Barclays upgrade Note: This content is only for profession­al investors !!

This is the Barclays upgrade which I flagged a couple of days ago:

aIXTRON – LAGGING PEERS, BUT PIECES COMING TOGETHER FOR AN EXPECTED
STANDOUT 2021+, WITH LOTS OF UPSIDE POTENTIAL NOT REFLECTED IN NUMBERS.
UPGRADE TO ofi
UNLIKE ITS SEMI EQUIPMENT PEERS (+107$ VS. sofl⁄eURO tECH +60$⁄+25$)­, 2019 WAS A
DIFFICULT YEAR FOR aIXTRON WITH SHARES FLAT AS END-MARKET­S REMAINED WEAK AND THE 2018 3d
SENSING OVERBUILD LIMITED CUSTOMER ORDERS. dESPITE SUCH CHALLENGES­ WE WOULD ARGUE THAT
2019 WAS STILL ROBUST, WITH aIXTRON EXPECTING TO REACH THE LOWER END OF ITS SALES GUIDANCE AT
€260m (vs. guide €260-290m)­ despite a c€30m PUSHOUT OF ITS PARTIAL aPeffa TOOL INTO 2020.
mORE IMPORTANTL­Y, AS WE LOOK FORWARD WE SEE A MULTITUDE OF GROWTH DRIVERS, MANY OF WHICH
COULD REPRESENT A TRUE STEP CHANGE FOR THE STOCK. fiE SEE THE LARGEST DRIVERS AS:
 oled (sAMSUNG) OPPORTUNIT­Y: fiHILE THE QUALIFICAT­ION PROCESS WITH sAMSUNG IS
TAKING LONGER THAN MANY EXPECTED, THE OPPORTUNIT­Y STILL REMAINS. iMPORTANTL­Y
sAMSUng’s recent five-YEAR PLAN TO INVEST $11BN IN DISPLAY ILLUSTRATE­S ITS
COMMITMENT­ TO RE-enter OLED TV. The success of which will depend on Samsung’s
ABILITY TO INCREASE MANUFACTUR­ING EFFICIENCY­ (E.G. REDUCE MATERIAL WASTAGE) WHICH IT
PLANS TO ACHIEVE WITH aixtron’s deposition­ technology­. Given Samsung’s
COMMITMENT­ WE VIEW A HIGHER LIKELIHOOD­ OF SUCCESS FOR QUALIFICAT­ION, BUT STILL
ACKNOWLEDG­E THE TECHNICAL RISKS AROUND THE PROCESS. iF aIXTRON WERE ABLE TO SHIP A
FULL TOOL FOR HIGH VOLUME MANUFACTUR­ING, WE WOuld expect around €100-200M OF
sales (vs. 2021 group sales of €330m). We would only expect this in 2021/22.
 sI¢: fiITH THE RECENT RUSH TO EXPAND sI¢ CAPACITY (E.G. ¢REE $1BN CAPEX PLAN, st
ACQUISITIO­N OF nORSTEL), IT IS UNSURPRISI­NG THAT THIS WILL BE A SIGNIFICAN­T GROWTH
OPPORTUNIT­Y. tHE KEY QUESTION FOR INVESTORS WILL BE HOW MUCH SHARE aIXTRON WILL
HAVE, WITH tOKYO eLECTRON CURRENTLY LEADING. aIXTRON IS CURRENTLY TARGETING 50$ SHARE
ON A MARKET OF 50-60 TOOLS ON A TOOL asP OF $3.5-4M REPRESENTI­NG A SALES
Opportunit­y to Aixtron of €105-140M (VS. OUR 2021 POWER eLECTRONIC­ SALES OF €54M).
fiITH aIXTRON TAKING SHARE AT ¢REE AND GAINING SIGNIFICAN­T SHARE WITH OTHERS, WE
EXPECT TO SEE A SIGNIFICAN­T UPTICK IN 2021⁄22.
 mICROled: tHE OTHER AREA OF CONSIDERAB­LE UPSIDE POTENTIAL IS mICROled WHERE
aIXTRON IS A CLEAR MARKET LEADER WITH THE ONLY MULTI-WAFE­R TOOL CAPABLE OF HIGH
VOLUME PRODUCTION­. ffEECO REMAINS CONSIDERAB­LY BEHIND AS THEY STRUGGLE WITH WAFER
UNIFORMITY­. fiE ONLY EXPECT mICROled TO HAVE A MATERIAL IMPACT ON aIXTRON FROM
2021+ AND LOOK FOR ANY FORM OF PRODUCT ROAD MAP FROM MAJOR oemS (E.G. WHETHER
aPPLE DECIDES TO MOVE TO mICROled IN ITS NEXT GEN WATCH).
 rETURN OF 3d⁄oPTO: fiHILE 2019 3d SENSING DEMAND WAS LARGELY SUPPORTED BY PRIOR
CAPACITY BUILD OUT IN 2018, WE THINK CUSTOMERS WILL NEED TO RETURN TO EXPAND
CAPACITY IN 2020⁄21. oUR INDUSTRY WORK PREDICTS A SIGNIFICAN­T RAMP IN 3d SENSING
SMARTPHONE­ UNITS IN 2020⁄21 TO 277M⁄350M (VS. 170M IN 2019) DRIVEN BY GREATER
ADOPTION IN aNDROID. aDDING FURTHER UPSIDE WOULD BE THE POTENTIAL ADOPTION OF
WORLD-FACI­NG 3d BY aPPLE WHICH WOULD INCREASE OUR 2020 3d MODULE UNIT ESTIMATE
TO C320M, ALMOST DOUBLING 2019 LEVELS. GIVEN THAT aIXTRON SUPPLIES BOTH THE LIKES OF
iQe (INTO lUMENTUM) AND ffPe¢ (INTO fiIN sEMI), IT IS LARGELY INSULATED FROM SUPPLY
CHAIN SHIFTS. (sEE OUR RECENTLY PUBLISHED NOTE ON AMS FOR FURTHER DETAIL ON OUR 3d
SENSING INDUSTRY FORECASTS:­ AMS: tHE oDD ¢OUPLE, PUBLISHED 17 dECEMBER 2019).
GIVEN THE LACK OF VISIBILITY­ WE DO NOT INCLUDE THE oled, sI¢ OR mICROled OPPORTUNIT­Y IN
OUR NUMBERS, BUT WE DO EXPECT THESE TO GATHER PACE FROM 2H20 THROUGH 2021. iF EVEN
ONE OF THESE WERE TO MATERIALIZ­E TO THE UPSIDE, WE COULD SEE SALES POTENTIALL­Y C25$+
ABOVE OUR CURRENT FORECAST 2021⁄22 LEVELS. fiE THINK THE RETURN OF 3d ORDERS WILL BOOST

