AXT Inc (AXTI) 2025 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to AXT Inc., second-quarter 2025 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 Inc. 2025 年第二季財務電話會議。今天主持電話會議的是執行長莫里斯楊博士和財務長加里菲舍爾。

In addition, Tim Bettles, VP of Business Development, will be participating in the Q&A portion of the call. My name is Audra, and I will be your coordinator today.

此外，業務發展副總裁 Tim Bettles 將參與電話會議的問答部分。我叫奧德拉，今天我將擔任您的協調員。

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

現在我想將電話轉給 AXT 投資者關係部門的 Leslie Green。請繼續。

Thank you, Audra, 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 questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies of or to utilize our manufacturing capacity.

謝謝你，奧德拉，大家午安。在我們開始之前，我想提醒您，在本次電話會議期間，包括對您的問題的回答中，我們將提供預測或做出其他前瞻性陳述，其中包括公司未來財務業績、市場狀況和趨勢、使用我們基板上製造的芯片或設備的新興應用、我們的產品組合、全球經濟和政治狀況，包括貿易關稅和生產進出口限制、我們在接下來的幾個季度費用、我們在接下來的幾個季度增加

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 results or events to differ materially. In addition to the matters just listed, these uncertainties and risks include, but are not limited to, the financial performance of our partially owned supply chain companies, increased environmental regulations in China and COVID-19 or other outbreaks of contagious disease.

我們希望提醒您，此類聲明涉及未來事件，基於管理層當前的預期，並受可能導致實際結果或事件發生重大差異的風險和不確定性的影響。除了剛剛列出的事項外，這些不確定性和風險包括但不限於我們部分擁有的供應鏈公司的財務業績、中國加強的環境法規以及 COVID-19 或其他傳染病的爆發。

In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to different materially from our current expectations.

除了剛才提到或本次電話會議可能討論的因素之外，我們也請您參閱本公司向美國證券交易委員會提交的定期報告。這些內容可透過我們網站的連結在線獲取，並包含可能導致實際結果與我們當前預期存在重大差異的風險因素的附加資訊。

This conference call will be available on our website at axt.com through July 31, 2026. I also want to note that shortly following the close of market today we issued a press release reporting financial results for the second quarter of 2025. This information is available on the Investor Relations portion of our website at axt.com.

本次電話會議將於 2026 年 7 月 31 日之前在我們的網站 axt.com 上提供。我還想指出，今天收盤後不久，我們發布了一份新聞稿，報告了 2025 年第二季的財務表現。此資訊可在我們網站 axt.com 的投資者關係部分找到。

I would now like to turn the call over to Gary Fischer for a review of our second-quarter 2025 results. Gary.

現在，我想將電話轉給加里·菲舍爾 (Gary Fischer)，讓他回顧一下我們 2025 年第二季的業績。加里。

Thank you, Leslie, and good afternoon to everyone. Revenue for the second quarter of 2025 was $18.0 million compared with $19.4 million in the first quarter of 2025 and $27.9 million in the second quarter of 2024.

謝謝你，萊斯利，大家下午好。2025 年第二季的營收為 1,800 萬美元，而 2025 年第一季的營收為 1,940 萬美元，2024 年第二季的營收為 2,790 萬美元。

To break down our Q2 [2026] revenue by product category, indium phosphide was $3.6 million, primarily from [PAN] and data center applications in China. Gallium arsenide was $6.2 million, germanium substrates were $1.5 million. Finally, revenue from our consolidated raw material joint venture companies in Q2 was $6.7 million. In the second quarter of 2025, revenue from Asia Pacific was 90%, Europe was 9%, and North America was 1%.

依產品類別細分我們第二季 [2026] 的收入，磷化銦為 360 萬美元，主要來自中國的 [PAN] 和資料中心應用。砷化鎵為620萬美元，鍺基板為150萬美元。最後，我們第二季合併原料合資公司的營收為 670 萬美元。2025年第二季度，來自亞太地區的營收佔90%，歐洲佔9%，北美佔1%。

The top five customers generated approximately 30.9% of total revenue and one customer was over the 10% level. Non-GAAP gross margin in the second quarter was 8.2%, reflecting a solid improvement from the prior quarter.

前五名客戶創造了約 30.9% 的總收入，其中一家客戶的收入超過了 10%。第二季非公認會計準則毛利率為 8.2%，較上一季有顯著改善。

For comparison, we reported a negative 6.1% gross margin in Q1 and a 27.6% gross margin last year in Q2 of 2024. For those who prefer to track results on a GAAP basis, gross margin in the second quarter was 8.0% compared with negative 6.4% in Q1 and 27.4% last year. We continue to be highly focused on driving continued improvement, including further recovery in Q3.

