News

1 May 2009

 

AXT’s sales halve as GaAs inventories burn off

For first-quarter 2009, AXT Inc of Fremont, CA, USA has reported revenue of $7.7m, down 51% on $15.6m last quarter and 61% on $19.6m a year ago.

While indium phosphide (InP) substrate revenue was up about 3% from about $475,000 both a year ago and last quarter to $490,000, germanium (Ge) substrate revenue was $622,000, down 9% on $684,000 last quarter and 56% on $1.4m a year ago. Gallium arsenide (GaAs) substrate revenue was also down, by 45% on $9.1m last quarter and 64% on $13.7m a year ago to $5m, due mainly to inventory overhang affecting sales of all diameters (particularly 4- and 6-inch). Raw materials sales were $1.5m, down severely by 72% from $5.3m last quarter and 62% from $4m a year ago.

“Our customers continued to utilize their excess inventory and made very good progress in the quarter, but not as quickly as we had hoped,” says chief financial officer Wilson Cheung. “We continued to experience push-outs of orders of our highest-value products, particularly 6-inch semi-insulating substrates and 4-inch semi-conducting substrates, into the balance of the year as our customers continue to use excess inventory in a weakened demand environment,” he adds.

Gross margin was minus 3.1%, down from last quarter’s 4.8% and 31.7% a year ago, due mainly to the low absorption rates (as a result of reduced sales from last quarter) and lower production volume (given the continued weakness at major customers).

In addition, to meet customer supply obligations, AXT’s gallium joint venture Ji Ya Semiconductor in China continued to source 99.99%-pure (4N) gallium from an independent third-party supplier, lowering gross margin. Ji Ya had ceased production for five weeks in fourth-quarter 2008 as a result of a supply shortage of raw materials from the affiliated aluminum plant in which it is housed (which had reduced production and halted operations due to falling aluminum prices in second-half 2008). AXT had expected Ji Ya to get back up to full capacity in Q1/2009, allowing gross margin to bounce back to more normal levels.

Operating expenses have risen from $4.1m last quarter to $5m. However, this included $629,000 severance and stock compensation accrual for former CEO Phil Yin, $350,000 in legal and professional fees related to March’s management change, and a $507,000 restructuring charge from cutting headcount (from 1120 to 1051, mainly through cutting production staffing from 902 to 845).

Net loss has grown from $2.4m last quarter to $5.5m, compared with net income of $2m a year ago. Cash and cash equivalents have fallen from $13.6m to $11.5m.

However, for second-quarter 2009, AXT expects revenue to rebound by 30-43% to $10-11m.

“Our key areas of focus continue to be research and development of advanced products and technologies, customer support, quality control, new customer qualifications and expense management,” says Cheung. “We believe that a strong focus in these strategic areas will allow us to emerge in a competitively solid position when the market improves.”

See related items:

AXT makes CFO principal executive officer pending appointment of interim CEO

AXT’s chairman & CEO Yin steps down

AXT’s revenue falls 13%, as GaAs sales drop by a third

See: AXT Company Profile

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