Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you explain the factors behind the lower gross margins and increased operating expenses in Q4, and how long these trends might continue? A: Gary Fischer, CFO, explained that gross margins are expected to remain low in Q1 due to reduced indium phosphide sales from export restrictions. However, they anticipate margins to return to mid-20% levels post-Q1. Morris Young, CEO, added that R&D investments in indium phosphide and gallium arsenide are nearing completion, which should improve yields and performance.
Q: What opportunities do you see for indium phosphide in data centers, and what is the revenue outlook for 2026? A: Tim Bettles, VP of Business Development, noted growth in both photodetectors and lasers, with a significant opportunity in high-speed VCSELs and indium phosphide-based photodetectors. They expect continued growth in 2025, with new opportunities in low EPD ion diode materials for next-generation EML lasers.
Q: How do you anticipate the impact of China's indium phosphide export restrictions, and what is your experience with similar gallium arsenide restrictions? A: Tim Bettles stated that the restrictions aim to prevent military applications, and they expect to secure permits for non-military uses. Based on past experience with gallium arsenide, they are optimistic about obtaining necessary permits without significant issues.
Q: Can you provide insights into the wireless market opportunity and expected growth in 2025? A: Morris Young highlighted that AXT has grown its market share in the HBT market from zero to 10% and aims to increase it by 30% in 2025. They plan to leverage process improvements from their 8-inch experience to enhance competitiveness and market share.
Q: What is the expected growth for indium phosphide in 2025, excluding export restrictions? A: Tim Bettles projected a 20% year-over-year growth, driven by increased adoption of silicon photonics and EML technologies. The market is dynamic, and additional growth could occur as these technologies gain traction.
Q: How do you plan to manage the germanium business given current market conditions? A: Morris Young explained that while demand is strong, high raw material costs limit profitability. They plan to manage market entry based on raw material price levels to ensure profitability.
Q: What is the mix between photodetectors and silicon photonics in your indium phosphide business? A: Tim Bettles indicated a 60/40 or 65/35 split in favor of lasers over detectors, with significant growth potential in both areas, particularly in silicon photonics.
Q: How do you expect the indium phosphide business to recover from export restrictions compared to gallium arsenide? A: Morris Young believes indium phosphide will recover more robustly due to its critical role and established customer relationships. They anticipate a strong recovery once permits are secured.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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