Raja M. Parvez, has served as chief executive officer of Rubicon Technology Inc (RBCN-$21.77), a provider of sapphire substrates and products to the high-brightness Light-Emitting Diodes (LED), Semiconductor, and Optical (blue laser diodes) industries, since August 2006. Yet, the electronics material supplier is still reimbursing him to commute from his home in Pennsylvania to executive offices in Franklin Park, Illinois."Pending his relocation," Parvez received $114,049 in the aggregate for fiscal 2006 and 2007, according to the company’s proxy filing on July 20, 2008.
Perhaps Parvez is too busy traveling to put roots down in the Prairie State, for more than 70% of sales are made to customers in Asia, principally to Taiwan-based Crystalwise Technology, a wafer fabricator, and Japanese-based Shinkosha Co, an optical communication device-maker.
Business Strategy
A shift away from incandescent to more energy-efficient LED lighting positions Rubicon for aggressive growth. However, Rubicon is highly dependent on increased market acceptance of solid state lighting, with approximately 62% of revenue derived from sales of components for use in the manufacture of LED products, ranging from mobile appliances (cell phones, digital cameras), flat panel televisions, signage (for very large advertising and stadium displays), and headlights for the automotive industries.
One key end-use application driving high demand is LED-backlighting units for notebook computers. "LED backlight units are being adopted by notebook manufacturers at an increasing rate and the penetration rate may now reach over 10% in 2008," said CEO Parviz on the company’s 1Q:08 earnings call on April 30.
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Competition
Albeit sapphire is currently the preferred substrate material for high brightness (HB) white, blue and green LED applications, silicon carbide, aluminum nitride, zinc oxide and bulk gallium nitride are other substrates being investigated and used in research and development for certain LED applications. Ergo, as technology progresses and sapphire is displaced as the substrate of choice for certain LED applications, Rubicon’s operating performance could flameout like an energy-inefficient, tungsten-filament light bulb.
In our view, Rubicon must leverage the growing demand for sapphire wafers in the LED markets by executing strategies for increasing and diversifying revenues to other applications. For example, larger diameter (6” to 8”) sapphire wafers are increasingly used for high performance Silicon-on-Sapphire Radio Frequency Integrated Circuits (RFIC) chips used in cell phones and base stations, wafer carriers for other substrates and as optical windows in the aerospace, medical device and sensor markets. These new applications are turning to sapphire for its high-performance and affordability.
Albeit sapphire is currently the preferred substrate material for high brightness (HB) white, blue and green LED applications, silicon carbide, aluminum nitride, zinc oxide and bulk gallium nitride are other substrates being investigated and used in research and development for certain LED applications. Ergo, as technology progresses and sapphire is displaced as the substrate of choice for certain LED applications, Rubicon’s operating performance could flameout like an energy-inefficient, tungsten-filament light bulb.
In our view, Rubicon must leverage the growing demand for sapphire wafers in the LED markets by executing strategies for increasing and diversifying revenues to other applications. For example, larger diameter (6” to 8”) sapphire wafers are increasingly used for high performance Silicon-on-Sapphire Radio Frequency Integrated Circuits (RFIC) chips used in cell phones and base stations, wafer carriers for other substrates and as optical windows in the aerospace, medical device and sensor markets. These new applications are turning to sapphire for its high-performance and affordability.
Outlook
Rubicon now has larger furnaces operational, producing larger, high quality, sapphire crystals to better serve the 6 and 8-inch markets, according to Parviz.
Addressing the potential for larger diameter sapphire in other industry applications suggests continued high growth for the Company. However, management is not raising top end of its guidance estimates until they are sure capacity can continue to come online ahead of schedule. Rubicon anticipates revenue for 2008 of between $47 million and $49 million and share-net of between $0.45 and $0.47.
What do you say, Mr. Parvez, is it time to "Cross the Rubicon?"
Editor David J. Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.
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