Aixtron purpose of this thread

Thanks again for your valuable input, fel - much appreciated! After having listened to the replay, I agree with your conclusions and don?t see a reason to reduce my position even if the valuation seems rich based on the ?headline numbers? (btw. Veeco is now trading at a 53x/30x PE for 2021/22).

However, while I have always appreciated Aixtron?s IR, this time I feel they have done a lousy job in terms of guidance. At 7.30am they publish a wide 40m guidance of 400-440m / 440-480m in sales / order entry just to say 7.5hrs later that the strong momentum is continuing (indicating the upper end of the range) and - in particular - mentioning that the lower end is ?out of reach?. If something is ?out of reach?, why providing this number a couple of hours earlier? Just doesn?t make sense.

I understand Aixtron?s conservativeness and the track record in underpromising and overdelivering, but there is no justification to provide a guidance number that is ?out of reach? - especially considering that there are just eight weeks left in this year. At least a 420-440m / 460-480m number would have made sense and in my view it would have done less harm to the share price to deliver a, say, 428m revenue number in Feb if guidance had been 420-440m, than what happened today. Now we are left with this slight disappointment until the year-end results are published in Feb 2022. This could have been handled more shareholder friendly!  

Enkris is starting the construction of a GaN-on-Si plant this month with 120K 6 inch and 120K 8 inch epi wafers annual capacity.   Enkris is a customer of Aixtron.  The completion of the plant is 02/23, so the order should be placed in 2022.  My estimate is ~30 G5.  T his is just one example.  I can't see a slow down of GaN either.

https://www.eet-china.com/mp/a87542.html
http://en.enkris.com/page/html/  

Credit: DIGITIMES
10/19/2021 news

Unikorn Semiconductor, a provider of compound semiconductor foundry services, expects its operation to grow by 2-3 times over the next 3-5 years and accordingly is in preparation to expand production capacity and set up production capacity for new products, according to company chairman Wayne Shih and president JS Wen.

Unikorn provides foundry services for two categories of semiconductors: Optoelectronics and microelectronics, with the former focusing on VCSEL and microLED and the latter on RF PA (power amplifier), filters and power devices.

VCSEL can be widely used in proximity sensing, 3D facial recognition and under-display fingerprint recognition, optical communication such as 25G fiber-optic communication.

For microLED, Unikorn has been in cooperation with international enterprises to develop microLED panels for use in large-size displays and AR/VR devices.

Microelectronic semiconductors are mainly based on GaN, a key material. Through cooperation with Global Communication Semiconductors - its strategic shareholder with a 45.39% stake - Unikorn is developing high-frequency, high-voltage and high-current 5G RF PA based on GaN for use in 5G base stations as well as BAW (bulk acoustic wave) filters for use in 5G smartphones.

While GaN has been mostly used in 65W fast charging devices, Unikorn has begun development of GaN-based PA for use in 5G smartphones, mainly because such PA semiconductors used in a 5G smartphone can be 50% or one-third fewer than those based on other materials. However, adoption of GaN is faced with physical constraints arising from material attributes and technological challenges and it will take time to solve these problems.

For GaN-based power devices, Unikorn looks to potential application to motherboards, home electric appliances, LED light panels and AC/DC power switches.

With a capital expenditure budget of over NT$1.0 billion (US$35.7 million), Unikorn will begin expansion of production capacity and establishment of capacity for new products in 2022.

Unikorn currently has eight MOCVD sets for foundry of epitaxial wafers, with some used by clients to test products. Besides adding MOCVD sets, Unikorn can substantially increase foundry capacity temporarily through cooperation with Epistar, its parent company engaged in production of LED and miniLED epitaxial wafers.

Shift from 4-inch semiconductor wafers to 6- and 8-inch ones is already a trend, and for GaN-on-Si wafers, 8-inch ones are more likely than 6-inch ones. Therefore, Unikorn plans to procure 8-inch MOCVD sets over the next 3-5 years, with the new equipment likely to be used to initially produce filters and power devices.
 

seems to me like a speculation on order intake peak. Same thing what happened start of 2018, when the OI for 3D sensing  peaked and the stock went for a long consolidation. Essentially, this was the end of the initial VCSEL wave (and still waiting for the next wave). A weaker OI in Q3 could have triggered speculation on similar development.
I could imagine that the next 2 Qs the OI will plateau expecting to take on again around Q3-Q4 driven by massive orders for SiC (what others stated here and what after all Aix expects).
So, to me any dip below 20 eur should not be for long ... if at all. If this happens, I consider stocking up.

Nevertheless, I still see Aixtron as a clear cyclical stock/company and the the time will come when the turnover will decrease and the stock will follow. Aixtron needs always to look for the next technological wave to ride on. In between are the valleys.  

Following up on my previous comment l would like to add the following, starting with some facts:

1) Order entry numbers in 2021
Order entry 1Q: 124.4m
Order entry 2Q: 138.4m
Order entry 3Q: 114.2m
Order entry YTD Sep: 377m
Average quarterly order entry in 2021: 126m
Order entry guidance for FY21: 440-480m
Implied order entry 4Q at low end of 440m: 63m
Implied order entry 4Q at mid of 460m: 83m
Implied order entry 4Q at high end of 480m: 103m


2) These are the qualitative comments from the management when they were asked about the order entry guidance and how it should be interpreted:

?(?) will lead us to the upper end of guidance is clearly possible (?) we very much see that there is strong momentum (?) and we clearly see that this order momentum which we have seen in the first three quarters of 2021 we would very much expect to continue on a high level also in the fourth quarter of 2021 and that automatically gets us to the upper end of guidance or beyond. That is very clear what we have in mind.? (Source: https://www.aixtron.com/investoren/events/...Conference%2520Call.mp3)


3) This is what Aixtron communicated in 2020 & 2019

29 Oct 2020:
?The Management Board expects incoming orders to be between EUR 270 million and EUR 300 million. Revenues should reach around EUR 260 million to EUR 280 million by the end of 2020.?

23 July 2020:
?Based on the solid order backlog and the currently estimated low impact of the COVID-19 pandemic, AIXTRONs Executive Board confirms its guidance for the full year 2020, and on the basis of an exchange rate of 1.20 USD/EUR, expects to receive orders and revenues of between EUR 260 million and EUR 300 million.?

24 Oct 2019:
?Management refines its forecast for 2019, now expecting to receive orders for the current financial year of around EUR 220 million (previously: EUR 220 million to EUR 260 million). With revenues of around EUR 260 million (previously: EUR 260 million to EUR 290 million)?

25 July 2019
?Management expects to receive orders for the current financial year in a range between EUR 220 million and EUR 260 million (?) with revenues in a range between EUR 260 million and EUR 290 million?


My thoughts on the above:

My personal interpretation of the message ?CLEARLY see that this order momentum VERY MUCH expect to CONTINUE on a HIGH level also in the fourth quarter of 2021? would be the quarterly average of 126m or at least the lowest level of 114m (seen in Q3). So if I verbally indicate in the analyst call an approx. 110m order entry in the fourth quarter, why the heck do I provide a 63-103m guidance a couple of hours earlier?

A quarterly development 2Q-4Qe of 138m --> 114m --> 83m (even 63m at the low end) supports the ?peak order? thesis and thus, Thursday?s share price reaction despite great 3Q results is in hindsight no surprise to me. I can?t help it, but this seems like a very strange/mediocre IR this time.

Everybody who has read my comments in past years knows that I have never been a fan of conspiracy theories. Thus, I will refrain from doing so now, however, my understanding is that we are in the middle of the fixing period for the LTI awards:

?At the start of the financial year, the Executive Board member receives forfeitable stock awards representing a share price based market value in an amount that varies from 1.4% to 2.25% of the consolidated net income for the financial year pursuant to the budget approved by the Supervisory Board. The value of these stock awards constitutes target LTI. The number of forfeitable stock awards is calculated based on the average of the closing prices (XETRA or successor system) on all stock exchange trading days in the last quarter of the previous year (1 October to 31 December).? (source: https://www.aixtron.com/investoren/...520Remuneration%2520System.pdf)

Again, I do not want to imply anything here, but I understand that there is an economic benefit for the management in not having a soaring share price during the fixing period from Oct ? Dec while seeing a strong share price after fixing in 1Q22 (with presentation of above guidance/consensus 4Q/FY21 results). Maybe my thought is nonsense (why then the positive comments in the call?), but given the incomprehensible communication this week, I just try to find a reasoning.


Second thought: with the 3Q results in 2019, Aixtron narrowed the revenue guidance from a 30m range to zero (?around 260m?) and in 2020, Aixtron narrowed the revenue guidance with the 3Q results from a 40m range to 20m. In 2021 there was no narrowing with the 3Q results despite earnings release a week later than in the prior year. So what is different compared to previous years that Aixtron is sticking to a wide 40m range?

