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GT Advanced Technologies Inc. Message Board

  • chelle3095 chelle3095 Nov 24, 2012 12:32 PM Flag

    Connecting some of the dots relating to future growth

    Polysilicon: GTAT's equipment is installed at 7 out of 9 of the highest polysilicon producers in the world. Current customers include:

    1) OCI of South Korea
    2) GCL-POLY (China)- the largest polysilicon producer by output in the world
    3) LDK (China)- No revenue from LDK since 2010. LDK's financial woes not material to GTAT backlog or future revenues

    OCI and GCL-POLY are both long term customers of GTAT. Both companies have expressed a focus on further reducing the cost of production as polysilicon prices continue to fall. This will be the only way they can preserve margins as there is excess manufacturing capacity currently. New generation SDR reactors and TCS products will facilitate this. GTAT equipment is already capable of producing polysilicon with 10-N and 11-N purity (semiconductor grade and beyond)

    PV: GTAT has provided equipment to 4 out 5 of the largest PV wafer manufacturers. Customers include:
    1) Trina Solar (China)
    2) LDK - former customer. No revenue from LDK since 2010. No backlog at risk from LDK's issues
    3) Yingli (China)
    4) Jinko Solar (China)
    5) Nexolon of South Korea
    6) Green Energy Technology of Taiwan

    GTAT was fundamental to China, Taiwan, South Korea build-out of PV production over the last several years. GTAT equipment helped China dominate low cost polysilicon and PV production. GTAT has heretofore dominated the multicrystalline polysilicon production with their technology. They have shipped/installed more than 3200 furnaces. However, technological advancement has progressed beyond multicrystalline to monocrystalline technology which increases efficiencies (19-20% range on average) and lowers cost. Recognizing the inevitable transition, GTAT developed an upgrade to allow existing furnaces to be upgraded to mono cast (monocrystalline). They also bought Confluence's HiCz techonology which further lowers cost of production and improves efficiencies up to 24%. There is no upgrade path to HiCz for existing customers, and new equipment will need to be purchased for those willing/able to move up to the newest technology. Given the prior massive investment by the Chinese customers into multicrystalline technology over the preceding 10 years, GTAT does not expect these customers to be early adopters of the HiCz products. They expect a new wave of customers (outside of China or new players within China) to step up. The rate this will happen is the real question. The push in the industry is for higher efficiency and lower cost of production and GTAT's technology appears to be in the sweet spot. Their equipment is capital intensive and the next phase of industry build-out is subject to limitations from the the macroeconomy and credit markets. The ion cannon technology will enable further cost reductions for wafer manufacturers which will be a quantum leap forward in cost reduction for the industry. We'll see come 2014...

    LED customers:
    1) OCI
    2) Haotian Optoelectronics

    This business segment is just getting started. OCI is a long established customer and is moving aggressively into LED/sapphire. They have stated goals of expanding to capture 20% of the LED/sapphire market over the next 4 years. That will take a lot of ASF furnaces to accomplish. The LED market is growing rapidly and new potential applications for sapphire are announced monthly. LED lighting is the primary application currently, but point of sale screens, smartphone screens, navigation screens, to name a few are on the horizon. The company expects more than 3000 ASF furnaces may be needed just to meet an adoption rate of 5 % among the smartphone market alone. The macroeconomy and credit markets may slow down rates of build out here as well. Time will tell.

    Silicon Carbide is just getting moving and the potential for this market should begin to materialize by late in 2013.


    1) According to the SEC filings, the company collects the same deposits and "backlog security" for ASF furnaces in the sapphire business segment as they do for their other equipment.

    2) 90% of funds are collected by the time the equipment is shipped for the PV and Sapphire equipment and 100 % for the polysilicon equipment. The remaining 10 % is collected once the equipment is in place and operating at acceptable performance metrics.

    3) The "Negative Cash Flow" complaints in the last quarter appear to be related to "deferred revenue" in the PV segment of about $100,000,000. As we know from the 10Q, all of the revenue shortfall last quarter came solely from the PV segment. "Deferred revenue" becomes "recognized revenue" upon shipment/delivery. The backlog in the PV segment is/was 10% of the total backlog of 1.5 billion, thus about 150 million total. Once the customer accepts delivery, then this will become recognized revenue. The company is clearing out the old PV backlog and has whittled it almost to nothing. This is backlog for the older generation DSS multicrystalline furnaces primarily. As they have just released the monocast upgrade in early 2012 and have HiCz coming out in 6 months, I am not surprised by the drop off in orders in this segment. Why would there be new orders for soon-to-be obsolete technology now that the company has displaced with new technology? The company has basically said that they have rendered the multicrystalline equipment obsolete and do not expect much in the way of new orders for any of it and will phase it out. They have put company resources and future sales expectations on the newer monocrystalline products.

    4) The credit agreement with Bank of America replaced the one they had with Credit Suisse last year. The company has drawn on most of the available credit at this point, but the sum total is nearly the same as what they had on the Credit Suisse account before they paid it off.

    5) The senior notes were issued for additional working capital and acquisitions at very favorable terms (3%). The company did not want to repatriate foreign profits due to the tax ramifications. Borrow at 3% to avoid paying 35%. Makes sense to me. The company intends to repay this with cash when the notes mature as stated in the 10Q.

    6) At a paltry $10 million initial investment and royalties of future sales, the Hyperion cannon is a shrewd purchase. And, there is no way that this acquisition will bankrupt the company at these terms. It appears that the company strategically took over the assets of Twin Creeks with very little future risk. The Cannon has been sufficiently developed such that Twin Creeks had already commercialized it and there are other such products in use already. As it turns out, this happens to be the best. GTAT is in a much better position to commercialize this product than Twin Creeks, as recognized by Twin Creek's creditors.

    7) GTAT has 480 million in the bank to ride out the current uncertainties in Asia. They have reported that annual revenues of 400 million are sufficient to keep them at break-even. The company appears at no short or intermediate risk of running out of money. Those that claim that they are going to run out of cash in the next 12 months are delusional.

    Sentiment: Buy

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