MTC and Veeco Compete for MOCVD Business and IP
February 12, 2018
Shenzhen MTC, the owner of Shenzhen MTC Optronics, which also owns Jiangxi MTC has indicated that the subsidiary will be purchasing 100 MOCVD tool sets to fill the new production fab it is building in Nanchang. The construction, which is expected to cost ~US$240m, will be financed by both the company and the Nanchang Hi-Tech Development Zone, and is expected to be completed in Q418. The total cost of the project, which includes a number of expansions in the future is expected to cost ~US$732m and will produce chip level product that will primarily be used internally.
The company is purchasing the MOCVD tools not from market share leaders Veeco or Aixtron, but from China based Advanced Micro-Fabrication Equipment Co. that has been embroiled in IP litigation with Veeco. In response to an injunction by Veeco concerning IP violations for parts of AMECs MOCVD tools, AMEC convinced the Chinese courts to prohibit the sale of certain Veeco tools in China, despite the fact that Veeco has held a majority share of the Chinese market. Until Veeco is able to make certain modifications to its most recent tool set or gain reinstatement in the Chinese courts, they are unable to sell them in China.
Another 100 tool sets, on top of recent expansion projects by San’an Opto and HC SemiTek and a number of others, who find themselves cutting LED prices while adding capacity will only put more pressure on prices. Reducing the number of Taiwanese competitors is more appealing to Chinese LED producers than profitability but the 50% government subsidies offset some of the costs. Many of those companies that took advantage of the state and provincial subsidies that were granted years ago are gone, and while the government has stated that such ‘generous’ subsidies have ended years ago, they seem to continue in LEDs, solar and displays. Of course, the US has its own way of providing ‘incentives’, and recent packages like the one set up to entice Foxconn to establish a plant in Wisconsin are coming under greater scrutiny given the use of tax dollars that some say will never be repaid in increased benefits to the locals.
MOCVD tool suppliers Veeco, Advanced Micro-Fabrication Equipment Inc. and SGL Carbon have indicated a settlement on all litigation and all cases in all courts relative to the disputes have been dismissed or withdrawn. The settlement allows Veeco to sell all of its products in China, allows SGL to supply parts to AMEC, which allows them to sell their MOCVD products worldwide. While no disclosure was made as to the settlement terms, they are likely far less than an extended litigation would have cost.