AXT Inc (AXTI) 2016 Q2 法說會逐字稿

Good afternoon everyone and welcome to AXT's second-quarter 2016 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer.

大家下午好，歡迎參加 AXT 2016 年第二季財務電話會議。今天主持會議的是執行長 Morris Young 博士和財務長 Gary Fischer。

My name is Rebecca and I will be your coordinator today. Please be advised today's call is being recorded.

我叫麗貝卡，今天我將擔任你們的協調員。請注意，今天的通話正在錄音。

(Operator Instructions)

（操作員說明）

I would now like to turn the call over to Leslie Green, Investor Relations for AXT. Please go ahead, ma'am.

我現在想將電話轉給 AXT 投資者關係部門的 Leslie Green。請繼續，女士。

Thank you, Rebecca, and good afternoon everyone. Before we begin I would like to remind you that during the course of this conference call, including comments made in response to your question, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the Company and our ability to control costs and improve efficiency, increase orders in succeeding quarters, improve our competitive position as the market improves as well as other market conditions and trends.

謝謝你，麗貝卡，大家下午好。在我們開始之前，我想提醒您，在本次電話會議期間，包括針對您的問題發表的評論，我們將提供有關未來財務業績等的預測或其他前瞻性聲明。公司以及我們控製成本和提高效率的能力，在接下來的幾個季度增加訂單，隨著市場的改善以及其他市場條件和趨勢提高我們的競爭地位。

We wish to caution you that such statements deal with future events, are based on management's current expectations and are subject to risks and uncertainties that could cause actual events or results to differ materially. These uncertainties and risks include but are not limited to overall conditions in the market in which the Company competes, global financial conditions and uncertainties, market acceptance and demand for the Company's products and the impact of delays by our customers on the timing of sales of products.

我們希望提醒您，此類陳述涉及未來事件，基於管理層當前的預期，並受到可能導致實際事件或結果產生重大差異的風險和不確定性的影響。這些不確定性和風險包括但不限於公司競爭市場的整體狀況、全球金融狀況和不確定性、市場對公司產品的接受度和需求以及客戶延遲對產品銷售時間的影響。

In addition to the factors that may be discussed in this call we refer you to the Company's periodic reports filed with the Securities and Exchange Commission and available online by link from our website for additional information on risk factors that could cause actual results to differ materially from our current expectations.

除了本次電話會議中可能討論的因素外，我們建議您參閱公司向美國證券交易委員會提交的定期報告，並可透過我們網站的連結在線獲取有關可能導致實際結果與實際結果存在重大差異的風險因素的更多資訊。我們目前的期望。

This conference call will be available on our website at AXT.com through July 27, 2017. Also before we begin I want to note that shortly following the close of market today we issued a press release reporting financial results for the second quarter of 2016. This information is also available on the investor relations portion of our website at AXT.com.

本次電話會議將於2017 年7 月27 日在我們的網站AXT.com 上發布。在我們開始之前，我想指出，在今天收盤後不久，我們發布了一份新聞稿，報告2016 年第二季度的財務表現。此資訊也可在我們網站 AXT.com 的投資者關係部分取得。

I would now like to turn the call over to Gary Fischer for a review of the second-quarter results. Gary?

我現在想將電話轉給加里費雪（Gary Fischer），以審查第二季的業績。加里？

Thank you, Leslie. Revenue for the second quarter of 2016 was $20.5 million compared with $18.7 million in the first quarter of 2016. This is at the high end of our expectations of $19.5 million to $20.5 million.

謝謝你，萊斯利。 2016 年第二季的營收為 2,050 萬美元，而 2016 年第一季的營收為 1,870 萬美元。這是我們預期 1,950 萬美元至 2,050 萬美元的上限。

In the second quarter of 2016 revenue for North America was 13%, Asia-Pacific was 65% and Europe was 22% total revenue. In the second quarter we had two customers that generated more than 10% of revenue and the top five customers generated approximately 42% of total revenue, reflecting again our diversification of both products and customers.

2016年第二季度，北美地區營收佔總營收的13%，亞太地區佔65%，歐洲佔22%。第二季度，我們有兩位客戶創造了超過 10% 的收入，前五名客戶創造了約 42% 的總收入，再次反映了我們產品和客戶的多元化。

Gross margin in the second quarter was 29.4%. This improvement from the prior quarter is the result of increasing product volume, a favorable mix and good progress in manufacturing efficiencies and yield improvements.

第二季毛利率為29.4%。與上一季相比的改善是產品數量增加、有利的產品組合以及製造效率和產量改進方面良好進展的結果。

Total operating expenses in the second quarter were $5.1 million. This is up slightly from the prior quarter as it includes a $226,000 charge related to a reduction in force at one of our consolidated subsidiaries in China.

第二季的總營運費用為 510 萬美元。這比上一季略有上升，因為其中包括與我們在中國的合併子公司裁員相關的 226,000 美元費用。

Total stock compensation in the quarter was $255,000 of which $5,000 was included in cost of revenues, $213,000 in SG&A and $37,000 in R&D. Operating profit for the second quarter of 2016 was $910,000 compared with $498,000 in the previous quarter.

本季的股票薪酬總額為 255,000 美元，其中 5,000 美元包含在收入成本中，213,000 美元包含在銷售成本中，37,000 美元包含在研發中。 2016 年第二季營業利潤為 91 萬美元，上一季為 49.8 萬美元。

Interest and other income for the second quarter was a gain of $28,000. This number consists of four categories: net interest of $100,000; number two, foreign exchange gain of $169,000; number three, equity accounting on our unconsolidated joint ventures, a loss of $400,000; and number four, other items equaling a gain of $159,000.

