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Editorial: CS/SSL Portfolio Update: Things Are Looking Up
 
... With the onset of Spring, as should be the custom, things are looking up. New and uplifting opportunities seem to be sprouting for many in the compound semi (CS) and solid state lighting (SSL) industries. Within Jo Ann's model CS/SSL stock portfolio, Anadigics is doing especially well, with Color...
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CIGS Solar Startup, Solyndra Raises $79 Million
CompouondSemi News Staff

April 6, 2007...Solyndra, a Santa Clara, California startup, which will specialize in copper indium gallium selenium (CIGS) solar cells has raised $79 million in funding. CIGS manufacturing is expensive and startups in the field have to have vast infusions of capital to pay for the required manufacturing facilities. Investors in the new solar company include CMEA Ventures and Redpoint Ventures, CNET reported in an article. (Note: that article made several factual errors about the efficiency and manufacturing cost of CIGS photovoltaics.) According to another article, this in a VC publication, Solyndra's technology will be led by VP of Engineering Benny Buller, formerly a GM at Applied Materials.

CIGS technology is more efficient than conventional solar cells, but it also costs more to produce. Each company has its own recipe for CIGS photovoltaics. The main difference from company to company seems to be in manufacturing techniques and the type of surface upon which the CIGS material is deposited. There is no word yet on how Solyndra plans to manufacture the photovoltaics, or what material they will be manufactured on. However, the startup has a long list of job openings on its web site. Several other companies in the sector have recently received significant funding. Nanosolar recently announced raising $100 million. Austin-based Heliovolt also raised funds to set up its own facility.

Georgia Tech Researchers Produce Nanoscale Generator
CompoundSemi News Staff

April 6, 2007...Researchers at the Georgia Institute of Technology in Atlanta, Georgia USA have developed a nanonscale generator that uses zinc oxide nanowires on a gallium arsenide, sapphire, or flexible polymer to generate a direct current by harnessing mechanical energy from environmental sources such as ultrasonic waves, mechanical vibration or blood flow. The nanogenerator utilizes small electrical charges created when the zinc oxide nanowires flex. The nanogenerator could provide power for nanoscale devices without batteries or other external power sources. Commenting on the R&D breakthrough, Zhong Lin Wang, Regents’ Professor in the School of Materials Science and Engineering at Georgia Tech said, "This is a major step toward a portable, adaptable and cost-effective technology for powering nanoscale devices. There has been a lot of interest in making nanodevices, but we have tended not to think about how to power them. Our nanogenerator allows us to harvest or recycle energy from many sources to power these devices." An explanation about the nanogenerator will be reported in the April 6 issue of the journal Science. The Georgia Tech research was sponsored by the Defense Advanced Research Projects Agency (DARPA), the National Science Foundation (NSF), and the Emory-Georgia Tech Center of Cancer Nanotechnology Excellence. Georgia Tech News Release

Technical University of Berlin Orders Thomas Swan System to Develop Nitride Alloy Materials
CompoundSemi News Staff

April 6, 2007...The Institute of Solid State Physics at the Technical University of Berlin has ordered a Thomas Swan epitaxial growth system from Aixtron. The system, which will be set up in the 3x3-inch configuration, will be used to develop GaN/ (Al, Ga, In ) nitride alloy based materials for optoelectronic devices such as lasers and LEDs. The materials will have high aluminum concentration and will go into lasers and ultra-violet LEDs. The new reactor will add to the University's other Aixtron systems, the AIX 200RF and the AIX 200/4 in the cleanrooms of the Eugene-Paul-Wigner Building.

The new system was chosen in part because of the Institute of Solid State Physics’ experiences with the other Aixtron systems. Professor Michael Kneissl, head of the Experimental Nanophysics and Photonics group, commented, “…The Thomas Swan 3x2 inch FT is clearly superior to other vertical systems in terms of process stability and precursor efficiency. It has demonstrated the process flexibility, uniformity in thickness, doping, and composition required for next-generation optoelectronic devices. It also supports a number of different in-situ control techniques. Alongside our existing systems it will be a useful platform for us to develop high-Al III-nitride laser diodes and high-brightness UV LEDs." Aixtron News Release

Strategy Analytics' GaAs Industry Forecast Due Out Today

April 4, 2007...The new 54 page GaAs Industry Forecast: 2006-2011 from Strategy Analytics of the UK is due out today. In it, author Asif Anwar reports that "Cellular handsets will continue to be the primary growth engine for the GaAs industry with Wi-Fi forecast to become the second largest market for GaAs. Overall, the market for GaAs devices will exceed $5 billion in 2011 and the corresponding market for GaAs substrates will be worth $480 million. VGF will be the underlying technology for bulk substrates while epitaxial substrates will remain evenly split between MOCVD and MBE technologies."

