AXT
- The verdict: a low-quality business subject to high cyclical risk and political risk.
- A pure merchant upstream supplier. Its strength (being a large qualified InP source inside the export control perimeter) has a permanent political dependency.
- Scarcity pricing on InP wafers is temporary, due to the export perimeter and the narrow set of qualified 6-inch suppliers. Announced capacity clusters in 2027 to 2029, plus emerging route to lower-cost production.
- Opacity: No disclosure of wafer volume, average selling price, capacity utilization, backlog, or revenue by end market.
- Chinese export permit: both the barrier and the risk.
- Owns raw material companies, which give buy priority (with no managerial control).
- Barriers: yield learning, (state-controlled) feedstock concentration, customer qualification (each customer has 2 qualified suppliers).
- AXT's moat - vertical integration and location: 1) feedstock integration and patents, 2) production locations in China and export control.
- Dilution is the funding model.
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