第二季的利息和其他收入增加了 28,000 美元。此數字由四類組成： 淨利息 100,000 美元；第二名，外匯收益169,000美元；第三，我們未合併的合資企業的權益會計，虧損 40 萬美元；第四，其他項目，收益為 159,000 美元。

For Q2 of 2016, we had a net profit of $1.151 million which is $0.03 per share. This was approximately $0.01 over our guidance range which was breakeven to a profit of $0.02 per share. By comparison we had a net profit of $42,000, or zero cents per share in the first quarter of 2016.

2016 年第二季度，我們的淨利潤為 115.1 萬美元，每股收益 0.03 美元。這比我們的指導範圍高出約了 0.01 美元，每股盈虧平衡為 0.02 美元的利潤。相比之下，2016 年第一季我們的淨利潤為 42,000 美元，即每股 0 美分。

Along with profits, cash increased nicely in the quarter by $1.6 million. Cash and cash equivalents increased to approximately $45 million at June 30, 2016. This compares with $43.3 million at March 31, 2016.

除利潤外，本季現金也大幅增加 160 萬美元。截至 2016 年 6 月 30 日，現金及現金等價物增至約 4,500 萬美元。而截至 2016 年 3 月 31 日，現金及現金等價物為 4,330 萬美元。

Depreciation and amortization in the quarter was $1.2 million and capital expenditures were $1.0 million. Accounts receivable net of reserves were $18.0 million at June 30, 2016 compared with $19.7 million at March 31, 2016. Net inventory is basically flat quarter to quarter.

本季折舊和攤提為 120 萬美元，資本支出為 100 萬美元。截至2016年6月30日，扣除準備金的應收帳款為1,800萬美元，而2016年3月31日為1,970萬美元。淨庫存與季度基本持平。

June-ending inventory was $38.6 million and March-ending inventory was $38.8 million. Ending inventory consisted of approximately 52% in raw materials, 41% in work in progress and 7% in finished goods. This was close to the spread in Q1.

6 月末庫存為 3,860 萬美元，3 月末庫存為 3,880 萬美元。期末庫存包括約 52% 的原料、41% 的在製品和 7% 的製成品。這接近第一季的利差。

That covers the numbers for now. But we do have some changes which are favorable regarding our relocation. We have recently learned that a master development plan of the area where our manufacturing facility is located has not yet been formally approved by the China central government and the timeline for relocating our gallium arsenide wafer production operations has not yet been determined by the China central government.

這涵蓋了目前的數字。但我們確實發生了一些有利於我們搬遷的變化。我們最近獲悉，我們的生產設施所在地區的總體發展規劃尚未獲得中國中央政府的正式批准，並且中國中央政府尚未確定搬遷我們的砷化鎵晶圓生產業務的時間表。

We believe the central government will undertake a comprehensive review of the master development plan which will add time to the process. We have also learned that there are a number of factors that the Beijing city government could consider and could extend the timeline for our relocation. We believe that we satisfy these factors and accordingly we may have some flexibility when we work with the government towards a resolution.

我們相信中央政府將對總體發展規劃進行全面審查，這將延長這一進程。我們也了解到，北京市政府可以考慮多種因素，並可以延長我們的搬遷時間表。我們相信我們滿足了這些因素，因此我們在與政府合作尋求解決方案時可能會有一定的靈活性。

In addition, the Beijing city government's Economic Development Bureau requested that we consider maintaining our indium phosphide production operations at our current site along with our China headquarters and our R&D center. We will keep you informed as things progress.

此外，北京市政府經濟發展局要求我們考慮維持現有廠址的磷化銦生產業務以及我們的中國總部和研發中心。隨著事情的進展，我們將隨時通知您。

I would now like to turn the call over to Dr. Morris Young.

我現在想把電話轉給莫里斯·楊博士。

Thank you, Gary. Once again we continued to show meaningful progress in our business. We achieved revenue at the high-end of our guidance range and exceeded our profitability expectations by a penny a share.

謝謝你，加里。我們的業務再次繼續取得有意義的進展。我們的收入達到了指導範圍的高端，並且超出了我們每股盈利預期一美分。

In addition, we further expanded the gross margin through yield improvements, manufacturing efficiencies and higher production volume and we generated positive cash flow. Q2 was another strong quarter for indium phosphide sales. While fiber-optic communications continue to be the leading applications for indium phosphide today we are seeing an increasing demand from beta center connectivity applications, technically called silicon photonics.

此外，我們透過提高產量、提高製造效率和提高產量進一步擴大了毛利率，並產生了正現金流。第二季度是磷化銦銷售的另一個強勁季度。雖然光纖通訊仍然是當今磷化銦的主要應用，但我們看到 beta 中心連接應用（技術上稱為矽光子學）的需求不斷增加。

This demand reflect the broad base of development activities currently undertaken by vendors throughout the ecosystem. In fact, at OFC this spring in Anaheim a number of silicon photonics-based products and technologies were showcased, including high-performance transceivers, optical modulators and detectors.

這種需求反映了供應商目前在整個生態系統中所進行的廣泛的開發活動。事實上，今年春天在阿納海姆舉行的 OFC 上，展示了許多基於矽光子的產品和技術，包括高性能收發器、光調製器和探測器。

Today data center networks are transitioning from 40 G to 100 G. Moving forward silicon photonics-based solutions are expected to be a significant enabling factor for cloud and hyperscale computing environments to begin planning their migration to 200 G plus.

如今，資料中心網路正在從 40 G 過渡到 100 G。基於矽光子的解決方案的發展預計將成為雲端和超大規模運算環境開始規劃向 200 G 以上遷移的重要推動因素。

Based on market models like Dell'Oro, C-RAN and [light counting] the 100 G to 400 G data center interconnect market is growing from $1.2 billion in 2016 to $5.1 billion in 2020. This is a 51% compound annual growth rate. This should result in a long product lifecycle for indium phosphide substrates.

