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Commentary: Who Might Buy Agilent's SPG Unit (which co-owns Lumileds), and Why?
... Normally we avoid writing about rumors, but this one's irresistible. Some highly credible news sources, EE Times being the one closest to our business, have reported that Agilent Technologies is actively shopping for a buyer of its Semiconductor Products Group (SPG), which includes the LED business that went to...
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Agilent SPG Selloff Speculation Reported Widely
LIGHTimes Staff

June 14, 2005...Agilent Technologies’ Semiconductor Products Group is beginning the process of actively looking for buyers, according to the Wall Street Journal, EE Times, and Reuters. The Semiconductor Products Group (SPG), based in San Jose, California USA, includes the LED business that went to Agilent when it spun off from Hewlett Packard. In addition, the company holds co-ownership in the joint venture with Philips, Lumileds Lighting. The reports speculated that the price for Agilent’s SPG unit could range from $1.5 to $2.0 billion.

While many of the reports were based upon conjecture, they provided further analysis with reported financial results of the company. According to EE Times the SPG unit “contributed $2.0 billion to Agilent’s $7.0 billion in revenue.” As reported by our journals in December, ( Ref: article ) Philips executive VP and CEO of their solid state lighting group, Peter van Strijp, reported that Lumileds' revenue for 2004 was $280 million. He also said that Philips net income from the 50-50 JV partnership amounted to $62 million. Our readers can surmise that Agilent’s net income from Lumileds would also be about $62 million. Speculation of a selloff centers on Philips who may opt for 100% ownership of Lumileds, who manufactures all colors of LEDs including white. Some industry watchers are hoping for a Lumileds IPO. An outside party with money could also potentially be the buyer. The fate of Agilent’s SPG unit and Lumileds remains to be seen. For details read the June 14th McDonald Report

HRL Laboratories to Provide GaN Device Fab Services
CompoundSemi News Staff

June 14, 2005...HRL Laboratories of Malibu, California USA has elected to open their normally prototyping doors to the merchant market and offer custom gallium nitride (GaN) device fabrication services. Included are HFET and MMIC prototyping, plus a design kit to help engineers communicate their design specifications and needs. According to a report over IOP's Compound Semiconductor website, HRL has reportedly developed a method for manufacturing the HFET devices on 100mm GaN substrates and their MMICs on 3-inch wafers. The current commercial prototype service is only for 75mm GaN substrates. The frequency range covered by the service runs from the ultra-high frequency, through the “Q-band.”

HRL is considered a major compound semi industry research facility and is currently co-owned by Raytheon, Boeing, and General Motors who comprise the lab's LLC members. HRL was originally called Hughes Research Laboratory and founded by the eccentric and legendary Howard Hughes of Hughes Aircraft (and movie) fame. While not a direct winner of the recent Defense Advanced Research Projects Agency (DARPA), GaN funding, HRL's close affiliation with Raytheon will undoubtedly allow them to contribute to that program in addition to becoming an important member of the relatively short list of preferred GaN fabricators due their long-standing reputation in innovative design development and services. (Ref: editorial).

SemiSouth Closes Round A Funding

June 14, 2005...Another group of investors have become silicon carbide (SiC) believers. SemiSouth Laboratories Inc. of Starkville, Mississippi USA, a provider of SiC power electronics devices and epiwafer materials, has closed its series A funding round after raising an undisclosed sum from Delta Capital, Southern Appalachian Fund, II-VI, Inc. and accredited private investors. SemiSouth says it will focus on its customers in the SiC and power electronics areas. "We are selling to several customers who have asked us to expand our capacity to meet their needs. This investment will allow us to accommodate their requests, and we are actively putting these resources in place to help our customers grow," Jeff Casady, SemiSouth president and co-founder commented.

David Latham, a partner with Delta Capital added, "We are very excited about being shareholders of SemiSouth for a number of reasons. We believe their technology and expertise will give them a strong competitive advantage in the emerging SiC space. In addition, we were impressed with the entire management team in their understanding and expertise in the SiC market. Finally, their strategic relationships with II-VI and Mississippi State University (MSU) are very valuable and will be beneficial as the company continues to grow." Company News Release

Update on Oxford Instruments Collaboration With University of Manchester

June 10, 2005...The School of Electrical and Electronic Engineering at the University of Manchester, says it houses the most advanced compound semiconductor material growth system in the UK. Oxford Instruments has donated the V100 molecular beam epitaxy (MBE) system as part of the facility collaboration with the University of Manchester. The state-of-the-art V100 system can grow on 6 in. substrates. It boasts what the company says is one of the highest process stabilities in the world while providing increased uniformity, greater capacity, and greater throughput than most systems. The system adds to the facility’s existing V90H reactor. Oxford Instruments has agreed to invest £240,000 over a three-year period for the ongoing costs of the laboratory and its equipment.

