BANGALORE GT Solar International, a U.S. solar and LED equipment maker, forecast its sapphire materials business will contribute about a tenth of its fiscal 2012 sales as orders for general lighting applications pick up.
Sapphire is the main base used in making LEDs, an industry that GT Solar CEO Tom Gutierrez expects will expand rapidly as incandescent and compact fluorescent light (CFL) bulbs are replaced by the cheaper and environment-friendly LED bulbs.
The Merrimack, New Hampshire-headquartered company, which makes sapphire material used in the LED, medical and aerospace industries, expects the business to contribute $70-$90 million to its fiscal 2012 sales of more than a billion dollars.
The sapphire material business is a part of the company's Crystal Systems segment, which also sells furnaces to companies looking to make their own sapphires. The entire segment reported revenue of $15.3 million for the fiscal year ended on April 2.
Its sapphire business backlog then included new orders worth more than $184.2 million, of which just $10 million was related to sapphire material contracts, with the rest coming from the furnace and other equipment orders.
But Gutierrez expects the demand for energy-efficient LEDs -- touted as the future of the lighting industry -- to grow despite the high investments required which have made its mass adoption slower than expected.
LED lights need to pay back hefty investments a lot quicker before they go mainstream, LED maker Cree's CEO said at the Reuters Global Energy and Climate Summit on Monday.
GT Solar's Gutierrez, however, said that as more capacity is brought on board, prices will fall, helping sales. He said the company's customers, centered in South Korea and China, were not averse to operating in a low-margin, high-volume environment.
"Our Asian customers are looking to make 15-20 percent gross margins versus the much higher margins that other suppliers in the industry are making today, and so it will sort itself out," he said on a conference call to discuss the company's fast-growing sapphire business.
On Monday, GT Solar, which has won a string of contracts this year, substantially raised its April-June forecast due to higher revenue recognition in the quarter.
Shares of the company, which from August will be known as GT Advanced Technologies, rose 6 percent at $12.89 in morning trade on Nasdaq. (Reporting by Krishna N Das in Bangalore; Editing by Savio D'Souza)