根據Dell'Oro、C-RAN 和[輕計數]等市場模型，100 G 至400 G 資料中心互連市場將從2016 年的12 億美元成長到2020 年的51 億美元。複合年增長率為51 %。這將導致磷化銦基材具有較長的產品生命週期。

Our indium phosphide revenue have grown at an average rate of more than 50% annually for the last two years. As a result of increasing demand AXT is strongly positioned with differentiated technology and manufacturing advantages as well as significant barriers to market entry.

過去兩年，我們的磷化銦收入年均成長超過50%。由於需求不斷增長，AXT 憑藉差異化的技術和製造優勢以及龐大的市場進入壁壘，佔據了強勢地位。

We believe that our substrate in volume production offers the lowest edge per density or EPD on the market. This is a critical specification, high-performance optical devices and an area in which our VGF technology is particularly well-suited.

我們相信，我們大量生產的基材可提供市場上單位密度或 EPD 的最低邊緣。這是一個關鍵的規格、高性能光學元件，也是我們的 VGF 技術特別適合的領域。

Our continuing customer success is also the result of the deep expertise of our team and our strong commitment to collaborating with our customers. We have close relationships and we are actively involved in helping them solving their specific technical processing issues in order to reap the full benefits of this challenging but exciting material.

我們客戶的持續成功也是我們團隊深厚的專業知識以及我們與客戶合作的堅定承諾的結果。我們有著密切的關係，我們積極參與幫助他們解決特定的技術加工問題，以便充分利用這種具有挑戰性但令人興奮的材料。

A majority of our sales and marketing professionals have PhDs in either physics or materials science and this is beneficial in building customer loyalty and respect. With our China-based facility and proprietary crystal growth equipment, we continue to expand capacity cost-effectively as demand requires.

我們的大多數銷售和行銷專業人員都擁有物理學或材料科學博士學位，這有利於建立客戶忠誠度和尊重。憑藉我們位於中國的工廠和專有的晶體生長設備，我們將根據需求繼續經濟有效地擴大產能。

Now turning to gallium arsenide. We saw some sequential growth in revenue in Q2 from semi-insulating substrates which have reached a relatively stable quarterly level of contribution. We are also seeing demand from customers for investigational activities into new applications for semi-insulating gallium arsenide that may provide additional upside.

現在轉向砷化鎵。我們看到第二季半絕緣基板的收入出現了一些環比增長，並達到了相對穩定的季度貢獻水平。我們也看到客戶對半絕緣砷化鎵新應用的研究活動的需求，這可能會提供額外的優勢。

Semiconducting gallium arsenide also increased modestly in the quarter. The majority of our revenue continues to be driven by demand for higher-end LED applications such as backlighting, signage, automotive. However, we are closely monitoring semiconducting gallium arsenide applications requiring very low defect density materials known as low EPD.

半導體砷化鎵在本季也小幅成長。我們的大部分收入繼續由背光、標誌、汽車等高端 LED 應用的需求推動。然而，我們正在密切關注需要極低缺陷密度材料（稱為低 EPD）的半導體砷化鎵應用。

These applications requiring low EPD is for vertical cavity emitting lasers or VCSEL for short. This emerging technology is gaining momentum in applications such as 3D sensing, the mobile phone and tablet market is likely to be among the earliest adopters but the technology is also very well-suited for other areas such as Smart TV, high-speed communications and high power materials processing. The very low EPD requirements for VCSEL devices provide a great opportunity for AXT as our VGF technology and proprietary processes allows us to offer industry-leading specifications.

這些需要低 EPD 的應用適用於垂直腔發射雷射（簡稱 VCSEL）。這項新興技術在 3D 感測等應用中勢頭強勁，手機和平板電腦市場可能是最早採用者之一，但該技術也非常適合其他領域，例如智慧電視、高速通訊和高性能電力材料加工。 VCSEL 裝置極低的 EPD 要求為 AXT 提供了絕佳的機會，因為我們的 VGF 技術和專有製程使我們能夠提供業界領先的規格。

Similar to indium phosphide these requirements create a meaningful significant barrier to entry. Our belief is that we could see meaningful contribution from VCSEL applications sometime next year. It will benefit the top line but also contribute towards the higher gross margins.

與磷化銦類似，這些要求創造了有意義的重大進入障礙。我們相信，明年某個時候我們可以看到 VCSEL 應用做出有意義的貢獻。這將有利於營收，同時也有助於提高毛利率。

Turning to raw materials, we saw no substantial changes to the pricing or demand environment for our key materials in Q2. However, several China-based gallium suppliers, including two of our own joint venture companies, are in the process of scaling back production to align with market demand.

談到原料，我們發現第二季關鍵材料的定價或需求環境沒有重大變化。然而，幾家中國鎵供應商，包括我們自己的兩家合資公司，正在縮減產量，以適應市場需求。

In addition, others may be shutting down altogether. We believe that further market stabilization and the eventual rebound in raw material pricing may come as a result of this decrease in volume production and excess inventory is being consumed.

此外，其他公司可能會完全關閉。我們認為，由於產量下降和過剩庫存被消耗，市場可能進一步穩定，原材料價格最終反彈。

Finally, I would like to say a few words about our gross margin performance. As Gary had mentioned earlier, we continue to benefit from a positive product mix stemming from our increased sales of indium phosphide substrate and other materials for high-end applications.

最後，我想談談我們的毛利率表現。正如加里之前提到的，我們繼續受益於積極的產品組合，這源於我們磷化銦基板和其他高端應用材料銷售的增加。

We're excited about these business opportunities across our portfolio and believe that our solid competitive position will allow us to drive through our growth in strategic areas. In addition, approximately two years ago we began implementing a variety of programs to reduce manufacturing costs. More recently we have focused on increasing yield for both ingots and wafering process.

