Aixtron regains Q4 LED lead

Aixtron had a clear lead in 2010 with well over 50% market share however Q3 2011 saw Veeco surge ahead. Veeco benefited in Q3’11 from the successful introduction and delayed recognition of its multi-chamber Maxbright tool.

03/02/2012


IMS research: excellence in market intelligneceAixtron No. 1 for Q4 2011, Veeco No. 1 for full year.

I’m currently working on the analysis for the MOCVD chapters of our quarterly GaN LED supply and demand report. We estimate how many reactors both Aixtron and Veeco shipped by a combination of 2 methods. Firstly, we survey all the customers to get information on how many reactors they are buying from each company and when. Secondly, we look at the revenue for each company in their quarterly financial results (Aixtron reported March 1st, Veeco February 6th) and calculate the number of tools based on our own estimates for average selling price. We haven’t finalized the precise analysis for the report yet but for GaN LED it looks like Aixtron shipped 85-95 chambers in Q4 and Veeco around 60-70 chambers.  Other companies in the market have not made significant progress against the big 2 this quarter so Aixtron and Veeco accounted for well over 90% of shipments again this quarter putting Aixtron at 57% unit share for the quarter and Veeco at 41%. We correctly predicted that Aixtron would rebound to the lead in Q4 in our Q4 report MOCVD chapters sent to subscribers on November 1st. Although Aixtron has a 35-40% lead in units vs. Veeco both companies have around $140-$150M each for LED related sales however we are still working on finalizing these figures for the report.

LED unitshare, Source: IMS ResearchAixtron had a clear lead in 2010 with well over 50% market share however Q3 2011 saw Veeco surge ahead. Veeco benefited in Q3’11 from the successful introduction and delayed recognition of its multi-chamber Maxbright tool. Veeco’s strength with the leading customers in China and gains at new players and Taiwanese companies migrating to China has supported its share gains. However Aixtron’s own business in China was as high as 70-80% for GaN LED for Q4, even nearer 90% if we include Taiwanese joint ventures in China.

Although Aixtron’s market share lead in Q4 is a noteworthy headline, we believe it won a few large orders that shipped in Q4 rather than significantly changing the competitive position vs. Veeco. Annual market share is probably more meaningful, and in 2011 Veeco was still ahead with around 344 chambers for GaN LED compared to an estimated 318 for Aixtron. This is the first year that Veeco has been the no 1 and marks quite a turnaround from Aixtron's strong lead in 2010. So with Aixtron ahead in Q4, but Veeco ahead for the whole of 2011, who will lead in 2012 for GaN LED?

Again, there’s 2 ways I can look at this. Firstly, the indications given in the earnings calls and secondly the projections we have based on speaking to LED customers and visiting LED fabs. On the first point, Veeco’s call outlined a total company revenue of $500-$600M for 2012 perhaps suggesting $300M-$350M for LED reactors  or 150+ chambers to be shipped while Aixtron have stated that they anticipate EBIT profitability for 2012. They have not given a revenue indication, but we believe this could indicate around US$385M for their total company revenue. Aixtron therefore expects less total company revenue than Veeco, having said that they do have a higher % of their overall business in GaN LED but still look likely to come in somewhere under $300M or around 140-150 tools which would put Veeco a little ahead.

Secondly, we can look at our current tool installations projected for 2012 based on surveying LED manufacturers. We are still working on these projections however they indicate a potential lead in chamber shipments for Veeco, and in my opinion possibly a slightly larger one than that hinted at in the earnings call which suggest a more even outlook. However that is a very provisional suggestion which could change, e.g. if orders get cancelled or moved out.

Looking at the numbers above, its clear that 2H 2011 and 2012 are at lower levels than the booming 2H’10 and FH’11. For instance, despite Aixtron’s jump in market share in Q4, it’s still worth pointing out that Q3 and Q4’11 were still its 2 lowest quarters for revenue (both total and LED) since 2009. Both companies were significantly affected by a worsening in conditions in the second half of 2011 which featured cancelled orders, industry over capacity and tightening demand. Aixtron talked in their earnings call yesterday of a “dramatic reduction of order intake” in the second half of 2011 while Veeco talked of a “temporary pause in the LED market” last month.

Regarding the outlook, Veeco commented that the “current overcapacity situation could mean that MOCVD orders remain at these depressed levels for multiple quarters”. Aixtron talked of a “challenging environment” for FH2012 and “perhaps” a “more positive” environment in the second half. Both Aixtron and Veeco’s current booking levels, and our survey of end users, indicate that FH’12 will certainly be far below FH’11. In fact, this has been clear for a while.

In the December edition of our quarterly GaN LED supply and demand report we gave two likely scenarios for 2012 chamber shipments, a pessimistic case of 244 and a base case of 393. With some deterioration of market conditions, it currently looks like the base case in our March report when completed will now be somewhere between those two figures, meaning 2012 shipments should be about half of 2011. Even so, they will still be above 2009 levels.

I should also say though that I am focused on GaN LED here (we have a separate group in IMS Research to cover Power Electronics). If we look at the total number of machines it’s a different picture because Aixtron has more of a play than Veeco in certain areas. Also, unlike my LED estimates quoted in this blog which are my own estimates, here we can compare publically available info and we can see that Veeco’s revenues for all MOCVD and MBE (LED & Solar) for 2011 were $828M compared to €611M (around $869M) for Aixtron’s revenue. Of course, I’ve excluded Veeco’s data storage business which is a separate area. If we just look at total company revenue in all areas then, Veeco was ahead again in 2011. So it does depend what you’re comparing.

Actual LED sales are not seeing such sharp declines, of course, and are actually fairly stable. From 2013-2014 onwards we fully expect a big penetration of LED in lighting and naturally MOCVD sales will turn upwards again at some stage. In our March report we will provide another update on that also. This blog should be considered only some preliminary thoughts following yesterday earnings call and the numbers are subject to revision before being finalized in our detailed report.

Further details on this report can be found here.



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