery of the sapphire market with orders for two through four inch cores increasing in the first quarter.  “We have continued to maintain high utilization of our crystal growth facilities throughout this slowdown because we are confident that demand will be strong in the second half of 2012,” commented Raja Parvez, Rubicon CEO and president, in the company’s earnings news release.

For Further Reading:  Large Diameter Sapphire Supports LED Market Growth

 

Barriers to Entry 1: China’s Appetite for MOCVD Reactors & How Easy Is It to Make Sapphire?

Questions about the barriers to entry and new market entrants from China have been dogging the LED industry.  A few industry experts have been taking a look at China and what it means to the industry.  Strategies Unlimited analyst Tom Hausken recently wrote a piece for LEDs Magazine about the Chinese LED manufacturing industry. China has been throwing a lot of capital at its nascent LED industry and the world is watching.  Tom’s article put some of the talk about the Chinese LED industry into perspective.

According to Hausken, research on the Chinese LED industry by Strategies Unlimited partner GG-LED shows that the Chinese effort goes far beyond MOCVD equipment.  The report further calls into question whether the Chinese can match world-class competitors.  “The report points out that the real shortage in expertise is not only designing LEDs and operating epitaxy reactors in general research, but particularly in planning and leading enterprises that can match world-class competitors,” wrote Hausken.

According to the report, Chinese investment is overly concentrated in LED epitaxy and chip production due to an outdated perception that the distribution of profit margins in the supply chain were concentrated at the epitaxy and chip layer. 

Only time will tell if the Chinese LED industry can get up to speed and become competitive on the world stage.  Hausken commented, “There is over-investment in LED manufacturing in China, but what will be the impact? At the very least, it makes the market less certain. A glut will accelerate the trend toward cheaper LEDs and LED lighting, which has been a goal of national policy makers. It may hurt chip makers and vendors of fab equipment along the way,if only by spoiling an otherwise rational market.”

Look for Part 2, Barriers to Entry 2 in a future post.

For Further Reading:  LEDs Magazine

China Joins Ban on Incandescent Bulbs

China

China

The world’s most populous country, China, is joining the ban on incandescent light bulbs. The Chinese government has decided to gradually phase out the energy-hogging lighting over the next five years saving the country lots of energy and some pollution too. 

China will ban imports and sales of 100-watt and higher incandescent bulbs starting in October 2012.  Bans will be imposed on 60-watt and 15-watt bulbs later over the five-year period. China joins theUSand the 28 countries in the European Union among others in phasing out traditional incandescent light bulbs.

Chinais one of the largest users and producers of incandescent bulbs.  According to an AP report, 3.85 billion incandescent bulbs were produced in China with more than a billion sold domestically. China’s NDRC says that the move will save 48 billion kilowatt hours of power per year and reduce carbon dioxide emissions by 48 million tones annually once the bulbs are phased out.

Rubicon Technology Ships 200,000th Large Diameter Sapphire Wafer

Chicago’s Rubicon Technology recently announced that the company shipped a total of 200,000 six-inch sapphire wafers to the LED manufacturing industry. Sapphire, the base material used for the majority of LEDs, is used in consumer products such as LED-based lighting, HDTVs, laptops, netbooks, smart phones and tablets, and automotive lighting.

Rubicon pioneered the development of large diameter sapphire wafers for use in the RFIC market and then took advantage of the market opportunity to develop the process to serve other markets like LED lighting.

Large diameter wafers help play a role in lowering the price of LED-based lighting to spur adoption worldwide. In the news release, Rubicon’s president and CEO, Raja Parvez said, “LED manufacturers understand that migration to a large diameter sapphire wafer platform offers an opportunity to achieve production and cost efficiencies. This is increasingly important as LED manufacturers seek to reduce costs throughout the LED manufacturing process to help the industry lower prices of LED-based lighting and encourage adoption worldwide.”