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Editorial: Rerun: Ramifications of Philips' Buyout of Lumileds, Epistar's Merger Rise and the Fate of Agilent's SPG
... It turns out the McDonald Report August 17th column speculating on the shifts underway in the advanced LED manufacturing space caused a bit of excitement and fresh buzz. Given many people might have been on summer vacation, we offer a rerun of that column, below. And don't forget... if...
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September 5, 2005...JDS Uniphase Corporation (JDSU) of San Jose, California USA, in its Q4 fiscal
2005 results posted a year-over-year revenue increase of 3% up to $712.2 million.
JDSU CEO, Kevin Kennedy said that this was the first year-over-year improvement
in posted revenue since 2001. The company still posted a loss totaling $145.7
million for the fiscal year. This posted loss includes a $62.7 million impairment
charge. JDSU reported strong sales in the long-haul and metro-network markets.
“Reconfigurable optical add/drop type electrical multiplexers
[ROTEMs] and some of the higher end sub systems have been the high growth
rates for us,” Kennedy said.
JDSU acquired laser maker, Lightwave Electronics, test and measurements solutions
provider, Acterna, and Photonic Power Systems Inc. over the fiscal year. Acterna
provided the biggest increase in headcount with an addition of about 1800 employees.
The company concluded a year of much consolidation and restructuring. During
the fiscal year the company sold its Fuzhou, China, manufacturing facility to
Fabrinet. In addition, the JDSU transferred both its Ewing and Mountain Lakes,
New Jersey manufacturing facilities to Fabrinet, a key manufacturing partner.
The company also reduced manufacturing in Santa Rosa, California, associated
with the phasing out of certain display products including high-volume consumer
light engines and coated micro display windows.
Mr. Kennedy said, “Clearly we are trying to continue to minimize the
amount of North American Manufacturing and in North American have only those things
that make sense.” He added that the company will continue to move manufacturing
out of North America to Asia and that, “We probably have one more year
of significant manufacturing footprint consolidation.” The company
plans to reduce its headcount by 550 in its continued consolidation and restructuring
in the coming fiscal year. In addition the company will stop manufacturing products
at its Santa Rosa, California facility. This will further reduce the head count
by about 130 workers. Kennedy mentioned that the company may look to Thailand and
Singapore as places for manufacturing. (Ref: Fourth
Quarter Fiscal Results ) Accent Releases p-GaN Carrier Concentration Profiling Process
CompoundSemi News StaffSeptember 1, 2005...Accent Optical Technologies, a private company located in Bend, Oregon USA,
has released a new etch process for Electrochemical CV carrier concentration
profiling of p-doped Gallium Nitride (GaN). According to the company, achieving
a high concentration of holes, also known as positive carriers in p-type GaN
is a critical step in producing HB LEDs or UV lasers for next generation DVD
players. While Secondary Ion Mass Spectrometry (SIMS) can measure the chemical
concentration of the dopant, it does not measure the electrically active carrier
concentration. Unlike
conventional metrology methods, Accent says their electrochemical vapor (ECV)
profiling directly measures the electrically active carrier concentration, which
has a direct impact on key performance parameters including forward voltage
and contact resistance. Content continues for LIGHTimes SecondPage members... Alfalight Releases 25W Pump Module for Fiber LasersAugust 31, 2005...Alfalight has released a 25 W pump module for fiber laser and amplifier configurations.
The Combined Power Module II (CPM-II) reportedly has precision wavelength control
through integrated temperature stabilization. The device is ideal at pumping lasers
at 976nm. Ron Bechtold, vice president of sales and marketing for Alfalight commented,
“This pump source simplifies the development of high-performance fiber
lasers and amplifiers by incorporating wavelength control, advanced protection
circuitry, higher output power and high reliability. As a result, users can
focus on the other aspects of their fiber laser system design and not the pump
performance.” Company
News Release Microsemi Release InGaP HBT Power Amplifier for Wireless DevicesAugust 31, 2005...Microsemi has expanded its portfolio to include a new indium gallium phosphide
(InGaP), hetero-junction bipolar transitor (HBT) power amplifier for wireless
devices. The LX5511 provides power gain up to 28 dB when operating in the 2.4-2.5GHz
frequency range. The device falls between the company’s other models, the
LX 5510B at 19dB and the LX 5512E at 32dB. It features active bias, power detection,
on-chip input/output matching. In addition it consumes little power and can therefore
be used for portable applications.
