Cree (NASDAQ:CREE), Rubicon Technology (NASDAQ:RBCN), AIXTRON (NASDAQ:AIXG), Veeco (NASDAQ:VECO) And Chinese Policy

It appears the Chinese may be changing their policy strategy for energy and power, and may push subsidies from upstream manufacturing toward downstream segments, which would have an impact on Cree (NASDAQ:CREE), Rubicon Technology (NASDAQ:RBCN), AIXTRON (NASDAQ:AIXG) and Veeco (NASDAQ:VECO), among others.

Canaccord said, "We are providing an update on the LED space following some recent noise, rumors and what we perceive as overall confusion in the space regarding the subsidy situation in China. For months now, our view is and has been that the Chinese Central Government is not pulling its subsidies but instead on the verge of a policy change, as part of the 12th 5-year plan to move government funds from upstream manufacturing subsidies toward downstream demand-based subsidies. We view this change as a long-term positive for the LED ecosystem as a whole, including volume LED component pure plays such as Cree (HOLD), Epistar, Formosa Epitaxy and material volume plays such as Rubicon Technology (BUY). In the near term, we also acknowledge the volatility this may cause for the incumbent tool suppliers AIXTRON (HOLD) and Veeco (HOLD) given the current Street expectations and general view that these companies are secular and not cyclical – which is not our view."

"We believe that there still remains a fundamental disconnect between Street expectations of equipment and likely shipments. As such, we feel stock valuations have run up beyond the supporting fundamentals. Given the increase in expectations over past year and the dependence on China to meet these expectations, the subsidy change could serve as a negative catalyst for the upstream tool suppliers. To be clear: we believe 2010 will represent a historical peak for MOCVD orders. Given the share appreciation on misinformation regarding the scale and scope of the Second Cycle and timing of the Third Cycle, we would not be averse to investors using both incumbent MOCVD suppliers as a short-term source of funds – even after recent pullbacks."

Cree, Inc. was trading at $66.48, down $0.78, or 1.16 percent, as of 12:05 PM EST. Rubicon Technology was at $20.01, down $0.33, or 1.62 percent. Aixtron was trading at $33.13, losing $0.82, or 2.42 percent. Veeco was at $40.53, dropping $1.23, or 2.95 percent.