Of course, given the elevated revenue level the range needs to put into perspective, i.e. it should be compared in percentage terms. But what else? Order entry doesn?t play a role for the remainder of the year, FX shouldn?t have such a big impact and service revenues do only play a minor role. The only thing I could see is that there are a few single large orders whos revenue recognition is dependent on shipment/delivery end of December vs early January. But can this explain a 40m revenue range in the next eight weeks?


Appreciate any feedback on the above and please correct me if there are any flaws in my calculation.

 

Android phones did not follow iPhones to implement 3D sensing for facial recognition  which led to the digestion of MOCVD capacity.   Comparing 3d sensing to Gan is like apple to orange.  3D sensing for phones specifically on facial recognition and even VR/AR are nice to have applications, as opposed to almost all GaN power semiconductors are for must have applications.  Companies that don't invest in capacity now will be left behind.  Therefore the pause/digestion period of MOCVD for GaN should be way ahead, IMHO.  

Hi all,

interesting article on various companies (among others Bosch, Aixtron, STM, Soitec) forming a European SIC consortium in order to establish a local SIC supply chain.

https://www.pv-magazine.de/2021/11/09/...mkarbid-halbleiter-aufbauen/

Regards,
Fel  

Ninety One Plc with a 3.13% stake.

https://www.dgap.de/dgap/News/pvr/...ide-distribution/?newsID=1486464

Not sure if the statement 'active investors' has any deeper meaning here:

"We are active investors. We focus on where we can make a real difference for our clients ? to help them achieve their long-term investment goals."
https://ninetyone.com/en/united-kingdom

Obviously, the build-up of the stake was that visible in recent share price performance.  

Episil just announced an increase of SiC epi capacity by 7-8 times and for GaN epi by 2-2.5 times starting 2022 by investing $20m next year and a total of $40m-50m in 2-3 years.  

Hi all,

Wolfspeed (Cree renamed into Wolfspeed) hosted they capital markets day today, presentation recording is available here (unfortunately the pdf is not). But I assume bullish on SIC (and GAN?). WOuld be interesting to review their view on the demand picture.

https://www.wolfspeed.com/company/news-events/events/investor-day-2021

Regards,
Fel  

There are confirmation on Q4 order, more color on Q4 EBIT, and positive comments about 2022.

https://podcasts.apple.com/us/podcast/...nancial-results/id1550331381  

New applications for GaN continue to grow.

https://kfgo.com/2021/11/18/...million-pushes-on-electric-car-market/  

Many thanks for the podcast link! I am still puzzled when I hear Guido?s message in the podcast ?we reported an order intake of 114 million in Q3 and see no reason why this should be lower going forward? taking into account the Q4 guidance of EUR 63 to 103m?this is so ridiculous, but I refrain from any further comments on this.  

Thanks for the above link to Wolfspeed's investor day presentation...I listened to some parts of the presentations, but didn't notice any Aixtron specific breaking news such as "machinery capex to explode in next weeks" or the like. However, anybody who is interested in learning about the tremendous SiC opportunities, should consider listening to the webcast.  

I think Guido said that the order inquiries remain strong and hinted that Q4 orders might be ~100m or even higher.  To qualify as orders strict criteria's like deposit, confirmed delivery date, etc. have to be satisfied, and Aixtron did not have the fully committed orders yet at the time of CC.  It is also possible that some customers were cooking on larger orders than Aixtron initially anticipated so they need more time to ink the deal.  That might lead to delay on commitment of orders.

The possibility of large orders coming in at Q4 was hinted by Felix in the Q2 CC:

David O'Connor, Exane BNP

Great. Good afternoon and thanks for taking my question. Felix, I'm just curious,
given the broad-based strength you talk about across the business. I was just
wondering why the order intake for the second half is going to 25% below the first
half? Maybe can you give us some of the puts and takes around that? Or maybe
even if there was only pull-forwards in the order intake into the first half, given the
tight supply chain across the industry? And I have a follow-up, thanks.

Dr. Felix Grawert

Thank you, very good question. So as said, we typically have a good visibility for 6
months forward, so we have a pretty good visibility now for third quarter. For the
fourth quarter, visibility remains moderate. We base our updated guidance on these
data points, resulting in EUR 220 million to go in H2 or average H2-orders per quarter
of EUR 110 million which is little below the first half. This is based on the upper end
of our order guidance for 2021, i.e. EUR 480 million in combination with EUR 260
million having been received in H1 of this year.

