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Sapphire substrate producer Rubicon Technology increased sales to LED-manufacturing customers in the second quarter of 2009 as demand for applications in notebook, netbook and TV backlights filtered through the supply chain.
That demand pushed Rubicon's total sales to $3.2m for the period, up from $2.3m in the first quarter of the year, but still a huge decrease on the $11.5m in sales that it posted in the second quarter last year. The weak sales and pricing environment resulted in a net loss of $2.9m, compared with the $2.2m profit Rubicon made this time last year.
Much of that decline results from much lower sales of large-diameter sapphire to Peregrine Semiconductor for RFIC applications, while sales of smaller material to LED makers have improved in recent months.
CEO Raja Parvez attributed that strengthening demand to the proliferation of LED backlights in large-area displays. “There has been a rush to deploy LED-lit TVs,” he said.
The problem for Rubicon is that the customers who need more sapphire substrates right now are largely based in Taiwan, where LED backlights are primarily manufactured, and where 2-inch wafer production is still used almost exclusively.
Because many suppliers can produce sapphire material at this size, Rubicon's expertise in larger wafers does not present any competitive advantage.
Illustrating this point, 2-inch material represented 76% of Rubicon's sales to the LED market in the latest quarter, with only 24% attributed to larger wafers. In the immediately prior quarter, 80% of LED-related sales were generated by the larger sizes.
But Parvez is confident that demand for 4-inch and even 6-inch material will pick up over the next 12-18 months. “Several LED manufacturers are investing in 4-inch wafer capacity,” he said.
Echoing suggestions earlier this week from MOCVD equipment supplier Veeco Instruments of a recent pick-up in demand, Parvez predicted that the final quarter of 2009 would see improving sales of 4-inch material.
The CEO added that some of the leading LED makers were now beginning their initial qualification of 6-inch wafers, and that one customer had begun early-stage development work on an 8-inch process.
“We expect to see production orders for 6-inch sapphire to begin in late 2010, going into 2011,” Parvez explained. “In the last 18 months, companies have progressed significantly.”
If the difficulties associated with uniform epiwafer production at those larger diameters can be ironed out by then, Parvez believes that Rubicon's “ES2” crystal manufacturing process will result in a significant competitive advantage over rivals using the more traditional vertical-gradient freeze (VGF) and Czochralski techniques.
“To get respectable yields and throughput [with 6-inch production], you need ES2,” he said. The technological barrier with the other techniques is significant.”But until production-level demand for that larger material emerges, Rubicon will remain under competitive pricing pressure. For the third quarter, it expects revenues to increase to $4.5m, with an accompanying net loss of $2.5m.
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The author Michael Hatcher is a freelance journalist based in Bristol, UK.