Oxford Instruments has hired Dr. Colin Mitchell as their research associate at the laboratory. “This facility is regarded as one of the best in the country for research and we provide material for research institutes and industry worldwide. We can provide a full process from initial design, materials growth and characterization, all the way to device fabrication and testing,” said Dr. Mitchell. “This enables us to provide a unique service to industry, investigating growth solutions for their devices, and using our experience and knowledge to demonstrate how to fully utilize the impressive capabilities of Oxford Instruments’ growth systems.”

The laboratory currently uses the V100 to produce high-speed low-noise transistors and develop Quantum Dot and Quantum Cascade lasers, in addition to photodetectors for infrared applications. The facility has also ‘spun-off’ an ISO9001:2000 certified company (ICS Ltd) for the commercial supply of material grown on the V90H. Material supplied from ICS is used in the ‘Adaptive Cruise Control’ car-radar systems fitted to BMW and Jaguar cars. One goal of the collaboration, which is in its twelfth year, is to research and develop materials, devices and subsystems facilitating the next generation of integrated communication components.

The ongoing collaboration is headed by Professor Mohamed Missous, chair of Semiconductor Materials and Devices at the University of Manchester. Professor Missous commented, “We are pleased to strengthen our relationship with Oxford Instruments ever further.” He added, “Together we can address cutting-edge applications and continue to push the boundaries in compound semiconductors.”

Cree Awarded Contract for High Voltage Power Management Systems and Debuts Two New LED Chips

June 9, 2005...The United States Office of Naval Intelligence has awarded Cree Inc. a $12 million dollar, 18-month contract to develop silicon carbide (SiC)-based high voltage, power management systems. The goal of this Phase II contract in the development initiative would be to reduce the size and weight of the high power electronic devices and power management equipment aboard aircraft carriers.

The USA's Defense Advanced Research Projects Agency (DARPA) is funding the contract under its Wide Bandgap Semiconductor Technology Initiative for High Power Electronics (WBST-HPE) the focus of which is to develop high power conversion and distribution technology. Cree has successfully completed its $8.3 million contract for Phase I of this initiative.

Other USA companies will reap some of the benefits of Cree’s windfall with subcontracts from Cree. Powerex, of Youngwood, Pennsylvania will be hired to perform module design and testing. Raytheon's Integrated Defense Systems of Sudbury, Maryland, and General Atomics of San Diego, California, will perform systems studies on the solid-state power supplies proposed for this application. In addition, Carnegie Mellon University and North Carolina State University will also participate in development effort. Company News Release

In other Cree news, the company has developed two new LED chips, the MegaBright 290 Gen 2 and the RazerThin 230. The RazerThin 230 uses 8% less power than previous generation chips and is targeted at keyboard backlighting applications which require low power consumption to extend battery life and low cost. “Higher brightness and lower power consumption are the driving requirements of the LED chip industry and the MegaBright 290 Gen 2 chip demonstrates a convergence of both features," states Scott Schwab, Cree vice president and general manager of optoelectronics. Company News Release

Toshiba of Japan Announces HD-DVD Recorder
CompoundSemi News Staff

June 9, 2005...Toshiba has reached what it considers another milestone in the race to standardize a new, higher capacity format for DVDs. Toshiba Corporation of Tokyo, Japan announced that it has developed the technology to produce recordable High Definition DVDs. The company developed the technology jointly with its Japanese DVD format allies, Kagaku Media Company and Hayashibara Biochemical Laboratories Inc. The single-recording HD DVD disks have a capacity of 15-gigabytes. Toshiba points out one advantage of their HD-DVD recorder; recordable disk manufacturers only have to make minor modifications to produce the new recordable HD-DVD disks.

Hitachi Maxell Ltd. and Mitsubishi Kagaku will begin marketing the new HD-DVD-R disks next spring to coincide with the beginning sales of Toshiba’s HD-DVD recorder. Many industry observers are quick to point out that early marketing and sales of a new DVD format does not necessarily mean early adoption by consumers, the ultimate judges in the race for a new higher capacity DVD format.

Sony Corporation with its Blu-Ray DVD technology is Toshiba's main competition in this race for a high-capacity DVD standard. (Ref: article) Both companies have gained many allies on their sides. Whichever side that wins will help the compoundsemi industry because both new DVD formats, Toshiba's HD-DVD, and Sony's Blu-Ray, require the use of blue laser diodes made from GaN-based compound semiconductors. Current DVD players use red laser diodes, which are based on GaInP or AlGaInP compound semi materials.

