For third-quarter 2012, Rubicon Technology Inc of Bensenville, IL, USA, which makes monocrystalline sapphire substrates and products for the LED, RFIC, semiconductor and optical industries, has reported revenue of $19.9m, up 17% on $17m last quarter, driven by strong 6-inch sapphire wafer sales. Revenue from 6-inch wafer sales alone rose 62% sequentially as demand increased from both the silicon-on-sapphire (SoS) and LED markets. However, due to low industry pricing for 2- through 4-inch core products, Rubicon decided to sell "a limited quantity" of those products in Q3.
Fiscal Q3/2011 Q4/2011 Q1/2012 Q2/2012 Q3/2012 Revenue $33.6m $19.4m $10m $17m $19.9m
"We saw strong demand for our 6-inch polished wafers in this quarter from both key markets, SoS and LED," commented president & CEO Raja Parvez. "While the recovery of the LED market is slower than expected, the strength of our technology has allowed us to outperform our peers by enabling us to take a leadership position in supporting emerging technologies such as silicon-on-sapphire, large-diameter LED substrates and large-area optical windows."
Gross margin rose to 12.3%, up from break-even last quarter. Operating loss was reduced to $1.1m from $3.1m, and earnings per share were $0.01 after recording a foreign currency gain and additional income tax credits.
"While the LED market in general continues to remain fairly weak, we are seeing signs of improvement, and the SoS market remains strong," Parvez says. "During the current LED industry cycle we continue to focus on enhancing our competitive position by developing new products, adding intellectual property and reducing our cost structure," he added.
Commenting on the outlook for Q4/2012, chief financial officer William Weissman commented, "We expect revenue to be similar to that of Q3, with most of our revenue again coming from 6-inch polished wafer sales. Pricing for 2- through 4-inch cores has not yet started to rebound, so we will likely [continue to] sell limited volume of these products again in Q4. Gross margin will likely be in the high single digits, as average pricing for 6-inch wafers will be somewhat lower," he added.
"The down cycle in the LED market has certainly delayed broader adoption of 6-inch substrates among LED chip manufacturers, and 6-inch usage remains limited at this time. We are now beginning to see some chip manufactures re-engage their development work on 6-inch and expect strong growth in the 6-inch market in the second half of next year," Weissman continued. "However, in the near term we expect to see some pricing pressure on 6-inch, given the limited demand and competitors trying to qualify for that business. Consequently, we expect a loss per share between $0.02 and $0.05 in Q4."
In the subsequent analysts' conference (on 8 November), Parvez expanded on his earlier summaries of Rubicon's recent and likely next-quarter performance as well as the conditions facing the firm's wider markets.
"Rubicon continues to be the largest provider of 6-inch wafers to the LED market due to our strength in both large-diameter crystal growth and large-diameter polishing," he commented. "The down cycle in the LED market has certainly delayed broader adoption of six-inch substrates by LED chip manufacturers and six-inch usage remains limited at this time. However, we continue to believe that large-diameter substrates are the future of LED chip manufacturing and we are now beginning to see some chip manufacturers re-engage their development work on 6-inch wafers. We have also begun discussing 8-inch wafers with some of our customers," he noted.
"One analyst said in September [2012] that they anticipate that, within two to three years, 25% of the total sapphire wafer surface area processed will be on 6-inch wafers, and in a few more years that number is expected to be 50%," Parvez continued. "We will begin to see greater 6-inch adoption in the second half of next year, which will be a strong growth driver for us," he believes. "However, in the near term we expect to see some pricing pressure on 6-inch wafers, given the limited demand and competitors trying to qualify for their business.
"Global consumption of LED in general lighting applications is expected to increase approximately 37% per year over the next few years before accelerating to an annual growth rate of over 50%. However, while the LED market is slowly improving we anticipate that it will likely be a couple of more quarters before we see some price improvement for 2- to 4-inch cores," Parvez adds.
"[Recently] it has been a difficult cycle for the LED industry, but the market is slowly improving while the silicon-on-sapphire market continues to grow," Parvez concluded. "During this [coming] cycle we'll continue to focus on extending our vertical integration and refining our processes in order to further extend Rubicon's competitive position."