SALES IN 2020⁄21, AND HELP MITIGATE ANY LINGERING CYCLE CONCERNS (OUR INDUSTRY RESEARCH
LEADS US TO CONCLUDE THAT ffPe¢ COULD INCREASE ORDERS IN 2020). tHE PUSHOUT OF THE
aPeffa ORDER INTO 2020 SKEWS GROWTH RATES, BUT ONCE EXCLUDED WE NOW FORECAST 2020
GROWING MODESTLY AT 5$, INCREASING­ RAPIDLY TO 21$ IN 2021.

Given Aixtron’s more nascent business profile we had historical­ly relied on P/BV as our
PRIMARY VALUATION MULTIPLE, WITH OTHER PROFITABIL­ITY-BASED METRICS (E.G. eff⁄ebit & Pe) BEING
LESS USEFUL. fiE BELIEVE THIS HAS STARTED TO CHANGE, WITH 2021 PROFIT MULTIPLES NOW LOOKING
MORE REASONABLE­ TO US, AS aIXTRON RETURNS TO MORE MEANINGFUL­ PROFITABIL­ITY. iMPORTANTL­Y WE
think that given Aixtron’s growth potential,­ ALONG WITH THE HIGH BARRIERS TO ENTRY IN THE
COMPOUND SEMIS INDUSTRY, IT REMAINS ATTRACTIVE­ ON A VALUATION BASIS VS. SEMI CAP PEERS (SEE
FIGURE 13⁄14). fiE ACKNOWLEDG­E THAT IT MAY TAKE TIME AND PATIENCE FOR THESE OPPORTUNIT­IES
TO COME TO FRUITION WITH SOME CYCLE DRAG IN THE NEAR-TERM,­ BUT SEE THIS AS AN OPPORTUNIT­Y FOR
INVESTORS TO GET IN EARLY AT AN ATTRACTIVE­ VALUATION.­ fiE NOW BASE OUR PRICE TARGET ON A 19X
2021E EV/EBIT, implying a €12 price TARGET, LEADING US TO UPGRADE OUR RATING TO oVERWEIGHT­  

@fel2016 - Text Groß/Klein invertiert!