相較之下，我們報告稱，2024 年第一季的毛利率為負 6.1%，去年第二季的毛利率為 27.6%。對於喜歡以 GAAP 追蹤業績的人來說，第二季的毛利率為 8.0%，而第一季為-6.4%，去年為 27.4%。我們將繼續高度關注推動持續改善，包括第三季的進一步復甦。

Moving to operating expenses, given the difficult climate, we have been working hard to hold OpEx down. Total non-GAAP operating expense in Q2 was $7.6 million compared with $8.5 million in Q1 and $8.9 million in Q2 of 2024. On a GAAP basis, total operating expense in Q2 was $8.2 million compared with $9.0 million in Q1 and $9.5 million in Q2 of 2024.

談到營運費用，鑑於困難的環境，我們一直在努力控制營運支出。第二季非公認會計準則總營運費用為 760 萬美元，而 2024 年第一季為 850 萬美元，第二季為 890 萬美元。以 GAAP 計算，第二季的總營運費用為 820 萬美元，而 2024 年第一季為 900 萬美元，第二季為 950 萬美元。

Our non-GAAP operating loss for the second quarter of 2025 was $6.1 million compared with the non-GAAP operating loss in Q1 of 2025 of $9.6 million and a non-GAAP operating loss of $1.2 million in Q2 of 2024. For reference, our GAAP operating line for the second quarter of 2025 was a loss of $6.7 million compared with an operating loss of $10.3 million in Q1 and an operating loss of $1.9 million in Q2 of 2024.

我們 2025 年第二季的非 GAAP 營業虧損為 610 萬美元，而 2025 年第一季的非 GAAP 營業虧損為 960 萬美元，2024 年第二季的非 GAAP 營業虧損為 120 萬美元。作為參考，我們 2025 年第二季的 GAAP 營業線虧損 670 萬美元，而 2024 年第一季的營業虧損為 1,030 萬美元，第二季的營業虧損為 190 萬美元。

Non-operating other income and expense and other items below the operating line for the second quarter of 2025 was a net loss of $0.4 million. The details can be seen in the P&L included in our press release today.

2025年第二季非營業性其他收入和支出以及營業線以下的其他項目淨虧損40萬美元。詳細資訊請參閱我們今天新聞稿中的損益表。

For Q2 of 2025, we had a non-GAAP net loss of $6.4 million or $0.15 per share compared with a non-GAAP net loss of $8.2 million or $0.19 per share in the first quarter of 2025. Non-GAAP net loss in Q2 of 2024 was $0.8 million or $0.02 per share. On a GAAP basis, net loss in Q2 was $7.0 million or $0.16 per share. By comparison, net loss was $8.8 million or $0.20 per share in the first quarter of 2025. GAAP net loss in Q2 of 2024 was $1.5 million or $0.04 per share.

2025 年第二季度，我們的非 GAAP 淨虧損為 640 萬美元，即每股 0.15 美元，而 2025 年第一季的非 GAAP 淨虧損為 820 萬美元，即每股 0.19 美元。2024 年第二季非公認會計準則淨虧損為 80 萬美元，即每股 0.02 美元。根據 GAAP 計算，第二季淨虧損為 700 萬美元，即每股 0.16 美元。相比之下，2025 年第一季的淨虧損為 880 萬美元，即每股 0.20 美元。2024 年第二季 GAAP 淨虧損為 150 萬美元，即每股 0.04 美元。

The weighted average basic shares outstanding in Q2 of 2025 was $43.7 million. Cash and cash equivalents and investments decreased by $3.1 million to $35.1 million as of June 30. By comparison, at March 31, it was $38.2 million.

2025 年第二季的加權平均基本流通股為 4,370 萬美元。截至 6 月 30 日，現金、現金等價物及投資減少了 310 萬美元，至 3,510 萬美元。相比之下，截至 3 月 31 日，這一數字為 3,820 萬美元。

The depreciation and amortization in the second quarter was $2.5 million. Total stock comp was $0.6 million. Net inventory was down by approximately $300,000 in the second quarter to $80.1 million. This continues to be a focus for us, and we expect to bring it down further in quarters to come. Okay, this concludes the presentation of our quarterly financial results.

第二季的折舊和攤提為 250 萬美元。總股票補償金額為 60 萬美元。第二季淨庫存約 30 萬美元，至 8,010 萬美元。這仍然是我們關注的重點，我們預計未來幾季這一比例將進一步降低。好的，我們的季度財務表現介紹到此結束。

Turning to our plan to list our subsidiary Tongmei in China on the STAR market in Shanghai. We've continued to keep our IPO application current. Tongmei remains in process as part of a much more selective and smaller group of prospective listings than a few years ago. While we are not insensitive to the current geopolitical environment, Tongmei is considered a Chinese company and continues to be regarded in China as a good IPO candidate. We will keep you informed of any updates.

談到我們將中國子公司同美在上海科創板上市的計畫。我們將繼續保持 IPO 申請的更新。與幾年前相比，同煤集團的上市選擇更加嚴格，規模也更小，目前同煤集團仍在籌備上市。雖然我們對當前的地緣政治環境並非不敏感，但同美被視為一家中國公司，並且在中國繼續被視為良好的 IPO 候選公司。我們將隨時向您通報任何更新。

With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris?

現在，我將把電話轉給莫里斯楊博士，讓他回顧我們的業務和市場。莫里斯？

Thank you, Gary. And thank you to our customers and investors for your ongoing support as we navigate this unique economic environment.

謝謝你，加里。感謝我們的客戶和投資者在我們應對這個獨特的經濟環境時給予的持續支持。

As Gary mentioned, our substrate revenue increase in Q2 from the entire quarter, but the increase was less than we had expected as a result of longer processing time for [getting us] export permits, coupled with some sluggishness in the demand environment in China.

正如加里所提到的，我們第二季的基板收入比整個季度有所增加，但由於獲得出口許可證的處理時間較長，再加上中國需求環境有些低迷，增幅低於我們的預期。

That said, we made good progress in driving recovery in our growth margins with a strong focus on manufacturing process and efficiency. We also saw healthy growth in AI-related demand for indium phosphide substrate in China. And as a result of obtaining our first export license in June, we were able to ship initial orders of indium phosphide substrates to our customers outside of China.

儘管如此，我們透過專注於製造流程和效率，在推動成長利潤率復甦方面取得了良好進展。我們也看到中國對磷化銦基板的人工智慧相關需求健康成長。由於我們在六月獲得了第一張出口許可證，我們能夠向中國以外的客戶運送首批磷化銦基板訂單。

Since export restrictions are top of our mind for our investors, I'd like to begin there with an update and then we will discuss our key markets. As many of you know, the Chinese government imposed trade restrictions on export of gallium arsenide in August of 2023 and our indium phosphide in February of 2025. These regulations explicitly seek to restrict the export of materials used for military applications and require that we file an export permit for every customer orders.

由於出口限制是我們投資者最關心的問題，因此我想先介紹一下最新情況，然後再討論我們的主要市場。眾所周知，中國政府於 2023 年 8 月對砷化鎵出口實施了貿易限制，並於 2025 年 2 月對我們的磷化銦出口實施了貿易限制。這些法規明確尋求限制用於軍事用途的材料的出口，並要求我們為每個客戶訂單提交出口許可證。

In our experience, we typically hear back our initial applications with 45 business days. And repeat applications are often processed faster. With that said, we found the primitive process in Q2 for gallium arsenide to be slower than we typically see over the last two years.

根據我們的經驗，我們通常會在 45 個工作天內收到初始申請的回覆。重複申請通常會得到更快的處理。話雖如此，我們發現第二季度砷化鎵的原始製程比過去兩年通常看到的要慢。

The delays in Q2 resulted in our being able to ship less material outside of China than we had anticipated. About half of our revenue shortfall in Q2 was the result of this factor. On a positive note, the pace of permits in the month of July has improved meaningfully, mostly on smaller orders, but this improvement is good news, and we do expect gallium arsenide revenue to grow sequentially.

第二季的延誤導致我們能夠運往中國境外的材料比我們預期的要少。我們第二季收入缺口的大約一半是由於這個因素造成的。從正面的一面來看，7月許可證發放速度明顯加快，主要是小額訂單，但這種改善是個好消息，我們確實預期砷化鎵收入將較上季成長。

We're pleased to be granted our first permit for indium phosphide in late June, and we were able to ship nearly $700,000 of material for our non-China backlog in indium phosphide in Q2. Although the process for indium phosphide has been a bit slower than we expected as well, we have received additional permits in July. I expect to see more over the coming months.

我們很高興在 6 月底獲得了第一張磷化銦許可證，並且我們能夠在第二季度為中國以外的磷化銦積壓訂單運送近 70 萬美元的材料。雖然磷化銦的進程也比我們預期的要慢一些，但我們在7月已經獲得了額外的許可。我希望在接下來的幾個月裡看到更多。

Based on the pace so far, we're taking a conservative view of the timing of larger premises in Q3. As we have mentioned previously, we don't believe that any of our indium phosphide sales go into military applications, so we feel we are in a good position to realize millions of dollars of sales backlog once we navigate the permit process.

根據迄今為止的進展速度，我們對第三季大型門市的開幕時間持保守看法。正如我們之前提到的，我們認為我們的磷化銦銷售不會用於軍事應用，因此我們認為，一旦我們完成許可程序，我們就有條件實現數百萬美元的銷售積壓。

While the recent geopolitical environment present a near-term headwind for our business, we are also taking advantage of some of the unique opportunities. The cloud and data center connectivity market in China is accelerating. And in an effort to promote innovation and reduce dependency on foreign suppliers, we're seeing a significant effort to develop domestic source of EML and silicon photonics-based lasers.

雖然最近的地緣政治環境為我們的業務帶來了短期阻力，但我們也正在利用一些獨特的機會。中國的雲端和資料中心連接市場正在加速發展。為了促進創新並減少對外國供應商的依賴，我們看到中國正在大力發展國內 EML 和基於矽光子學的雷射。

We estimate that China's data center optical interconnect market is currently around one-third of the global market. However, most of the optical devices for these interconnects are sourced from outside of China, and applications for indium phosphide substrate within China remain focused on [PON business] only.

