AIXTRON, a key player in the semiconductor equipment space, delivered a strong Q1 2024, exceeding revenue expectations. Despite this positive performance, the company reiterated its full-year guidance, citing a moderate slowdown in silicon carbide (SiC) capacity expansion. On the surface, this seems reasonable, given the recent adjustments in electric vehicle (EV) penetration forecasts. However, a deeper dive into AIXTRON's transcript reveals a curious contradiction that might hint at a more intriguing story.

While acknowledging the SiC slowdown, AIXTRON's CEO, Dr. Felix Grawert, highlighted a significant increase in inventory levels. The company attributes this buildup to their previous strategy of securing early supplies during the tight supply chain environment of 2021-2023. However, the transcript also reveals that AIXTRON anticipates receiving a substantial volume of SiC orders later in Q3 2024, orders they still expect to ship within the year.

This raises a crucial question: Why is AIXTRON building inventory, expecting to fulfill late SiC orders, while simultaneously proclaiming a SiC slowdown? The answer could lie in a dynamic that hasn't been widely discussed – the potential for a rapid acceleration in 8-inch SiC wafer adoption.

AIXTRON is uniquely positioned to capitalize on this shift. Their G10-SiC system boasts dual wafer size capability, enabling customers to seamlessly transition from 6-inch to 8-inch wafers. The company's CEO emphasized that all current equipment selections are being made with 200mm (8-inch) wafers in mind, confirming the industry's commitment to this larger wafer size.

If a significant number of AIXTRON's SiC customers are on the cusp of transitioning to 8-inch production, the current “slowdown” could be a temporary lull before a massive wave of orders. AIXTRON's proactive inventory buildup could be a strategic maneuver to ensure they are ready to meet this surge in demand.

Examining the Numbers: Inventory Growth and Potential Revenue

Let's examine the numbers. AIXTRON's inventory level at the end of Q1 2024 stood at €436 million, a substantial increase from €394 million at the end of 2023. The company expects to reduce inventory levels by the end of 2024, implying a significant portion of this inventory will be converted into revenue. Could this be a sign that AIXTRON is expecting more SiC orders than they are letting on?

The transcript provides further clues. Dr. Grawert states that while some customers are experiencing a slowdown, others have a 'very strong order pipeline' and are driving AIXTRON's SiC volume in 2024. He even mentions 'rush acceleration shipment timelines' and 'rush installations' for some clients. This suggests a stark divergence in SiC demand, with some customers already transitioning to 8-inch production and pushing AIXTRON to deliver systems as quickly as possible.

AIXTRON's reiterated guidance for 2024, with a wide revenue range of €630 million to €720 million, further supports the hypothesis of a potential late-year SiC surge. This range allows for both scenarios: a continued moderate slowdown if the 8-inch transition lags, or a significant upswing if customer demand accelerates as anticipated.

Implications of the 8-inch SiC Adoption Wave

The implications of this potential 8-inch SiC adoption wave are significant. It would not only drive substantial revenue growth for AIXTRON but also solidify their market leadership in SiC. Their competitors, particularly those lacking a dual wafer size offering, might struggle to keep pace, allowing AIXTRON to capture a significant portion of the market share.

It's important to note that this is a hypothesis based on observations from AIXTRON's Q1 transcript. The company has not explicitly confirmed or denied an impending surge in 8-inch SiC orders. However, the inconsistencies in their statements, coupled with the strategic inventory buildup and the confirmed industry trend towards 8-inch wafers, point toward a dynamic that warrants closer scrutiny.

If this hypothesis proves accurate, the 'SiC slowdown' narrative might be masking a much larger and more profitable story – one that positions AIXTRON as the clear winner in the rapidly evolving world of power semiconductor equipment.

"Fun Fact: AIXTRON's name is derived from a combination of the Latin word 'aix,' meaning 'goat,' and the English word 'tron,' signifying advanced technology. This unusual name reflects the company's origins in a region of Germany known for its goat farming, and its commitment to cutting-edge innovation."