In the Cat Bird Seat: A Review of Emcore’s Business

| About: EMCORE Corporation (EMKR)

A few weeks ago, I posted an article on Seeking Alpha outlining the developments I had come across, after much due diligence, of Emcore (EMKR) and its Terrestrial Solar Concentrated Photovoltaics division. 

I would like to again discuss Emcore’s activities, in a bit more detail, based on information I have been able to put together from some of the excellent posts by bloggers on one of their financial message boards

Emcore Fiber Optics

Emcore’s expertise in the past has been centered primarily on developing light based solutions for complex problems. They have worked to develop a comprehensive portfolio of Fiber Optic products, only matched by the likes of JDS Uniphase (JDSU), Fujitsu and Finisar (FNSR), positioning this division for any future upgrades required for the broadband market that are most certainly coming.

The IEEE standard 802.3 currently being developed for 2010 stipulates the next generation in standard transmission rates is for Ethernet speeds of 40Gbps which Emcore has already multiple product lines of and 100Gbps by 2010.

Emcore has developed a number of leading technologies to meet this higher criteria and appears to be working on additional technologies to further their ability to compete in this field. Their recent acquisitions of Intel's (INTC) Fiber Optic arm has allowed Emcore to move into the major league, re-positioning them from a market component supplier to a full one-stop shop for high speed fiber optical products; the first acquisition was for Intel’s Telecommunications-related portion of the business, the second the cable and connects division.

Reviewing Emcore’s presentation at the analysts' meeting in April should provide some idea as to significance of the comprehensive product mix in the Fiber field that Emcore now has.

In addition to these acquisitions, Emcore has already made their mark with the provision of 55 miles of high speed FO cable for IBM’s (IBM) PetaflopRoadrunner” computer system. This relationship with IBM, as well as Intel Capital taking a significant stakeholding in Emcore on the open market, and also as part of the fiber optic division purchases, will likely provide Emcore with significant marketing opportunities which would be the envy of other Fiber Optic name brand suppliers. 

Emcore Solar

There are two divisions within Emcore's solar development arm. The first, their satellite based solar division, has been operational for many years, with Emcore having successfully worked with NASA, Boeing (BA), and Lockheed Martin (LMT) to produce space based solar arrays.

Lockheed Martin Corp. beat out Boeing Co. to win an Air Force contract worth up to $3.57 billion to build as many as 12 next-generation global positioning satellites, the Pentagon said Thursday.

This contract awarded to Lockheed Martin will most likely utilize Emcore’s triple junction cells as Emcore, through their purchase of Tecstar, has had a long relationship with Lockheed; the other major cell manufacturer of these cells in the US, Spectrolab, is owned by Boeing, who missed out on this contract. 

Emcore Terrestrial Concentrated Photovoltaics

In my previous article, my predominant focus was on the potential of Emcore’s Terrestrial Solar Concentrated Photovoltaics division, and I would like to return to that area now. 


One of the most significant factors determining the feasibility of a solar technology for use in utility scale installations is the Levelized Cost of Energy, or to put it a bit more plainly, how much it is estimated to cost per kilowatt hour to produce power. Well, in April, Emcore made a presentation to analysts which I was able to obtain a copy of via a blogger who had requested this information and been sent it from Emcore. On page 13 of this presentation, Emcore has stated:

  • 8c per kWh based on their current 25kW array. Or $3.20 per watt.
  • 4.5c per kWh based on a 28kW array which is being developed. Or $1.80 per watt. 

The 25kW array appears to contain approximately 1820 cell modules (26 rows x 7 cells x 10 modules) indicating an output per cell of a little under 15W. It is also based, from what I can tell, on around 500-1000 sun concentration and Emcore’s current 39% efficient cells.

This is where Moore’s Law comes in, but this time with solar electricity.

Firstly, Emcore has a target of 45% efficient cells by 2010. This may not sound like much, but when you consider that it is in fact a 20% increase from the current 39% efficiency here alone (think utility scale 1000MW to 1200MW), it starts to add up.