我們估計，中國資料中心光互連市場目前約佔全球市場的三分之一。然而，這些互連的光元件大部分來自中國境外，中國境內的磷化銦基板應用仍僅集中在[PON業務]上。

Further, laser manufacturers in China are developing an appreciation for the critical benefit of low EPD material in high-speed interconnected devices, both in the traditional PON market and in the new data center market. As a result, our sales are in indium phosphide within China are increasing.

此外，中國的雷射製造商逐漸認識到低 EPD 材料在傳統 PON 市場和新資料中心市場中高速互連設備的關鍵優勢。因此，我們在中國的磷化銦銷量正在成長。

In Q2, we nearly doubled our revenue for AI -- for indium phosphide within China. And our revenue for AI related application in China, although are increasing, although, the revenue base is small and we expect to continue to grow in Q3. The [tend] for data center market in China remains small at this moment, but we expect to see significant growth over the next few years, as the power laser providers expand their portfolio to include EML and silica platonic solutions.

在第二季度，我們在中國境內的磷化銦 AI 收入幾乎翻了一番。我們在中國人工智慧相關應用的營收雖然增加，但營收基數較小，我們預期第三季將持續成長。目前，中國資料中心市場的規模仍然較小，但隨著功率雷射供應商將其產品組合擴展至包括 EML 和二氧化矽柏拉圖解決方案，我們預計未來幾年將顯著成長。

Broadly speaking, we expect to grow our total indium phosphide revenue by 30% or more in Q3 as a result of growth in applications for PON, data center connectivity, and various indium phosphide-based sensors.

總體而言，由於 PON、資料中心連接和各種基於磷化銦的感測器的應用成長，我們預計第三季磷化銦總收入將成長 30% 或更多。

Now turning to gallium arsenide. Demand in China was sluggish in Q2 as customers are taking a more cautious approach to ordering and holding inventory. Despite the lackluster environment, we were pleased to be able to grow our wireless business in China during the quarter, with continued growth expected in Q3.

現在轉向砷化鎵。由於客戶在訂購和持有庫存方面採取了更加謹慎的態度，中國第二季度的需求低迷。儘管環境不景氣，我們仍然很高興能夠在本季成長我們在中國的無線業務，預計第三季將繼續成長。

As we mentioned, there's a sizable opportunity in the wireless market for which our technology and products are well suited. During Q2, we took a more measured approach to market expansion and we're able to service a portion of the customer opportunity while executing effectively at modestly higher production levels.

正如我們所提到的，無線市場存在著巨大的機遇，我們的技術和產品非常適合這個市場。在第二季度，我們採取了更謹慎的市場擴張方式，我們能夠在適度提高生產水平的同時有效執行部分客戶機會。

The adjustment we made in our approach, along with the strong focus from our manufacturing organization on yield and efficiency, allowed us to drive meaningful improvements in gallium arsenide growth margins, which contributed to our overall progress to our [good] margin recovery. And this [world] should continue to be a top priority for us in the second half of the year.

我們的方法調整，加上製造組織對產量和效率的高度關注，使我們能夠推動砷化鎵成長利潤率的顯著提高，這有助於我們整體實現利潤率的良好復甦。而這（世界）應該繼續成為我們下半年的首要任務。

Turning to germanium business. We saw growth in our revenue in Q2, driven by satellite solar cell applications in China. This market is highly price sensitive, and we continue to be very selective in the business opportunities we choose to support as the sharp rise in germanium raw material pricing in the last several years has severely constrained gross margins.

轉向鍺業務。受中國衛星太陽能電池應用的推動，我們第二季的營收有所成長。這個市場對價格高度敏感，由於過去幾年鍺原材料價格的急劇上漲嚴重限制了毛利率，因此我們在選擇支持的商業機會時仍然非常謹慎。

In addition, germanium substrate permits for sales outside of China have been difficult to obtain. Therefore, in Q3, we expect to see our sales come down again, and we may remain at lower level rate through the second half of the year.

此外，鍺襯底在中國境外的銷售許可證一直難以取得。因此，我們預計第三季的銷售額將再次下降，下半年的銷售額可能會維持在較低的水平。

With regard to our raw material joint ventures, our consolidated revenue in Q2 declined by approximately $1.6 million compared to Q1. The economic climate was one factor. And the other factor relates to the mix of revenue from the two service model a customer may choose for our germanium -- for their gallium purification process.

就我們的原料合資企業而言，我們第二季的綜合收入與第一季相比下降了約 160 萬美元。經濟環境是一個因素。另一個因素與客戶為我們的鍺（鎵純化製程）所選擇的兩種服務模式的收入組合有關。

On a positive note, the pricing environment has been relatively stable. Globally, there continues to be a greater awareness of the importance of Earth's material, and we're ahead of the curve in developing this unique and integrated supply chain.

