Coherent's Business With Apple Is A Carrot For Its Acquisition By II-VI

Summary

• II-VI has made an unsolicited offer to buy Coherent.
• Coherent sells excimer lasers to Korea's AP Systems, which uses them to process LCD and OLED displays.
• Apple plans to use OLED displays in iPhone 13, made with laser anneal technology from AP Systems.
• Entry into the display business at Apple and Samsung will complement II-VI's 3D smartphone business.

On Jan. 25, 2021, I wrote a Semiconductor Deep Dive Marketplace article entitled “

II-VI: Multiple Robust Drivers Propelling My Favorite Stock

.”

One business sector in particular I want to address in this article 3D Sensing, where I note:

“In the past quarter, II-VI (IIVI) secured multiple VCSEL design wins for Android smartphones and laptop applications, which will complement its existing design wins at Apple and others. 3D sensing grew more than 200% YoY and over 160% organically. II-VI’s silicon carbide business grew 50% YoY in the quarter.

VCSELs are processed on 6" diameter (150 mm) GaAs wafers and cost about $10,000/wafer at modest volumes. With a usable area of ~ 15,000 mm², this translates to ~$0.6/mm². They are used in smartphones by Apple (AAPL) and Samsung (OTC:SSNLF), each of which have integrated ToF (time of flight) functions in their respective products, such as iPhone and iPad Pro for the former and S20+ and S20 Ultra 5G for the latter.”

Display Market and Apple and II-VI

My thesis for this article is detailed in Chart 2. Coherent (NYSE:COHR) manufacturers excimer lasers and sells them to Korea’s AP Systems, which incorporates them into a Excimer Laser Anneal ("ELA") system, which is used to convert amorphous silicon thin films into polycrystalline LTPS (low temperature polysilicon).

Newer technology is to combine LTPS with thin films of IGZO (indium gallium zinc oxide) thin films to form LTPO (low temperature polycrystalline oxide), which are used in the backplane of OLED displays. LTPO is used in Apple’s SmartWatch and will be used in Apple’s iPhone 13.

Chart 1

AP Systems Performance in Display Equipment 2020

Table 1 shows revenues of top display equipment suppliers for 2019 and 2020 on a quarterly and yearly basis, according to our report entitled “OLED and LCD Markets: Technology, Directions and Market Analysis.”

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.