- 12 April 2006 -

Substrate market revenues to pass $600 million by 2010 says report

According to the latest edition of Strategy Analytics' annual 5-year
outlook for the gallium arsenide microelectronics industry, "GaAs
Industry Forecast: 2005-2010", demand for GaAs bulk and epitaxial
substrates will grow by 30-40% over 2006 and 2007, effectively
doubling by 2008.

They attribute this to demand for handsets remaining strong -
shipments are expected to grow by 15% year-on-year in 2006, exceeding
1 billion units by year-end 2007.

The introduction of increasing complex multi-mode, multi-band
architectures over 2006 and 2007 will increase the number and size of
HBT and pHEMT die going into front-end modules.

"The increasing complexity of RF front-end module architectures will
lead to a significant increase in the overall GaAs real estate in
cellular handset front-end modules. This will result in volume demand
for substrates growing by over 150% from 2005 to 2010," observed Asif
Anwar, Director of the Strategy Analytics GaAs and Compound
Semiconductor Technologies service.

"We will see fab utilization for the industry approaching 100% over
the next two to three years," noted Stephen Entwistle, VP of the
Strategic Technologies Practice at Strategy Analytics. "Substrate
suppliers will need to increase material output and make any necessary
investments to ensure that they can continue to meet demand.
Otherwise, these suppliers risk losing market share to competitors."

EDITORIAL COMMENT: Ahead of the annual CS Mantech and CS Vision
meetings in Vancouver (April 24th - April 27th, 2006, where Asif Anwar
will present a special market report outlining the key trends that
will drive growth in the compound semiconductor industry over the next
five years) Strategy Analytics is clearly in optimistic mood. Not for
several years has this sector of the III-Vs business seen such an
upbeat prediction. This is good news for the whole sector. It could
well result in excellent sales of raw materials and equipment.
Conversely, market expansion may ultimately not fulfil its potential
and we could see a hardening of prices. The lower end of the supply
chain has always endured tight margins. In the fallow years therefore
capital investment has perhaps not kept up. It will be interesting to
see how the market dynamics pan out.