從正面的方面來看，定價環境相對穩定。在全球範圍內，人們越來越意識到地球材料的重要性，我們在開發這獨特而整合的供應鏈方面處於領先地位。

In summary, though the export permit process has been slower than we would like to be, we are making progress against the backlog of more than $10 million in customer orders for gallium arsenide and indium phosphide substrates.

總而言之，儘管出口許可證的審批過程比我們希望的要慢，但我們在處理積壓的超過 1000 萬美元的砷化鎵和磷化銦基板客戶訂單方面正在取得進展。

We're also encouraged to see growth in strategic applications within China, including indium phosphide for AI-related data center connectivity and gallium arsenide for wireless devices. With a strong focus on gross margin improvement across our product portfolio, we delivered meaningful recovery in Q2, expect to continue our progress in the second half of the year.

我們也很高興看到中國國內戰略應用的成長，包括用於人工智慧相關資料中心連接的磷化銦和用於無線設備的砷化鎵。透過高度重視整個產品組合的毛利率提高，我們在第二季實現了有意義的復甦，預計下半年將繼續取得進展。

Our competitive positioning continues to be enhanced by superior product performance in key specifications such as low EPD and we're working diligently to support the next-generation technology requirements of our global customer base.

我們的競爭地位透過在低 EPD 等關鍵規格上的卓越產品性能不斷得到增強，並且我們正在努力支持全球客戶群的下一代技術需求。

With that said, I will now turn the call back to Gary for our third-quarter guidance. Gary?

話雖如此，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. In keeping with our comments today, we believe Q3 revenue will grow sequentially to be in the range of $19.0 million to $21.0 million. This guidance range includes a modest contribution from indium phosphide and gallium arsenide for our customers outside of China, and only includes revenue for which we currently have permits.

謝謝你，莫里斯。與我們今天的評論一致，我們認為第三季的營收將環比增長至 1,900 萬美元至 2,100 萬美元之間。該指導範圍包括磷化銦和砷化鎵為中國以外的客戶提供的適度貢獻，並且僅包括我們目前擁有許可證的收入。

Within China, we continue to optimize emerging opportunities to grow our business and strategic applications for both indium phosphide and gallium arsenide. And finally, we expect our germanium revenue to be down and our raw material business to be approximately flat in Q3 from the prior quarter.

在中國，我們繼續優化新興機遇，以發展磷化銦和砷化鎵的業務和策略應用。最後，我們預計第三季我們的鍺收入將下降，原物料業務將與上一季基本持平。

As Morris mentioned, we continue to focus strongly on gross margin improvement. In Q3, we expect our margins to improve again, and to be in the low mid to mid-teens. Based on this revenue range and gross margin improvement, we believe our non-GAAP net loss will be in the range of $0.11 to $0.13, and GAAP net loss will be in the range of $0.13 to $0.15. Share count will be approximately 43.8 million shares.

正如莫里斯所提到的，我們將繼續高度重視毛利率的提高。在第三季度，我們預計利潤率將再次提高，達到中低至十五左右的水平。基於此收入範圍和毛利率的提升，我們預計非公認會計準則淨虧損將在0.11美元至0.13美元之間，公認會計準則淨虧損將在0.13美元至0.15美元之間。股票數量約4380萬股。

Okay, this concludes our prepared comments. We'd be glad now to answer any of your questions. Audra?

好的，我們的準備好的評論到此結束。我們現在很樂意回答您的任何問題。奧德拉？

(Operator Instructions) Ross Cole, Needham & Company.

（操作員指示）羅斯·科爾，尼德漢姆公司。

It's great to hear that you're starting to get some of the permits, especially for indium phosphide. But I was wondering, given that there's still been a bit of a delay in the permitting, are you concerned about any potential share loss to customers if they're continuing to wait for this licensing process? Thank you.

很高興聽到你們開始獲得一些許可證，特別是磷化銦的許可證。但我想知道，鑑於許可方面仍存在一些延遲，如果客戶繼續等待這個許可流程，您是否擔心可能會造成市場份額損失？謝謝。

Tim, go ahead.

提姆，繼續吧。

Yes, sorry, Morris. Yes, I can answer to that. So in the near term, obviously, it has taken some extra time to get these permits, and the customers are working every channel they can to get material in on time.

是的，對不起，莫里斯。是的，我可以回答這個問題。因此，在短期內，顯然需要花費一些額外的時間來獲得這些許可證，而客戶正在盡一切努力按時獲得材料。

But we do continue to receive permits. And if we continue to receive permits for the -- specifically for those larger orders, we have a very healthy backlog that's ready to ship, and we believe that the market is just growing too fast to be adequately serviced by just two players at this moment. So long term, I think the business still holds good.

但我們確實繼續獲得許可證。如果我們繼續獲得許可 - 特別是對於那些較大的訂單，我們有一個非常健康的積壓訂單可以發貨，我們相信市場增長太快，目前僅靠兩家公司無法充分服務。所以從長遠來看，我認為業務仍然保持良好。

Yeah, if I may add to that point, I think, indium phosphide is at a critical juncture at this point. I think indium phosphide traditionally has been serving the faster data center activities such as transceivers, but now with AI going from 800G to 1.60 to 3.2T, as the speed goes up higher, higher, they said the need for indium phosphide is more and also the requirement for lower EPD material becomes that much more important.

