Rubicon Technology, Inc. (RBCN)

Canaccord Genuity 32nd Annual Growth Conference Call

August 14, 2012 4:00 pm ET


William F. Weissman – Chief Financial Officer, Treasurer and Secretary


Jonathan E. Dorsheimer – Canaccord Genuity


Jonathan E. Dorsheimer – Canaccord Genuity

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Okay. Well, I’d like to thank everybody for coming. My name is Jed Dorsheimer. I’m one of the Senior Analysts at Canaccord running the Display and Lighting sectors globally for our firm.

And well for those who saw me at lunch, give a presentation on LEDs and solid-state lighting, one of the key ingredients in manufacturing an LED, which is the basic component for any solid-state light is sapphire technology.

Basically it’s the substrates that’s used in 90% of the growth of LEDs and there is a few incumbent companies that sell into that market and we’re lucky enough to have one of them Rubicon Technology here to tell us more about how they are doing. It’s interesting I actually go back about 11 years when I first did diligence on this company. And so it’s been nice to see them grow and come into the public market.

To just to do a couple of housekeeping items, one, we will have our breakout with all the Q&A across the hall in the – in the London room; and two, I’d point you to our conference materials for important disclosure.

I’d like to introduce Dee Johnson in the back, Head of IR for Rubicon, and Bill too, CFO of Rubicon to tell us more about their story and how they are going with the LED and also more recently the Silicon-on-Sapphire.

So with that, I’ll turn it over to Bill Weissman. Thanks.

William F. Weissman

Thanks, Jed. Good afternoon, everyone. So Rubicon is the world’s leading provider of sapphire products as Jed mentioned. One of the main applications for Sapphire is in the LED market. It uses the substrates of choice in the LED market. But there are also a couple of other key markets we served, the SoS market and the optical market. And I’ll talk more about each one of those.

We are one of the really only fully vertically-integrated sapphire producers in the marketplace, meaning we produced very high grade large-diameter sapphire products from the very base materials of aluminum oxide powder and I’ll explain that a little bit more as well.

Our real strength is in our ability to produce these materials in very large diameters with very tight tolerances, which has enabled several leading industries, the SoS market is one application, which I’ll talk about, which is growing rapidly right now and which has really start out at large-diameter wafers and we’re also helping the LED market progress to larger and larger diameter wafers, which is helping that market kind of lower cost and address the strong demand.

The LED market is the biggest market by far. It is historically been got 80% of our revenue stream, we’re a little less from that right now, but clearly the biggest user of sapphire. The SoS market, which I’ll talk about more, is really the fastest growing segment, we started serving right now and the optical market is our third major market.

Within the LED market, I think everybody is familiar with the main applications, historically, it’s been mostly display, backlighting, signage and that’s been driving the growth for the past couple of years. Of course the Holy Grail in industry is general lighting.

As we’re starting to see some penetration in general lighting is mostly in commercial and industrial settings, street lighting and so on, but we haven’t quite reach the inflection point in general lighting, but Jed and many other analysts had to follow the space thing, that is not too far in a distant future. And automotive is the third sub-segment within the LED market. You are starting to see more and more cars, different models of cars with LED lighting both interior and exterior lighting.

I mentioned the large diameters, the importance of large diameter; in the LED market, we’re starting to see the same path of progression that we saw in the semiconductor world, which has started out with small diameter substrates and for economies of scale grew to larger and larger substrates. In the LED market, it started out with two inches, three and four inch substrates are prevailing right now and we’re starting to see some migration to six inch. This is important as we’ll talk about this little further. Rubicon is the market leader in large diameter sapphire. We have about 70% market share in six inch wafers today both in the SoS and LED market.

In the SoS space, for those of you who are not familiar with it, the antenna switch within your smartphone, which controls the send and receive signal historically has been made with gallium arsenide based chips. Our customer came up with the SoS technology, which provides for one single monolithically grown chip that replaces those multiple gallium arsenide chips resulting in smaller form factor, less power usage, because sapphire is such a good insulator eliminates, virtually eliminates the crosstalk associated with some cell phones.

For that reason, our customer is rapidly gaining market share and has been engineering into all of the major smartphones, the Apple and the Samsung and even in the iPad. And we have seen significant growth. Our revenue from this sub-segment has doubled sequentially over the past two quarters going from $2 million at the end of last year to $4 million to $7 million in the last quarter and we expect it to continue to grow throughout this year and into next year.

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