Rubicon expects recovery in LED demand in the second half of 2012

OFweek Semiconductor Lighting Network February 27, 2012 News, Rubicon Technology, a US sapphire wafer supplier, said its first quarter 2012 results will be the lowest point of the current industry's overcapacity period.

In the 2011 annual earnings conference call, Raja Parvez, chief executive of Rubicon Technology, revealed to investors that company revenue is expected to drop to $8 million to $12 million in the first quarter of 2012; and the fourth quarter of 2011 It closed at US$19.4 million, down 34% year-on-year and down 42% from the previous quarter.

The main difficulty for Rubicon is that the major manufacturers have postponed the transfer of 6-inch sapphire-based LED manufacturing. Only OSRAM Opto Semiconductors of Germany has achieved this shift.

Rubicon claims that its 6-inch sapphire wafers are supplied to LED manufacturers more than other suppliers, but shipments of 230,000 sapphire wafers, a small portion of which are used for RF chip manufacturing, have aggravated major customers. Inventory in a market environment with a severe excess capacity.

Rubicon's performance in the third quarter of 2011 also reflected the company’s dependence on 6-inch materials for a single large customer, which resulted in 60% of the company’s revenue for the quarter.

Parvez said: “The market situation in the fourth quarter was very difficult. Due to the excessive inventory in the LED supply chain, the market demand for sapphire wafers and cores was quite limited.”

In the past when market demand was strong, Rubicon greatly benefited from the rapid increase in the price of sapphire products, and now the situation is reversed. In the last few months of 2011, there were very few orders, and the average selling price of 6-inch wafers fell by 30% in the fourth quarter alone.

Parvez expects that sales of 6-inch wafers will continue to be weak in the first half of 2012, but due to the company's $20 million supply agreement with the largest customer, it will supply sapphire wafers to customers from June to December this year. Products, so the company's sales of 6-inch wafers will begin to recover in the third quarter.

Some analysts expect that the downward trend in prices throughout 2011 and continuing into early 2012 will make LED lighting products more competitive than current general lighting technologies by the end of this year. In 2013, LED technology will be widely used in the lighting industry. Parvez believes Rubicon will be able to seize this opportunity.

Parvez said: "We believe that market demand will recover strongly in the second half of 2012. The most promising market in the LED industry - general lighting is in its infancy, while the more mature consumer electronics and automotive sectors still have a lot of growth opportunities."

Parvez told investors: "Our recovery is early, and most of the inventory adjustments have ended."

However, Parvez warned that the current quarter will be more difficult than in the fourth quarter of last year. In the fourth quarter, Rubicon's Malaysian wafer polishing plant used only 20% of its capacity.

If Parvez's forecast is accurate, market demand for Rubicon's products will begin to recover at the end of the second quarter of this year, when more capacity will be required for 6-inch materials as excess capacity is finally digested. By then, Rubicon will be able to reduce raw material costs by 20% through the invented raw material processing process. In addition, the transfer of crystallographic wafer production capacity from Illinois to Malaysia will also allow the cost to decline further.

In fiscal 2011, Rubicon’s annual pretax profit nearly doubled to 54.6 million U.S. dollars, and its sales revenue was 134 million U.S. dollars, an increase of 73%.