The LX5511 has a 3.3 V power supply and a built in heat sink inside a 16-pin
micro-lead package. James J. Peterson, Microsemi President and Chief Executive
Officer. Said, "Microsemi's InGaP HBT technology provides superior
high-gain power amplifier solutions for all the IEEE standards being designed
into current and next-generation wireless LAN systems," Company
News Release MII Files its 300th Patent Application Worldwide
Scott McMahanAugust 31, 2005...Molecular Imprints Inc. (MII), which specializes in imprint lithography and is headquartered in Austin, Texas USA, has reached a significant
milestone, filing its 300th patent application worldwide. With over 40 patents
allowed or issued, the company is establishing what it believes to be the largest
nano-scale and 3D imprint patent portfolio in the world, based on published
patents. This is an impressive feat for most any company. What makes the the accomplishmet even more phenomenal is that the 300 patent applications worldwide average to about 3 patent applications per employee in the company with just over 100 employees. The company’s patented Step-and-Flash Imprint Lithography system
uses micro imprints made in an epoxy-like material that hardens at room temperature
under UV-light to make semiconductor and compoundsemi structures. (Ref: article).
The company says that its S-FIL system can reach scales, resolutions, and throughputs
never before possible. The technology has attracted considerable attention and
has received numerous accolades including EE Times’ Annual Creativity
in Electronics (ACE) award for “Most Promising New Technology.”
(Ref: article).
The company said their technology can also be used for create other nanotechnology
structures.
In early August, the company announced what at first glance might seem an unlikely
partnership with two companies, XAAR and of Cambridge, UK, a supplier of industrial
printheads, inks, and peripheral equipment, and Vivid a subsidiary of XAAR.
S.V Screenvasan, MII chief technology officer (CTO) said, “These two companies
are leaders in fluid dispense technology and will continue to provide the pioneering
work for our nanolighography system.” Company
News Release AXT Appoints Industry Veteran as VP of Global Sales and MarketingAugust 29, 2005...AXT, a manufacturer of compound semiconductor substrates has appointed industry
veteran, John J. Cerilli, as vice president of global sales and marketing. Mr.
Cerilli most recently served as director of sales and marketing at MOCVD equipment
supplier, Aixtron AG. According to AXT, his 29 years of experience in the semiconductor
industry comes from a variety areas within the semiconductor industry including:
marketing research services, new business development, capital equipment sales,
customer service, wafer fab operations, technical recruiting and training.
“One of our key areas of focus is to strengthen our sales efforts
both domestically and internationally and to explore additional opportunities
that may exist both within our current customer base and with new customers,"
said Phil Yin, chief executive officer. "As such, I am thrilled to
welcome John to AXT. I have known him for many years and I believe that his
experience, knowledge of the industry and extensive contacts will drive AXT's
revenue growth and help the company to regain its former position as a leader
in the compound semiconductor substrate market." Company
News Release Sensors Unlimited's Chairman Honored
CompoundSemi News StaffAugust 29, 2005...Sensors Unlimited’s chairman, Greg Olsen was named “Innovator of
the Year 2005” by Princeton Regional Chamber of Commerce in Princeton,
New Jersey USA. He is the world’s third private space explorer and first
space tourist since the Columbia tragedy, according to Space Adventures Ltd.
Olsen is scheduled to launch to the International Space Station this October
1, 2005 on the Soyuz TMA-7 orbital spaceflight mission from the Baikonur Cosmodrome
in Kazakhstan. (Ref: April 1, 2004 news
and editorial
"Greg Olsen's Great Adventure")
Sensors Unlimited, Inc. began as a research and development startup and sold itself to Finisar in in October of 2000 for approximately $700 million (ref: Oct.
18, 2000 news) and bought back its independence two years later for
only approximately $6.1 million in an unprecedented "restart" strategy
(ref: Oct.
8, 2002 news). Greg Olsen has been at the helm of Sensors Unlimited
since its original founding. The company has gained fame as the leading global supplier of highly sensitive near-infrared detectors,
cameras and systems made with indium gallium arsenide (InGaAs). Dr. Olsen plans
to conduct remote sensing and astronomy research projects incorporating his
company’s shortwave infrared (SWIR) imaging technology while in flight.
According to Sensors Unlimited, their imaging products are critical to a variety
of industries, including biomedical, military, security, scientific, industrial,
historical art inspection and telecommunications. Company
News Release Emcore Wins Contract for Satellite Solar Panels; Temporarily Reopens City of Industry Facility
CompoundSemi News StaffAugust 26, 2005...Emcore Corporation headquartered in Somerset, New Jersey USA, has received an
$8 million contract to produce solar cells for a large geosynchronous communications
satellite. The company says that the contract also contains options for additional
solar panel deliveries through 2007. Emcore reportedly plans to resume production
of solar panels at its City of Industry, California facility which was earmarked
for closure in April and then shut down in July of this year (Ref:
article).