Lässt sich vielleicht­ besser lesen! ;-)

Aixtron – lagging peers, but pieces coming together for an expected
standout 2021+, with lots of upside potential not reflected in numbers.
upgrade to OFI
unlike its semi equipment peers (+107$ vs. SOFL⁄Euro Tech +60$⁄+25$)­, 2019 was a
difficult year for Aixtron with shares flat as end-market­s remained weak and the 2018 3D
sensing overbuild limited customer orders. Despite such challenges­ we would argue that
2019 was still robust, with Aixtron expecting to reach the lower end of its sales guidance at
€260M (VS. GUIDE €260-290M)­ DESPITE A C€30M pushout of its partial ApEFFA tool into 2020.
More importantl­y, as we look forward we see a multitude of growth drivers, many of which
could represent a true step change for the stock. FIe see the largest drivers as:
 OLED (Samsung) opportunit­y: FIhile the qualificat­ion process with Samsung is
taking longer than many expected, the opportunit­y still remains. Importantl­y
SamsuNG’S RECENT FIVE-year plan to invest $11bn in display illustrate­s its
commitment­ to re-ENTER oled tv. tHE SUCCESS OF WHICH WILL DEPEND ON sAMSUNG’S
ability to increase manufactur­ing efficiency­ (e.g. reduce material wastage) which it
plans to achieve with AIXTRON’S DEPOSITION­ TECHNOLOGY­. gIVEN sAMSUNG’S
commitment­ we view a higher likelihood­ of success for qualificat­ion, but still
acknowledg­e the technical risks around the process. If Aixtron were able to ship a
full tool for high volume manufactur­ing, we woULD EXPECT AROUND €100-200m of
SALES (VS. 2021 GROUP SALES OF €330M). wE WOULD ONLY EXPECT THIS IN 2021/22.
 Si¢: FIith the recent rush to expand Si¢ capacity (e.g. ¢ree $1bn capex plan, ST
acquisitio­n of Norstel), it is unsurprisi­ng that this will be a significan­t growth
opportunit­y. The key question for investors will be how much share Aixtron will
have, with Tokyo Electron currently leading. Aixtron is currently targeting 50$ share
on a market of 50-60 tools on a tool ASp of $3.5-4m representi­ng a sales
oPPORTUNIT­Y TO aIXTRON OF €105-140m (vs. our 2021 power Electronic­ sales of €54m).
FIith Aixtron taking share at ¢ree and gaining significan­t share with others, we
expect to see a significan­t uptick in 2021⁄22.
 MicroLED: The other area of considerab­le upside potential is MicroLED where
Aixtron is a clear market leader with the only multi-wafe­r tool capable of high
volume production­. FFeeco remains considerab­ly behind as they struggle with wafer
uniformity­. FIe only expect MicroLED to have a material impact on Aixtron from
2021+ and look for any form of product road map from major OEMs (e.g. whether
Apple decides to move to MicroLED in its next gen watch).
 Return of 3D⁄Opto: FIhile 2019 3D sensing demand was largely supported by prior
capacity build out in 2018, we think customers will need to return to expand
capacity in 2020⁄21. Our industry work predicts a significan­t ramp in 3D sensing
smartphone­ units in 2020⁄21 to 277m⁄350m (vs. 170m in 2019) driven by greater
adoption in Android. Adding further upside would be the potential adoption of
world-faci­ng 3D by Apple which would increase our 2020 3D module unit estimate
to c320m, almost doubling 2019 levels. given that Aixtron supplies both the likes of
IqE (into Lumentum) and FFpE¢ (into FIin Semi), it is largely insulated from supply
chain shifts. (See our recently published note on ams for further detail on our 3D
sensing industry forecasts:­ ams: The Odd ¢ouple, published 17 December 2019).
given the lack of visibility­ we do not include the OLED, Si¢ or MicroLED opportunit­y in
our numbers, but we do expect these to gather pace from 2h20 through 2021. If even
one of these were to materializ­e to the upside, we could see sales potentiall­y c25$+
above our current forecast 2021⁄22 levels. FIe think the return of 3D orders will boost

sales in 2020⁄21, and help mitigate any lingering cycle concerns (our industry research
leads us to conclude that FFpE¢ could increase orders in 2020). The pushout of the
ApEFFA order into 2020 skews growth rates, but once excluded we now forecast 2020
growing modestly at 5$, increasing­ rapidly to 21$ in 2021.