Factor in the increase in concentration which has already been demonstrated in real life practical examples by the SunCube of 1122 suns (up to double the output for a cell) and the developments in the pipeline by IBM (now a major customer of Emcore) of 2300 suns, and you see a doubling again.

The Suncube uses a relatively simple design with low cost components. Acrylic Fresnel Lens, which can be bought relatively cheaply in bulk, readily available materials for the frame and enclosure of their Suncube technology, and of course Emcore’s cells. Now you may think the 9 cell component of each Suncube would be expensive, but on a cost basis, Emcore has been able to reduce this part of the installation to 37cents per watt.

…David Danzilio, vice president and general manager of Emcore Photovoltaics, told that his company's cells are already available at $0.37 per watt for 100MW quantities.

So based on 9 cells at Emcore's 25kW array price, the cell component of the Suncube would be close to 9 x 15W x $0.37, or around $50 USD.  

It appears that the cost per kWh, based on the information above, is already at or below that of traditional means of electricity production. In other words, this technology is possibly at grid parity already and is expected to improve. Here are a number of graphs I have produced that use this basic information and theoretical limitations of 70% efficiency and 2300 suns.

Others are also making the same prediction for cheaper electricity. 

Research division

Emcore’s research division would be well recognized within the scientific community with a comprehensive list of patents both current and pending, and their success working within the GelCore consortium to develop Light Emitting Diode technology and their past successes in the Fiber Optic and Satellite Solar areas. This long and successful experience in multiple disciplines demonstrates their ability to take their lab based prototypes through to successful commercial production.

Emcore has a long history of employing highly qualified scientists so do have the capacity to develop and comprehensively test the products it has in its product range.

  • 2002-2003 - 105 employees in research and development
  • 2003-2004 - 94 employees in R&D
  • 2004-2005 - 99 employees in R&D
  • 2005-2006 - 107 employees in R&D…of whom 54 had a Ph.D. degree
  • 2006-2007 - 118 employees in R&D…of whom 46 had a Ph.D. degree 

They have also accumulated an impressive catalog of Intellectual property rights.

I have put together a list of patents of CPV, LED and Fiber based on a posting on the Yahoo message boards. These have not been fully reviewed but are a quick look at the patents based on the searches returned by the registrar’s offices. 

Manufacturing Facilities

Any new technology, as you would be aware, requires costs for Research and Development. In the case of Emcore, this is no exception and has been a contributing factor to their inability to announce positive earnings. However the R&D appears to be complete as far as their current product line of terrestrial solar concentration cells and systems and Emcore has now got a fully operational manufacturing line in Albuquerque New Mexico. 

Emcore has previously stated that they are able to manufacture 600,000 cells a month. However a recent interview with David Danzilio, company vice president and general manager of its photovoltaic division, indicates that Emcore

…produces some 60,000 solar cells, in two sizes, per day.  

Extrapolating my conservative figure of 10W per cell and 500 suns, this equates to around 600,000 watts per day, or 219MW per year.

Remember however, the concentration factor has a significant bearing on actual output of these cells and this figure quickly increases under higher sun concentration. Using a conservative figure of 1000 suns (based on Green and Gold’s 1122 suns technology), the net MW output of this solar cell manufacturing plant would actually be around 440MW.  

Emcore’s R&D has also been proven to the point that they have developed and installed multiple reactors and solar receiver production lines.

…HONG HOU: Jed, We have a fleet of nine reactors right now in the installation. We have a tenth one on the way over. It probably will be arriving in a week or so. We have planned to add another two reactors…

…As for the solar cell receiver manufacturing capacity, due to the delay in equipment delivery for our automated receiver manufacturing line, as we discussed previously, our first line was finally up and running in March. Our second automated line has entered into the volume production already and we expect to commence shipment from the third receiver line in June. These are installed in Albuquerque…. (source)

This all sounds good, but what has it cost? How many billions, you may ask. Well as far as I can tell, Emcore sold their 49% of GelCore in 2006 for $100 million to General Electric and appointed Dr Hong Hou around the same time to develop their solar product division.