我們對我們產品組合中的這些商機感到興奮，並相信我們穩固的競爭地位將使我們能夠推動策略領域的成長。此外，大約兩年前，我們開始實施各種計劃來降低製造成本。最近，我們專注於提高矽錠和晶圓製程的產量。

Single crystal growth and the resultant wafer creation are highly technical and we have strengthened our proprietary process technology during this focus. I'm pleased to report that over time all these programs have begun to contribute meaningfully to our gross margin performance and I believe that there is plenty of room for further improvement.

單晶生長和由此產生的晶圓製造技術含量很高，在此過程中我們加強了我們的專有製程技術。我很高興地報告，隨著時間的推移，所有這些計劃都開始對我們的毛利率表現做出有意義的貢獻，並且我相信還有很大的進一步改進的空間。

We expect to see sustainable benefit and continue to study additional areas in which we feel we may drive further improvement. As a result, our gross margin is demonstrating a positive trend. For example, we improved by nearly 900 basis points in Q2 from the prior year.

我們期望看到可持續的效益，並繼續研究我們認為可以推動進一步改進的其他領域。因此，我們的毛利率呈現出正面的趨勢。例如，第二季度我們的業績比去年同期提高了近 900 個基點。

There are many factors that contribute to our gross margin. As such, we do not expect -- we do expect to see fluctuations quarter to quarter but believe that this can continue to improve over time.

影響我們毛利率的因素很多。因此，我們預計不會出現季度與季度之間的波動，但相信隨著時間的推移，這種情況會繼續改善。

In closing, this is an exciting time in our business. We are highly focused on maximizing opportunities in strategic emerging areas where AXT is solidly positioned with tangible advantages in technology, in manufacturing capability and in in-house expertise.

最後，這是我們業務中激動人心的時刻。我們高度重視在策略新興領域中最大限度地利用機遇，AXT 在這些領域中擁有穩固的地位，在技術、製造能力和內部專業知識方面擁有切實的優勢。

In addition, we are delivering a business model that prioritized cost efficiency, spending discipline and diligent cash management and our shareholder returns. Across our organization the AXT team is executing well and Gary and I are looking forward to reporting to you on our continued progress.

此外，我們正在提供一種優先考慮成本效率、支出紀律、勤勉的現金管理和股東回報的業務模式。在我們的整個組織中，AXT 團隊執行得很好，而加里和我期待向您報告我們的持續進展。

This concludes my prepared comments. I will now turn the call back to Gary for our third-quarter guidance. Gary?

我準備好的評論到此結束。我現在將把電話轉回給加里，詢問我們的第三季指導。加里？

Thank you, Morris. As we look ahead to Q3 we expect to see continued growth in our business in keeping with the near-term trends that Morris discussed.

謝謝你，莫里斯。展望第三季度，我們預計我們的業務將持續成長，與莫里斯討論的近期趨勢保持一致。

As such, we believe that revenues will be in the range of $20.5 million to $21.5 million. We're expecting the bottom line to be in the range of a $0.03 to $0.05 profit per share based on 32.5 million diluted common shares outstanding.

因此，我們認為收入將在 2,050 萬美元至 2,150 萬美元之間。基於 3,250 萬股稀釋後已發行普通股，我們預計每股利潤將在 0.03 至 0.05 美元之間。

This concludes our prepared comments. Morris and I would be glad to answer your questions now. Operator?

我們準備好的評論到此結束。莫里斯和我現在很高興回答你的問題。操作員？

(Operator Instructions) Edwin Mok, Needham & Company.

（操作員說明）Edwin Mok，Needham & Company。

Hey, thanks for taking my questions and congrats for a great quarter. First question, I guess, just on the guidance you just gave. Can you help me out with the moving parts?

嘿，感謝您回答我的問題，並祝賀您度過了一個美好的季度。我想第一個問題就是關於你剛才給的指導。你能幫我修理移動部件嗎？

Do you expect gross margin to further expand? You did a great job this quarter, 29%. Do you expect that to further expand as you increase your top line in the coming quarter and how should we think about OpEx?

您預計毛利率會進一步擴大嗎？本季您做得很好，29%。您預計隨著下個季度營收的增加，這一數字會進一步擴大嗎？我們應該如何考慮營運支出？

Edwin, we didn't quite hear part of your question. Could you repeat the middle section?

艾德溫，我們沒有完全聽到你問題的一部分。你能重複一下中間部分嗎？

Yes, no problem. Just a question in terms of your guidance. Do we expect gross margins to further expand this quarter and then how do we think about OpEx for the quarter?

是沒有問題。只是一個關於您的指導的問題。我們預計本季的毛利率將進一步擴大，那麼我們如何看待本季的營運支出？

We don't know for sure what's going to happen to the gross margin because it's too early. But we would expect it to be in the high 20s.

我們不確定毛利率會發生什麼變化，因為現在還為時過早。但我們預計它會在 20 多歲左右。

And the operating expense.

以及營運費用。

Operating expense, it's been trending remarkably flat for a number of quarters and we don't have anything that we know about in terms of new hires or new programs that's going to spike it up. So I think it will stay relatively flat.

營運費用在幾個季度中一直呈現顯著持平的趨勢，而且據我們所知，在新員工或新項目方面，沒有任何資訊會導致營運費用上升。所以我認為它會保持相對穩定。

Okay great. That's helpful. Second question I have is on indium phosphide.

好的，太好了。這很有幫助。我的第二個問題是關於磷化銦。

Obviously you guys have done really well. I think Morris you said on the call almost 50% growth, year-over-year growth. How much was indium phosphide as a percentage of total revenue this quarter? If you can give us some rough ideas on that.