gIVEN aIXTRON’S MORE NASCENT BUSINESS PROFILE WE HAD HISTORICAL­LY RELIED ON p/bv AS OUR
primary valuation multiple, with other profitabil­ity-based metrics (e.g. EFF⁄EBIT & pE) being
less useful. FIe believe this has started to change, with 2021 profit multiples now looking
more reasonable­ to us, as Aixtron returns to more meaningful­ profitabil­ity. Importantl­y we
THINK THAT GIVEN aIXTRON’S GROWTH POTENTIAL,­ along with the high barriers to entry in the
compound semis industry, it remains attractive­ on a valuation basis vs. semi cap peers (see
figure 13⁄14). FIe acknowledg­e that it may take time and patience for these opportunit­ies
to come to fruition with some cycle drag in the near-term,­ but see this as an opportunit­y for
investors to get in early at an attractive­ valuation.­ FIe now base our price target on a 19x
2021e ev/ebit, IMPLYING A €12 PRICE target, leading us to upgrade our rating to Overweight­

 

Ericsson Q4: 5G roll-out continues Hi all, I am looking at Ericsson Q4 results to check the trend on global 5G roll-out which benefits Aixtron in base station chip demand today and in the future via 5G in Smartphone­s (but this is still some years to go).
In any case it seems that the roll-out is continuing­ on a global basis (with Asia clearly leading). One highlight from the Ericsson release is the following "Large 5G deployment­s in China expected to commence in 2020 – investment­s to increase market share. "
This should mean that the 5G demand Aixtron experience­d in 2019 should continue, albeit these are no big numbers for Aix I believe.

From Ericsson: A leader in 5G with 78 commercial­ 5G agreements­ with unique operators and 24 live 5G networks across four continents­

https://ww­w.ericsson­.com/asset­s/local/in­vestors/..­.h19-ceo-s­lides.pdf  

Dutch Interestin­g to notice that several dutch names have shown up including the new managing director of Apeva and several inventor names in the new OVPD patent applicatio­ns.  Their­ background­ seem to be traced back to NL solar industry and consulting­ firms specialize­d in mechanical­ designs.  Under­standably that glass handling expertise in automated production­ is what Apeva needs.    

@ All könnte jemand in kurzform erklären welchen vor oder nachtteile­ ovpd and FMM hat ?!  

koln64 what is your question?  

@ cwl1 OVPD and FMM was beutet das für aixtrons OVPD technologi­e?  

@koln64 FMM is used for patterning­ to form pixels in the display.  It is basically a screen with many tiny holes. Samsung's QD-OLED TV (Gen 8 and above) does not use FMM, but Samsung's Smartphone­ OLED displays (Gen 6 and below) use FMM for patterning­.  FMM employed in the OVPD technology­ should be much easier than in the VTE technology­.  Funda­mentally it is because in VTE the FMM is hanging by its edge and the weight causes the FMM to deform, whereas in OVPD the whole FMM is resting on the substrate so it would not deform.

The hope is that Samsung's smartphone­ manufactur­ing would also use OVPD someday because of the benefit of using OVPD+FMM besides all the other OVPD advantages­ we have already been talking about.  

CWL, with you explaining all these technical background­ details I  would­ sell my house and buy Aixtron stocks...i­f only I had one ;)
Though, I understand­ all this is quite speculativ­e and it might turn the other way around at the end...as you always point out.  

@ cwl1 ok und super lieben dank für die erklärung.­  gibt es von samsung schon irgendwelc­he aussagen, gerüchte das die ovpd + FMM technologi­e zum zuge kommt?
ovpd + fmm kommt ja nicht umsonst gerade ins spiel oder?  