Editor's Note: Our apologies for an earlier report on this, mistakenly crediting silicon as the material used in red laser diodes. Silicon continually moves quickly in its technological innovation, but it still does not emit enough light to produce commercially viable LEDs nor laser diodes. Please address any corrections to existing articles, or suggestions for news coverage to our news editor, Scott McMahan. His email is: scottmc @

Phosphor Technology Discussions Highlighted at Blue 2005
Scott McMahan

June 8, 2005...As Jed Dorsheimer, equity research analyst of Adams Harkness and Hill, said during his Blue 2005 presentation about intellectual property and patents, 2005 may indeed become known as the “Year of the Phosphor.” (Ref: article). For this reason, CompoundSemi Online, the event coordinators, invited leading phosphor technology innovators to the event, Phosphortech of Atlanta, Georgia USA, and Intematix of Moraga, California USA. Dr. Christopher J. Summers, CEO of Phosphortech of Atlanta, Georgia USA, a company that has won five small business innovative research awards from the US government, discussed some non-proprietary phosphor solutions for white LEDS. Dr. Yi-Qun Li, director of research and development at Intematix, also spoke at Blue 2005. He discussed Intematix's technology and method for rapid phosphor discovery. If you attended Blue 2005 and would like access to this and all the other presentations, click and login with a user name and password we provide. If you did not attend but would like access, send a request to: Tom Griffiths will get back to you with details. Content continues for LIGHTimes SecondPage members...

Aixtron AG Centralizes Sales, Service, and Support
CompoundSemi News Staff

June 8, 2005...Until now Aixtron AG has operated Thomas Swan, Epigress, and Genus as separate entities. As part of its strategic expansion, Aixtron of Aachen, Germany, a provider of chemical vapor disposition (CVD) equipment for compound semi epitaxy announced the establishment of Aixtron Europe to centralize all the sales, service, and spare parts for all Aixtron products including: Thomas Swan, Epigress, and Genus for the company’s European customers. Thomas Swan and Epigress were acquired by Aixtron in 1999, and Genus was acquired earlier this year.

Dr. Frank Schulte, who has more than 20 years experience in the semiconductor industry with 15 of it at Aixtron setting up a subsidiary in Japan, will serve as director of Aixtron Europe. Aixtron AG executive vice president, Dr. Bernd Schulte stated, “The establishment of Aixtron Europe follows AIXTRON’s long-term strategy to focus its service and support to the customers.”

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Commentary & Perspective...

Who Might Buy Agilent's SPG Unit (which co-owns Lumileds), and Why?

June 14, 2005...Normally we avoid writing about rumors, but this one's irresistible. Some highly credible news sources, EE Times being the one closest to our business, have reported that Agilent Technologies is actively shopping for a buyer of its Semiconductor Products Group (SPG), which includes the LED business that went to Agilent when it spun off from Hewlett Packard, and... more importantly to our industry, Lumileds Lighting, the JV co-owned by Agilent and Philips. Agilent, HP and Lumileds have their international roots firmly planted in the USA, and all remain headquartered in the famed Silicon Valley in California. Philips is based in the Netherlands. Now the speculation fun begins. Will Lumileds indeed be part of the deal? Who will be the buyer (or buyers)? And how would such a shift alter the existing LED manufacturing landscape?

Agilent has evidently recruited Goldman Sachs to handle the sale of the group and the speculative pricetag could be in the neighborhood of $1.5 billion to $2.0 billion, according to The Wall Street Journal and Reuters. EE Times did the math for us and noted that, last year, Agilent's SPG unit "contributed $2 billion to Agilent's $7 billion in revenue. Semiconductor orders were $435 million during the first quarter of 2005, down 26 percent from one year ago but up 7 percent sequentially. First-quarter chip revenue, at $450 million, was 5 percent below last year and down 9 percent sequentially. Segment profit, at $27 million, was $33 million below last year's quarter on a $24 million drop in revenue. Sequentially, profit was $19 million higher, despite a $42 million drop in revenue."

To that we can add that the Lumileds JV, which is physically housed in Agilent's SPG LED facility in San Jose, California yielded $280 million in revenue for FY'04. Philips' executive VP and CEO of the company's solid state lighting unit, Peter van Strijp, revealed in late December that Lumileds' revenues represented 43% annual growth, and that Philip's net income amounted to $62 million. These figures were reported by Philips in December of 2004, and covered as exclusive headline news in these pages. (Ref: Dec. 23, 2004 Philips Reports Lumileds' Impressive Financial Performance for FY '04 which includes links to the presentations). Prior to that, Lumileds' revenues had never been publicly disclosed. Since the JV is owned 50-50 by Agilent and Philips, one could surmise that Agilent scored $62 million net income from last year and that this is included in the $280 million reported revenue. At the size of the $2.0 billion revenue that the SPG group adds, $62 million starts to look like loose change.