是的，如果我可以補充這一點，我認為磷化銦現在正處於關鍵時刻。我認為磷化銦傳統上一直服務於更快的資料中心活動，例如收發器，但現在隨著人工智慧從 800G 到 1.60 到 3.2T，隨著速度越來越高，他們表示對磷化銦的需求越來越大，對較低 EPD 材料的要求也變得更加重要。

And so not only I believe with AI's advancement in data center applications will increase the need for indium phosphide tremendously and also because of the device size becomes larger and the power requirement for this higher speed indium phosphide devices will need better quality material, and all that said should increase our indium phosphide business opportunity for AXT.

因此，我相信，不僅人工智慧在資料中心應用的進步將極大地增加對磷化銦的需求，而且由於設備尺寸變得更大，並且這種更高速磷化銦設備的功率需求將需要更優質的材料，所有這些都應該增加 AXT 的磷化銦業務機會。

And with all that said, AXT is also a significant player on indium phosphide substrate supply overall. We believe we are either number one or number two in the world of indium phosphide substrate supply, which we estimated to be at least 40% of the world indium phosphide supply. So I think, although, the permitting and the geopolitical restriction is hurting our business at this point, but I think the demand is there. We believe we should recover.

綜上所述，AXT 也是磷化銦基板供應領域的重要參與者。我們相信，我們在世界磷化銦基板供應領域排名第一或第二，我們估計我們的供應量至少佔世界磷化銦供應量的 40%。因此我認為，儘管許可和地緣政治限制目前正在損害我們的業務，但我認為需求是存在的。我們相信我們應該會康復。

Great. Thank you so much. That was really helpful. And then I have another question. It looks like -- it's great to see your gross margin improving again.

偉大的。太感謝了。這真的很有幫助。我還有一個問題。看起來——很高興看到你們的毛利率再次提高。

And I wanted -- just to confirm. I remember in the first quarter, there had been a bit of a yield issue associated with germanium arsenide for a wireless HPT customer. It seems like that's been resolved and have you resumed the business opportunity with that customer at this time?

我只是想確認一下。我記得在第一季度，無線 HPT 客戶在砷化鍺產量方面遇到了一些問題。看來這個問題已經解決了，您現在是否已經恢復與該客戶的業務機會？

Yes, we have. But although as we said in the script, we're taking a fairly conservative approach. And so we're not taking a big portion of it, but we want to not only serve the customer well, also holding our -- improving our margin.

是的，我們有。但儘管正如我們在劇本中所說的那樣，我們採取了相當保守的方法。因此，我們不會佔用太多的份額，但我們不僅希望為客戶提供良好的服務，還希望提高我們的利潤率。

So I think we should be able to continue to see the improvement throughout the second half of the year on that business. And if we can improve the margin, so that also implies better yield and efficiency, we should ask for a higher portion of our business with our customers, so that should grow our revenue as well.

因此我認為我們應該能夠在今年下半年繼續看到該業務的改善。如果我們可以提高利潤率，那就意味著更高的產量和效率，我們就應該要求客戶承擔更大比例的業務，這樣我們的收入也會增加。

Tim Savageaux, Northland Capital Market.

北國資本市場 (Northland Capital Market) 的 Tim Savageaux。

I want to go back to something Tim said or the other Tim about the market growing too fast to be serviced by two players, and I want to kind of dig into that a little bit more. Obviously, we've got a lot of indications of that both from what the hyperscale guys are planning to spend and what we're hearing from various members of the technology kind of ecosystem demand seems to be pretty strong.

我想回顧一下蒂姆或其他蒂姆說過的一句話，即市場成長太快，無法由兩家公司來服務，我想更深入地探討一下這個問題。顯然，我們已經得到許多跡象表明，無論是從超大規模企業計劃支出的情況，還是從技術生態系統各個成員那裡聽到的情況來看，需求似乎相當強勁。

I wonder from AXTI's perspective, any more details on what you're seeing there in terms of the growth and/or growth potential and whether that's how your backlog may have increased during the quarter given the export issues and how you see that playing out for the rest of the year. I guess where we're not facing these export issues in indium phosphide, is the growth rate that you had been looking for before, has that accelerated? What are the trends there?

我想知道從 AXTI 的角度來看，您能否提供更多關於增長和/或增長潛力的詳細信息，以及考慮到出口問題，本季度您的積壓訂單是否可能增加，以及您如何看待這種情況在今年剩餘時間內的發展。我想，我們在磷化銦方面沒有面臨這些出口問題，您之前一直在尋找的成長率是否有所加快？那裡的趨勢是什麼？

So yeah, I just basically want to repeat a little bit what Morris has just said. Obviously, we are seeing market trends that the demand for optical interconnectivity is growing rapidly. The move to higher speed transceivers is moving rapidly just as we expect. This not only -- we've said for a long time now, this has a bit of a double benefit for us because we are not only seeing that people as we move to larger and larger, higher and higher speeds, the constraints on the lasers and detectors become higher and higher.

