Hi all (in english to make it easier for CWL who can most likely add more to this topic),
after some busy days I have been reading up on the Q4 conf call transcript and read some research on ST Micro as well (see below) and wanted to share my updated end-market analysis which is key to Aixtron's mid-term growth potential. Please add/comment on the below!
1. VCSEL: Capacity utilisation at customers has improved vs. 2018/19 levels and initial discussions about potential future orders. I expect orders to return in H2-20, depending on the negative Corona etc. impacts on the supply chain. So this end-market is improving somewhat vs. 2019.
2. SIC: This market remains in ramp-up phase with more customer wins for Aixtron and first orders. We are not at volume ramp up yet though, so estimate around 10-20m in revenue/quarter potentially ramping further in 2021/22 as EV programs kick-off (example at VW). So so far a small market, in its early but gradual growth phase. Main driver are EV's.
3. GAN: The biggest surprise to me from the call. This is clearly moving into a focussed R&D stage at customers. ST Micro has done an acquisition here and they seem to be innovation leaders (as in SIC) and will add production capacity over 2020/21. This end market is in earlier stages then SIC (probably 2-3 years earlier) and clearly moving into a small production stage, before really moving into volume production probably in 2022/23. In the call Aixtron says that "there is much much more to come" and see "double digit fraction of our number in 2021/22" which I assume means a double digit % of our revenue number. I would be a bit cautious and expect this only to occur for GAN in 2022/23. Main driver here is 5G adoption in Smartphones.
4. Mini/Micro LED: This market is also moving in the right direction, with some shipments already happened in Q4. We are clearly at the point where application for Mini/Micro LEDs for TVs should be moving from low volume, very high end applications (e.g. Samsung The Wall) to higher volume, high price TV applications (although this will still take some years I assume) and Wearables (i am waiting for the next Apple Watch application). In the call Aixtron said "applications for both and we see orders this year and revenue this year both increasing over the past, simply because the move from R&D to feasibility of high volume production". My take is that we are in feasibility for high volume production with the next step being high vol production. Timeline probably 2020-22.
5. OVPD/APEVA: This is very clearly on track. Order expected in 2020, some revenue will be booked in 2020 according to Percentage of Completion Accounting. In the call they say "first of all let me mention that we are confident to get the thing up and running no to give the wrong connotations". As in past calls they also continue to mention the "high customer interest". To me, this project has a 95% likelihood, the question is when the follow-up order worth about 120m € comes in, most likely in H2-2021/H1-2022.
Also note that the Aftermarket business has grown steadily over the last years. There the guidance for 2020 looks quite conservative to me (again).
So summing it all up, the outlook for end-markets really remains solid with VCSEL, SIC and Mini/Micro LED the biggest near-term options plus the OVPD project.
Nevertheless I expect Q1 to be a weaker revenue quarter, given the weaker order intake in Q3-19. If that happens, it will present another nice buying opportunity in my view, so i am still treading cautiously on the stock until Q1 is out of the way. But the structural outlook, as highlighted above is STRONG (e.g. predictable revenue growth in a highly volatile and uncertain world).
Here is the ST Micro newsflow (I personally think about buying some shares there as well but have not decided yet):
STMicroelectronics to Acquire Majority Stake in Gallium Nitride innovator Exagan
“ST has built strong momentum in silicon carbide and is now expanding in another very promising compound material, gallium nitride, to drive adoption of the power products based on GaN by customers across the automotive, industrial and consumer markets” said Jean-Marc Chery, President and CEO of STMicroelectronics. “The acquisition of a majority stake in Exagan is another step forward in strengthening our global technology leadership in power semiconductors and our long-term GaN roadmap, ecosystem and business. It comes in addition to ongoing developments with CEA-Leti in Tours, France, and the recently-announced collaboration with TSMC.”
Here is a broker statement on that acquisition:
Where is STM on GaN now? Trying to replicate SiC success. STM has a production
line for RF GaN in its Catania (Italy) fab with 150mm wafer volume ramp likely by 2020
end followed by expanding into 200mm wafers starting from 2021. It also has a pilot line
for GaN Power in its Tours (France) fab with volume production likely from 2021. STM is
trying to replicate the success it had with SiC (sales to grow from virtually nothing in 2017
to $300mn+ in 2020E) to now GaN as well by forging partnerships and adding
manufacturing presence in what remains a nascent market. Out of $1.5bn of capex budget
for 2020, STM has set aside $0.4bn for strategic initiatives like SiC, GaN and Imaging.