Because of time constraints and certain production capabilities, the City of Industry
facility was chosen over the company’s Albuquerque, New Mexico photovoltaics
facility.
Emcore will continue to manufacture other solar panels at its Albuquerque facility.
The company plans to extend the capability of its Albuquerque facility to produce
high power solar cells for geosynchronous satellites during fiscal 2006. Once
this is accomplished the company says it will cease operations of its City of
Industry facility. The extended closure schedule is expected to reduce the shutdown
costs for the facility. New shutdown costs estimates remain to be determined.
These costs depend in part on whether or not the described customer exercises
its purchase options.
As of August 1, Emcore projected the total shutdown costs for the City of Industry
facility to be about $3.4 million, of which $1.54 million was expected to go
towards restructuring and severance charges. (Ref: Form
8-K of US Securities and Exchange Commission filings). TDI Demonstrates InN on Sapphire Waffers
LIGHTimes StaffAugust 25, 2005...Technologies and Devices International, Inc.(TDI), a privately held corporation
in Silver Springs, Maryland USA, has demonstrated InN epitaxy with its hydride
vapor phase expitaxy (HVPE) technology on 2-inch sapphire substrates. According
to the company, the indium nitride (InN) on sapphire substrates and aluminum
nitride (AlN) on silicon carbide (SiC)substrates can be used in blue and UV
LEDs. Dr. Vladimir Dmitriev, president and CEO of TDI said that the development
of the InN on sapphire substrates was funded as part of the Department of Energy
(DOE), Solid State Lighting program (not to be confused with the Next Generation
Lighting Industry Alliance that the DOE recently started).
Content continues for LIGHTimes SecondPage members... Apples to Oranges Comparison of LED Market Predictions
LIGHTimes StaffAugust 25, 2005...The fledgling solid state lighting industry is still years away from enjoying maximum installation of advanced LEDs in general lighting applications, as two different
research firms have recently predicted. Where we are now and where we will
be four or five years from now are apparently vastly different for analysts
at Strategies Unlimited (Ref:
our Aug. 17 coverage) and iSuppli (Ref:
EETimes Aug. 24 article). iSuppli of El Segundo, California USA predicts
the expansion of the LED market for general lighting from their 2005 estimate
of the market of $144 million to $874 million by 2010. Strategies Unlimited
of Mountain View, California USA, regarded as the traditional leading market
analyst firm in the compound semi and solid state lighting fields has recently
released it's latest HB LED market numbers. While the two firms' numbers are
not direct "apples to apples" comparisons, there is some agreement in their prediction for the adoption of HB LEDs for general lighting. Content continues for LIGHTimes SecondPage members... DVD Format Talks Delayed Indefinitely
CompoundSemi News StaffAugust 24, 2005...Wired News reported that Sony and
Toshiba have failed to agree on a single next-generation DVD standard and have
suspended talks indefinitely. Junko Furuta, Toshiba spokesperson said that the
higher capacity Blu-ray disks would be more difficult to integrate into laptops
and car navigation systems. The two sides of the debate focus on the choice of
Sony’s Blu-ray DVD format or Toshiba’s HD-DVD format as the one, next-generation
DVD standard. Both sides are developing products with their respective formats.
Toshiba says it will come out with HD-DVD players by the end of the year, and
Sony’s game console, Playstation 3 with the ability to play Blu-ray disks,
will come out in the spring 2006.
Both the HD-DVD and Blu-ray formats utilize blue lasers which have a shorter
wavelength than the red lasers used in current DVD and CD devices. This allows
more information to be stored. The HD-DVDs reportedly have a capacity of 15Gb.
Whereas Sony has had conflicting reports about its capacity. The Blu-ray disks’
reported capacities have ranged from 25 GB, (the most recent claim) up to 50Gb.
Many media companies are taking sides in the issue. Recently movie maker, Lions
Gate Entertainment announced that their entire movie library will be made available
in Blu-ray format. Our news features are reported
by the CompoundSemi News staff writers.
For submissions or content suggestions, you can contact us using
editor -at - compoundsemi.com
For more information and to reserve promotion space contact
Info7 -at - compoundsemi.com
or call +1 (512) 257-9888 |
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The
McDonald Report
Commentary & Perspective...