Since that time, using Emcore’s SEC filings for R&D costs even including the prior 2 years of 2004 and factoring in a $30 million dollar premium for this year, comes to a grand total of $116 million dollars.

…During fiscal 2007, 2006 and 2005, we invested $30.0 million, $19.7 million, and $16.5 million, respectively in R&D activities.  As a percentage of revenue, R&D represented 18%, 14%, and 14% for fiscal 2007, 2006 and 2005, respectively. (source)

To develop the technology, build the production lines and begin producing solar cells, solar receivers, prove concept and build a full system manufacturing line producing 219MW, possibly 440MW worth of concentrated photovoltaic products has cost a fraction of what a typical solar manufacturing line would.  

This adds some credibility to the claim by Green and Gold Energy that the current cost to build a combined cell, receiver, and Suncube 1GW per annum manufacturing facility is at around $120 million.

..To build a combined Emcore and GGE SunCube 1 GW plant is around US$120 million.

Sunball forum 19 May 2008. For the full blog post and other emails, go here.  


One of the critical components often determining a companies success or failure in business is its ability to establish a respectable client base. Emcore have achieved this with their fiber optic division with the following:

…Customers for the Fiber Optics segment include: Avago Technologies, Inc., Alcatel, Aurora Networks, BUPT-GUOAN Broadband, C-Cor Electronics, Cisco Systems, Inc., Finisar, Hewlett-Packard Corporation, Intel Corporation, Jabil, JDSU, Motorola, Network Appliance, Sycamore Networks, Inc., and Tellabs. (source)

Further relationships have also been formed as a result of the Intel acquisition including with IBM and Mellanox

The photovoltaic products division has the following customer base:

.. Boeing, General Dynamics, the Indian Space Research Organization (“ISRO”), Lockheed Martin, Space Systems/Loral, Green and Gold Energy, CS La Mancha and ES Systems. (source)

But as their terrestrial solar division has only just reached production output most recently, I would like to review a few other customers Emcore appears to have lined up. 

Emcore and Green and Gold Energy

Much has been written about Emcore’s relationships with Green and Gold Energy and their Suncube International Group  licensees' ability to meet their financial commitments. But hopefully, with the information I have tried to outline in this piece, you now understand that not only are the potential costs for building a significant sized multi-megawatt combined Suncube factories far below the equivalent costs of a standard flat plate panel factory, but also manufacturing and materials costs are quite low. Factor in the ability of these photovoltaic units to concentrate to 1122 suns, the Emcore 20 year cell guarantee and the simple design, and you have a product which could be easily built in almost any country in the world.

The countries which are current SCIG licencees all have significant feed-in tariffs. Spain, South Korea, South Australia, where GGE are based, and Israel are seriously considering them. It is these necessary introductory feed-in tariffs which allow the Suncube licencees to convince the financial sector to fund manufacturing facilities for a technology which the world needs as much as it can get right now with the sky-rocketing cost of energy.

ES Systems, one of the licensees' Sunryder module development, is well underway. 

Emcore and Menova

Menova Energy has been selected by the Ontario Ministry of Research and Innovation to install a demonstration installation of Menova’s Power-Spar technology at a Wal-Mart in Canada with a contract value of $5.9 million dollars. If this goes well, Wal-Mart may elect to outfit their stores throughout Canada to meet its long-term sustainability goal of 100$ renewable energy. Menova is a customer of Emcore’s cells, according to this report from Roth Capital and confirmed (in my opinion) by the use of Emcore’s projected efficiency chart in their presentation at the CPV conference in April in Madrid.

The potential here is significant if proven successful in that Wal-Mart has 278 stores in Canada alone. At an average of $6 million, this adds up to a conservative figure of over $1.6 billion dollars.