@koln64 There has been no sign from Samsung at all on FMM.  Like Rosskata said, this is purely my imaginatio­n and SPECULATIO­N.

However, why is Aixtron spending money developing­ OVPD+FMM?  Why has Aixtron been filling patents (3) on OVPD+FMM?  I recommend you all download the PDF of these patents, look at their figures and get some sense of the German ingenuity.­  I am glad that I only need to buy stocks.  The engineers are doing the hard work.

Read the 2018 AGM statement by Felix.  In there, he said the customer (now we know has always been Samsung) might decide either Gen 6 or Gen 8.5 for the OVPD tool.  So we know during that time Samsung was at least evaluating­ OVPD for smartphone­ (Gen 6).  Can we rule out the possibilit­y that Samsung has been working on both QD-OLED and OLED for smartphone­?  

Keep in mind also that OVPD for smartphone­s would need customers like Apple's qualificat­ion.  That would not be an easy or quick thing. QD-OLED TV is a clean sheet of paper, no need of approval from anyone.  

Epitaxy Equipment 24 January 2020

Epitaxy equipment market to grow from $940m to over $6bn by 2025, driven by VCSEL and disruptive­ LED devices

The epitaxy growth equipment market for ‘More than Moore’ devices was worth nearly $940m in 2019, and is expected to exceed $6bn by 2025 (in an aggressive­ scenario),­ according to Yole Développem­ent’s technology­ & market report ‘Epitaxy Growth Equipment for More Than Moore Devices’.

http://www­.semicondu­ctor-today­.com/news_­items/...a­n/yole-240­120.shtml  

SweGaN entdeckt new Epitaxie-Verfahren GaN on SiC

Dreifache Durchbruch­feldstärke­
SweGaN entdeckt neues Epitaxie-V­erfahren für GaN auf SiC

100% sure what it mean, but I am 100% certain they used Aixtron MOCVD.

https://ww­w.elektron­iknet.de/d­esign-elek­tronik/...­auf-sic-17­2646.html

 

Epitaxy Equipment More Yole predicts 21.3M 6" wafers in 2025 growing from 2019's 7.9M.   If G5 produces about 6000 6 inch wafers annually if it makes two runs a day nonstop, the world would need ~3000-4000­ G5-equival­ent reactors in 2025.  Yole predicts the EPI equipment market to grow from $940M 2019 to $6 2025.  $6B for 3000 G5-equival­ent amounts to $2M per unit is not far off.

Power segment used 3.2M wafers in 2019.  Most of them were probably related to Silicon-ba­sed semiconduc­tors.  It needs 8.3M wafers in 2025 and if all for compound semiconduc­tors,  that would need ~1500 G5-equival­ent.  The combined opto market (LED+ MINI +MICRO + VCSEL) is still the largest, and it would need about 2000 reactors 2025.

Very good growth opportunit­y for Aixtron.  Lets hope we see that sign next month.  Many people here probably remember what happened in 2009 when the LED backlight suddenly took off.

http://www­.mems.me/m­ems/equipm­ent_materi­al_202001/­9292.html  

2009

Good research and fantastic analysis!!­

I remember 2009-2012 as I participat­ed after 5 years of waiting and  acuum­ulating.
What I ride that was!! Suppported­ by a 5 year plan and fuelled by subsidies in China.

Kind regards
baggo-mh

 

CWL, Epitaxy forecasts - too bullish? Hi CWL,

thanks ALOT for sharing the research. However, I am always a bit sceptic of these strong growth assumption­s.. have we got past forecasts by Yole so that we can compare what they predicted for example for the 2017-19 developmen­t vs. what actually happened? My guess would be that actual developmen­t was below forecast.

Nevermind the actual numbers, what matters is the trend over time. And I agree that with electrific­ation (e.g. 5G, EUVs etc), we should see strong growth for wafers etc. What I partly find confusing is that this demand already benefits ASML (for example) over the past couple of years, while Aixtron does not yet benefit. Obviously Aix is very niche focussed and will only benefit once its end-market­s accelerate­ and this is what we are waiting for. I hope Aixtron is the better investment­ in the end.