Rerun: Ramifications of Philips' Buyout of Lumileds, Epistar's Merger Rise and the Fate of Agilent's SPGAugust 29, 2005...It turns out the McDonald Report August
17th column speculating on the shifts underway in the advanced LED manufacturing
space caused a bit of excitement and fresh buzz. Given many people might have
been on summer vacation, we offer a rerun of that column, below. And don't forget...
if you've been out of touch for a few weeks at a time, simply click on "recent
headlines" in our features box to catch up on what you might have missed.
Next week Jo Ann will be doing her monthly review of her CS Stock Portfolio,
so... stay tuned.
After an especially quiet summer in the news department, mid-August brought
forth major stories that will likely shift the landscape of the compound semi-based
solid state lighting (SSL) industry supply chain. Philips
will buy Agilent's share of Lumileds, Agilent's
SPG group was purchased by two huge equity investment groups, and Epistar
will merge with UEC. Building on the current facts, speculation now centers
on what Philips will actually do with Lumileds, when SPG will be ready for an
IPO, and if the rise of a larger Epistar equates to expanding what's come to
be known as "The Big 5" to "The Big 6". As topping all this,
Strategies Unlimited has released it's latest HB LED report (ref: company
news release) on the demand side of the business with the promise of
the follow-on supply side study due out in a couple of months. No less than
40 companies were interviewed, bringing this columnist to the conclusion that
the advanced LED business continues to boom and that the SSL industry is getting
so big, it's getting difficult for even the experts to keep track!
First, let's tackle Lumileds' news. Reading back in my own June 14th speculations
of Who
Might Buy Agilent's SPG Group (which co-owns Lumileds) and Why?, danged
if I didn't hit it right on the head predicting that Philips would scoop up
the rest of Lumileds. Agilent, formerly part of Hewlett Packard, was the mother
of this highly regarded JV and when the deal is done, they will have cut the
umbilical cord in exchange for close to one billion American dollars. That makes
the value of Lumileds at about $2 billion with the company's Dutch father figure,
Philips, owning all but the 3.5% that's owned by Lumileds employees. Mom and
Dad had kept their offspring on such a tight leash that it wasn't until last
December that the world finally found out just how much income the little tyke
was earning for for them (ref: Dec.
23, 2004 news and Jan.
16, 2005 McDonald Report).
Let's leap ahead and look at what could happen if Philips decided (as I
heartily recommended in June at the conclusion of my column)
to allow Lumileds the freedom they've always wanted and deserved and let it
go for an Independent Public Offering (IPO). Philips would likely hold on to
a fair chunk of stock, employees would gobble up their share, people like you
and I would get in on the action, and lots of people would make money. Most
important of all, Lumileds customers wouldn't worry that Philips would be keeping
all the jewels for their own light fixtures... not that Philips would do that,
quite the contrary. Philips is a fine, upstanding giant in the lighting industry
and they'll do the right thing with their wholly-owned offspring. My guess is
that Philips won't groom Lumileds for an IPO, even though I wish they
would, mainly because I'd love to hold stock in Lumileds. It will more likely
be business as usual at Lumileds and not much will change with their established
customer base. But, by owning Lumileds completely, at least LEDs have come to
the attention of the senior management, big time, at Philips! And if they're
talking LED up, the mainstream and general business press will get the message
and that's very good for our industry.
Others in "The Big 5", namely Toyoda Gosei and Osram Opto, are owned
by larger systems integrators and I doubt that ownership by an overlord has
inhibited their sales. I simply like independence, and I think Lumileds would
thrive under an independent publicly-held corporate structure, preferably on
the USA's Nasdaq exchange. Cree and Nichia are the others in The Big 5 and both
are independent. Cree trades on the Nasdaq and is now in a close 2nd place to
Lumiled's market cap at about $1.85 billion. (FYI... of the Big 5, I own
a few shares in Cree as part of my CS Stock portfolio, about which I write the
first of every month (ref: Aug
3, 2005 report)). As I said, I'd love to add Lumileds to that portfolio
and it wouldn't be a measly 100 shares! My bet is that a Lumileds IPO would
skyrocket. They're simply that good, and that well regarded in the SSL industry.
Their management and R&D team are unsurpassed, and most of them have been
there from the start with many dating back to the glory days of HP when pioneering
the advanced LED field. Money can't buy that kind of loyalty (... although it
helps). It's simply the HP legacy.
A side issue of the sale of Agilent's SPG group is how the new owners of SPG,
private equity firms Kohlberg Kravis Roberts &
Co (KKR) and Silver Lake Partners,
who will collectively buy SPG (minus Lumileds) for $2.66 billion. Speculation
there revolves around how the new owners will create value for the newly liberated
entity. There are some tremendous synergistic programs going on between Lumileds
and SPG, which co-share headquarter facilities in Silicon Valley in the USA.