Hitachi Cable Says 4-Inch GaN Substrates Possible With New Growth Method

April 2, 2007...While attending the Japan Society of Applied Physics at Aoyama Gakuin University, Hitachi Cable Ltd. announced that it has created a highly reproduceable 3-inch gallium nitride substrate prototype, according to a Nikkei Electronics article. The company claims that it is the first company to release photos and data for 3-inch GaN substrates. The industry primarily utilizes 2-inch GaN substrates. During a presentation the company reportedly was asked the question, “How far can it grow in size?” A company spokesperson told Nikkei Electronics, “We believe 4-inch products can be produced with no difficulty if the production equipments are arranged accordingly."

The compound semi industry has devoted much effort to reducing manufacturing costs of components requiring GaN substrates. Increasing the substrate diameter is one method of decreasing the cost per component by allowing more components to be placed on a single substrate. Hitachi reported that it was able to produce a larger diameter substrate by using a new technique it developed which adds a thin “sacrifice layer” onto the base substrate upon which the GaN is grown using HVPE. The sacrifice layer has a microscopic void in between the thick film GaN and the base substrate. This allows for easier detachment of the thick film GaN, the article stated. The article also carries considerable technical details. Hitachi is calling their procedure, "the void-assisted separation method."

Next Gen DVD Player Prices Reach $500 Benchmark Sooner than Expected.

April 3, 2007...Samsung Electronics lowered the price for its Blu-ray Disc (BD) player BP-1000 by about 48% to US$469.99 in late March of 2007, a Digitimes article stated. Toshiba immediately responded by reducing the US retail price for its entry-level HD DVD player HD-A2 to US$399. The retail price for Blu-ray or HD DVD players was lowered to the benchmark of $499 two quarters sooner than expected, the article said. While the format war is by no means over, the lower prices will bring much more early adopters of next generation DVD technology.

Vishay Completes Acquisition of Power Control Systems Business of International Rectifier
CompoundSemi News Staff

April 2, 2007...Vishay has completed its acquisition of the Power Control Systems business from International Rectifier for $290 millon in cash. During the December quarter of fiscal 2006, revenues for the acquired product lines totaled about $81 million (roughly $320 million per year expected). Vishay predicts that after the first 12 months of operation it could increase its net profits from breaking even to about $40 million by March 2008. Vishay expects the newly acquired business to increase net profits to $50 million per year by March 2010.

According to Vishay, the aquired product lines, a complement to its own product portfolio, consist of high-voltage and high-power range products including: planar high-voltage MOSFETs, Schottky diodes, diode rectifiers, fast-recovery diodes, high-power diodes and thyristors, power modules (a combination of power diodes, thyristors, MOSFETs, and IGBTs), and automotive modules and assemblies.

The acquisition includes a wafer fab in Torino, Italy, as well as facilities in Swansea, UK; Mumbai, India; and Xian, China. Currently, Vishay has no plans for extensive restructuring. Vishay reported that it had entered into several Transition Service Agreements with International Rectifier for IT, logistics, and other functions as well as for the supply of wafers for up to three years. Vishay said it expects a smooth transition of the newly acquired business into Vishay's existing organization. Vishay News Release

Finisar to Acquire Azna LLC and Kodeos Communications Inc.
CompoundSemi News Staff

April 2, 2007...Optical component maker and tester, Finisar of Sunnyvale, California USA, reported that it has entered into agreements to acquire Azna LLC of Wilmington, Massachusetts, and Kodeos Communications Inc. based in South Plainfield, New Jersey. Finisar says that both acquisitions broaden its product lines, especially those for telecom applications. The acquisition will also add advanced modulation and electronic signal processing to economically extend the reach and tunability of transceivers.

Finisar reports that it will purchase the “equity interests in Azna for $19.7 million in initial consideration comprised of $2.7 million in cash and two convertible promissory notes in the principal amount of $15.6 million and $1.4 million that will be payable, at Finisar's option, in cash or in shares of Finisar common stock.” Finisar indicated it will purchase equity interests in Kodeos for initial payment of $7 million, an additional payment of up to $2.5 million to certain equity interest holders, and $1 milliono to current Kodeos employees.