顯然你們做得非常好。我想莫里斯你在電話會議上說成長了近 50%，比去年同期成長。本季磷化銦佔總營收的百分比是多少？如果您能給我們一些粗略的想法。

Then in terms of demand for that, we've heard some really robust projections out there that demand can potentially double in the next few quarters, etc., etc. How are you guys in terms of your capacity? Do you still have excess capacity you can ramp up or can you move some of your other production capacity into indium phosphide? Can you give us some color on that?

然後就需求而言，我們聽到了一些非常有力的預測，即未來幾季需求可能會翻一番，等等。你們的產能怎麼樣？您是否仍有多餘產能可以增加，或者您可以將一些其他產能轉移到磷化銦上嗎？你能為我們提供一些資訊嗎？

I guess maybe I like to take the second part of the question. I like to see capacity ramp up. That is a very sweet part of the answer AXT can provide because you can see that we have demonstrated you can grow over 50% yearly over the last few years.

我想也許我喜歡回答問題的第二部分。我喜歡看到容量的增加。這是 AXT 可以提供的答案中非常甜蜜的一部分，因為您可以看到我們已經證明您在過去幾年中每年可以增長 50% 以上。

So we are very well prepared. And don't forget also with all these very high growth rate we didn't hit its stride in terms of product quality or missing some delivery etc. So I think we're for a well prepared for that.

所以我們已經做好了充分的準備。並且不要忘記，儘管增長率非常高，但我們在產品品質或錯過一些交付等方面並沒有取得進展。所以我認為我們已經為此做好了充分的準備。

Also we have had work with our either existing customer as well as targeted new customer to increase our market share. So I think we are confident that we're going to see continued growth in that market. However, I think you said something product demand could be doubling.

此外，我們還與現有客戶以及目標新客戶合作，以增加我們的市場份額。因此，我認為我們有信心看到該市場的持續成長。然而，我認為你說過產品需求可能會翻倍。

I'd like to see here from who that maybe we can ring them up. But I think you're absolutely right, in certain specific areas such as what we've quoted in our script that over 50% yearly growth rate for the next five years on the data center growth is definitely very, very amazingly robust.

我想看看是誰，也許我們可以打電話給他們。但我認為你絕對是對的，在某些特定領域，例如我們在腳本中引用的內容，未來五年資料中心成長超過 50% 的年增長率絕對是非常非常強勁的。

So I wouldn't doubt about it. But then of course the indium phosphide is composed of more diverse application set now. Fiber to the home, it may not have 50% growth year over year.

所以我不會懷疑這一點。當然，磷化銦現在由更多樣化的應用組成。光纖到戶，年成長可能不會達到50%。

And don't forget we are also taking market share. So I think if the market were growing let's say 10%, 15% I think we are modeling somewhere around 25% then we should be able to grow faster than the market growth rate because we're taking market share. Does that answer your question?

不要忘記我們也在爭取市場佔有率。所以我認為，如果市場成長 10%、15%，我認為我們正在建模 25% 左右，那麼我們應該能夠比市場成長率更快成長，因為我們正在佔據市場份額。這是否回答你的問題？

That's actually very, very helpful in terms of color there. In terms of percentage of revenue can you give us some color around that?

就顏色而言，這實際上非常非常有幫助。就收入百分比而言，您能給我們一些說明嗎？

Yes, this is Gary. I can answer that. So last quarter indium phosphide was a little north of 30% of our revenue and this quarter it was a little bit south at 30% of our revenue but under a higher total revenue at the denominator. And then one of the thing I think we should explain.

是的，這是加里。我可以回答這個問題。因此，上季磷化銦占我們營收的 30% 略高，本季略低，占我們營收的 30%，但分母的總營收較高。然後我認為我們應該解釋一件事。

You said something about can we reallocate or transfer equipment from one product line to another? And there may be some things that are common that can be used in each line, but normally the way our business model works is we don't grow, for example, indium phosphide inside of the gallium arsenide furnace. There's lots of reasons including contamination, including temperature control.

您提到我們可以將設備從一條生產線重新分配或轉移到另一條生產線嗎？可能有一些通用的東西可以在每條生產線中使用，但通常我們的商業模式的運作方式是我們不生長，例如砷化鎵爐內的磷化銦。原因有很多，包括污染，包括溫度控制。

Indium phosphide is grown under high pressure. But we budget and plan for capacity expansion within the normal CapEx. Our CapEx is always running in the last few quarters $1 million to $1.5 million a quarter.

磷化銦是在高壓下生長的。但我們在正常資本支出範圍內對產能擴張進行預算和規劃。在過去幾季中，我們的資本支出始終為每季 100 萬至 150 萬美元。

And that includes new furnaces, includes more wafer saws. It includes all the things that we need to grow the indium phosphide capacity.

這包括新的熔爐，包括更多的晶圓鋸。它包括我們提高磷化銦產能所需的所有內容。

We're ahead of the curve on that. We're not waiting until the orders come in because we have enough market knowledge where we can see where it's going to grow. Okay, next question please.

我們在這方面處於領先地位。我們不會等到訂單到來，因為我們有足夠的市場知識，可以看到它的成長方向。好的，請下一個問題。

Rich Shannon, Craig-Hallum.

里奇·香農，克雷格·哈勒姆。

Well, hi, Morris and Gary. Thanks for taking my questions and congratulations on a very nice second quarter. Maybe a follow-up on the last question on the topic of indium phosphide here.

嗯，嗨，莫里斯和加里。感謝您回答我的問題，並祝賀第二季度非常順利。也許是關於磷化銦主題的最後一個問題的後續行動。

Gary, just to make sure I heard you right I think you mentioned in your first quarter indium phosphide is a little bit more than 30%, this past quarter little bit less. That would suggest indium phosphide is on the order of flattish.

