To answer your questions:
<<(1) How immune is this industry from invasion from the semiconductor CVD industry? >>
The precision which is required of the modern MOCVD systems is pretty intense - atomic layer control over the deposition. I think that, plus the relatively small size of the market, (<$100 mil annually) will keep the big CVD companies away.
<<(2) Can this industry be viewed as where the semiconductor equipment industry was perhaps 20 years ago? That is, of course, a broad statement but any comparisons would be appreciated. >>
While I think it is a great industry, I don't think it will be a $150 billion a year [current dollars] business in 20 years like silicon is now.
<<(3) How does EMKR stack up against its competitors in terms of market share, profitability, etc? Who are the MBE equipment suppliers? Are any public yet? What is the total size of the MBE equipment market and the MOCVD equipment market and what are their relative growth rates?>>
Their main competition is aprivately held German company called Aixtron, and between the two of them they dominate the MOCVD market, each having 1996 sales around $30 million. The main suppliers of MBE equipment are VG Semicon (based in England but owned by giant Thermo Electron), Riber (French, privately held), and EPI (American, privately held, not currently active in the high volume production market). The MOCVD reactor market might be in the $100 million range, the MBE market might be in the $50 million range. I've never seen an independent analysis of either.
<<(4) I am a bit taken aback by EMKR's extremely high debt to equity ratio and by the fact that its CEO is a merchant banker rather than an engineer. Do you see any red flags there as well?>>
From the prospectus: "The Company has been in operation since 1984 and had an accumulated deficit of $18.1 million at 9/30/96." The installation of the merchant banker happen right before the S-1 filing. I think it was probably a measure intended to assure "the Street" that there was an experienced money-manager at the helm.
<<(5) Today's earnings seem to confirm that the company is executing well on their strategy to sell wafers and not just equipment. Do you feel that this is a viable longterm strategy and that EMKR can do both without eventually competing with its customers?>>
I find their strategy to be very novel, at least as far was our industry is concerned. Without anything to compare it to, I find it tough to ferret out its pros and cons - sorry, I'm not very helpful on this one. I would guess that they will make some potential equipment customers nervous, but that they have done a risk/benefit analysis that tells them that any possible resultant lost equipment business can be made up by the materials business.
<<(6) Any anecdotal evidence regarding how EMKR's equipment is perceived in the marketplace?>>
The compound semiconductor is filled with ancedotal evidence!! Given that it isn't big enough to attract the intensive analyst scrutiny that the Si equipment industry gets, it is almost all we have. In my experience, Emcore and Aixtron are both well-regarded. |