Jerry Rawls, Finisar's chairman of the board, president, and CEO said that the acquisition of Kodeos would address the 10Gb/s 300-pin transponder market for telecom applications. Rawls added that with the acquisition of Azna, Finisar “…will be able to create a competitive advantage in terms of the cost, reach, and performance of our products for both telecom and datacom applications." Finisar News Release

Anadigics Introduces PA to Slash Handset Power Consumption
CompoundSemi News Staff

March 29, 2007...Anadigics has introduced its ZeroIC CDMA power amplifier designed to cut average current consumption by up to 50 percent over what it says was its previously industry leading HELP technology. Furthermore the company asserts that the PA slashes current usage by up to 85 percent compared to conventional two-stage amplifiers. At low power levels, the PA boasts zero power consumption with its new feature. The company points out that because the majority of handsets transmit at low power levels in a fully populated network, the ZeroIC power amplifier could translate into significant power consumption savings for the vast majority of handsets. Anadigics says that the unique power saving features of ZeroIC PAs are made possible by Anadigics' unique InGaP-Plus technology and differentiated design IP. In addition the compact devices have internal voltage regulators to further reduce space. Company News Release

Bookham Unveils Record Power 980nm Pump Laser Module
CompoundSemi News Staff

March 29, 2007...Bookham unveiled its new 750mW 980nm pump laser module at OFC/NOFEC 2007 in San Jose, California USA this week. The company considers the laser to be the most powerful telecom 980nm pump laser. The company indicated that it offers a “kink-free” power output of 750 mW. The company says that the pump modules output power will reduce the number of pumps required and therefore enable cost reductions. Bookham indicated that similar pump laser technology is being applications for next-generation submarines, which require high power and very high reliability. The new pump module takes advantage of Bookham’s generation eight laser chip (G08), which is qualified for use in both terrestrial and submarine applications. Bookham boasts that the industry-leading performance and reliability of the G08 laser chip makes it ideally suited for high-performance uncooled applications. Company News Release

IQE Wins $2.4 Million in Contracts; Announces 2006 Results
CompoundSemi News Staff

March 29, 2007...IQE, a maker of advanced wafer products was awarded two one-year development contracts worth a total of $2.4 million. These contracts add to the other research and development projects to be delivered in 2007, the company said. With the two new contracts, the awards to date for delivery in 2007 total almost USD $5 million. The company also released its yearly earnings statement posting a 55.2 percent increase in revenue in 2006 over its 2005 results. The company indicated that much of the growth is attributed to two acquisitions during the year, Singapore based MBE Technology Pte and Emcore's electronic materials division.

One of the new contracts focuses on the development of strontium titanium oxide on silicon epi-wafers (STO/Si) using IQE’s molecular beam epitaxy (MBE) systems. IQE will further develop a method for using MBE to deposit STO/Si with high quality and superior composition for future high volume production.

The other contract is to develop advanced material structures for increased processing speed for future ICs. Dr Drew Nelson, IQE Chief Executive, commented, “We plan to aggressively pursue the metal-oxide on Silicon market where we offer unique and superior solutions for these advanced state of the art materials systems. Our entry into this market is important as it further diversifies the Group’s product portfolio and underscores our position as the global leader in advanced semiconductor wafer production and R&D.” Company News Release

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Commentary & Perspective...

CS/SSL Portfolio Update: Things Are Looking Up
Jo Ann McDonald, founding editor

April 4, 2007...With the onset of Spring, as should be the custom, things are looking up. New and uplifting opportunities seem to be sprouting for many in the compound semi (CS) and solid state lighting (SSL) industries. Within Jo Ann's model CS/SSL stock portfolio, Anadigics is doing especially well, with Color Kinetics and Spire in second and third place. And in recent news, we're hearing of especially good strides by IQE and Hitachi Cable, and that Cree's acquisition of Cotco just went through. Even Strategy Analytics says things are looking up, predicting that the CS industry generally demonstrated positive results in '06 and should continue to improve in '07.

The news from one of our industry's key market research firms, Strategy Analytics in the UK, was especially uplifting (ref: March 26 headline news). Asif Anwar, Director of SA's GaAs and Compound Semiconductors Technologies Program within the firm's Strategic Technologies Practice, pointed out that the CS industry is moving into profitability even though individual companies have had ups and downs for the calendar year 2006. The SA report indicates that the CS industry generally demonstrated positive results. Using my model CS/SSL portfolio as a barometer, I concur.