Current metrics are what matter. Agilent's SPG unit is down in revenue by $12 million and no company can sustain a loss for long in these hard times. So selling off the loser could make sense to the hard of heart. But... the Lumileds JV appears to be a winner within SPG, producing good bucks for its parents. Agilent has stayed relatively quiet all along about how well their high brightness, high power LED offspring is doing. At the same time, they've announced various steps that moves Agilent's conventional LED manufacturing prowess into continually closer alliance with Lumileds' product line, which shouldn't be hard, given they're in the same building. It seems to me that the LED business, combining Agilent's conventional LEDs and Lumiled's HB/HP LEDs, would go for a hefty price to someone interested in being a massive force in LED manufacturing. If you have a billion or so to sink into it, you might have something.

Keep in mind that when your JV is a 50-50 partnership and one of the parents wants to bail out and run with the cash, the other parent has a big say so about what happens to the kid. Philips may opt for full custody. But they may not want all of Agilent's SPG product lines. One of the more interesting lines within SPG is Envisium, which is the brand name for a line of mid-power LEDs co-developed by Agilent and Lumileds. SPG also sells dot matrix displays, light bars, segmented and smart displays, surface mount LEDs and through hole LEDs, so a breakup and piece meal sell off might be the course Agilent takes.

When speculating about what Philips might do about Lumileds, its important to remember that Philips is one of a small handful of true world-class lighting companies. They're holding 50% ownership of one of the brightest and best of the advanced (versus conventional) LED makers, including all colors, which includes some of the best of class white LEDs. If you're starting a betting pool around the office, it might not hurt to first take a site-seeing trip around Lumileds' website to view for yourself what Lumileds brings to the Agilent SPG speculation party. Also, beyond the products lines, Lumileds has some wonderful people running the shop, led by Mike Holt and backed by an extremely talented technical staff. They're all rather HP-like (hip and patient) in the fine tradition of that once great Silicon Valley leader. And if Agilent sold its share of Lumileds to anyone, they'd have to factor in that the man who conceived of Lumileds in the first place was George Craford, who continues to serve as CTO. The inclusion of George in a sale would require declaring him a national treasure.

Then there are all those Asian companies with deep pockets to consider as potential buyers. Asians already hold most of America's debt, so why not buy one of America's brightest hopes? I'd think there are Japanese, Korean and Chinese companies just waiting for a chance like this, providing they can afford the tag. Agilent would be foolish not to get the most money they can for their share of Lumileds. I'd think the easiest course is for Agilent to simply sell their interest in Lumileds to Philips. People inside our business have long speculated that Lumileds would go to Philips if there was a divorce, or if one of the spouses died. And everyone knows the Netherlands (which is Philips' home base) owns most of the world, but simply doesn't brag about the fact. The Netherlands has been a well-oiled and well-heeled country for a long, long time and is very good at understating their ownership of enterprises. They've been at this ownership/control thing even longer than England. Never underestimate the power of a strong European company if they have their hearts and minds set on owning something.

My personal choice, of course, would be to see Lumileds spun off into independent status. Ideally, it would go public on the American Nasdaq stock exchange. Boy, that'd be one I'd want to have shares in. An IPO like that would be our industry's version of Google when it went public. Opening at $100/share, Google shares are now selling for around $300/share. Google proved it actually isn't as bad an economic climate to go for an IPO as many people may think. Lumiled's LED manufacturing prowess is legendary and its people are among the best. If it did go public, it could be a very successful IPO. I sincerely hope Philips and Agilent think about that when negotiations begin... should the rumors prove true.

But like all rumors, this one may not pan out. We'll see. If true, a sale would change the LED landscape, depending on who ends up owning Agilent's LED business and Lumileds, and whether or not the Lumileds JV is part of the deal. Personally, I think there'd be tremendous strength in packaging Agilent's LED business and Lumileds Lighting together as a stand-alone company, and blowing the doors off the Nasdaq in an IPO. Whether or not the rumors prove true, I think I'll start comparing notes with all the old timers from HP, like Roland Haitz who retired as R&D Manager for the Agilent components group, and goes way back to the early days of HP LEDs. And I'll start digging into my archives (which are bursting with legend and fact from the old days, along with lots of dust) and enlist the aid of Strategies Unlimited. Together, Bob Steele and I know all the great stories. Hey... maybe the price tag for SPG and 50% of Lumileds will go up when potential buyers, brokers and sellers calling the shots learn what's really at stake?

If you have news or views to share about the compound semiconductor, LED or solid state lighting industries
contact our Publisher, Tom Griffiths
His direct tel in Austin is +1-512-257-9888

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