Walmart has a total of 2,980 stores in 14 countries outside the US, and within the US, 971 Wal-Mart Discount Stores, 2,447 Wal-Mart Supercenters, 132 Wal-Mart Neighborhood Markets and 591 Sam’s Clubs which, if Wal-Mart do follow through with their commitment it will offer substantial opportunities for renewable energy providers. 

Emcore and Worldwater

For those that don’t follow Emcore closely, Emcore purchased a 21% stake in WorldWater and Solar Technologies back in November of 2006. Worldwater, of course, has a fully owned successful solar division themselves in Entech solar. Currently Entech Solar is in the final stages of completing a factory, which was expected to have an estimated annual output of 50MW with expansion capacity of 200MW.

…Also in November 2006, EMCORE and WorldWater announced the formation of a strategic alliance and supply agreement under which EMCORE will be the exclusive supplier of high-efficiency multi-junction solar cells, assemblies and concentrator subsystems to WorldWater with expected revenue up to $100.0 million over the next 3 years… (source)

So it is a given that this is a brand new factory which Emcore will supply cells for.

As a reasonable confirmation of this, Entech stretched lens array use a 35cm long cell which is larger than the standard cell of 10cm. And if you remember from earlier “…produces some 60,000 solar cells, in two sizes, per day.”

Entech has also been improving their stretched lens array technology in an effort to achieve 440x concentrations. Page 55 in their Heritage plans for solar concentration shows this. If they have achieved this, and each Sunline Array of 3.7 meters is able to house 370 of the 10mm cells (although it will probably use the 35mm cells), over the area you would in effect be looking at 10W x 370, or 3.7kW per side. Erring on the side of caution, however, and de-rating each side of these for the lower than 500 concentrations and possibly 75% of the cells, we still end up with close to 2.5kW per side or 5 kW per complete Sunline Array. 

Plus, the metalized heat sink grid is able to generate useable heat. But that is for another post. 

Emcore and Concentrix

Concentrix is a contributor at the ISFOC facility in Spain which now has 100kW of  concentrated photovoltaic panels ready to connect to the grid. They also have some serious heavyweight backing with their Concentrix Iberia collaboration with Abengoa. Later this year, Concentrix aims to open a 25MW production facility to produce this technology. Abengoa, of course, has already built a number of operational solar plants and is hoping to build one of the largest solar plants in the world ,in Arizona, beginning in 2009.

Do they use Emcore cells or technology? I cannot tell you for sure. It is about the only link I have had trouble confirming from my original post on this subject way back in April.

…Out of the total 3MW CPV installation for ISFOC a possible total 1,850kW appears to have been supplied by Emcore cells…

…Stage 1  Isofoton (700kW) - Spain. Assume Emcore cells as follow on orders for Emcore cells came from Spain.  

Concentrix (500kW) - UK co. Guessing Azur, also a UK mob.

Solfocus (500kW) - Backers via NGEN include Boeing so Spectrolab are their cell supplier. Concentration assembly is also different as Emcore appears to be using a fresnel lens..

The technology Concentrix uses is Concentrated Photovoltaics as per their presentation at the CPV last week in Madrid. But unless I can confirm, this is one that I’d have to put in the "To Be Confirmed" file. 

Emcore and Intel

In my previous article, I posted about possible additional reasons for Intel’s association with Emcore and their search for a solar investment opportunity. Although I still cannot confirm a direct link to Emcore’s solar division, the development that Intel is to invest $50M in a solar spin off called Spectrawatt, along with Solon AG, Cogentrix Energy and PCG Clean Energy technology fund, without declaring which technology, gives me pause to consider what type of plant they intend to build. 

Other associations

There are a few more customers of Emcore in Concentracion Solar La Mancha, Pod Energy group, and of course the SunPeak memorandum of understanding with Emcore to build up to 700 MW of concentrated photovoltaic installations. But you can easily find out all you need to know about these and Emcore’s association potential opportunities in China with the XinAo group and their factory in Langfang province on their website.  


