If SAMSUNG is planning to or has decided to drop OVPD, we would have seen a very different signal.
Even before we ever heard of QD-OLED which was in late 2017 early 2018, gen 1 and 2 were ordered so the collaboration had already begun. Originally we heard a decision on project C was to be decided in April 2019, then it was shifted to June, then August, and finally Samsung announced in October. So Samsung itself has delayed the project. There is nothing Aixtron could do to keep the original timeline.
AIXTRON licensed the OVPD technology in 2000. After hundreds of millions of $ and countless intellectual power spent, it is coming to the end of the tunnel. It is a long journey indeed, 20 years of efforts. Nobody can promise anything about the future, neither you, me nor Aixtron. If Aixtron eventually failed on OVPD, I would not blame them for not trying hard enough. No risk, no reward. I can wait another few months. If there is no OVPD expenditure, Aixtron's EBIT wold be 25m more.
Let us recap the history. Through which you decide if there has been transparency or you fault Aixtron for misleading or incompetency.
2017 Q1 CC:
“We received a purchase order from a large Asian display manufacturer for an OVPD deposition R&D tool, due for delivery in Q4/2017. This is an important milestone in our OLED development program.”
Q - David Mulholland - UBS - Analyst Great. And maybe one quick follow-up on the OLED side. Obviously, I know you probably can't specify who the customer is, but is it fair to assume that this is someone that's already active in OLED display? And could you possibly just give us a bit of background, had you gone through the full process with this customer at your own site last year that then led to this order? Maybe just a bit more color on the strength of the relationship with the Asian OLED display manufacturer?
A- Bernd Schulte You can be sure that is a customer who is already engaged in OLED manufacturing. And I think we have been mentioning in previous calls that this program goes through 3 major stages. So this is the second stage where we, with the customer together, target to prove the feasibility for high-volume manufacturing. It’s for high-volume manufacturing but on a smaller substrate size level. The first step was showing the feasibility of the technology in general. Now we are at the second step. And of course the third step would be doing this all together on higher volume manufacturing and a larger substrate size.
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2017 Q2 CC: Not Available
2017 Q3 CC:
Regarding our OLED activities, we have established APEVA – our OLED subsidiary, where we are seeking a joint venture partner to share both the risks and rewards of what we believe is a very big market opportunity.
Our OLED business – now in APEVA – is approaching major milestones in terms of customer qualification. Our Gen2 Pilot manufacturing tool is in final assembly and will be ready for testing by the customer this year. We are in discussions with potential Joint Venture partners in Asia for this business.
2017 Q4 CC:
Our OLED activities have been transferred to our daughter company APEVA and the discussions with a potential Joint Venture Partner are ongoing. A Gen1 OVPD-system is in operation at an Asian display manufacturer’s R&D line. A Gen2 system will soon be installed at the customer's facility in order to qualify the technology for mass production. If successful in qualification and adopted by our customers, the OVPD technology offers a very high revenue and profit potential in the years to come. However, if the qualification is not successful, then this potential might not materialize at all and we would need to adjust our R&D spending accordingly.
We currently have a Gen2 OLED deposition system, which has been built up at a site in Asia. The system is up and running. We are currently doing some technical fine tuning and close collaboration with our customer. If that is successful, then the tool will be moved into our customers' R&D fab for qualification. And this moving into the fab, we expect in Q2.
2018 Q1 CC:
Let me also briefly comment on our OLEDs business, APEVA, which addresses a 50 Billion US-Dollar end market opportunity by 2021 with their OLED display technology. The project is progressing as announced in the February Earnings call: our Gen2 tool is being set up and tested in a facility in Asia and will soon be installed at a customer's facility in order to qualify the technology for mass production. Discussions with a Joint Venture Partner are intensively ongoing, but have not been concluded yet.
As mentioned, the status is unchanged, yet making good progress since we last met and also since the last earnings call in February. The Gen2 tool has been set up and is being tested. And we expect this tool to be moved in the customer facility. You know, it's about the tool to pass the qualification and for that it will be thoroughly tested. Based on those tests, the customer will make his decision.
2018 Q2 CC: NA
2018 Q3 CC:
Currently we are installing our Gen2 OLED production solution for testing at a major Asian display manufacturer. We are very hopeful to sign a production an order next year for a prototype system scaled up to full production size, as a next step in our journey toward mass production.
Getting to your third question, how confident we are that we will get an order in 2019 for the next larger scaled-up system. As we mentioned, we are executing our development program, which comes in multiple steps: Currently, we are installing our Gen2 system in the fab of our customer. The customer will then test this system, and the system has to live up to the value proposition that we are expecting. If the value proposition is verified based on the Gen2 system, we can expect to get an order. If it fails to fly, we will not get the order. That is the risk, which is still pending over our OLED activities. To your question about the target market, smartphone or television. This depends largely on the decision of our customer. A television system would be a larger size than a smartphone system. I would not want to anticipate here the decision of the customer before it is being made, because we understand that at our customer, a number of things really depend on the verification of the technology and on their internal roadmap discussion. We will follow our customer's wish here.
2018 Q4 CC (Q&A NA):
The Gen2 OLED test system achieved positive results, so that our customer agreed to the installation of the test system in his production facility. This installation has been completed. In the next step, the system will produce layers of OLED stacks, which will be thoroughly investigated by the customer. When these tests are successfully concluded, we expect to receive a customer order for a large area deposition chamber in production format later in 2019
2019 Q1 CC:
We completed the installation of our Gen2 pilot production OLED tool within our customer’s facilities as we told you in February. Currently, the tool is being put into operation jointly by the customer and our APEVA engineers. This represents another step forward on the way to the qualification of the OVPD technology. In the coming months, the joint operation of the system shall confirm the performance of the technology and the resulting data will be the base for the customer’s decision to order production size chamber during 2019.
Yes, the qualification progress is on track and the tool has been installed. What’s now happening is a number of functional tests of the tool. It’s a very complex tool with a huge set of functionalities. Step by step all the different functions are being tested and the elements and building blocks of the tool are being put into operation. And when that is completed, then complete OLED stacks will be produced by the customer. Based on this, the customer, from running the tool and producing these R&D-type OLEDs, will get measurement data and make his decision. Thus, within the complex qualification process, things are on track
2019 Q2 CC:
With regards OLEDs, our Gen2 tool had been installed in the customer facility earlier this year. The tool is jointly operated by a team of engineers of our customer and of our subsidiary APEVA. The tool is running stable and its process performance is currently being fine-tuned. It is undergoing an in-depth evaluation with respect to OVPD technology and the performance of OLEDs produced on that tool. As a result, we are making good progress in the qualification of our technology.
Thank you for the question. So, on the OLED topic first, our tool is currently being operated by our engineers and engineers of our customer. They are together executing test runs. They are producing OLEDs on a Gen2 laboratory format on the tool, that is, complete OLED devices are produced which are then being rigorously tested for specifications like brightness, lifetime, color saturation, all kind of type of technical parameters. We expect that evaluation to last throughout summer, early fall. In that, all tests are being fully completed and all the technical and engineering results of those tests need to be available. This also means some fine-tuning and some optimization of finding the right set points for such a brand new tool. Then when all that is completed, we will really know about the technology potential and then we can talk about a customer order. Thus, in a nutshell, at this point in time it would be too early to comment or to give any directional input. But I think we are well on track with respect to executing this testing phase. Maybe that gives you an idea what the status of that project is.
Janardan Menon Got it. And last question is on the OLED side. The date for when we might see an order for a larger GenX system has flipped a little over the last year or so, there was an expectation that that could have come earlier. You're now saying before the end of the year. Can you give us a feel for where you are in that process? Is there an ongoing negotiation on the size of the machine and the price which would be paid et cetera that has already started or is that something that is yet to start at this point in time and will depend on the ongoing testing that the customer is indulging in?
Felix Grawert The latter is correct. As I mentioned it's first about evaluating the tool and fully understanding the capabilities of the tool. And if that is positive, then after that it comes to the commercial discussion with the customer. As you know, the overall program has been delayed, but now we are on track with respect to the testing effort. Therefore the exact date for the order is not clear. First we need to complete the steps 14 © AIXTRON SE Investor Relations, July 2019 mentioned and after those steps, the next phase of customer discussion and negotiation will start.
2019 Q3 CC:
With regards to OLED, our Gen2 tool is jointly being operated by a team of engineers of our customer and of our subsidiary APEVA. Together, they are optimizing OLEDs produced with our OVPD Technology as well as the deposition tool. This is an iterative process meaning an OLED is produced, measured and analyzed. Then, the process parameters are adapted and changes to the tool are being made. Finally, the next batch of OLEDs is being produced, insights are gained and used for the next iteration, and so on. With this process, we enhance the performance of our OVPD technology which the customer then evaluates versus the incumbent VTE technology. As this procedure is still ongoing, we do not expect our customer to place a follow up order for a larger tool by the end of this year. We therefore now expect such order to be placed during H1 of 2020.
Janardan Menon Okay. And then on the OLED side - this I think has been delayed to a certain extent through the course of this year because, initially, the order was expected earlier in the year. And you've said that it's because there is this iterative process going on with the customer where some OLED panels are being produced, et cetera. What is the confidence that it can happen in the first half of next year? What I'm trying to get at is, are you getting a feeling, looking at the kind of changes that you asked, et cetera, that we are reaching the end of that process, or is this something where you don't really have visibility when the end is because the customer may keep on tweaking the requirements for a lot more time to come?
Felix Grawert Very good question from your side. Yes, it's true that we are delayed on the OLED project with respect to the initial schedule. And second, it is exactly as you have outlined, we do expect to reach the end of this qualification process. We have a perspective that this is going to happen throughout the first half of 2020. We do not expect this to be dragging on forever.
Let me come to your two questions on the OLED side. So, your first question was how big the impact on the guidance was. The impact on the order intake guidance was a few tens of millions that we took out in 2019 and have moved into 2020. To your second question: Is OLED a never-ending story? The answer to that is, that it clearly has taken us longer than we had expected. This is why we now corrected our expectations. But we clearly do see light at the end of the tunnel and we plan to get there. So, I would say no, it's not a never-ending story but we have a viewpoint where we want to get to and come out of the tunnel the positive way.