The overall cost of the portfolio at the time of the initial purchase, which includes 100 shares each of 14 representative publicly held companies, totaled $9,590. That's a lot of money to this meager columnist, but skin in the game nonetheless. The current value of that portfolio is $11,001. So that's a gain of 14% since the stocks were original purchased, most of which were purchased just short of two years ago. Doing stock broker type math, that's an "8.4% annual rate of total return." In the USA's current economic and sociopolitical climate, that's considered pretty darn good and competitive with the performance of things like closed end and mutual funds. Last spring, however, the portfolio stocks were doing even better than they are now (ref: my March 20, 2006 McD Report, when they were up a whopping 60%! But uncertain times bring predictable ups and downs in the financial market. [Note: A list of the 14 stocks is in my last update (ref: Feb. 14th McD Report). Changes slated, as previously announced, include selling the consistently underperforming Vitesse and WJ Communication stocks and buying IQE, which trades on the London Exchange. Also note that the broker and closed end fund guru that manages these for me, Mike Sims of Wedbush Morgan in Santa Rosa, California, is slated to attend our CS Vision 2007 executive business forum June 19-20 in Austin and can fill you in more on the dynamics of the CS/SSL industries as viewed by classic USA investment managers.]

As Asif notes in the summary of his 54 page GaAs Industry Forecast: 2006-2011, which is due out today... "Cellular handsets will continue to be the primary growth engine for the GaAs industry. Wi-Fi is forecast to become the second largest market for GaAs. Overall, the market for GaAs devices will exceed $5 billion in 2011 and the corresponding market for GaAs substrates will be worth $480 million. VGF will be the underlying technology for bulk substrates (hey... AXT will love hearing that! One of our other Vision co-chairs is AXT's Phil Yin) while epitaxial substrates will remain evenly split between MOCVD and MBE technologies." Overall, according to Asif, the telecom sector market is picking up, so performance should indeed improve in 2007. He also noted that the CS equipment makers found strong demand from the LED sector. Stephen Entwistle, VP of Strategy Analytics' Strategic Technologies Practice, elaborated saying that “2006 was a good year for the industry with strong demand helping to drive revenues. At the same time, companies adopted focused strategies that included divesting operations that did not tie in with their core business, helping them to move towards profitability.” We'll hear more details on this in June direct from Asif Anwar when he too speaks at our annual CS Vision 2007 executive business forum June 19-20 in Austin.

The news from Hitachi Cable (ref: our headline news, April 2nd) caught my attention because it puts another big name in the "GaN substrate" market with yet another "new process." I put quotes around those terms, because... as we know... all GaN substrates are not created equal. Native GaN, GaN epitaxy, GaN lift off... GaN, GaN GaN. And then there are the hybrids, like AlN... etc. I love it! It's like the Baskin Robbins of substrates and reaching critical mass stage has been a long time coming. All of a sudden, people seem to be running for the previously barren territory like it was the new Gold Rush. For those of you who have already declared GaN substrate turf, you'll look carefully at what Hitachi Cable has claimed, and try to find out details. To those of you contemplating staking a new claim, you might consider increasing your visibility.

I predict there will be GaN turf wars before you know it and probably a lot more buying and selling of GaN development facilities. (We also have an expert on mergers and acquisitions, Chip Fisher, of Greene, Holcomb and Fisher in Minneapolis keynoting at CS Vision). And we're of course going to tackle the specific topic of the burgeoning GaN substrate market in depth. For example, Keith Evans, whose company, Kyma, is on the forefront of native GaN substrate development, is one of our co-chairs, and Craig Farley, formerly of Emcore fame, is a slated speaker. He's quite an expert on GaN electronics and always has been. Also we have Strategies Unlimited's Hank Rodeen coming to referee. Much fun in store, indeed.

Which brings us to IQE's news (ref: our March 29 headline news). IQE is definitely on the rebuild and they're getting amazingly big, fast, mostly under most people's radar. IQE and Nitronex, as I recall, were the pioneers of GaN on silicon, which has always promised to help open a whole new lower cost flavor of GaN that would appeal nicely to silicon designers as they're much more accustomed to playing with bigger wafer sizes. IQE's new Somerset, New Jersey RF arm (formerly Emcore's epiwafer foundry, which Craig Farley used to run, and is now overseen by Alex Ceruzzi with 10 year Emcore veteran, Ivan Eliashevich directing R&D there) is already at 60 people and hiring. IQE-RF LLC knows its GaN (and it still resides in the same building as Velox). As I see it, the trick is to gain turf while there's still turf left. The mesh of talent between the UK and New Jersey is truly, well... awesome. We look forward to hearing more from the newly enriched IQE at Vision and what Drew Nelson's and Ivan Eliashevich's vision for the wide bandgap marketplace might be. Like I said... much fun in store.

Winding up back with the model CS/SSL portfolio, Anadigics is clearly the star right now. Anad has performed wonderfully of late and is the first company of the 14 that's yielded over $1000 in profit. Way to go Anad! I suspect that they're doing it the old fashioned way, by telling their story the right way to the right people, by staying the course and sticking to their core competence, and by ever improving on their processes and product evolutions. What a novel idea!

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