是的，我基本上只是想重複莫里斯剛才說的話。顯然，我們看到光互連需求快速成長的市場趨勢。正如我們預期的那樣，向更高速收發器的轉變正在迅速推進。這不僅——我們已經說過很長時間了，這對我們來說有雙重好處，因為我們不僅看到人們隨著我們向越來越大、越來越高的速度前進，對雷射和探測器的限制也越來越高。

So higher quality material is required, low EPD material is required. So we also see some market share coming our way because of that. But in addition to that, a lot of these new devices are large. As we move into some of the larger EML devices and we move to silicon photonics, the acreage of indium phosphide that is used goes up too. So we do see the demand for indium phosphide substrates increasing, very healthily, certainly at least at the growth rates that we were predicting earlier this year and probably even higher.

因此需要更高品質的材料，需要低 EPD 材料。因此，我們也看到一些市場份額因此而增加。但除此之外，很多新設備體積都很大。隨著我們進入一些更大的 EML 設備並轉向矽光子學，使用的磷化銦的面積也在增加。因此，我們確實看到對磷化銦基板的需求正在非常健康地增長，至少達到了我們今年早些時候預測的成長率，甚至可能更高。

As Morris again said, we own about 40% market share in this. So when I say it's difficult for this market to be served by two players, we've got quality and technology improvement over our competition. We've got 40% market share already. It's very difficult to fill that hole very quickly.

正如莫里斯再次所說，我們擁有約 40% 的市場份額。因此，當我說這個市場很難由兩家公司共同服務時，我們在品質和技術上都比競爭對手有所進步。我們已經佔有40%的市場佔有率。要迅速填補這個空缺非常困難。

We are still seeing orders, although the permit process is going slow. We're receiving new orders on pretty much a daily basis for indium phosphide. So we're definitely seeing the demand for AXT is still there. Once we start getting these orders, these permits come through, I'm sure we're going to see more demand coming our way.

儘管許可證審批過程進展緩慢，但我們仍然看到訂單。我們幾乎每天都會收到磷化銦的新訂單。所以我們確實看到對 AXT 的需求仍然存在。一旦我們開始獲得這些訂單，這些許可證通過，我相信我們將會看到更多的需求。

Okay, thanks. And then just to follow up, I think you mentioned the $10 million backlog for both indium phosphide and gallium arsenide. And I guess looking at the shortfall in the quarter, I think you said half of that was gallium arsenide export.

好的，謝謝。然後，為了跟進，我想您提到了磷化銦和砷化鎵的 1000 萬美元積壓訂單。我想，從本季的缺口來看，您說其中一半是砷化鎵出口。

Should we infer from that that the majority, not the vast majority, of that backlog is indium phosphide? And if -- without the permits, I mean, could you ship all that this quarter? Or, I guess, how quickly do you think you can get back to $10 million or get [to two] $10 million a quarter in indium phosphide substrate revenue?

我們是否可以由此推斷，積壓的大部分（而不是絕大多數）是磷化銦？如果沒有許可證，您能在本季運送所有這些貨物嗎？或者，我猜，您認為多快才能將磷化銦基板收入恢復到 1000 萬美元或每季度實現 1000 萬美元？

Right, okay, good question, thank you, Tim. So yes, more than 50% of backlog is indium phosphide. And we've got a large amount of capacity there right now. We're typically turning orders around in four to six weeks. Sometimes if we need to, we can turn them around faster than that.

好的，好的，好問題，謝謝你，提姆。是的，超過 50% 的積壓訂單是磷化銦。我們現在在那裡擁有大量的產能。我們通常會在四到六週內完成訂單。有時如果需要的話，我們可以更快地扭轉局面。

Of course, before all of this permit procedure that came into place, we've got a lot of [whip], and we've built up whip waiting to go to get some of those permits coming in as well. So it is possible that we can turn all of this backlog around pretty quickly, but of course it's going to be very dependent on the timing that those permits come in and how they come in throughout Q3. But we do anticipate that this will -- should we get more permits, we're confident we will, we'll see an upside to our Q3 guidance.

當然，在所有這些許可程序實施之前，我們已經獲得了很多[whip]，並且我們已經建立了whip等待去獲得一些許可證。因此，我們有可能很快解決所有積壓問題，但當然這將在很大程度上取決於這些許可證的發放時間以及它們在第三季度的發放情況。但我們確實預計，如果我們獲得更多許可證，我們有信心，我們將看到第三季指引的上升。

Richard Shannon, Craig Hallum Capital Group.

理查德‧香農 (Richard Shannon)，克雷格‧哈勒姆資本集團 (Craig Hallum Capital Group)。

Hi, this is [Tyler Anderson] on for Richard Shannon. Thank you for taking my questions. Could you expand upon why the gallium arsenide export licenses slowed down as the indium phosphide licenses began to be issued? And is this the same agency that's issuing these? And are you expecting any lower cadence of the indium phosphide licenses than what you expected before because of the gallium arsenide slowdown?

