UPDATE 1-INTERVIEW-Veeco aims for half of LED tool market in '11

Fri Feb 25, 2011 6:34pm GMT

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* Sees China subsidies intact through first half of 2011 * Industry tool shipments could reach 1,000 this year * Korean demand to restart in second half of 2011 By Nichola Groom and Matt Daily LOS ANGELES/NEW YORK, Feb 25 (Reuters) - Veeco Instruments Inc (VECO.O) aims to supply at least half the global market for LED tools this year and expects the Chinese subsidies that underpin demand to stay intact through the first half of 2011, Chief Executive John Peeler said on Friday. Veeco, which along with Germany's Aixtron AG (AIXGn.DE) is one of two global suppliers of equipment to manufacture LEDs, increased its share of the global market to 45 percent last year from 30 percent in 2009. This year, Peeler said that growth would continue, albeit at a slower pace. "We'd like to get over 50 percent and stay over 50 percent," Peeler said, noting the company already had more than half the Chinese and Korean markets. Regarding analyst estimates that call for the company's share to reach 60 percent in two years, Peeler said there "is a reasonable chance we can get to 60 percent." Industrywide, 800 LED tools were shipped last year. That number could grow to as much as 1,000 this year, depending on the rate of growth in China and Korea. "It might be 900, it might be 1,000," Peeler said. "It's really going to depend on how the growth continues throughout the year." In recent years, Chinese local governments have subsidized at least 70 percent of the price of LED tools, prompting dozens of companies to start fabricating the semiconductor light sources. As a result, well over half of Plainview, New York-based Veeco's business comes from China, Peeler said. Market fears about the end of those incentives have plagued shares in the LED sector, but Peeler said he expected the subsidies to continue at least through the first half of the year, with regions scaling back one by one. "We believe they will end at different times in different places," Peeler said, adding that there was "a huge, really strong sense of urgency on the part of Chinese customers to try to build up a substantial business before these subsidies end." Korean demand for LED manufacturing equipment should restart in the second half of this year after falling off in 2010, Peeler said.

(Reporting by Nichola Groom; editing by Gunna Dickson)

((nichola.groom@thomsonreuters.com; +1-213-955-6755; Reuters Messaging: nichola.groom.reuters.com@reuters.net)) Keywords: VEECO/

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