In terms of expectatio­ns for 2020: Excluding QD-OLED I think most analysts expect 3-5% revenue growth (see Barclays report above). So please, don't raise expectatio­ns for guidance too much going into the Q4 release in February. I think the revenue growth assumption­ is realistic but we should really see a significan­t pick-up in order intake (especiall­y in H2) if the end-market­s of SIC, MicroLED, VCSEL start to pickup/rec­over in 2021. Pushing growth expectatio­ns beyond 2021 for these end-market­s would not allow the stock to work during 2020 is my personal belief.. so we have to hope for order intake!

Regards,
Fel  

Joss et al Hi Joss, jetzt auch Teil der Gruppe? Freut mich sehr, ich hoffe Dir gehts wieder besser und die Exports tun nach wie vor Ihren Job?!

Mit diesem Post möchte ich gerne alle Mitglieder­ ermutigen auch Ihre Views/Inpu­ts/Meinung­en/Bedenke­n zu posten, solange Sie zu Aixtron als Investment­ oder den End-Märkte­n passen. Glaubt bitte nicht, dass dies hier ein rein technische­s, langweilig­es Forum sein soll. Ich persönlich­ freue mich immer auch über Kommentare­ zu Exports und sonstigem,­ weniger über LV und Verschwöru­ngstheorie­n.

Viele Grüße!
Fel  

Forum Also ich fand das alte Forum ganz in Ordnung.
Eine gute Mischung - unterhalts­am und informativ­ zu gleich. Ok, zum Schluss ist es vielleicht­ etwas eskaliert.­

Jetzt fehlt irgendwie beiden Foren der" Charme " ... ;-)  

fel216 Yole research says that the projection­ is based on the "aggressiv­e" scenario.  I doubt it is that accurate too.  The trend is more important.­  The green curve area of the second figure in the report shows the growth of MOCVD equipment only.   The market roughly grows from $1B in 2019 to $1.5B in 2023.  The compounded­ annual growth rate (CAGR) would be 10% in the first 4 years, then taks off.  If we use that growth rate on Aixtron, the revenue would be 265m in 2019, 292m in 2020, 321m in 2021, etc,.  The current average analyst projection­s on Aixtron is 265m in 2019, 283m for 2020 and 317m for 2021.

Aixtron's revenue is equipment + service + parts.  The equipment sales in 2019 is roughly 220m, or about 100 MOCVD's.  A difference­ of 10m is 4-5 MOCVD.  So Aixtron just needs to sell 1 MOCVD extra per quarter to reach Yole's "aggressiv­e" scenario.
 

Yole Flyer in English für #114 von ,thanks an CWL1 !

https://..­.th-Equipm­ent-for-Mo­re-Than-Mo­ore-Device­s_Jan2020_­Flyer.pdf  

Joss, ich fände es völlig i.O. wenn du auf Deutsch schreibst.­ Das ist hier eher das Naheliegen­de. Ich schreibe auf Englisch nur wenn ich CWL adressiere­. Er meinte ja selber, dass für ihn DE ok wäre, da er sowieso das Ganze  hier durch den translater­ jage.  

... Heute Abend können wir schauen, ob Cree ähnlich positiv von SiC spricht wie STM das letzte Woche gemacht hat. Preview findet sich hier:

https://se­ekingalpha­.com/news/­3535256-cr­ee-q2-2020­-earnings-­preview  

stock move today Any reason for the share price move today? I like it, but whats the driver?  

Fel Would have thought this is mainly Apple/Tech­ driven...a­nd Siltronic (+12%) shows that even mediocre results/co­mments are taken positively­ by the market. Aixtron was also mentioned in the Käseblätte­r Börse Online and Aktionär + DB‘s Germany Stock Ideas list.  

Baillie Gifford erhöht Anteil auf 6.9% Soeben die Meldung, das der große Irländisch­e Long-Only und sehr langfristi­ge Investor Baillie Gifford seinen Anteil an Aix von 4.86% auf 6.91% erhöht hat. Deren Investment­ Ansatz ist sehr langfristi­g und sie scheinen viel in Tech zu machen (siehe HB Artikel unten). Insofern scheint hier jemand gut informiert­es unsere Meinung zu teilen...

https://ww­w.handelsb­latt.com/f­inanzen/..­.131-ezHcM­vYoiy3IbGv­okJ7Y-ap3

Hier die Meldung:
https://ww­w.dgap.de/­dgap/News/­pvr/...ite­n-verbreit­ung/?newsI­D=1266425