蓋瑞，為了確保我沒聽錯，我想你在第一季提到磷化銦略高於 30%，上個季度略少。這顯示磷化銦處於平坦狀態。

Is that a correct interpretation? If so, what is the reason why it wasn't growing quarter on quarter as the optical market appears to be pretty robust out there?

這是正確的解釋嗎？如果是這樣，那麼為什麼在光學市場看起來相當強勁的情況下，它卻沒有實現季度成長呢？

Probably timing. We're not losing sleep over it.

大概是時機吧。我們不會因此而失眠。

It builds because it's a small TAM. There is some lumpiness but it doesn't undercut anything that we think in terms of the business model going forward.

它之所以能夠構建，是因為它是一個小型 TAM。雖然存在一些障礙，但它並沒有削弱我們對未來商業模式的思考。

Okay, fair enough. And then maybe I'll take that same topic into the third quarter which is how should we think about growth in indium phosphide in the third quarter relative to the overall midpoint growth rate implied in your guidance?

好吧，很公平。然後也許我會在第三季度討論同樣的主題，即我們應該如何考慮第三季度磷化銦相對於您的指導中暗示的總體中點增長率的增長？

I think it should grow. I mean so far the budget calls for it will be another record quarter.

我認為它應該增長。我的意思是，到目前為止，預算要求這將是另一個創紀錄的季度。

Okay. Is indium phosphide the strongest piece of your revenue growth for the third quarter or is there something that's doing better?

好的。磷化銦是你們第三季營收成長最強勁的部分還是有什麼表現較好的部分？

It's indium phosphide.

它是磷化銦。

Indium phosphide. Okay.

磷化銦。好的。

I apologize for asking you to mostly repeat what you said in your prepared remarks, Morris, I got interrupted. But can you repeat what you said regarding gallium pricing and I think you mentioned something about capacity coming off-line. I apologize, but just want to make sure I caught those comments again, please.

我很抱歉要求你大部分重複你在準備好的發言中所說的話，莫里斯，我被打斷了。但您能否重複一下您所說的有關鎵定價的內容，我認為您提到了有關產能下線的問題。我很抱歉，但只是想確保我再次收到這些評論。

Right. The gallium price was flat for the quarter but we also said that our two joint ventures in China have closed, stopped production from sometime early June. And we know others in China they have closed down completely.

正確的。本季鎵價格持平，但我們也表示，我們在中國的兩家合資企業已關閉，從 6 月初開始停止生產。我們知道中國的其他國家已經完全關閉。

And also you can see that one of our additional expenses in our SG&A was a reduction of force that we had a substantial layoff in one of our joint ventures producing gallium. So we think the market is probably should take note and start to stabilizing the demand and supply side economics. Hopefully that will firm up the price.

此外，您還可以看到，我們的銷售、管理和行政費用 (SG&A) 中的一項額外費用是我們對一家生產鎵的合資企業進行了大幅裁員，從而減少了人力。因此我們認為市場可能應該注意到並開始穩定需求和供給面經濟。希望這將使物價堅挺。

Okay. Would you expect any near-term improvement or is that something you expect over a multi-quarter period of time?

好的。您預計近期會有任何改善嗎？或者您預計在多個季度的時間內會出現這種情況嗎？

We are not building that into our forecast. I think we were just saying it should be flat. But I think over time I'm relatively excited about it and as you know I don't know if you detect the tone that we are increasingly optimistic about the gallium arsenide business overall.

我們不會將其納入我們的預測中。我想我們只是說它應該是平的。但我認為隨著時間的推移，我對此感到相對興奮，正如你所知，我不知道你是否察覺到我們對砷化鎵業務整體越來越樂觀的基調。

This opportunity in the VCSEL business I think it comes to fruition, it's a strong demand coming sometime in 2017. And also this other application that I was talking about within insulating substrates also is creating a granular demand. So you can see the market is such that the wireless side is stabilized, the SOI cannibalized and our pHEMT business is downward, okay? And in HBT it's taking hold of itself and yet there are other developments which will create demand which not only speaks volumes for us in terms of substrate revenue as well as profit contribution but also creates more new demand for gallium.

我認為 VCSEL 業務中的這個機會已經實現，這是 2017 年某個時候出現的強勁需求。而且我在絕緣基板中討論的其他應用也正在創造細粒度的需求。所以你可以看到市場是這樣的，無線端穩定了，SOI 被蠶食了，我們的 pHEMT 業務正在下降，好嗎？在 HBT 領域，它正在佔據主導地位，但還有其他發展將創造需求，這不僅對我們的基板收入和利潤貢獻意義重大，而且還為鎵創造了更多新的需求。

Morris, you did a good job of leading me to my next question, part of those last several comments you made here specifically regarding the VCSEL market. You mentioned some uptake sometime next year.

Morris，您很好地引導我提出了下一個問題，這是您在此專門針對 VCSEL 市場發表的最後幾條評論的一部分。您提到明年某個時候會有一些吸收。

What's giving you the confidence that that's coming? We've been hearing about applications like 3D sensing for, frankly, some time now. What gives you the confidence that it's coming in a fairly short period of time?

是什麼讓您對這一切的到來充滿信心？坦白說，我們聽說 3D 感測等應用程式已經有一段時間了。是什麼讓您確信它會在相當短的時間內實現？

Well, I think it comes with one of them is market research. In fact, one specific application is at this company called Lenovo --

嗯，我認為其中之一就是市場研究。事實上，這家名為聯想的公司有一個特定的應用程式——

Lenovo, the Chinese OEM?

