AXT, Inc. Resumes Substrate Production at Its Beijing Manufacturing Facility

FREMONT, Calif., March 20, 2017 -- AXT, Inc. (NasdaqGS:AXTI), a leading manufacturer of compound semiconductor substrates, today announced that it has resumed wafer processing production of all substrate types, including indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge), at its manufacturing facility in Beijing, China, following an electrical fire on March 16, 2017.

As previously reported, the fire caused no damage to indium phosphide crystal growth or wafer production. In addition, the company’s 6-inch gallium arsenide and germanium crystal growth furnaces were not damaged by the fire, and there is no damage to the electrical supply supporting these 6-inch crystal growth furnaces. The electrical power supply supporting 2-inch, 3-inch and 4-inch gallium arsenide and germanium crystal growth was damaged. The company’s custom-designed furnaces enable it to rotate key furnace hardware between different growth diameters.  The company plans to use some of the 6-inch furnace capacity for 2-inch, 3-inch and 4-inch diameter gallium arsenide and germanium crystal growth production.

In addition to rotating diameter sizes, the company has sufficient redundancy in furnaces and plans to move furnaces within the plant to an area designated for crystal growth expansion.  Power can then be connected and the company can restore the smaller diameter crystals to full production.  The company believes it can return to full production during the second quarter.  Further, to meet immediate customer demand, staged inventory of smaller diameter crystalline ingots will be moved to wafer processing.

AXT’s wafer processing production area, including its clean room, is housed in a facility across the street from the building in which the electrical short circuit fire occurred, and was not affected by this event.  Further, as it previously announced, no structural damage occurred to the building in which the fire took place.

“I am thankful that no injuries occurred and that the damage to our facilities was considerably less than we initially believed,” said Morris Young, chief executive officer. “Further, I am grateful to local authorities for their timely response and assistance. We remain convinced about our business opportunities and are deeply committed to supporting the requirements of our customers through this process.”

About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge) through its manufacturing facilities in Beijing, China.  In addition, AXT maintains its sales, administration and customer service functions at its headquarters in Fremont, California.  The company’s substrate products can be used primarily in fiber optic communications, 3-D sensing, solar cell, lighting display applications and wireless communications. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates. AXT has manufacturing facilities in China and, as part of its supply chain strategy, has partial ownership in ten companies in China producing raw materials. For more information, see AXT’s website at http://www.axt.com.

Safe Harbor Statement

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal securities laws, including, our expectations with respect to returning to full production and our business opportunities. These forward-looking statements are based upon assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. These uncertainties and factors include but are not limited to: the timing of our ability to restart production; possible restrictions placed on us by government agencies; possible reactions from customers; overall conditions in the markets in which the company competes; global financial conditions and uncertainties; policies and regulations in China; market acceptance and demand for the company’s products; the impact of factory closures,  or other events causing delays by our customers on the timing of sales of our products; our ability to control costs; our ability to utilize our manufacturing capacity; product yields and their impact on gross margins; and other factors as set forth in the company’s annual report on Form 10-K, quarterly reports on Form 10-Q and other filings made with the Securities and Exchange Commission.  Each of these factors is difficult to predict and many are beyond the company’s control. The company does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise.

Gary Fischer
Chief Financial Officer
(510) 438-4700