Sapphire-on-silicon (SoS) RFIC maker Peregrine Semiconductor Corp of San Diego, CA, USA has told Rubicon Technology Inc of Franklin Park, IL, USA, which makes sapphire substrates and products for RFICs, LEDs, blue lasers and other optical applications, that it will not take any further shipments of sapphire products until further notice due to declining demand for its products.

In September, to accommodate Peregrine’s inventory situation, Rubicon executed a revised contract that shifted the delivery of $4.3m of contracted volumes from 2008 to 2009. Together with the slowdown in handheld device and small-display markets that use smaller-diameter LED wafers (raising the total value of shipments deferred to first-half 2009 to $7m), Rubicon lowered revenue guidance for Q3/2008 from $12.5m to $11.5-12m and (together with Q4 guidance of $8-8.5m) full-year 2008 guidance from $47-49m to $41.5-42.5m.

However, recent demand reduction by Peregrine’s customers related to the current global economic slowdown has resulted in the further action by Peregrine. The remaining value of the current contract is about $7m; $2m was to be delivered in fourth-quarter 2008 and the remaining $5m in first-half 2009.

“This unexpected news from Peregrine will affect our production planning for the rest of this fiscal year and into next year,” says Rubicon's CEO Raja Parvez. “We are in the process of evaluating all options related to the customer's contract obligations and we are examining the potential impact to our operations. This contract issue, along with the uncertainty of the global markets, makes it premature for us to provide a meaningful update to earnings guidance at this time,” he adds.

“Our products serve the LED, SoS RFIC and optical markets - all of which offer strong long-term growth potential. However, right now, macroeconomic conditions are having a significant impact on demand for consumer electronics, where much of our sapphire is used for LED and RFIC applications,” Parvez continues. “For the near term, we will control expenses as we weather this challenging economic environment.” He stresses that Rubicon has a strong balance sheet in its cash position, with no debt.

Rubicon will announce its third-quarter 2008 results on 30 October.