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Veeco Instruments shares fall on Chinese court ruling

Nexus ion beam deposition system in the Veeco

Nexus ion beam deposition system in the Veeco facility in Plainview on July 18, 2012. Credit: Newsday / Thomas A. Ferrara

Shares of Plainview-based Veeco Instruments Inc. fell almost 20 percent Friday after a court delivered a blow in its patent infringement battle with a Chinese rival.

Stock in the maker of tools used to manufacture light-emitting diodes and semiconductor devices tumbled $2.75 to close at $11.90 Friday after a Chinese court ruled that Veeco must stop “importing, making, selling and offering to sell” a key product that the court said infringed on a patent held by Shanghai-based Advanced Micro-Fabrication Equipment Inc., known as AMEC.

In a news release issued by Veeco after Thursday’s market close, Veeco said the Thursday ruling by the Fujian High Court, which applies to the Chinese market, came without hearing Veeco’s arguments on the alleged infringement of its EPIK 700 system, which is used to deposit layers of atoms onto semiconductor wafers.

That process is known as “metal organic chemical vapor deposition,” or MOCVD.

In April, Veeco filed a patent infringement lawsuit in the U.S. District Court for the Eastern District of New York in Brooklyn against SGL Carbon, a supplier to AMEC. In November, the court granted Veeco’s motion of a preliminary injunction prohibiting SGL from shipping wafer carriers to AMEC using the technology under dispute and denied SGL’s motion to suspend the injunction pending appeal.

Patrick Ho, an analyst for St. Louis-based financial services firm Stifel, said in a research note Friday that Veeco’s lawsuit, aimed at what Veeco “believes was infringement by AMEC” on its technology, “may have backfired” when AMEC filed its own legal action.

Ho said that AMEC’s July lawsuit against Veeco was filed in China to gain a “home court advantage.”

The analyst said the court ruling was “clearly meant to appease a local and leading Chinese equipment vendor and in response to Veeco’s lawsuit against SGL Carbon, which indirectly targets AMEC.”

He described the Chinese court ruling as “significant negative news . . . that caught Veeco and us by surprise,” and said he is re-evaluating his estimates for the company, which gets 60 percent to 70 percent of its MOCVD revenue — the bulk of its business — from the China market.

Veeco was Long Island’s 15th largest public company by revenue in 2016, with sales of $332.5 million. Veeco shares were down about 47 percent in the past 12 months as of Friday’s opening.

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