聯想，中國OEM？

Yes, yes. They are coming up with this new phone called the first Project Tango phone. And they have -- it's very difficult for me to explain what a phone but then you can go and Google it and they can measure the distance, they can --

是的是的。他們正在推出這款新手機，稱為第一款 Project Tango 手機。他們有——我很難解釋什麼是手機，但你可以去谷歌搜索，他們可以測量距離，他們可以——

Yes, I'm familiar with Project Tango, Morris and I've heard of that phone. So you don't need to explain that.

是的，我很熟悉 Project Tango，莫里斯，我也聽過這款手機。所以你不需要解釋這一點。

So I think that's an exciting opportunity. And I think it obviously depends on how do they build and then out does the market receive that. And we also are hearing a lot of rumors in the marketplace including potential requests for quotations requiring very large volume applications for this.

所以我認為這是一個令人興奮的機會。我認為這顯然取決於他們如何構建，然後市場會接受它。我們還在市場上聽到了很多謠言，包括潛在的報價請求，需要大量的應用程式。

And also the other thing I'm concluding is that smartphone is selling very tiredly. There are no new features which will attract new customers buying the next generation of cell phone. And with the new, brand-new application such as Project Tango I believe it is a very exciting opportunity for all, potentially all the cell phone makers to adopt this technology.

我得出的另一件事是，智慧型手機的銷售非常疲軟。沒有什麼新功能可以吸引新客戶購買下一代手機。有了像 Project Tango 這樣的全新應用程序，我相信這對所有人（甚至可能是所有手機製造商）來說都是一個非常令人興奮的機會來採用這項技術。

Again not to mention I also saw the very high power VCSEL that you can produce actually can do material processing. So all these are very exciting now the new applications for gallium arsenide.

更不用說我還看到了你可以生產的非常高功率的VCSEL實際上可以進行材料處理。因此，砷化鎵的新應用現在非常令人興奮。

Okay. Great.

好的。偉大的。

The key is lasers. If it needs lasers it needs very high quality, it needs low EPD, that hit us right in our forte.

關鍵是雷射。如果需要雷射器，就需要非常高的質量，需要低 EPD，這正是我們的強項。

Okay. I appreciate all the detail, Morris. Thank you very much.

好的。我很欣賞所有的細節，莫里斯。非常感謝。

And I have asked a lot of questions, I will jump out of line here. But thank you very much.

我已經問了很多問題，我會在這裡跳出來。但非常感謝你。

Zach Houston, Footprints Asset Management.

扎克休斯頓，足跡資產管理公司。

Good afternoon, Morris and Gary. Thanks for taking my call. Congratulations on another solid quarter. Can you just talk a little bit more about the competitive advantages you're seeing in the indium phosphide space that's really allowing you to take market share?

下午好，莫里斯和加里。感謝您接聽我的電話。恭喜又一個穩定的季度。您能否多談談您在磷化銦領域看到的真正讓您佔據市場份額的競爭優勢？

Yes, I think we do this by VGF, vertical gradient freeze. As you know AXT has been the pioneer and the powerhouse in VGF technology.

是的，我認為我們透過 VGF（垂直梯度凍結）來做到這一點。如您所知，AXT 一直是 VGF 技術的先驅和推動者。

We applied it to gallium arsenide and really lead us to the market leading position in gallium arsenide at one time in 2001. And we have continued that technology into indium phosphide. That enables us to leverage our know-how in VGF technology into indium phosphide but also VGF is inherently capable of producing very low EPD material and that fits almost perfectly to the demand of a lot of these optical devices which requires very low EPD because EPD actually is called etch pit density.

我們將其應用到砷化鎵上，並在2001年一度真正使我們在砷化鎵領域取得了市場領先地位。並且我們將這項技術延續到了磷化銦上。這使我們能夠將 VGF 技術的專業知識運用到磷化銦中，而且 VGF 本身就能夠生產極低 EPD 的材料，並且幾乎完全滿足許多需要極低 EPD 的光學元件的需求，因為 EPD 實際上稱為蝕坑密度。

It's a defect density. It will kill a device in a high-performance optical device. That's our advantage.

這是缺陷密度。它會殺死高性能光學器件中的一個裝置。這就是我們的優勢。

We also have developed a lot of in-house process technology that we consider proprietary. The growth of indium phosphide crystals is very difficult. And so that's why there's only three companies in the world that produce it in volume.

我們也開發了許多我們認為專有的內部製程技術。磷化銦晶體的生長非常困難。這就是為什麼世界上只有三家公司可以大量生產它。

But within that group of three, each company tries to increase their position, their yield, their specifications. And we've probably excelled in that as a leader. And that's helped it.

但在這三家公司中，每家公司都試圖提高自己的地位、產量和規格。身為領導者，我們可能在這方面表現出色。這很有幫助。

Perfect, thank you guys again.

完美，再次謝謝你們。

Arthur Su, Needham & Company.

Arthur Su，李約瑟公司。

Hi guys. I just had a quick follow-up question for Edwin. I know earlier you had mentioned that you were planning on, or you had plans to add capacity due to the ramp of indium phosphide. So are there any or can you help us think about the potential revenue opportunity for capacity that you could have in place in a year or next year or maybe even right now?

嗨，大家好。我只是想問埃德溫一個快速的後續問題。我知道早些時候您曾提到您正在計劃，或者您計劃由於磷化銦的增加而增加產能。那麼，您是否可以幫助我們考慮您在一年或明年甚至現在可能擁有的產能的潛在收入機會？

I don't know how to answer that question. I think capacity is a moving target. We review our capacity expansion plans almost every six months because the dynamics of the market.

我不知道如何回答這個問題。我認為容量是一個不斷變化的目標。由於市場動態，我們幾乎每六個月審查一次產能擴張計畫。

And we are adding also our development into six-inch indium phosphide, for instance. So I don't think you should think about capacity as a limitation to our indium phosphide market. I think you should think about what's the addressable market, how much we've (technical difficulty) either gain the market share or grow with the market share.