The first half was characterized by some very large volume orders. There could be
similar order patterns in the second half as well. But this we do not know.

However, we would not expect, such volume orders to surprise us again as they did,
triggering the trading statement in June. Nevertheless, we cannot exclude that
either. And that's the reason why we have given the guidance today, following our
logic not to fuel expectations going too high given the current visibility. This
expresses our current view on the demand for the remainder of the year.
In summary this is what we currently see in terms of the volume which we believe
is a very good volume. And we are here on a long-term trend.
 

CWL, thanks for your feedback - the issue of qualification of orders is fully understood.

However, I stand by my criticism that a company shouldn?t provide a guidance range in the morning of 63-103m just to say a couple of hours later that the lower bound ?is out of reach? and that the real expectation (114-127m?) is sharply above the guided range. Considering the qualitative comments in the analyst call, a guidance range of, say, 90-110m would IMHO have been a better reflection of the reality and would have done less harm to the share price.

I think the company did a good job after 2Q by saying that 2Q included some one-off effects and the market should not expect order entry on the same level in 3Q and 4Q ? but they messed it up with the 4Q guidance for reasons I can only speculate about (see my previous postings).  Anyway, let's hope for a better communication next time.  

Thanks alot for your detailed input again here, CWL. So we should expect very solid Q4 numbers (solid orders, strong sales / EBIT and balance sheet), potentially with a dividend announcement and good guidance (I expect 5-10% sales growth) with consensus currently expecting 4% sales and 7% EBIT growth (too low in my view). Together that gives me the conviction to add a little bit more to my already large position on days like today.

Regards!
Fel  

"Fuzhou Daily" November 17 reported that the local district Changle landed four industry investment projects with a total investment of over 39.6 billion yuan, including a total investment of around 6 billion yuan gallium nitride project.

The investment is the same as Innoscience's Suzhou project, and the latter's phase one project was put into production in June this year, and it is expected to produce 6,000 8-inch silicon-based gallium nitride wafers per month in 2021 .

The Fuzhou gallium nitride project will also build an 8-inch gallium nitride plant, and plans to "become a leading domestic gallium nitride power device manufacturer." It is reported that the project will be divided into two building, the purchase of 20 sets to 30 sets of MOCVD equipment .  

Morning,

seems I was a bit too early yesterday.. the stock is -10% on no big news in my view. But on big volume (yesterday and today), so there seems to be a big seller in the market. A bit stupid to throw so much volume on the market and drown the stock.. well.

I think this is not fundamentally driven and most likely some profit taking ahead of year end and following the strong share price performance YTD.

Berenberg issued an update today, cutting their estimates somewhat and target price from 29 to 26.. but I doubt that this really triggered it.

So lets be patient and wait for strong Q4 and solid 2022 guidance (my opinion has not changed, obviously).

Regards!
Fel  

At least there is some benefit for the management as we are in the fixing period of their share awards.

I wouldn?t want to read too much into today?s share price plunge as basically all well running blue chip tech stocks have been hit the last few days. However, from my point of view, the management has strongly contributed to it with their latest quarterly communication. If order entry pattern is 2Q: 139m, 3Q: 114m and 4Qe: 82m (middle of Aixtron?s guidance), nobody should be surprised to see analysts such as Oddo and Berenberg to adjust their estimates down, elaborating about a peak order entry in 2021. DB linked the share price reaction on the reporting day to the order entry guidance as well.

I added to my position today at EUR 18.25.  

No negative news I could detect.  Actually there are positive news this morning saying that the iPhone 14 will have new  VCSEL module for proximity and gesture sensing.    

1st time poster here - the move down seems to flow from IQE news.  They slashed their capex guide for year but it seems they are mostly pushing out payments to '22  

 " iqep.com/media/press-releases/2021/trading-update/ "  

I also added at 18.27.  My assessment is that IQE has company specific issues.  

II-VI has been taking share from IQE on VCSEL for iPhone through the FINNISAR operation in Sherman.  

In addition, VPEC is gaining shares from the Chinese telecom and smartphone companies due to the geopolitical situation.  VPEC has announced adding 20% capacity in2022 that's about 10 MOCVD.  

 

war heut nicht so ein schöner Tag für AIX.

Ins fallende Messer habe ich trotzdem gegriffen - habe halt statt zum Kaffee
nach Kölsch gegriffen ...