|Equipment Manufacturers Seek to Capitalize in the Fast-
Growing Solar and OLED Sectors
by Dave Reiner
Thursday, January 24, 2008
Companies like Applied Materials (Nasdaq: AMAT), KLA-Tencor (Nasdaq: KLAC), Photon Dynamics (Nasdaq:PHTN), and Cogenics, Inc. (Nasdaq:CGNX) control the majority of the microelectronic equipment market but there are a few innovative microcap companies like NexTech Solutions, Inc.(OTC:NXSL) which are poised to capture sales in some of the fastest-growing segments of the market: solar and OLED equipment. According to Display Search, The OLED market is also expected to grow 117% in 2008 on sales of $2.6 billion, and reach $4.6 billion in 2010. In early January of this year at the Consumer Electronics Show in Las Vegas, Sony introduced the industryís first Organic Light Emitting Diode (OLED) television in the United States. The 11-inch diagonal XEL-1 model is 3 millimeters thin and offers picture quality with extremely high contrast.
"The launch of an OLED TV is one of the most important industry landmarks," said Randy Waynick, senior vice president of Sony Electronics. Home Products Division. "Not only does the technology change the form factor of television, it delivers flawless picture quality that will soon become the standard against which all TVs are measured."
Rising oil and gas prices are fueling the demand for clean alternative energy sources like solar energy, and governments around the world have provided financial incentives to aid in the deployment of solar technology. As a result, this has driven an increasing amount of venture capital funds into the solar sector.
According to the Information Network, the photovoltaic market has followed an average annual growth of 30% over the last five years, reaching 60% in 2004 and tripling by 2010. Such dynamism is creating important market and industry mutations. Established PV companies like Sunpower (Nasdaq:SPWR) and Suntech (NYSE:STP) are now modeling their businesses in anticipation of pressure on margins. This is good news for coating and inspection equipment makers like NexTech Solutions, Inc. Analyst GaŽtan Rull, at Yole Devloppement in France states that, "The PV equipment market will overspend $2B in 2010. Moreover, silicon shortage is stimulating investments in new technologies and especially thin films. We expect lasers, CVD and PVD systems to explode at very short term with CAGR of 40%."
NexTech, Solutions Inc. has a competitive advantage over rival firms since it is the only company that we are aware of to combine inspection and coating technology in one solution. According to the Company, its patented coating technology is "the emerging world standard, with no known viable next generation competition, particularly for large substrate applications", which creates a strong barrier to entry for potential competitors. The NexTech-FAS joint venture, which consolidated the assets and operations of the two companies into the Delaware limited liability company, NFJV, LLC, presents an interesting question: Just how much revenue and profit will FAS add to the Company? This combination will be an interesting story to follow, since FAS appears to have some of the leading technology in the microelectronic coating industry. The joint venture is the first step in the completion of the merger transaction between the two companies.
While the U.S. economy in 2008 may be a bumpy ride due to recession concerns, we believe rate cuts by the Federal Reserve will provide a low interest rate environment that will be favorable to capital investment. The weak U.S. Dollar may cushion the effect of an economic downturn, as foreign economies will have the ability to buy U.S. products at a lower cost. We look forward to watching NexTech Solutions Inc. grow in 2008, and the addition of the NexTech-FAS joint venture could provide some interesting developments.
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