I have not discussed Emcore’s past financial reporting and there is good cause for that. I believe the profit potential of both the optical division and CPV division are right now complete unknowns.

The acquisition of two arms of Intel, and the combination with Emcore’s fiber optic technologies, means we now have a business division which has no real and accurate financial history to base any longer term projections on. Their comprehensive product mix takes them into a whole different category of suppliers, and their proven associations with Intel and IBM mean they already have the exposure to industry majors.

The Terrestrial Concentrated Photovoltaics division, as outlined in my last post and in a little more detail here, is also an unknown financially. The fact that Emcore has only recently started producing these cells and already have significant customer orders lined up indicates this product range could be about to take off. What their earnings could be in a year there is no way to predict. Basing assumptions on past financial performance is also a little misleading as the costs over the last few years have been attributable to research and development.

So all I will say is this: Emcore is already there with two very new, very distinct business divisions both with technologies that will help to improve the way we live.

Just as significant is they have no debt.

…our balance sheet is now debt-free.. (source)

So the way I look at it is, in effect, both the fiber optic division and the solar division are starting from scratch.

Which also explains quite well why Emcore is moving towards a split of the company. 

Institutional Support and the Russell 3000

Major institutional holdings of Emcore shares as listed on Nasdaq deserve a little bit of closer review. Over the past few months, institutions have built a stake of over 72% of the company. Combine this with insider holdings of approximately 9,344,476 shares or 12%, and you have at best 15.55% of Emcore stock on the open market. Now Nasdaq also report 25,114,854 shares short. This means that in a best case scenario, a possible shortfall of 13,073,544, or in fact a substantial ‘naked short’ situation with 116.89% of shares on the market. However, Yahoo lists the insider and institutional holdings at 99%, indicating that almost all of the short shares are in fact naked short shares. Short Squeeze goes one better and indicates a short position of 40.3%, putting any short interest investors in a relatively risky position. In addition, the funds listed on Nasdaq as shareholders in Emcore haves over $5 trillion dollars under management, so they would have the means to fully research Emcore’s prospects before investing and holding this stock.

Here is a breakdown of the institutional and investor holdings as listed by Nasdaq. 

Also, on 27th June, Emcore will be added to the Russell 3000. My understanding is that this is an annual event and is usually used by larger mutual funds to rebalance their portfolios, which could mean a higher demand for Emcore stock.  


I would have liked to have written my own conclusion here, but as I have indicated, the bloggers on Emcore’s message boards have written the story above for me. So instead I will use and try to summarize what one of the bloggers recently posted. 

Emcore (EMKR) has a different solar development program that most in that its potential is not in small scale installations but with a more significant potential – utility scale installations with a focus on supplying commercial quantities of electricity straight into the grid. With the rising costs of energy, in particular oil, the days of business as usual which require traveling long distances to work may be numbered. The average person will simply not be able to afford the fuel costs and it is unrealistic to expect business to pick up the extra tab. Emcore’s very high speed fiber optic product range could therefore play a role in shifting those who can into a situation where they may be able to do a lot of their work from home. Think India call centers if you don’t think this is realistic. And of course, from a business point of view, it is much smarter practice to utilize high speed teleconferencing sessions as much as possible to save travel costs.

This bit I cannot paraphrase

…there will be an enormous need for data transmission, smarter, stronger home and business Internet and telephone connections. EMKR will be sitting in the Cat Bird Seat…

Factor in the second division of Concentrated Photovoltaics and Emcore has technologies that may be able to provide us with the things that we all want: more time at home, shorter but smarter working weeks, less need to travel to work and, if these technologies are adopted, as I am sure Emcore and their stakeholders would like them to be, almost guaranteed cheaper and cleaner energy.

Further reference: Emcore’s Business Model

Disclosure: Author has a long position in EMKR