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Veeco Instruments (VECO) |
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WIKI ANALYSIS
Veeco Instruments Inc. (VECO) designs, manufactures and markets equipment to make light emitting diodes (LEDs), solar panels, hard-disk drives and other devices. The Company operates in two segments: Light Emitting Diode (LED) and Solar, and Data Storage.[1] Nearly 80% of Veeco's revenue comes from Asia, a segment that grew at a staggering 125% year-over-year rate between 2009 and 2010.[2] However, such growth is highly erratic due to Semiconductor Cyclicality.
Business Growth
Following the global recession, Veeco experienced a rapid improvement in business conditions in late 2009 and continuing into 2010.[3]. Revenue in 2010 is $933.23 million, compared to $282.41 million in 2009. Net income also improved equally as drastically, with $361 milliion in 2010 and a loss of $15.56 million in 2009.[2]
Key Trends and Forces
Threat from semiconductor industry's cyclicality
The semiconductor market is notoriously cyclical. ]The semiconductor industry is affected by the fluctuating demand for PCs and cell phones, and by the rest of the electronics market. The demand in up cycles is so high that the chip manufacturers cannot always meet demand. On the other hand, if electronic sales, particularly PC sales, are slow, demand for chips can plummet. The semiconductor industry is at the whim of consumer demand more than corporate demand, adding to the volatility in demand.
80% of Veeco's Revenue Comes from Asia
About 80% of Veeco's revenues come from Asia due to the concentration of fabs there.[4] Many semiconductor manufacturers are building fabs or outsourcing to fabs in parts of Asia, particularly Taiwan. Asia has lower overhead costs, and it is also convenient to be located near major electronics markets such as Japan and China. The large growth potential in China could be a major factor for semiconductor demand in years to come.
Competition
Veeco's main competitors are:
- Aixtron Aktiengesellschaft (AIXG)
- Applied Materials (AMAT)
- Centrotherm PV (FRA:CTN)
- Taiyo Nippon Sanso (TYO:4091)
- Riber (EPA:RIB)
Veeco remains a company with very high net margins due to the company's focus on the lucrative LED market in comparison to many of its competitors' focus on chip manufacturing. Veeco's net margin in 2010 was approximately 39%.[2]
References
- ↑ Reuters: Company Profile - VECO
- ↑ 2.0 2.1 2.2 Wikinvest SEC Files: VECO 2010 10-K, Page 26
- ↑ Wikinvest SEC Files: VECO 2010 10-K, Page 4
- ↑ Wikinvest SEC Files: VECO 2010 10-K, Page 31
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