Will SPG go on a slim fast diet and experience the usual cutbacks that inevitably
happen after a buyout? Will SPG be groomed for an IPO by these heavily monied
owners? This is a case where an IPO is essentially assured, which could make
SPG's buddies at Lumileds even more envious and wanting total independence for
themselves. With political shakeups in the USA underway (finally), the sluggish,
muddy roads are slowly being cleared to make way for healthy USA-based IPOs
again.
KKR and Silver Lake are huge privately-held equity investment firms. They are
run by very, very smart people who graduated from the Warren Buffet School for
Billionaires. What they traditionally do is put one of their people on the board
of directors to keep an watchful, but generally hands-off eye on things and
advise where needed. But they don't micromanage and they tend not
to put the axe to things and break up what works. Patiently, they groom their
new acquisition for an IPO by making sure savvy business people who know how
to grow a company's value are at the helm. My guess is that Agilent's current
SPG group will be re-grouped and re-branded and go for an IPO when the time
is right, which could be soon... or years from now. These are patient investors
and they wait until the payoff is extremely large, and well-assured.
Now, let's move our focus across the Pacific ocean to Taiwan where Epistar
and UEC have announced their intent to merge (ref Aug.
15 news). Word on the Taiwan streets (and those who travel by plane
to get to and from them) is that rumors of this merger were rampant over
the last couple of months, so "locals" were not surprised. The merger
will comfortably combine UEC's strength in ROY (red, orange & yellow) LEDs
and finished devices with Epistar's strong BG (blue & green) technology
and chips. The current buzz speculates that this lays the groundwork to now
elevate Epistar (as the newly merged company will be named) to an equal-enough
footing with the current "Big 5" (Lumileds, Nichia, Cree, Osram Opto
and Toyoda Gosei), expanding that group to what would become "The Big 6".
So I do what I always do when I don't know the answer. I called Bob Steele,
our industry's foremost prognosticator (and world traveler, most recently
back from safari in Africa). Bob had just completed the latest Strategies
Unlimited HB LED
Market Review and Forecast prior to leaving for Africa.
The whopping 170 page Strategies Unlimited HB LED market report is the definitive
roundup of the demand side. While market growth is slowing some, the overall
advanced LED market is still expected to reach $6.8 billion in 2009, nearly
doubling from 2004. The supply side, which Bob and his colleagues at SU will
be reporting next, will include the facts that market maturity is indeed changing
the landscape. In our telephone chat, Bob agreed with the word on the Taiwan
streets that the merger of UEC and Epistar indeed boosts their status. But he
pointed out that there are also other very big Asian players coming on fast,
including Seoul Semiconductor in Korea. He added that mainland China now has
6 to 8 epiwafer and chip companies coming online, in addition to Cotco. The
old "Big 5" may have to be relegated to history as simply "The
Pioneers." We'll see what happens when the consolidation dust settles.
So as companies get bigger, and some of the biggies get bought, how does the
SSL industry landscape look to be reshaping as we pull out of summer? Extremely
promising, especially if you're in it for the long haul. Some of the smaller
companies that don't merge with their big brothers may be left by the wayside,
but the good people in those companies (and their IP) simply move on to another
home. Strategies Unlimited's HB LED report stresses that growth between now
and 2009 will be driven by emerging applications such as illumination, automotive
headlamps, and backlights for LCD monitors and TV screens whereas the industry
grew largely by mobile appliances such as mobile phones, digital cameras, PDAs,
etc. That, to me, is significant. It means we're moving logically to higher
end applications.
The changes in the landscape and the promise of IPOs and more consolidation
may also equate to a welcome stabilization of LED prices. I find that especially
encouraging. Whereas most successful USA-based LED companies (Cree, Lumileds,
etc.) enjoy healthy gross margins, many of the Asian companies have been working
at a much lower margin, and that simply can't continue. I recall the age-old
marketing metric: If you can't make it for less than you sell it for,
you certainly won't make it up in volume. If the margins improve, it
follows then that so will the wages to the employees producing the goods. Thus,
everyone's quality of life will be elevated while the world becomes better illuminated.
Literally and figuratively. Think about it. Price isn't everything in life.
If you have questions about the
solid state lighting and compound semiconductor industries or have news
or views to share, I'm Jo Ann McDonald, Editor of LIGHTimes and CompoundSemi News.
Feel free to contact me directly, anytime. 
My direct tel at the ranch is
+1-325-463-5345
From time to time Jo Ann may comment on companies in which she holds a
modest investment - be sure to read
her disclosure at some point in time... |