大家好，我是 [Tyler Anderson]，為 Richard Shannon 播報。感謝您回答我的問題。您能否解釋為什麼在磷化銦許可證開始發放的同時，砷化鎵出口許可證的發放卻放緩了？這是發布這些證書的同一機構嗎？由於砷化鎵生產放緩，您是否預計磷化銦許可證的發放節奏會比之前預期的要低？

Again, I can answer. I can at least start to answer that, and then Morris can probably elaborate a little bit more. It's difficult for us to speculate, really, what is going on here. But we do know is that it is not AXT specific. The whole industry has been faced with delays with gallium arsenide permits.

再次，我可以回答。我至少可以開始回答這個問題，然後莫里斯可能會進一步詳細說明。我們真的很難推測這裡到底發生了什麼事。但我們確實知道它不是 AXT 特有的。整個產業都面臨砷化鎵許可證的延遲。

What we have seen, however, is that through Q3 and certainly through this past month, the permits seem to be -- the permit approval process seems to be speeding up again, and we've received quite a few more permits just in July.

然而，我們看到的是，透過第三季以及過去的一個月，許可證審批流程似乎再次加快，僅在 7 月我們就收到了不少許可證。

But I think it looks like they're now catching up through some of the backlog that we've seen there. So hopefully, things will return to normal fairly soon, both on gallium arsenide and then hopefully we'll see the same kind of cadence on indium phosphide as we approach normality on gallium arsenide.

但我認為他們現在似乎正在解決我們所看到的一些積壓問題。因此，希望砷化鎵的情況能很快恢復正常，然後隨著砷化鎵逐漸恢復正常，我們也能看到磷化銦出現同樣的節奏。

Yeah. I think Tim doesn't want to speculate, but I can sort of tell you, if you see the news that the ongoing of the restriction of rare earths in China implementing the policy probably has something to do with it. In other words, China will want to use this as a negotiating tool.

是的。我想提姆不想猜測，但我可以告訴你，如果你看到新聞，中國正在實施的稀土限制政策可能與此有關。換句話說，中國希望將此作為談判工具。

So I think they started to restrict the number of permits, but I think we are seeing the latter part of it. They start to relax more now. I think hopefully it's getting into a more regular session that they would -- we should be able to get more permits regularly.

所以我認為他們開始限制許可證的數量，但我認為我們看到的是後期的情況。他們現在開始更加放鬆了。我認為希望他們能夠召開更定期的會議——我們應該能夠定期獲得更多許可證。

Thank you for that. And are you seeing any sort of advanced order makings where customers are starting to build inventory? And could we see any kind of spikes in your revenue moving forward as you work through the backlog and people start to place larger orders while they can get a permit?

謝謝你。您是否看到客戶開始建立庫存的任何形式的提前訂單？隨著您處理積壓的工作，並且人們在獲得許可證的同時開始下更大的訂單，我們是否會看到您的收入出現任何激增？

I would tend to think they're threatening to give us big inventory orders to anticipate getting the permits, but I don't think we are at that stage because we're not delivering even the first big, large orders. We do have a lot of very urgent orders that needs to be delivered. And so the customer said, okay, if we can get the first order through, they will give us the other anticipated order, they want to build inventory.

我傾向於認為他們威脅要給我們大量庫存訂單以期獲得許可證，但我不認為我們處於那個階段，因為我們甚至沒有交付第一個大訂單。我們確實有很多非常緊急的訂單需要交付。所以客戶說，好吧，如果我們能完成第一批訂單，他們就會給我們另一個預期的訂單，他們想建立庫存。

But I don't think we are at that stage to worry about that yet because we're not even delivering the first batch. I mean, as far as big order is concerned. We so far delivered, we said, $700,000 worth of indium phosphide orders outside of China. But the backlog is 6, 7 times or even 10 times that.

但我認為我們還沒有到需要擔心這個問題的階段，因為我們甚至還沒有交付第一批產品。我的意思是，就大訂單而言。我們表示，迄今為止我們已經向中國境外交付了價值 70 萬美元的磷化銦訂單。但積壓數量卻是這個數字的6倍、7倍甚至10倍。

And that concludes our Q&A session. I will now turn the conference back over to Leslie Green for closing remarks.

我們的問答環節到此結束。現在我將會議交還給萊斯利格林 (Leslie Green) 做結束語。

Thank you all for participating in our conference call. We will be participating in the Annual Needham Virtual Semiconductor and SemiCap Conference in August and hope to see many of you there. And as always, please feel free to contact us if you would like to set up a call. We look forward to speaking with you in the near future. Thanks.

感謝大家參加我們的電話會議。我們將參加八月的年度 Needham 虛擬半導體和 SemiCap 會議，希望在那裡見到你們。像往常一樣，如果您想撥打電話，請隨時與我們聯繫。我們期待不久的將來與您交談。謝謝。

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連線。