例如，我們還增加了對六英寸磷化銦的開發。因此，我認為您不應該將產能視為我們磷化銦市場的限制。我認為你應該考慮一下潛在的市場是什麼，我們已經（技術難度）獲得了多少市場份額，或者隨著市場份額的增長而增長。

I guess I should maybe try to phrase it another way. Given the capacity expectations at the plants that you have for your capacity expansion at full capacity, at full utilization is there any way we can (technical difficulty) potential revenue AXT can generate or is that sort of the wrong way to look at it?

我想我也許應該嘗試用另一種方​​式表達它。考慮到工廠對滿載產能擴張的產能預期，在充分利用的情況下，我們有什麼方法可以（技術難度）AXT 可以產生潛在收入，或者這種看待它的方式是錯誤的？

I think you guys probably can make some pretty educated estimates. As a policy we don't want to wander into getting long-term revenue guidance. That's not a best practices.

我認為你們可能可以做出一些很有根據的估計。作為一項政策，我們不想陷入長期收入指引。這不是最佳實踐。

So even though it's linked to a question about capacity we probably want you to make your own estimate. However, let me make a comment that I think is useful for you to understand is that we can add capacity incrementally. It's important for anyone that has been thinking about capacity increases you don't picture this is a digital phenomenon, like today we're at X and after we spend $1 billion we'll be at X plus $1 billion in CapEx.

因此，即使它與容量問題相關，我們也可能希望您做出自己的估計。不過，讓我發表一條評論，我認為這對您理解很有用，那就是我們可以逐步增加容量。對於任何一直在考慮容量增加的人來說，這一點很重要，你不會想像這是一種數字現象，就像今天我們處於X 水平，在我們花費10 億​​美元後，我們將達到X 加上10 億美元的資本支出。

Our CapEx for indium phosphide can be added in increments of thousands of dollars, not even millions of dollars and definitely not billions of dollars. So we have a proprietary designed, custom-designed pressure chamber that we work on and we have other things that we build and we can order them and have them delivered over time but it's not years, it's months or quarters. So capacity is really well managed by the Company and I think it's under control.

我們的磷化銦資本支出可以數千美元的增量增加，甚至不會是數百萬美元，而且絕對不會是數十億美元。因此，我們有一個專有設計、客製化設計的壓力室，我們正在研究它，我們還有我們製造的其他東西，我們可以訂購它們並隨著時間的推移交付它們，但不是幾年，而是幾個月或幾季。因此，公司的產能管理確實很好，我認為它處於控制之中。

Great. Thanks for clarifying. Thank you.

偉大的。感謝您的澄清。謝謝。

Rich Shannon, Craig-Hallum.

里奇·香農，克雷格·哈勒姆。

Hey guys, thanks for letting me ask a couple more quick questions. This won't take long.

嘿夥計們，謝謝你讓我問幾個簡單的問題。這不會花很長時間。

Let's see, first of all, you mentioned 10% customers, you have two of them. Is one of them the one that you reported last quarter and historically has been a 10% customer?

讓我們來看看，首先，你提到了 10% 的客戶，你有兩個。其中之一是您上季報告的、歷史上佔 10% 的客戶嗎？

Yes.

是的。

Can you characterize the second one at all, specifically what products and what revenue segment or segments that they are generating revenue from?

您能否描述第二個問題，特別是他們從哪些產品以及哪些收入部門或哪些部門產生收入？

It's a customer that buys indium phosphide.

是一位購買磷化銦的客戶。

Okay. Excellent. I appreciate that.

好的。出色的。我很感激。

My second question is on indium phosphide. Morris, given the nice growth rate and probably in my view a long-term sustained growth rate in the optical space, are you seeing any pressures on pricing, pricing curves that look more difficult in the future than they have been in the past few years?

我的第二個問題是關於磷化銦。莫里斯，鑑於光學領域的良好增長率，並且在我看來可能是長期持續的增長率，您是否看到定價方面的任何壓力，定價曲線在未來看起來比過去幾年更加困難？

I hope there's no customer on the call. Well, I really think right now we're not talking about that at all. The customers are very specific about what they want.

我希望沒有顧客打電話來。嗯，我真的認為現在我們根本不討論這個。客戶對於他們想要的東西非常具體。

Obviously any customer who comes with a very large volume wants to talk to us about price. But we're not seeing a big decrease in what we are also sharing with them is that look, if we were to increase our capacity by 50% we're going to gain some benefit of that capacity utilization on the overhead.

顯然，任何數量很大的客戶都想與我們討論價格。但我們並沒有看到大幅減少，我們還與他們分享的是，如果我們將容量增加 50%，我們將在開銷上從容量利用率中獲得一些好處。

So we are going to give them some discount so we can maintain our margin per se. So I don't think we should ever begin to think about in that direction yet.

因此，我們將給他們一些折扣，這樣我們就可以維持我們的利潤率。所以我認為我們還不應該開始朝這個方向思考。

Okay. Fair enough. That's all my questions. Thank you.

好的。很公平。這就是我的所有問題。謝謝。

At this time there are no other questions. So I would like to turn things over to Dr. Young for any additional or concluding remarks.

此時沒有其他問題了。因此，我想將事情轉交給楊博士，讓他徵求任何補充或總結性意見。

Thank you for participating in our conference call. As always please feel free to contact me or Gary Fischer directly if you would like to meet with us. We look forward to speaking with you in the near future.

感謝您參加我們的電話會議。像往常一樣，如果您想與我們會面，請隨時直接聯繫我或加里費雪。我們期待在不久的將來與您交談。

That does conclude today's presentation. We do thank everyone for your participation.

今天的演講到此結束。我們非常感謝大家的參與。