FORWARD-LOOKING STATEMENTS
Certain information contained or incorporated by reference in this Annual Report on Form 10-K is forward-looking in nature. All statements included or incorporated by reference in this Annual Report on Form 10-K, or made by management of Amtech Systems, Inc. and its subsidiaries (“the Company” or “Amtech”), other than statements of historical fact, are hereby identified as “forward-looking statements” (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). Examples of forward-looking statements include statements regarding Amtech's future financial results, operating results, business strategies, projected costs, products under development, competitive positions and plans and objectives of the Company and its management for future operations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “would,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the section entitled “ITEM 1A. RISK FACTORS.” These and many other factors could affect Amtech's future operating results and financial condition, and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.
All references to “we,” “our,” “us,” or “Amtech” refer to Amtech Systems, Inc. and its subsidiaries.
PART I
ITEM 1. BUSINESS
OUR COMPANY
We are a leading global provider of thermal processing systems, including related automation, parts and services for the solar / photovoltaic, semiconductor, silicon wafer and MEMS industries. We also manufacture and sell polishing templates, steel carriers and double-sided polishing and lapping machines to fabricators of LED's, optics, quartz, ceramics and metal parts.
Our major emphasis is the development of next-generation thermal process and ion implant equipment for solar cell manufacturing, which we believe is the key to driving increased efficiency and lowering cost and will ultimately lead to grid parity. The markets we serve are experiencing rapid technological advances and are, historically, cyclical. Therefore, future profitability and growth depend on our ability to develop or acquire and market profitable new products, and on our ability to adapt to cyclical trends.
We believe our product portfolio, developed through a strong track record of technological innovation as well as the successful integration of key acquisitions, reduces the cost of solar cell manufacturing by increasing solar cell efficiency, increasing throughput and reducing yield losses. We have been providing manufacturing solutions to the semiconductor industry for over 30 years and have leveraged our semiconductor technology and industry presence to capitalize on growth opportunities in the solar industry, now the dominant portion of our business. Our customers use our furnaces and automation to manufacture solar cells, semiconductors, silicon wafers and microelectromechanical systems (MEMS), which are used in end markets such as solar power, telecommunications, consumer electronics, computers, automotive and mobile hand-held devices. Through our recent acquisition of a controlling interest in Kingstone Technology Hong Kong Limited (“Kingstone”), we have expanded our development efforts in the area of solar ion implant. To complement our research and development efforts, we also sell our equipment to, and coordinate certain development efforts with, research institutes and universities. Revenue from the LED market is very small, but growing rapidly.
For fiscal 2011, we recognized net revenue of $247 million, which included $212 million of solar revenue or approximately 86% of our total revenue. These results compare to $120 million of net revenue for fiscal 2010, which included $99 million of solar revenue or approximately 82% of our total revenue. Our order backlog as of September 30, 2011 and 2010 was $86 million and $94 million, respectively, a 9% decrease. Our backlog as of September 30, 2011 included approximately $71 million of orders from our solar industry customers compared to $85 million of orders from our solar industry customers as of September 30, 2010. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales in subsequent periods, nor is backlog any assurance that we will realize revenue or profit from completing these orders.
Orders from the solar industry totaled $199 million during fiscal 2011, compared to $162 million and $22 million in fiscal 2010 and 2009, respectively. The solar book to bill ratio for fiscal years 2011 and 2010 is 0.9:1 and 1.5:1, respectively. Our order pipeline has slowed due mainly to a worldwide overcapacity of solar cell production. The pipeline is also negatively influenced by slower
growth in demand for solar modules, caused by the frequently-fluctuating government support (subsidies) for solar energy installations.
For information regarding risks to our business, see “ITEM 1A. RISK FACTORS.”
COMPETITIVE STRENGTHS
We believe that our competitive strengths include:
Market Leader in Solar Diffusion Processing Systems. We are a leading provider of horizontal diffusion furnaces to the global solar cell market and count many of the world's leading solar cell manufacturers as customers. Since we entered the solar market in 2006, we have shipped approximately 500 diffusion furnaces globally. Our diffusion furnaces enable our customers to produce high quality solar cells with higher efficiencies and result in lower total cost of ownership.
Technology Enabling High Efficiency, Low Cost Solar Cell Manufacturing. Our technology platform provides key components to the solar cell manufacturing industry that enable lower cost of ownership and improved customer economics by increasing solar cell efficiency, increasing throughput, reducing yield losses, reducing labor costs, enhancing quality and cutting operating and maintenance expenses. We are continually developing next-generation process technology for solar cell manufacturing to further drive increased efficiency and lower cost which is expected to ultimately lead to grid parity.
Technology Roadmap for Continued Product Differentiation. We are continually developing next-generation technology which we believe will help increase solar cell efficiency to higher than 20%. Our proprietary N-type furnace has a track record of mass production and has played a critical role in achieving significant efficiency gains over conventional P-type solar cells. We developed our N-type furnace in collaboration with the Energy Research Centre of the Netherlands, a leading solar research center in Europe and Yingli Green Energy Holding Company Limited, one of the world's leading vertically integrated PV product manufacturers. Also in our product pipeline is a future high efficiency cell processing technology based on the ion implant process, which we acquired through our acquisition of Kingstone. Further, we have developed a roadmap of identified technologies supported by partnerships that will enable continued improvements in solar cell conversion efficiency as the market shifts from a capacity driven marketplace to a technology driven marketplace over time.
Key Equipment Supplier to the World's Leading Solar Cell Manufacturers. We have developed a large and growing global customer base and currently provide systems and equipment to many of the world's leading solar cell manufacturers. Asia represents one of the largest and fastest growing solar cell manufacturing regions in the world and for fiscal year 2011, Asian customers represented 88% of our net revenues. We believe our alignment with many of the leading Asian global solar cell manufacturers represents a significant endorsement of our technology value proposition, which in turn, we believe, will help us pursue our strategy of expanding our product suite to capture a greater percentage of capital spent in building future solar cell manufacturing capacity.
Track Record of Successful Acquisitions, Integration and New Product Development. Over the course of our history, we have built a leading technology platform based on the successful integration of six strategic acquisitions, several value-added collaboration and partnership agreements as well as an aggressive internal product innovation program. We believe that our track record of success illustrates our ability to both maintain our technology leadership and expand our customer base going forward. Select acquisitions include: